Focus on Healthcare is a five-part series that provides a critical analysis of Singapore’s healthcare system, popularly known as the 3M system (MediShield, Medisave, Medifund). Through it, we hope to provide an understanding of how healthcare financing is currently being funded and used in Singapore, and explore the ways in which this can be further enhanced to cater for the needs of Singaporeans.

In this third part, we do some back-of-napkin calculations on how best to stretch existing funds from our 3M surpluses, to get something closer to universal healthcare coverage.


By Roy Ngerng and Leong Sze Hian

We have thus far ascertained that Singapore’s 3M healthcare system is far from providing universal coverage, and there is still a lot more available funds in the system that can help fund the healthcare needs of every Singaporean. How, then, do we tap this resource?

Let us do a thought experiment. In part two of this series, we calculated that the government disburses about 1.8% of the total 3M balance.

What if we increased the total 3M expenditure by 10 times, from 1.8% to 18%? Even then, there would still be another 82% in the 3M balance which is untouched. But more importantly, just by increasing the 3M expenditure by 10 times, we might just be able to fully cover the total health spending of all Singaporeans.

Along with what was covered in part one, we surmised that the 3M expenditure of about $1.095 billion accounts for only 8% of the total health spending.

Similarly, by increasing the spending by 10 times, at $10.95 billion, the 3Ms would be able to cover 80% of the total health spending, with the rest being covered by subsidies. And even then, we would still have more than $53 billion in untouched balance in the 3M.

3M expenditure

This is not forgetting that in 2005, “the Central Provident Fund Board (CPFB) (had spun) off its MediShield Plus plans to a private insurer, through a competitive tender.

Was the surplus from the MediShield Plus also transferred, or was it transferred back into the MediShield reserves? If so, would there also have been a larger pool of MediShield reserves?

In addition, about $86 million of Medifund surpluses were previously transferred into the Reserves. What were the reasons to transfer the Medifund surpluses into the Reserves? If the Medifund surpluses had been retained, they would have been able to grow a larger pool of Medifund to benefit more “needy” Singaporeans. Also, if the Medifund surpluses were transferred into the MediShield instead, Singaporeans would have been able to benefit from the stronger financial protection, and we would also have a larger pool of Medifund/MediShield.

As of now, lower-income Singaporeans are not able to buy additional MediShield coverage from private insurers. As the Ministry of Health stated, “Many middle and higher income Singaporeans have also supplemented their basic coverage with integrated private insurance policies (“Integrated Shield plans”) for treatment in the private sector.” But the low-income Singaporeans have been left out in the process and as a result, there is a gap in their healthcare financing needs that is left unfilled.

Clearly, the government could easily increase the 3M expenditure by 10 times and allow all Singaporeans to be adequately covered. There wouldn’t be a need to buy private insurance for healthcare, and everyone would be covered, whether you are rich or poor. One wonders if the government is aware of the massive surpluses in the 3M scheme, and that it could increase its spending to offer full financial coverage, a necessary step towards true “universal healthcare” for Singaporeans, and still be able to retain at least 80% of the balance untouched.

Ironically, MOH said that “MediShield is a not-for-profit insurance scheme focused on protecting Singaporeans against large subsidised bills.” At this point, MediShield withdrawals make up only 25% of the MediShield reserves and only 2% of the total health expenditure.

Meanwhile, MediShield operates on a 75% surplus, while Singaporeans still have to pay out-of-pocket or through private insurers 69% of their own healthcare needs. Does the “not-for-profit” argument still stand? And can the Singapore government do more to truly allow Singaporeans to enjoy “universal healthcare”?

Since the overall 3M balance is more than adequate to cover for all health expenditure in Singapore, there is in fact no need for Singaporeans to buy private health insurance, since they can be all covered under a national public health insurance plan. The current system creates unnecessary duplication.

Also, the premiums that we and our employers pay to private insurers for private health insurance has accumulated into a separate private MediShield Plus and private insurance balance.

Including the $64 billion in the 3M balance, exactly how big is the pool of 3M + private insurance balance?

To further illustrate what more can be done before the government asks Singaporeans to pay more, let’s take a look at the CPF contribution rates.

As reported in The Heart Truths, “For the CPF, ‘the Ordinary Wage Ceiling is $5,000’. This means that the ‘maximum amount of CPF payable’ for anyone is based on a wage ceiling of $5,000. So, if you earn above $5,000, you still pay a 20% CPF based on a $5,000 monthly wage, or $1,000 every month. You don’t have to pay CPF for the rest of your income.”

What this means is that everything else being constant, after the $5,000 wage level, a person who earns more than $5,000 does not pay 20% of their wages into the CPF. Instead, the more they earn, the lower the proportion they pay into their CPF. Thus for someone who earns $10,000 every month, for example, he or she would only be paying 10% (S$1,000) of his wage into the CPF.

3m cpf contribution rate

If everyone were to contribute an equal proportion of 20% of their wages into the CPF and risk-pooled, the increase in the 3M reserves would be quite substantial. A greater pool of reserves would allow more low-income families to more readily access healthcare and allow for a higher balance to be accumulated in the 3M reserves.


So, do taxes and the GST need to be increased?

PM Lee announced minor tweaks to Singapore’s healthcare financing system but had at the same time said that the MediShield premiums and Medisave contribution rates would need to be increased to fund these minor tweaks. Not only that, it has been suggested that the GST might also need to be increased as well.

It begs the question: Why is there a need to increase revenue sources and rates to fund the 3Ms, when the payout for the tweaks to MediShield and Medisave is likely to be a lot smaller? Where will all the additional revenue collected go to, when it is clearly not pumped back to fund citizens’ utilisation of the 3M system?

As such, there is a very strong case to be made that before the government even considers increasing Singaporeans’ burden, the government should first and foremost increase its own share from the 3M investment profits, and allow for Medisave to cover a larger proportion of healthcare bills, and for a wider variety of uses.

Second, before a rise in a broad-based tax such as the GST is introduced to all Singaporeans, the government should equalise the CPF contribution rates for everyone, regardless of their income level.

Increasing the government’s expenditure and equalising the CPF contribution should be more than enough to ward off any need to increase taxes broadly on all Singaporeans for many years.

It is very clear that there is currently no need for Singaporeans to pay for the expected increase in healthcare costs, as there are substantial surpluses in the 3M balances and there is no major pressing financial reason for doing so.

Singaporeans would have very good reasons to question any proposed increase in MediShield premiums and the Medisave contribution rates, as well as any increase in taxes and GST, if it does come to that. It might be worthwhile for the government to share with Singaporeans the computation behind the 3M schemes, to convince Singaporeans on the long-term planning behind these schemes, as well as their utilization, before the government proposes any other increases to Singaporeans’ 3M contribution.

Stay tuned for part four, where we benchmark Singapore’s state healthcare expenditure against those of other developed nations.

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