MEDISAVE SCHEME (Details)

Mr Goh Chee Wee asked the Minister for Health (a) if he can furnish details of the proposed Medisave Scheme; and (b) whether the proposed Scheme will affect the medical benefits schemes currently being offered by employers and whether it will not discourage employers from providing medical benefits to employees which are normally covered by collective agreements between the employers and the unions.

The Minister of Defence and Second Minister for Health (Mr Goh Chok Tong): Mr Speaker, Sir, the Medisave Scheme affects every Singaporean. I will, therefore, discuss the Scheme with various civic organizations and other relevant bodies before finalizing it. As it is, three talks with 150 CCC members are planned for next month.

I will, therefore, not be able to furnish full details of the Scheme today. I will, however, outline my Ministry's thinking on the subject. At present, the combined CPF contributions from an employer and his employee amount to 45% of the worker's salary. This rate is expected to be raised to 50% within the next three or four years. A portion, equivalent to 6% of the salary, will be reserved to form a Medisave Account. The Medisave Account is an individual savings account to meet hospitalization expenses; it belongs to- the particular employee. It is not an insurance account. The contribution is, therefore, not an insurance premium.

As the combined contributions to CPF are subject to a ceiling which, at present, equals to $1,350 per month, the 6% contribution to Medisave will also be subject to a ceiling at $180 per month. The employer and the employee will contribute equally, i.e. 3% each.

Should the employee be hospitalized and incur a hospital bill, he may withdraw from his Medisave Account to pay for the bill. The Medisave Account also extends to his immediate family members (spouse, parents and children). In other words, he can also withdraw from his Medisave Account to help pay the hospital bill incurred by any of his immediate family members.

In deriving at this contribution rate of 6%, my Ministry took into account:-

(a) the frequency of hospitalization actually experienced by Singaporeans over the last 10 years;

(b) the length of hospitalization, and

(c) the services rendered to the patient while in hospital.

A detailed study of past hospitalization records shows that more than 90% of Singaporeans were hospitalized only twice or less during the last 10 years. 44% were hospitalized only once, 12% twice and 35% never. 5% were in hospital three times and only 4% more than three times. The hospitalization incidence includes admissions of mothers at the 0 & G wards.

We calculate that at a contribution rate of 6% of salary, most households will have sufficient savings in their Medisave Accounts to cover their expected hospitalization expenses. Our calculations were based on charges for treatment in Class C wards. Class C will continue to be heavily subsidized in this decade to ensure that Singaporeans can afford basic hospital care should they need it under the Medisave Scheme.

It is possible that some Medisave Accounts may not have sufficient funds to cover hospital costs at the time of hospitalization. For instance, a young worker who has just started working may not have accumulated sufficient savings in his Medisave Account. If he or his family member falls sick and requires hospital care, we may allow his Medisave Account to go into the "red", i.e. giving him the equivalent of a bank overdraft. He will pay it back through subsequent contributions to Medisave.

To answer the second part of the question, we know that at present:-

(a) not all employers provide medical benefits to their employees;

(b) very few employers extend medical benefits to the dependants of the employees; and

(c) not many employers extend medical benefits to their employees beyond retirement age.

The Medisave Scheme covers all family members. It takes into account the employee and his spouse's hospitalization needs after retirement. For most employees, it is, therefore, an improvement over their present medical benefits scheme.

The Medisave Scheme is not intended to replace the current medical benefits schemes provided by employers. It does not cover outpatient treatment, for example. Employers who currently provide medical benefits to their employees may, however, consider modifying their medical schemes to take into account Medisave. For instance, an employer may stipulate that his employee must be responsible, through his Medisave, for the first few dollars of his hospital bill. The employer will take care of the rest. This will provide the employee with an incentive to stay well.

Another possible modification is for the employer to upgrade the ward-eligibility status of the better workers. For example, an employer may require all his employees to pay for hospitalization in Class C wards out of the latter's Medisave Account. He may then put the better worker in Class B or Class A wards and paying for the extra charges.

Mr Speaker, Sir, it may take me a few more months to finalize the Medisave Scheme. To be sick and unable to afford basic medical treatment is utter misery. We want to ensure that such misery does not befall any Singaporean. There are now many more aged sick who find themselves abandoned by their families because they have become a burden to them. With Medisave most Singaporeans will in future be able to pay for their basic health care with dignity long after they have retired. For those who cannot, they will still be treated. Medical treatment will not be denied to anyone, young or old, on the ground that his or his family's Medisave Account has run out.

Mr Jeyaretnam: Mr Speaker, Sir, as I understand the Minister, the plan is to enable an employee to pay for his medical care out of his savings with the CPF. Would the Minister say what plans his Ministry has for those who do not make any contributions to the Central Provident Fund?

Mr Goh Chok Tong: Mr Speaker, Sir, for those who are not working, their hospitalization expenses will have to come from the working member's Medisave Account. As for the self-employed who do not have a CPF account, our present thinking is that they too must voluntarily have a Medisave Account. This can be done by perhaps charging these people a fee on a cost basis unless they have a Medisave Account, in which case they will get a rebate on the cost which they have incurred for staying in the hospital. This will provide the necessary incentive for the self-employed to start a Medisave Account.

Mr Sia Kah Hui (Paya Lebar): Mr Speaker, Sir, if a member's Medisave Account is in the red, is he required to pay interest?

Mr Goh Chok Tong: Sir, if his Medisave Account earns interest, then if it goes into the red, he has to pay interest. If the Medisave Account does not earn interest, then, of course, he will not be charged any interest.

Mr Goh Chee Wee: Mr Speaker, Sir, the current practice is that the employer provides more or less the same amount of hospitalization benefits to his employees irrespective of their wages. In other words, a worker earning $300 a month is covered to the same extent as a worker earning $1,000 a month. Under the Medisave Scheme the amount of the employer's contribution to the Scheme is based on the salary of the worker. So a worker who earns $300 a month would only have $18 a month in his Medisave Account and he is the one who probably could not afford the medical bills; whereas a person who earns $3,000 a month -

Mr Speaker: What is your supplementary question, Mr Goh?

Mr Goh Chee Wee: Coming, Sir. Whereas a worker who earns $3,000 a month is credited with $180 a month in his Medisave Account. May I ask the Hon. Minister whether it would not be more equitable and sensible to ask the employer to contribute a fixed amount to the Medisave Scheme irrespective of his employee's salary or, alternatively, could a minimum amount be stipulated for the benefit of the low income group?

Mr Goh Chok Tong: Mr Speaker, Sir, there is a contradiction in the question posed by the hon. Member. He has mentioned that at the moment employers provide medical benefits to their employees regardless of their wages. In other words, if an employee has to go to the hospital, whether he earns $200 or $500 a month, he would be reimbursed or be given the same benefit. The Medisave Account is not intended to replace the employer's medical benefit scheme. So if the employer were to pay a fixed amount to the employee regardless of his earning capacity into his Medisave Account, the employee would in effect be given double medical benefits. He is already enjoying fixed medical benefits under the present medical benefit scheme and if at the same time he is to enjoy a fixed amount, it could come up to 20% or 30% of income for the lower income worker. The Scheme which we envisage can be modified, however, by employers. Good employers may wish to top up beyond the 6% envisaged for their good employees. There is nothing to stop them from doing so.

As for his suggestion that we consider a minimum, I think that is a valid suggestion. If the income of certain workers tends to be on the low side and is unlikely to increase over time, perhaps a minimum would help the employee to build up his Medisave Account. But this is something which we would like to look into carefully before we decide.