Wednesday 18 March 2015

Changes to Medisave: Budget 2015

Several changes to Medisave were announced during the parliamentary debate over the Health Ministry’s budget last week.
By Salma Khalik and Mike M Dizon, The Straits Times, 17 Mar 2015

Help people choose right healthcare plan
By Salma Khalik, Senior Health Correspondent, The Straits Times, 23 Mar 2015

WITH the launch of MediShield Life later this year, everyone can expect to pay significantly more in health insurance premiums, regardless of whether they are on the basic scheme or on one of the private Integrated Shield Plans (IPs) offered by five insurance companies.

Those on the basic scheme need not worry as the entire premium will be payable with Medisave money. Those in the middle- to lower-income brackets will also get permanent subsidies to help them defray the cost of the higher premiums.

But the last time MediShield rates went up, in 2013, some IP premiums shot up by more than 100 per cent - more than $1,000 in dollar increase for some - even though the actual MediShield increases were lower.

This will likely happen again with the higher MediShield Life premiums the IPs have to pay on behalf of their policyholders - since it became compulsory in 2005 for all IPs to incorporate the national healthcare insurance.

It therefore becomes even more important that people choose the health plan that best suits them. Buying too expensive a plan would mean wasting Medisave money unnecessarily.

That is why the Ministry of Health (MOH) must be lauded for introducing a two-tier scheme for payment of health insurance premiums.

The first tier pays for the MediShield Life portion of the premium. The second tier for the add-on IP portion.

This second tier is unlikely to completely pay the entire IP portion for the more expensive schemes pegged at A-class treatment at public hospitals or private hospital care.

This means that the majority, if not all, of IP policyholders will have to pay part of their premiums in cash - bringing their attention annually to the amount they are paying in premiums.

Today, the vast majority of IP holders whose entire premium is paid for with Medisave have no idea what they are paying in premiums.

That is, until the premium tops the $800 cap on Medisave payment. At that point, many are shocked to realise the amount they have been disbursing, unknowingly, for their health insurance coverage.

The change in the amount of Medisave that can be used for IPs will vary with age - which likely means that even the young on more expensive schemes will have to pay part of their premiums in cash - making them fully cognizant of what they are paying.

Today, this usually hits home only when they are in their 50s or 60s when their premiums are higher than the amount of Medisave money they can use, and a cash top-up is needed.

The MediShield Life Review Committee found that some people "have overstretched themselves to buy the most expensive product for higher protection".

This is borne out by their finding that seven in 10 people with insurance coverage pegged at public hospital A-class wards opted for lower-class wards when they actually needed hospital care.

Similarly, six in 10 with private hospital insurance plans opted for public hospital care.

The committee said this mismatch of insurance coverage and usage stemmed largely from poor understanding of their health plans and what they covered.

It suggested pegging Medisave coverage of IP premiums at B1 coverage, and recommended that this level of cover be standardised across all five insurance companies providing IPs.

While in theory this is a good suggestion as it will cover only the lowest IP category, it will likelly see many people opt for it simply because premiums for this category of IP can be entirely paid for with Medisave for their whole lives, and not because it is what is best suited for them.

Pegging the Additional Withdrawal Limit to slightly below the B1 premiums - say at 90 per cent - means some cash outlay.

This way no one, except for those on the compulsory basic MediShield, can totally ignore the amount of premiums that need to be paid every year.

In other words, choosing even a B1 class coverage is a decision they made consciously, and not a default simply because premiums can be entirely covered by Medisave.

It is also fairer to all if everyone on an IP has to pay some of the premium in cash, even if for some, the amount is very small. People who find it difficult paying the cash outlay have obviously chosen the wrong cover.

By choosing the cover best suited to their financial circumstances, they would also ensure that Medisave money goes further. That is especially important for people who have retired and are no longer growing their Medisave accounts.

Having insurers spell out how much of the premiums is for MediShield Life and how much is for the IP portion; and similarly how much of claims come from the basic scheme and how much from the add-on IP, will help people decide if they are getting value for money on their IPs.

