MediShield Life: Problems with pre-funding

MediShield Life: Problems with pre-funding

SINGAPORE - The members of the MediShield Life Review Committee have a tall task before them and six months to come up with a plan - to reshape health-care financing to better distribute the burden of payment as society ages and costs spiral upwards.

The committee includes corporate chiefs as well as community leaders and unionists who have heard first-hand Singaporeans speak of their fears of not having enough for their own health care or that of family members.

That is in spite of hefty government subsidies, health-care savings and insurance.

Stories of huge hospital bills reducing families to bankruptcy pop up but these are anecdotal. The Health Ministry has stressed that very large bills make up only a tiny percentage of the total for subsidised patients, and even then there is help available for those affected.

Such fears are why Health Minister Gan Kim Yong has assured people his ministry wants "to give Singaporeans greater peace of mind", and why he has launched a big reform of Medishield.

The current health-care financing framework was set up some 30 years ago, with the launch of Medisave, the national medical savings scheme.

At that time, people in Singapore had life expectancies that were 10 years shorter than they are today.

At the point of retirement at age 62, people can expect to live for another 20 years or more, and should set aside enough money for that.

But even for those who keep healthy, the health-care costs in the form of insurance premiums go up with age. In the year they retire, at the age of 62, their MediShield premium would be $455 a year. By the time they are 82 and living off their savings, it would have jumped to $1,123.

And by the time they are 90 - about 10,000 people are older that - MediShield would no longer cover them.

Add to that the spiralling health-care costs, which have doubled in less than a decade, and it is no wonder people break out in cold sweat at the uncertainty that the future holds.

How much more expensive will medical treatments cost in future?

Lifelong coverage

To manage the problem of soaring health-care costs, the Government has decided to make changes to the current system of health-care financing, to reduce the share of big hospital bills that people need to pay out of their own pockets.

This is basically a two-pronged approach.

First, the Government's share of health-care financing will go up from the current 35 per cent to 40 per cent or more. In dollar terms, it will raise spending from $4 billion a year in 2012 to $8 billion a year by 2016.

But even this, it fears, will not be enough.

Hence the decision to introduce MediShield Life from 2015, to cover everyone for life.

This is a major policy shift from an individual-centric approach to a collective-responsibility approach. It's not just a matter of getting the 8 per cent of people currently not covered by MediShield to join the scheme.

That will have little impact on the rest of the population.

The important change is that everyone will be covered, even those with pre-existing or congenital diseases, and for as long as they live.

The bulk of the 8 per cent currently not covered are either very old, already sick, or at high risk of a major illness - in other words, people who are poor insurance candidates.

Currently, these people have to fend for themselves. They get the usual subsidies at public hospitals if they opt for B2 or C class wards when hospitalised. If they have Medisave, that can pay the remainder of their bills.

But many who are elderly or have suffered from a chronic ailment for years have little by way of Medisave savings. So they would need to pay in cash, or turn to Medifund for help if they are means-tested as poor.

With MediShield Life, these people will get a substantial part of such bills taken care of by insurance.

While it would be a major relief for them, it means a heavier burden on everyone else.

But it reflects the true nature of insurance - where everyone pays into a pool, and those who need it draw on this pooled money - in other words, collective responsibility for the medical bills of a few.

Furthermore, the insurance will be enhanced to take on a larger share of large bills.

But even as many people laud the move, some have questioned why the Government does not take on a larger role instead of spreading the burden among all MediShield policyholders.

Others say the current model of individual responsibility is sound and should just continue.

Yes, both are possible options, as practised by countries like Britain, which provides universal care, and the United States, where currently much is paid for with private insurance.

Having the Government take on the full load would mean higher taxes - as the money has to come from somewhere.

This has the advantage of the rich contributing more. The drawback is that the burden would fall on the working population - which means that younger people will end up paying for the elderly.

As the population ages, there will be more elderly folk to look after, and fewer younger people paying taxes.

As Health Minister Gan Kim Yong explained in Parliament just this week: "If we do not carefully manage health-care costs, the tax burden on the population will increase significantly as we will have more and more elderly folk and our children's generation will be paying for our health-care costs when we ourselves grow old."

People tend to consume more when health care is free. So even with the proposed changes, there will still be a significant part of the bill in the form of deductibles and co-payment, that the individual has to bear.

Leaving the system as it is, is also not ideal.

Caring for the vulnerable

Today, many of those who need health care most - the elderly and those with congenital illnesses or at high risk - are left out in the cold.

For some, the drain on their family finances can be extremely taxing. The problem will only worsen as the population greys. A caring society is one that looks after the less fortunate.

Making MediShield compulsory for all is also not without its drawbacks.

A major concern is affordability of premiums, especially after retirement. It's well and good to say everyone must be included. But not all can afford to be.

However, Prime Minister Lee Hsien Loong has promised that the poor and the elderly will be given help. The questions now are: Who gets the help, and to what extent?

The MediShield Life review committee has been given six months to come up with its recommendations. The members will be talking to a wide spectrum of people to get their views.

For people who want a say in their future, this is the time to speak up.

As Mr Gan said: "This is a major step we are undertaking, from which there will be no turning back."

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