Uniquely Singapore

Uniquely Singapore

Medishield – one of the most profitable in the world

Leong Sze Hian

I refer to the Committee of Supply debate in Parliament on the Ministry of Health (MOH).

In 2006, as a result of requiring all private insurers’ CPF Shield plans to incorporate MediShield, the number of MediShield policyholders grew from 1.26 million to 2.75 million in 1 year. Its loss ratio was only 53 per cent ($67 million paid out over $126 million premium collected in the first 10 months of 2006).

In this connection, MediShield’s loss and expense ratio improved to 40 per cent ($119 million claims and expenses over $297 million collection), according to CPF Board’s 2006 annual report. (CPF)

In my letter “Cap co-insurance so Class C patients pay less” (ST, Feb 11, 2005), I asked: “Now that MediShield Plus will be hived off to a private insurer, will the surplus accumulated be transferred to MediShield and, if so, what is the estimated amount?”

I also asked the question again 3 months later, in my letter “Hello, Anybody listening?” (BT, May 25, 2005).

If the surplus from MediShield Plus was say $500 million[1], the combined surplus for both MediShield and MediShield Plus may now be about $1.4 billion. (Medishield surplus is over $900 million.)

Medishield – most profitable in the world?

To the best of my knowledge, MediShield may be one of the most profitable medical insurance schemes in the world, even by private insurers’ benchmarks, which generally operate with a claims and expense ratio of about 80 to 90 per cent – compared to Medishield’s 40 per cent, as explained above.

In contrast to most other countries’ national health schemes, which generally operate with a deficit, funded through the Budget, and a “pay as you go” basis, Singapore’s is probably the exception, in accumulating increasing surpluses.

Whilst policyholders getting older are expected to have more claims, we should also take into consideration that premiums increase with age, and the pool of insureds keeps increasing, especially with the inclusion this year of all new-born children.

The ad-hoc top-ups to Medisave accounts may be consumed by increasing premiums, which despite warnings of possible deficits, have always resulted in increasing surpluses, whenever premiums are raised to enhance coverage.

I would like to suggest that the MOH’s actuarial projections be made public, together with a year-to-year accounting of loss and expense ratios, surpluses, and accumulated surpluses, so that the question of how much surpluses is enough may be studied and reviewed on an on-going basis.

Higher healthcare costs but subsidies remain at same level?

According to the Ministry of Health’s (MOH) web site, MOH has been absorbing GST in full for all subsidised patients in public hospitals and polyclinics since 1994. For example, in 2005, when the GST rate was 5 per cent, the Government paid for the full GST at a total of $28 million. Last year, when GST was raised to 7 per cent, government subsidies to offset GST increased to $39 million, continuing to benefit subsidised patients.

Do the above statistics mean that the amount of total subsidies was $560 million ($28m divided by 5 per cent) and $557 million ($39m divided by 7 per cent), in 2005 and 2007, respectively?

As I understand that hospital admissions, polyclinics, specialist outpatient clinics, A & E, attendances, and hospital occupancy rates, have all hit record highs, with significant increases from 2005 to 2007, why is it that the total subsidy amount appears to have remained about the same for 2005 and 2007- $560m and $557m respectively?

Have subsidies for subsidised patients increased in tandem with the increase in patients and higher healthcare costs?

GST contributed to healthcare inflation

In a letter to the Straits Times on January 31, 2008, both the Ministry of Health and the Ministry of Finance said:

“Subsidised patients do not bear any GST cost, as it is borne entirely by the Government. Hence, GST did not raise the cost of subsidised health-care services.”

I think this may not have adequately addressed the calls by members of parliament and members of the public, to exempt hospital fees, medicine and medical-related equipment from GST, because the bulk of healthcare spending is from non-subsidised, rather than subsidised services.

Therefore, the GST increase may have contributed to healthcare inflation hitting a high of 6.3 per cent in December, 2007.

If hospital fees were exempt from the GST, and MOH didn’t have to pay for the full GST at a total of $39 million in 2007, could some of this amount have been made available and even more subsidies given to needy patients?

With another $39 million, perhaps the two national health groups running the polyclinics wouldn’t have to announce recently that they have to start fund-raising activities to supplement some of the estimated $2.5 million required under the Medical Assistance Scheme, to enable needy patients who cannot afford to pay, to go to polyclinics, because Medifund cannot be used for polyclinics.

By the way, inflation has hit another high since 1982. According to the Department of Statistics’s (DOS) latest Consumer Price Index (CPI) report, Healthcare registered the second highest inflation of 7.4 % (housing was the highest at 9.9 %) among all items, for Jan – Feb 2008 over Jan – Feb 2007.

Inflation for the lowest 20 % of Households by income, was 1.3, 1.8 and 2.0 % for 2005, 2006 and 2007, respectively, compared to -0.1, 0.4 and 2.3 % for the highest 20 % income households.

With the implementation of Means Testing, Healthcare inflation for some may be even higher.


(1) “MediShield’s financial status must be protected”, Straits Times, Feb 16, 2005


Uniquely Singapore by Sze Hian features every Monday on TOC. 


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