Does Singapore need a new approach to healthcare? Comparing SDP’s healthcare policy with 3M healthcare scheme

Much has been said about the affordable healthcare system in Singapore. In particular, the 3M (MediSave, MediShield (Life) and MediFund) formula has been hailed as an effective system to help keep government healthcare expenditure low while not burdening people which heavy out-of-pocket medical expenses.

In fact, Ministry of Health (MOH) has said on their Facebook page that “Singapore has come a long way as we work to build a healthcare system that is accessible, affordable and provides quality of care.” The website notes that the healthcare system in Singapore is designed to ensure that “everyone has access to different levels of healthcare in a timely, cost-effective and seamless manner.”

However, in recent years we’ve heard more and more stories of how average Singaporeans are struggling to keep up with rapidly rising medical costs. With an ever ageing population, healthcare has become a major concern for the country.

The most recent story of how healthcare is becoming a burden is that of a Singaporean whose application to withdraw from his CPF ordinary and special accounts to pay for his wife’s cancer treatment was denied by the CPF Board. Suriia Dass’ wife Sarojini Jayapal, who was diagnosed with cancer, decided to seek treatment at Mount Elizabeth Hospital – a private institution – as they were the only ones that said she had a chance of beating the illness.

According to CPF themselves, Ms Jayapal has withdrawn all her CPF savings and both her and her husbands’ MediSave accounts to pay for her treatment. The couple has also resorted to borrowing money from moneylenders, family, friends and Mr Dass’ company. To continue the treatments, the husband now wants to withdraw his own CPF savings for pay for it but the CPF Board has denied his application due to policy restrictions.

What this illustrates is that if hit with a catastrophic illness like cancer, the average person or couple in Singapore will likely not have enough money to see them through the illness under this 3M system. And if they are lucky to hold on just long enough for treatment to work, they will most definitely end up heavily in debt and would have dried up their entire retirement savings.

In 2017, S$17.26 billion was spent on healthcare services (hospitals, western clinics, non-western clinics and dental and others) by patients seeking medical attention. In 2016, it was S$16.23 billion.

High medical cost and out of pocket payments

Just recently we published an article about how public polyclinics appear to be charging higher medical fees than private clinics – people don’t seem to immediately notice purely because of these so-called subsidies provided by the government.

When you look at unsubsidised costs at public polyclinics, they are much higher compared to the same at private clinics. So really, the subsidies are not helping the way we think they are and healthcare costs are not as cheap as they are said to be.

According to ValueChampion, Singaporeans pays very high out-of-pocket costs for healthcare even after taking into account every subsidy and insurance coverage available. In fact, out-of-pocket costs make up almost 37% of the total healthcare expenditure in Singapore – that’s almost three times higher than the high income-country average and 1.4 times higher than the East Asia & Pacific average.

It does not help when we have the cost of public healthcare being similar or more expensive after subsidises. The most recent example of this was presented by blogger Phillip Ang who found that the consultation fees at a public polyclinic was much higher than that at a private clinic.

On his blog, Mr Ang detailed his experience of getting a consultation at a public clinic for a cyst removal which involved seeing a GP, then a specialist and looking at an estimated bill for an operation. The total he would have had to pay including the operation was S$325 after subsidies. Deciding to take the private clinic route instead, Mr Ang only paid S$280 for the same consultations and procedure, much lower than what he would have had to fork out at a public clinic.

What this illustrates, Mr Ang says, is that “polyclinic patients do not enjoy high subsidies because consultation fees have been inflated to higher than private GP rates”.

“Assuming a 70% ‘subsidy’, total unsubsidised cost for a cyst operation at government hospitals is about $1000. Obvious to even an idiot, government claims of patients enjoying huge subsidies cannot be true,” he wrote.

So as you can see, the current system which was developed decades ago just doesn’t quite work anymore.

