Healthy opportunity for generosity

SINGAPORE - Prime Minister Lee Hsien Loong announced the introduction of MediShield Life in his National Day Rally last month. It builds on the national medical insurance scheme MediShield which currently covers 92 per cent of residents, and is included in all medical insurance plans paid for with Medisave money.

Two things will change.

First, it will be compulsory for all citizens and permanent residents; there will be no exclusions, regardless of whether a person requires such insurance.

The second change comes as a result of that: as everyone is included, it will also cover those with congenital problems or pre-existing diseases - currently excluded from MediShield.

A paradigm shift

While it might sound like a simple change as Singapore moves towards becoming an all-inclusive society, it is a paradigm shift.

So what is significant about it?

Several commentators have described the change as one that moves Singapore towards having universal health coverage (UHC).

The World Health Organisation defines UHC as "ensuring that all people can use the promotive, preventive, curative, rehabilitative and palliative health services they need, of sufficient quality to be effective, while also ensuring that the use of these services does not expose the user to financial hardship".

Yet taking that definition will mean that no country will ever have universal health coverage, since giving every patient what he needs regardless of cost will certainly break the bank of even the richest nations. The most expensive drug today, Soliris, to treat a rare disease that destroys the red blood cells, costs US$600,000 (S$768,000) a year.

I would say that a more realistic definition is providing everyone with "normal" or basic care, without going to extremes in extending life for a short period at an exorbitant cost. And if this is a more realistic definition of UHC, I would argue that it already exists here.

Today, there are heavy government subsidies of up to 80 per cent for hospital care. There is Medifund to pick up the rest of the bill for those who can't afford to pay. No one should be denied basic medical care - be it in hospital or as an outpatient.

Medifund, MediShield Life

The paradigm shift will come in the way health care here will be financed in the future.

The burden of caring for the poor and sick facing large bills will be shifted from the Government to the rest of society.

The Government's share of bills for MediShield Life - aside from the aforesaid subsidies - will be limited to paying the premiums for the pioneer generation with little in their Medisave accounts, and for those who can't afford them. For the destitute, through Medifund, it would also pay the patient's share of the bill after insurance kicks in.

But most subsidised patients facing big bills will have those bills paid out of MediShield Life - in other words, by the premiums paid by everyone in the country.

One good suggestion is to front-load: have working adults pay higher premiums when young to offset what they would need to pay when they get old. This is already happening today, but only in a small way. Someone who has been with MediShield since the age of 30 years gets an annual discount ranging from $156 at the age of 71 years to $449 from the age of 86 years. The discount gets smaller the later a person joins, with none for those joining after the age of 60 years.

While greater front-loading might help the current young, those already in middle age have only a short runway to chalk up savings - and it's way too late for those who have already retired.

As the population ages, the call on medical services will go up. Even with heavy government subsidies, some will not be able to afford to pay. Under today's scheme of things, they can turn to Medifund for help.

But if Medifund has to cater to a much larger group of future elderly and unemployed patients, it would have to balloon to keep up with the expected demand.

This is where MediShield Life comes in, paying the first tranche of a subsidised bill, before Medifund is tapped. This reduces the amount that Medifund has to foot. More money from this fund could then go to pay for outpatient treatment that might just keep these people out of hospital.

At present, a patient with pneumonia who spent 11 days in intensive care out of two weeks in hospital would incur a bill of $36,700. In C class with 80 per cent subsidy, the Government picks up $29,700 - leaving a bill of $7,000.

If the patient is poor with no insurance or money in Medisave, Medifund picks up this $7,000 tab. However, with current MediShield coverage, the insurance would pay $4,600, leaving Medifund to cover only $2,400.

Who pays for Medifund? The Government.

Who pays for MediShield Life? Citizens.

What does this mean?

First, each patient will tap less from Medifund, because MediShield Life will kick in first. This doesn't mean Medifund will fund less of health care. As more people turn to the fund, even if each takes a smaller amount, the total will grow. Furthermore, Medifund also helps the poor cope with outpatient bills. Such help can go up if more money is available.

Second, MediShield Life taking on a bigger share of bills means that everyone will have to pay more in annual premiums than today's $50-$1,190 a year. How much more is debatable, but all indications point to fairly significant increases across all ages. The impact will be even greater as it comes on top of recent increases in premiums of between $17 and $251 in March this year.

MediShield Life will include the 8 per cent of residents who are currently not in the scheme. Some have opted out, but there are also many who are either too old or already sick, who will be immediately able to draw on the insurance to help pay their bills.

There might be some form of entry payment for those coming in late, to make it more equitable for those who have been on MediShield for many years. But this will certainly not be enough to offset their potential drawing on the scheme, because premiums that equal the potential draw give them no benefit. So premiums will have to go up significantly for everyone, to cover these bills.

Another clue pointing to significantly higher premiums lies in the statement by Health Minister Gan Kim Yong that changes to MediShield Life will address people's concerns about their share of large hospital bills. This suggests the insurance will have to pay out more. Since whatever is paid out has to come from premiums paid in, that means premiums will rise.

The introduction of MediShield Life is a watershed move, and not just because of premium hikes.

It marks Singapore's transition to a society where citizens assume a greater burden for each other - including for those whom no profit-oriented insurer will cover.

Now, there is nothing wrong with everyone chipping in to help the sick, the old or the poor meet their medical bills. A society that is willing to lend a helping hand to others in dire straits is a caring society; one to be proud of.

In fact, there is no reason why such a major shift in health-care financing policy should end there.

At this point, it might be fruitful to see if the scheme can be tweaked even further to better suit Singapore's needs, by harnessing Singaporeans' latent generosity.

Today, premiums for MediShield are based on a person's age. But there's really no reason why the rich and the poor should pay the same rate just because they are the same age. Why not have premiums that differ according to income, even within the same age group?

Singaporeans will have to decide if premium increases for MediShield Life should be borne equally, or should the more wealthy pay a higher portion, the idea being to help the less well-off?

Perhaps each age band could have two to three premium rates based on a person's income. So everyone pays at least the normal premium; while someone in the 75th percentile in his age group could pay 1.25 times and one in the 90th percentile pay 1.5 times.

So retirees, children and the unemployed will all pay the lower rate, while the rich pay the highest amount.

Tapping generosity

It is heartening that many Singaporeans have supported the introduction of MediShield Life despite the higher premiums that will accompany the scheme.

That generosity can be tapped even further if we allow people to make voluntary contributions into a fund to supplement MediShield Life. A steady stream of such philanthropic donations - by individuals or corporations - would go a long way towards keeping premiums affordable for the rest.

Paying more than is mandated should be encouraged - perhaps with the same tax rebate given to donations to charities.

It might also be a good time to encourage people to pay medical insurance premiums with cash, rather than with money from their Medisave. Doing so means there will be more remaining in Medisave accounts as people age, as they no longer deplete it to pay the annual premium.

Again, a tax rebate might encourage such behaviour.

To be sure, such a model of an insurance fund, with premiums varying with income, and that encourages tax-deductible donations, will be a mixed creature. It may be administratively untidy.

There may not be another such model elsewhere.

But it's worth trying, given Singapore's pressing need for sustainable health-care financing as the population ages, and as pressure mounts on government coffers.

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