Friday 8 December 2017

Govt spending on healthcare expected to rise sharply; Singapore faces demographic time bomb in 2018

Finance Minister Heng Swee Keat says it will go up by at least $3 billion by 2020 because of ageing population, tech advances
By Salma Khalik, Senior Health Correspondent, The Straits Times, 7 Dec 2017

Singapore may have to foot a bigger health bill to care for its ageing population.

Government expenditure on healthcare is expected to "rise quite sharply" in the next three to five years, Finance Minister Heng Swee Keat said yesterday.

He expects it to go up by at least $3 billion by 2020 from the current levels.

To put that in perspective, the total budget for the Ministry of Health (MOH) in 2010 was $4 billion. In this year's Budget, Mr Heng allocated it $10 billion.

A jump of another $3 billion by 2020 would mean that in 10 years, the health budget will climb to more than three times its 2010 level.

After a tour of Changi General Hospital (CGH) and St Andrew's Community Hospital (SACH) yesterday, Mr Heng said: "As medical technology improves, as our population ages, the demands will grow, and the need to provide for that will also grow." He predicted an annual MOH budget of "at least" $13 billion from 2020.

Professor Euston Quah, head of economics at Nanyang Technological University, said rising healthcare costs will mean higher taxes.

He said: "It is one major reason since, increasingly, healthcare is subsidised for greater number of eligible people.

"Income tax and corporate taxes, which are direct taxes, are low in Singapore relative to other countries, but indirect taxes (GST and other non-earnings-based taxes) make up for it."

In his Budget speech in February, Mr Heng had said that part of a bigger healthcare bill will be covered by new taxes or the Government raising present taxes.

Dr Chia Shi-Lu, head of the Government Parliamentary Committee for Health, said: "Spending on healthcare will comprise an increasing proportion of net government expenditure over the next decade.

"When taxes do increase, it is good to know that a significant proportion of our tax dollars is going towards healthcare, which is a public good and necessity."

Mr Heng said the $3 billion increase is "just an initial estimate", and will depend on "how well we are able to manage in the next few years".

He added: "It is something Health Minister Gan Kim Yong and I continue to discuss, getting our projections right and getting our resources ready to meet that need."

At CGH and SACH, he saw how technology enhanced care. He was shown the bed transporter which reduces the number of people needed to move a bed with a patient on it from two persons to one.

He saw how a new technology can assess wounds in seconds, instead of the 30 minutes a nurse would normally take.

He also saw how technology is used to provide better rehabilitation for patients, and how their vital signs such as blood pressure and heart rates are automatically entered into the system.

"What I am seeing is very encouraging, how the hospital itself is taking action, first to upgrade its operations, then to upgrade the skills of its people, and doing this in a very holistic way," he said after spending half a day there.

Mr Heng admired the healthcare staff's attitude of "How can I be more innovative? How can I improve outcome?"

He said: "That spirit of not being satisfied with what we have today, but thinking of what we can do better tomorrow, and having the willingness to try, that is critical."

Singapore's demographic time bomb: Number of old people will match number of young for first time in 2018, says UOB economist
Ageing population may mean changes to taxes, immigration rules, says economist
The Straits Times, 7 Dec 2017

Next year marks an ominous turning point for Singapore's ageing population, according to research by economist Francis Tan from United Overseas Bank.

In 2018, the share of the population that is 65 years old and older will match that of those younger than 15 years old for the first time, he wrote in a report yesterday.

As the elderly population starts to crowd out the young, the "demographic time bomb" may mean changes to taxes, immigration rules and social services, he said.

At this rate, seniors in Singapore's population will make up more than double the share of the youngest residents in 2030.

With already the oldest population in ASEAN, the Singapore of 2030 will probably look a lot like the demographics-embattled Japan of last year, Mr Tan's figures show.

That is all making policy more complicated as the city-state seeks to ensure that the elderly population is being cared for without curbing the well-being of its younger residents.

One way to increase the labour supply would be to ease immigration restrictions, a move that would have to be done at a managed pace to avoid worsening the "foreigner assimilation issue" in Singapore, even though the country cannot afford zero immigration, Mr Tan said.

He used the analogy of a restaurant's kitchen to show how ageing threatens growth and the quality of output.

"If there are fewer new chefs coming into the kitchen to cook the massive pot of broth (because of low birth rates and low levels of immigration), the existing pool of experienced chefs is ageing and retiring, and there is no improvement in labour productivity, the amount of broth (gross domestic product) that will be produced in the next period will certainly be less, or worse still, be of inferior quality," he wrote.

The stark trend also helps explain why Prime Minister Lee Hsien Loong has said tax increases are not a matter of if, but when.

Mr Tan sees the Government increasing the goods and services tax (GST) next year to 8 per cent from 7 per cent, with an equal boost in 2019.

Still, he noted: "The demographic time bomb starts ticking only in 2018 - it does not mean that it will explode yet. There is still a sizeable percentage of working-age population supporting the economy. That said, one will have to understand that this cannot last forever."

In a briefing on the outlook for next year, OCBC Bank economist Selena Ling argued that it would be overly simplistic to immediately assume a broad-based GST hike.

There are many other options for taxes the Government could hike to substantially raise revenues, she said yesterday.

The timing for any tax hike has to be carefully considered, because next year will likely see a confluence of factors that will make the operating environment challenging for businesses in Singapore, and a GST hike would exacerbate matters, she noted.


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