SDP’s single-payer healthcare plan

So what will? Well, Singapore Democratic Party (SDP) Chairman Prof Paul Tambyah who has been in the medical industry for decades, pointed out in a speech on SDP’s own plan that the current healthcare system runs like “a profit-making venture which consistently collects surpluses far in excess of the money spent taking care of patients.”

“Healthcare is treated like a commodity where people avoid important primary healthcare services because of the costs and end up spending a lot of money treating complications that could have been prevented,” Prof Tambyah said.

As an alternative, Prof Tambyah suggested a model based on equal treatment for all individuals, “care based on clinical need and not on ability to pay.”

Under SDP’s proposed plan, current MediSave money will be returned to each person’s CPF ordinary account. On top of that, they also propose a single-ward class which provides the same treatment for all individuals based on clinical need, instead of one’s ability to pay for the quality of treatment.

The plan will scrap the 3M system and replace it with a system which provides more comprehensive coverage. The party proposes a single-payer system under a new National Health Investment Fund (NHIF) into which the public contributes individual payments while the government contributes investment returns.

This would require compulsory individual contributions into NHIF to be taken from one’s CPF with the amount averaging to about S$600 per person per year (or S$50 per person per month), depending on your income level. The payments are a premium that will provide coverage for basic health, accidents, and pregnancy for all residents.

Variable premium is not unique as MediShield also uses it based on age and income group. It varies between S$98 a year to $1530 a year. But note that while Medishield has no lifetime limit for claims, it imposes a cap of $100,000 per policy year.

Full-subsidies for the poor and unemployed

Another aspect of SDP’s healthcare plan is that it is engineered to function with up to 25% of the population under a Full Subsidy (FS). This means that the poor and unemployed in Singapore will receive full subsidy of their medical expenses and they won’t have to fork out a single cent.

Anticipating concern over the sustainability of this plan and potential abuse, SDP also proposes strict restrictions. For example under the ‘unemployed category’, a young, able-bodied and able-minded person who is on unemployment benefits but is not seriously seeking employment will be required to renew their FS status every three months and then every two months once their unemployment benefit expires. Failing that, they will be automatically reverted to the regular status requiring them to co-pay for medical expenses.

Additionally, SDP is proposing regular strict audits of people on the FS scheme.

And to maintain the lesson of personal responsibility and reduce abuse of the system – something that the Prime Minister has reiterated is what 3M is supposed to do – co-payments will be disbursed with a cap.

3M versus single-payer system

Some critics have argued at SDP’s plan will only bankrupt the system, saying that the plan is not sustainable. But will that really be a problem?

As SDP’s plan is meant to cover all residents working in Singapore including low-paid foreign labour, taking the number of Singapore’s resident (citizen & PR) labour force as well as the foreign labour force (all employment passes and permits) in 2017 according to MOM, that’s 2.27 million and 1.368 million people respectively. That totals to 3.638 million people who will contribute about S$50 a month into the proposed NHIF, amounting to roughly S$2.18 billion a year.

If you look at the numbers for MediSave, the Ministry of Health recorded a total of approximately 3.5 million accounts in 2017 which total up to about S$89.5 billion. That’s an average of S$25,600 per account. However, the total amount withdrawn in direct medical expenses under MediSave that year was only S$945 million or around 1% while around S$7.5 billion was collected via MediSave contributions.

For MediShield, as of 2017, a total of S$5.7 billion sits in its reserve. S$845 million was paid out to cover 555,000 claims in that same year with an average payout of S$1,520 per claim while around S$1.88 billion was collected as premium. The average payout for the top 10% of bills is approximately S$5,800. As for the bottom percentage, a lot of the bills would not qualify for claims because the deductible sum had not been met for the policy year.

For MediFund, MOH reported that it provided a total of $149.8 million through 1,179,525 successful applications in assistance to needy Singaporeans on their medical bills 2017.

