Healthcare Funding in Budget 2014: Government Spending vs. Private Spending

By Singapore Armchair Critic

In my earlier blogpost on healthcare funding, I highlighted that our government spending on healthcare is the lowest among the advanced economies in East Asia and Scandinavia, including Hong Kong, South Korea, Taiwan, Japan, Denmark, Norway and Sweden.

The chart below shows that Singapore government spending on healthcare is only 36% of total healthcare spending. Take note that our Medisave monies spent on health are not counted as out-of-pocket spending.

(Data sources: WHO Data Observatory, Taiwan & Hong Kong). Note that Medisave is not counted as out-of-pocket spending in the Singapore figure.

In the 2013 Budget Speech, the 2013 National Day Rally Speech and the 2014 Budget Speech, the government has repeatedly indicated that it will look into reducing individual out-of-pocket expenditure on health and increase state spending on health. Deputy Prime Minister Tharman Shanmugaratnam said in last Friday’s Budget Speech that “Government healthcare spending for the population as a whole will grow, quite apart from the extra benefits we are providing the Pioneer Generation.”

However, the Budget Speech gives no indication on how much government healthcare spending may increase as a percentage of the total healthcare bill, vis-à-vis private health expenditure including individual out-of-pocket expenses, Medisave payment and insurance.

This missing piece of vital information is found in a Straits Times report “Footing the Bill” (16 November 2013), which indicates that the government shall increase its share in total health spending from the current 35% to 40% or more in the future.

Now refer to the above chart and we can see that even if raised to 40%, our government health spending is still considerably lower than that of other advanced economies. Furthermore, this increased government spending is partially offset by the proposed tax changes, i.e. the additional annual tax revenue of SGD 445 million from tobacco, liquor and betting.

As indicated by the Budget Speech, the increased government spending on health shall be in the form of tax-funded subsidies and Medisave top-ups. At the same time, our private expenditure on health shall go up too as we pay for higher Medishield premiums, contribute more to Medisave and also dig into our pockets to pay for higher healthcare costs.

The table below summarizes the Budget Speech details on how government and private health spending are channeled to three items: Medishield Life, outpatient care and Medisave.

Note that subsidies for the Pioneer Generation are not means-tested whereas those for lower/middle income groups are.

Gathering from the information we have at hand, I would say it is too early to rejoice because we do not know:

How much healthcare costs will increase in 2014
On the whole, healthcare costs went up by 4% in September 2013 from September 2012. This includes 3.7% inflation in medical treatment (see Table below).

How much Medishield Life premiums shall cost (pending proposal by MediShield Life Review Committee in May 2014)
The cost of medical health insurance already grew by 9.5% in September 2013 year-on-year; how much higher will premiums be for Medishield Life with universal coverage?

How Medisave usage for the elderly shall be less restrictive (no details yet)
And no, medisave usage will not be more flexible for the rest of the younger population.

This is to say that while government health spending as a percentage of the total healthcare bill may increase with the proposed changes drawn up in the Budget Speech, individuals who do not fall under the lower and middle income groups may still have to fork out more in absolute amount – in cash and through Medisave – to pay for higher insurance premiums and higher medical costs over the long term.