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Changes in Singapore’s healthcare subsidy framework from 2022

Singapore stretches healthcare dollar with targeted subsidies

With healthcare spending going up every year as Singapore's population greys and the country's fiscal situation gets tighter than it has been in decades, it has become more crucial than ever to make every dollar count. Insight looks at how the latest changes in the healthcare subsidy framework help make a difference.

By Linette Lai, Political Correspondent, The Straits Times, 13 Mar 2021

Healthcare spending has sometimes been compared to a balloon - squeeze it in one area and a bulge appears in another.

The analogy speaks to how difficult it is to rein in rising healthcare costs, a challenge that Singapore has become increasingly familiar with as its population greys.

The big question is: With limited resources and growing needs on every end, how can the country make every healthcare dollar count?

Stretching the healthcare dollar is one of the main aims behind changes to the subsidy structure in public healthcare institutions announced last week by the Health Ministry.

In a nutshell: Hospitals will use per capita household income to determine subsidies, rather than individual income. There will also be just one subsidy range for the B2 and C ward classes. On top of that, changes in the subsidy structure at specialist outpatient clinics mean that people who earn more will have to pay more.

Lastly, subsidies in community hospitals will rise - to tally more closely with subsidies in acute hospitals - removing one financial barrier that patients may face when making the switch from one to the other.

Singapore has 10 public acute hospitals. They are the eight general hospitals, KK Women's and Children's Hospital, as well as the National Heart Centre Singapore.

The changes are slated to take effect by the middle of next year.

Commenting on the changes, Professor Teo Yik Ying, dean of the Saw Swee Hock School of Public Health at National University of Singapore, said that with healthcare costs expected to go up, it seems likely that the Government's intent is for subsidies to play a larger role.

"But this means subsidies need to be more targeted and equitable, especially towards those who require more assistance," he said.

"This is the main reason underpinning the changes."

Greatest bang for its buck

Singapore has traditionally prided itself on achieving the greatest bang for its buck in healthcare.

A banner that used to hang outside the Health Ministry's headquarters in Outram Park proudly proclaimed: "The World's Most Cost-effective Healthcare System". It has the statistics to bear this out.

The latest available data shows that government spending on healthcare - including expenditure on endowment funds such as MediFund, but excluding transfers - stood at 2.1 per cent of Singapore's gross domestic product in 2017, which is significantly lower than what is routinely spent by other developed countries.

But this is unlikely to last. As it is, the figure is expected to rise to 3 per cent by 2030, when the proportion of Singaporeans aged 65 and older will go up from one in six to one in four.

Already, Singapore is beginning to see signs of this trend. The national health expenditure rose from $13 billion in 2012 to $22 billion in 2017, or around 11 per cent yearly. And the Government's share of healthcare spending went up from 40 per cent in 2013 to 46 per cent in 2018.

The new subsidy changes will help by channelling patients to the facilities that are most cost-effective and best meet their needs - what is known in healthcare parlance as "right-siting".

In other words, not every ailment would be best treated with a long stay at an acute hospital, just as one would not use a sledgehammer to crack a walnut.

Budget 2021 debate in Parliament

Singapore must press on with plans for next growth phase, says DPM Heng

It is investing in growth areas, and skills for new jobs, to emerge stronger from the crisis

By Linette Lai, Political Correspondent, The Straits Times, 27 Feb 2021

With a narrow window of opportunity in which to transform its economy, Singapore has to press ahead with planned investments in order to secure its next decade of growth, Deputy Prime Minister and Finance Minister Heng Swee Keat said yesterday.

Doing so would enable the economy to provide jobs in new areas even as it restructures, and enable the country to emerge stronger after the Covid-19 pandemic has passed.

And if it has to draw on the country's reserves to do so, it should do its best to make good on the draw, he told Parliament.

"Now is the time to chart our course, position ourselves to catch the winds of opportunity and sail boldly in the reshaped world," he said in his speech rounding up three days of debate in which 65 MPs spoke.

Mr Heng set out what it means for Singapore to emerge stronger together - the theme of this year's $107 billion Budget - and stressed that the Government cannot do this all alone.

"The Government is committed to put in the investments," he said. "To succeed, every Singaporean must come together to build the Singapore that we want."

By creating opportunities for workers to acquire skills needed for the new jobs of the future, the Government would help them stay employable, and also help prevent a "Covid-19 generation" of young people without jobs.

He called on businesses to look beyond hiring just "plug and play" workers and consider taking on those with potential to learn. At the same time, job seekers should keep an open mind, taking the initiative to build new skills and staying receptive to new job roles.

Singaporeans must also look out for one another, he said, adding that the Government will push ahead with plans to develop deeper capabilities in the social sector.

At the same time, Singapore has to consider how to pay for the choices it makes, Mr Heng said, noting that discussions on building a society with better social safety nets are "only one half of the conversation".

"We must be upfront - if we want to spend more, we have to raise the revenue," he said, reiterating that the impending goods and services tax (GST) hike from 7 per cent to 9 per cent, which will take place soon, between next year and 2025, is necessary to fund Singapore's rising spending needs in areas such as healthcare.

"Economic growth alone is not likely to raise enough revenues to fully meet our needs," he added. "The honest, but hard, conclusion is that we will need to raise more tax revenue."

The GST hike will be matched with a $6 billion Assurance Package that effectively delays its effect for at least five years for most Singaporean households, he said.

Mr Heng acknowledged that it is natural for everyone to look out for what is new in each year's Budget. But Singaporeans should also appreciate what is already there, and look at the nation's spending in totality over the years, he said.

Over the past decade, Singapore has been gradually tilting its system of taxes and financial transfers in favour of lower-and middle-income groups, he noted.

This year, a member of a lower-income citizen household can expect benefits of $6,500 after taxes on average, and a member of a middle-income household gets $3,500. In contrast, a member of a household in the highest income group pays around $9,500 in taxes, after accounting for benefits, he said.

Mr Heng also addressed concerns MPs raised that this year's Budget appears to have little short-term support for middle-income households. This is not so, he said, noting the $42 billion set aside for social spending and transfers on top of security spending and economic investments, all of which benefit Singaporeans.

"We should not look at each Budget in terms of 'goodies for me', but whether the totality of the spending creates more opportunities for us and our children."

He also cited Nominated MP Hoon Hian Teck, who on Wednesday articulated Singapore's need to balance stabilising the economy to avoid a sharp downturn, and investing in structural policies for transformation.

Mr Heng also noted how Mr Shawn Huang (Jurong GRC) put it aptly when he said that for Singapore to survive, it had to pivot and develop an edge to seize opportunities of the future. "If we get this right, we can set our economy on the path of growth for the next five to 10 years," said the DPM.