As for ElderShield, we are unaware of the annual collection in 2017 but Minister of Health Gan Kim Yong revealed in May 2018 that out of the S$2.6 billion collected in ElderShield premiums between 2002 and 2015, only about S$100 million was paid out. That is less than 4% of premiums collected and where you have cases such as ElderShield members like Mr Teo who is certified blind but denied payment by the insurer.

So in total, under the 3M system where billions of taxes, premiums and contributions have been collected by the government, a mere S$1.94 billion was paid out in 2017 to relieve the burden of medical bills while at the same time, $9.4 billion was collected under MediSave and MediShield, not including the taxes paid to the government and the interest generated from the huge reserves of MediSave. A moderate return of 6% of the MediSave assets in 2017, if it was invested prudently, would have been S$5.4 billion.

So we can see that under SDP’s plan, the monthly premium that people would need to pay is significantly less than what they are paying now for MediSave and MediShield combined, for higher coverage and payout.

No transparency in profit and loss of govt medical insurance

Justifying the disparity of the ElderShield payout of premium collected and its payout of claims , Mr Gan said “it is prudent for the total amount of premiums collected to exceed the amount of claims paid while our policyholders are still young, because the premiums collected are meant to provide coverage against future claims throughout the policyholder’s lifetime” as “the proportion of claims over premiums collected has been increasing since 2002.”

But that explanation doesn’t address the need for additional premiums under the new CareShield Life Scheme. There’s already lots of money collected from ElderShield premiums, more than sufficient to cover the payouts even if the cumulative value of the require payouts increase by 15-20% over the next 15 years. The substantial surplus could also be invested to generate further returns, thus reducing the need to raise premiums on a regular basis.

The thing is, the Ministry of Health has relied on the rationale of pre-funding in the past when questioned about MediShield collecting almost three times what was paid out between November 2015 and September 2016. That implies that MediShield is sustainable on a 3:1 ratio of collections to payouts. Looking at the ElderShield numbers, the ratio is much higher with collections to payout ratio at less than 4%.

So what is the government’s actual justification for consistently increasing premiums in all these plans while sitting on such a huge reserve?

Blogger and newly-turned politician, Leong Sze Hian often asks on his blog for the Singapore government to make its actuarial report public. He also asks an inconvenient question, “Are there any countries in the world, whereby the mandatory national health insurance scheme is apparently, making money?”

SDP ahead of PAP’s time? 

On financing of its healthcare plan, SDP had proposed for the healthcare expenditure of the government to be increased from $4 billion to $10.5 billion back in 2012 and was criticised for it by the ruling party during the General Election in 2015.

However, in 2014, then-Deputy Prime Minister Tharman had already said that the government’s projected healthcare spending is expected to triple by 2020 to S$12 billion from S$4 billion in 2011. And according to the MOH website, the government’s healthcare expenditure was S$9.29 billion in 2018, up over S$600 million from the previous year’s S$8.64 billion, which is not too far from what SDP had been proposing.

Now if anyone were to seriously think about it, the only drawback to SDP’s plan compared to the current 3M system is that the government won’t be able to keep the ridiculous amount of money that people pay for their medical protection.

As we’ve illustrated in this article, people have already been paying a great deal in their annual MediShield premiums and monthly MediSave contribution but the coverage and protection they receive in return are minuscule, barely enough to meet their needs when a catastrophic illness hits a member of the family. As the Singapore population ages and with fewer dependants, more will have to rely on their insurance for future healthcare cost but how many will be able to foot the increasing premium and cost of treatment?

The fundamental point we have to remember before asking ‘how much is enough’ or arguing that you don’t want to contribute to anyone’s medical fees – such as the case at the beginning of this article of Mr & Mrs Dass who are both trying their hardest to fight the illness – is that no one chooses to be sick.

Should unlucky families be penalised for losing the genetic lottery by inheriting rare and destructive diseases be left to their own devices? And should their medical fees be borne by good samaritans donating on charity platforms or should it be covered by a national healthcare system like what SDP is proposing?