Beware escalating costs in universal coverage
By Phua Kai Hong For The Strait TimesYesterday, the MediShield Life Review Committee released its final report on Singapore's new national health insurance mechanism, giving specific recommendations regarding premiums.
As expected, premiums will rise to cover the much extended coverage, although The Straits Times website described the premium rises as "much lower than feared". But while there are bouquets all round for the generous benefits offered, many trade-offs have to be struck to achieve a balance between affordability and coverage.
The experiences of other developed places reveal issues that need to be addressed when implementing universal health insurance. One of these involves the integration of myriad voluntary insurance schemes. In South Korea, the process took almost 12 years and Taiwan over three years before its national health insurance scheme could be rolled out, and yet many bugbears in these systems are still being resolved.
A one-size-fits-all approach, like a single-payer system where one party, usually the state, is the one that pays for health-care costs, usually ends up with a multitude of problems. But so sometimes do heterogeneous methods.
Already, in Singapore, there is anxiety over how much premiums will rise for private plans offering Integrated Shield coverage. Those with pre-existing illness ask if these Integrated Shield plans offering higher-class ward coverage are also available to them, now that MediShield Life promises coverage for pre-existing conditions.
No health financing system is free from the risk of becoming unsustainable. Singapore has been prudent in broadening its financing. It inherited a tax-based system where health-care costs were borne by the state.
In 1984, Medisave introduced individual health savings accounts funded by employer and employee mandatory savings. In 1990, MediShield introduced insurance to the mix, with a low-cost health insurance plan for catastrophic illnesses or prolonged illness for which Medisave wasn't enough.
Medifund, designed to help needy Singaporeans who are unable to pay for their medical expenses, followed in 1993. This fund acts as a safety net for those who cannot afford the subsidised charges despite Medisave and MediShield coverage.
MediShield Life is the filler needed to plug the remaining health insurance gaps and stretch the social safety net for universal health coverage of the population.
One might be tempted to think that such a diverse mix of financing - savings, insurance, taxation - puts Singapore in excellent financial condition to finance its health-care needs.
But there are danger points.
A rapidly ageing population, coupled with rising expectations of health-care treatment, can fuel sharp cost increases.
Tax revenues will still be needed to provide public health services, including subsidies for the poor and other necessary activities such as health education, training and regulation. The challenges of maintaining the quality of public services for the poor and reducing long waiting lists will continue - indeed, may even intensify, with MediShield Life, since more people are being brought under the health insurance umbrella.
There is also the risk that more generous coverage may spur demand and supply, since better coverage translates into lower out-of-pocket costs for patients, giving the illusion of "free" or cheaper services at the point of delivery.
The generous Pioneer Generation Package of medical subsidies for those aged 65 and above, funded out of tax revenue, has already set a precedent, with younger cohorts possibly clamouring for similar consideration in future.
Politically, there could be more demands for tax-funded health financing. To be sure, every prudent government will always try to prevent escalating costs of health care. Taxation-based financing is also subject to budget processes and controls.
Still, taken together, the effects of the mix of demography, expectations and political pressure should not be underestimated. If societal behaviour does not change fast enough, or people are reluctant to stomach higher premiums to pay for the old and sick, they may instead revert to over- reliance on government financing - to the detriment of the public purse at a time when revenues are shrinking due to a lower tax base.
So amid the accolades for the MediShield Life package, it's timely to sound a note of caution: Yes, Singapore is on a strong foundation with its health-care bill funded by a robust mix of taxation, savings and insurance. But beware the inherent risks of public demands for more tax-funded care.
In reality, the two financing models - one in which the state pays either through taxation or social health insurance, and the other in which citizens fund their own health care through compulsory savings - are converging in all developed countries as populations age. Both models are basically pay-as-you-go systems, because risks are pooled for the whole population by community rating instead of risk-rating by age bands.
But as populations age, and more people enter the high-risk, high-premium category, costs will escalate. It makes sense, therefore, for people to build up savings and "front-load" premiums. This means paying more when they are young and have a steady income so that they do not have to pay high premiums when they are old and the risks borne by the insurer are greater.
That said, no amount of increased financing can really be enough without managing costs on the supply side, usually by altering the incentives of health- care workers to provide cost-effective services. Whether through taxes, insurance premiums or savings, all parties will eventually have to pay more for better health care. In the process, it will be important to maintain a fair and equitable balance between the public and private sectors, while integrating the different sources of financing.
The writer is a health economist at the Lee Kuan Yew School of Public Policy, National University of Singapore.
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Next on the agenda: Rein in rising costs of health care
By Salma Khalik, Senior Health Correspondent
The MediShield Life Review Committee has done a good job in coming up with a national insurance scheme to cover everyone, with higher benefits than now, yet maintaining premiums at an affordable level.
And the Government has to be lauded too, for loosening its purse strings to the tune of $4 billion over the first five years, and for giving the assurance that the premium subsidies for two in three people will be a permanent feature.
Taken together, they will certainly give Singaporeans greater assurance that they will be able to afford medical care till the end of their lives, even as costs continue to rise, fuelled by inflation and new medical treatments.
You might think that policymakers should be entitled to some rest now, given that they have put in the complex structure for such a major shift in health-care financing.
But they really should not, for the immediate next goal must be to rein in rising health-care costs.
"Insurance inevitably causes both patients and medical providers to become less cost-conscious, and to use more medical services than they really should," warned the committee in its report. "We have to accept this."
But should we really?
Health-care costs here have been going up by 10 per cent annually over the past five years.
If the introduction of MediShield Life were to push costs up further, then surely the affordability of the new scheme would be at risk in years to come.
This is especially as Singapore is also facing a rapidly ageing population which would already put a heavier burden on medical care.
As Mrs Hauw Soo Hoon, one of the 11 members of the committee, said yesterday, insurance claims come from a pot which is filled by premiums from everyone.
She said: "So actually it's everybody's responsibility to watch that this pot of money is being utilised in a responsible way."
This will take public education.
People must learn to be responsible and not let the "buffet syndrome" - where some diners will pile their plates high with food they cannot finish eating simply because there is no extra charge - destroy a promising medical insurance that covers everyone.
Health-care providers, too, must guard against being "kiasu" and ordering an unnecessary battery of tests just to have all bases covered. This will do society no service.
But perhaps the biggest impact on health-care costs comes from keeping the population healthy and out of hospital.
It involves the healthy staying that way.
Perhaps even more important is to catch diseases at as early a stage as possible, and keep it in check.
A lot of this is already being done, with subsidised screening and chronic care for the less well-off.
It should be ramped up. Not only will it help put a lid on costs, but it will also improve the quality of life of Singaporeans.
While it will involve a lot of effort, and will not come cheap, it will certainly be cheaper than having to care for the same people in hospital.
This is not something the Government can do alone.
People must do their part - and heed the frequent mantra of eating healthy, exercising often, not smoking, and going for regular screening.
For those who have chronic ailments such as diabetes, it will be important to follow their doctors' orders, for this will mean the difference between a high quality of life - or none at all.
Yes, MediShield Life gives the assurance that big hospital bills will be taken care of.
But my sincere wish is for people to happily keep paying premiums - and never needing to claim for any bills at all.
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