By Marcel Bilger, Published The Straits Times, 4 Jan 2014
THERE is no better time than the current public consultation on MediShield Life to look at how and why other countries have implemented mandatory health insurance. The Swiss experience is especially interesting, not only because of the similarities that exist between Singapore and Switzerland, but also because this experience illustrates the key questions and trade-offs involved when making reforms.
When implementing change, it is good to lay down exactly what one wants to achieve.
The first objective of the Swiss reform was to increase solidarity between genders, young and old, healthy and sick, and rich and poor. In the Singapore context, one can think of collective responsibility as a close equivalent to the Swiss view of solidarity.
The second objective of the Swiss reform was to provide quality health care to the entire population. The third objective was to contain increases in health care costs.
Before health insurance became mandatory in Switzerland in 1996, most citizens had health insurance, just like in Singapore today thanks to MediShield. In Switzerland, the main reason to mandate health insurance was to ensure full coverage of the population. An additional consideration was to prevent healthy individuals from opting out and leaving the scheme, insuring only the sick at a high cost.
Despite being an important point of the reform, mandating health insurance in itself only affected an extremely small percentage of the population. What affected everyone was a change in the insurance system. Before the reform, premiums were set according to the financial risk posed by the insured to the insurer. It included factors such as gender and age.
Under the new community rating, everyone living in the same region paid the same premium. An adverse consequence of setting per capita premiums is that they automatically lead to premiums that are too high for lower-income people. A system of government subsidies was therefore put in place to reduce their premiums.
In order to ensure quality health care, Switzerland also increased the benefits package covered by health insurance. It now includes a wide range of goods and services for curative and rehabilitative care. By law, to be included in the benefits package, new goods and services need to be appropriate, effective and yield value for money.
The importance of the last condition cannot be over-emphasised as a more generous coverage will also be reflected in higher premiums. In practice, however, this was only systematically done for pharmaceuticals. Many services were added with little proven scientific value.
In an effort to contain the increase in health-care costs, the reform introduced a minimum deductible (below which the insured fully bear the costs) and a co-insurance rate of 10 per cent on most goods and treatments, up to a cap so as to limit excessive payments. As is well-known in Singapore, cost-sharing aims at reducing the overconsumption of health care due to its apparent lower price to users. At the same time, cost-sharing retains most of the benefits of risk pooling that health insurance provides.
In addition, the Swiss reform introduced a highly regulated competitive framework involving decentralised health insurers. This is similar to the reform currently taking place in the United States known as "Obamacare". The idea is to curb costs by giving insurance companies an incentive to reduce their administrative costs, exercise strict control over health-care providers and, most importantly, introduce new and innovative models of care.
Were the objectives met by the Swiss reform? Social solidarity arguably improved, both in terms of health financing and access to care due to the mandatory aspect of health insurance and community-based determination of premium levels. However, health financing remains very regressive, with insurance premiums representing a far greater burden to lower-income individuals. Government subsidies for premium reductions were insufficient and failed to target the neediest.
As for provision of care, the adoption of an extensive benefits package brought Switzerland close to the ideal of universal health coverage, which is now actively promoted by the international community. Clearly, the greatest shortcoming of the reform was to contain the steady increase in health-care costs. Cost-sharing and competition between insurers proved unable to cancel out the combined effect of extensive benefits package with ageing and the rising burden of chronic diseases. Health insurance premiums are very high and have been increasing at a rate of almost 5 per cent a year on average since the reform.
Interestingly, the mandatory aspect of health insurance was never seriously questioned in Switzerland. Most criticisms were aimed instead at how insurance premiums are set. In Singapore too, I think that mandating health insurance through MediShield Life is a good solution. With family sizes shrinking, individuals without insurance would find it increasingly difficult to access care otherwise.
Perhaps the most important lesson that can be drawn from the Swiss reform is that a more cost-sensitive and progressive expansion of the benefits package is needed. However, with the emergence of new diseases, the development of new treatments and growing expectations of health insurance, the benefits package is bound to expand. When designing MediShield Life, it will be important to anticipate this dynamic and determine the exact conditions under which new treatments will be added into the benefits package.
When improving the coverage for large bills, MediShield Life should also not overlook the coverage of low-cost but highly cost-effective care. For instance, the insurance deductible might have the adverse effect of discouraging the use of preventive care. Targeted government subsidies could be needed to cancel out the dissuading effect of MediShield Life co-payments.
In any case, offering comprehensive health care to an ageing population will never come cheap. I believe that, given the demographic challenge ahead, innovative solutions will be needed. One idea would be to tie insurance premiums to modifiable health-risk factors such as healthy eating, physical activity, or adherence to health treatments. If one thinks that premiums should be set according to risk, why not set them according to risks that individuals can act upon? This would not only reduce costs, but it would also promote healthy ageing.
It would be quite remarkable to find a solution to the problem of health-care financing in the most unlikely place - in health-care financing itself.
The writer is Assistant Professor in the Health Services and Systems Research Programme at the Duke-NUS Graduate Medical School, Singapore.
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