While it might be a hassle for people who can clearly afford the best, and have hefty Medisave accounts they would like to use for this, their inconvenience is a small matter against the millions of dollars insurance firms have been raking in from people who have bought coverage way above their need, or their ability to pay.

Many of the people who have IPs do not have hefty Medisave accounts. Some do not even meet the Medisave minimum sum of $43,500 required at the age of 55.

For them to buy upmarket insurance coverage is obviously a mistake, for they are unlikely to be able to afford to pay their share of big hospital bills in that class of ward. Many do realise that, which is why more than half end up in a lower ward than their insurance allows.

Insurance, like the provision of healthcare itself, is an uneven playing field with knowledge residing almost entirely with the supplier. Giving consumers more information is a good way of balancing this inequality and allows for real informed choices.

Making them pay in cash, no matter how small the sum, is a good way of forcing people to choose rationally.

Lower Medisave withdrawal limits for IP premiums unfair

WHILE I applaud the implementation of MediShield Life, I cannot help but feel that this comes at the expense of Integrated Shield Plan (IP) policyholders ("Changes to Medisave"; Tuesday).

From the risk-reward perspective of the insurer, premiums would have to increase to compensate for the higher risk.

I am glad that the Government is willing to subsidise the premium hike for the first five years.

But what happens thereafter?

Currently, Central Provident Fund (CPF) members up to age 65 can use up to $800 of their Medisave funds annually to pay for their IP premiums.

So, it came as a shock to me to learn that when MediShield Life is launched, under the two-tier Medisave payment system, an IP policyholder with an annual premium of $640, for example, will have to fork out $155 in cash.

Under the current system, this $640 could have been fully deducted from Medisave.

The change is unfair to the IP policyholder who does not have any pre-existing illness and is 100 per cent covered by the IP.

What is wrong with the current system of allowing up to $800 of premiums to be deducted from Medisave?

MediShield Life should be viewed as a basic plan to complement IPs, which provide higher-quality healthcare, especially given today's chronic bed shortages.

But the changes seem to be discouraging IPs, since, when the rider is included, the policyholder will have to fork out so much more in cash than the current situation.

This could result in more people crowding public hospitals, given the lower cost there.

With MediShield Life and full-coverage IPs, there will be less need to tap Medisave to pay for medical bills.

We should be allowed to use the funds accumulating there to pay for IP premiums when MediShield Life kicks in.

Tay Kim Lee
ST Forum, 20 Mar 2015

Medisave withdrawal limits: MOH replies

WE THANK Mr Tay Kim Lee for his feedback ("Lower Medisave withdrawal limits for IP premiums unfair"; last Friday).

An Integrated Shield Plan (IP) comprises two components - a basic MediShield component and an additional private insurance component.

Similarly, the IP premium also comprises two corresponding components.

However, a single Medisave withdrawal limit applies to the total IP premium today.

The Ministry of Health (MOH) will restructure this limit into two separate components to give greater clarity and certainty.

With the restructuring, Medisave can be used to fully cover MediShield Life premiums after the applicable subsidies, including additional premiums for pre-existing conditions, if any.

This way, Singaporeans will be assured that they can tap into their Medisave to pay for MediShield Life fully.

A new Additional Withdrawal Limit (AWL) will apply specifically to the private insurance component of IPs.

Singaporeans will continue to be able to use their Medisave to pay in full or part of this private insurance component, depending on their age and the type of coverage.

The AWL figure of $50 used in the infographic on March 17 ("Changes to Medisave") was solely for illustrative purposes.

MOH is currently studying the appropriate AWLs to set and we will have to balance between helping Singaporeans pay for their IP premiums using Medisave, and ensuring that they have enough Medisave for their other healthcare needs.

MOH will announce the actual AWLs at a later date.

We encourage Singaporeans to carefully consider the long-term affordability of their preferred plan when deciding if they should get an IP.

Lim Bee Khim (Ms)
Corporate Communications
Ministry of Health
ST Forum, 25 Mar 2015

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