MEDISAVE SCHEME

The Minister of Defence and Second Minister for Health (Mr Goh Chok Tong): Mr Speaker, Sir, I beg to move the Motion* standing in my name as it appears on the Order Paper.

*The Motion reads as follows:

That this House having noted the National Health Plan -- A Blue Paper by the Ministry of Health, February 1983 as contained in Paper Misc. 4 of 1983,

(1) approves in principle the Medisave Scheme which will enable Singaporeans to set aside their own savings to meet future hospitalisation expenses; and

(2) recommends that there be periodic reviews in the implementation of the Scheme and that adjustments be made when experience shows this to be desirable.

Health care concerns everyone. Healthy living, preventing people from getting sick and curing those who do is the responsibility of the whole State and all its citizens. It is for this reason that I have moved the above Motion only after many months of public discussions on the subject. The National Health Plan, in particular the concept of Medisave, was finalized as a Blue Paper only after my Ministry has brain- stormed it with a cross-section of people - medical personnel, members from the mass media, employers, workers, unions, and the consumers as represented by the CCCs and the RCs, and others.

Even then, it is not in its final form. After its release in February this year, we have received further feed-back, and studied the considered views submitted to the Ministry by several individuals and organizations. My Ministry thanks them all for their valuable contributions. I hope hon. Members will be free this afternoon with their observations, suggestions, criticisms and comments on how to improve our health system.

A common observation about the Blue Paper is its brevity and lack of details. The broad brush strokes were deliberate. The Paper deals with ideas and not the minutiae of health care. Its conciseness makes for easier reading.

The National Health Plan aims:

(i) to build a healthy, vigorous, active and physically fit population through healthy living, prevention of illnesses and community care; and

(ii) to give all Singaporeans proper access to efficient health care services at a cost the individual and the country can afford.

This is not just a pious hope. It can be achieved with realism and compassion. The heart of the National Health Plan is the Medisave Scheme.

In conceiving the Medisave Scheme, the details of which are spelt out in Part 11 of the National Health Plan, we have the advantage of perfect hindsight. Many developed countries, for example, Britain, West Germany, France, Italy, Australia and Japan, have implemented different variations of a liberal "cradle to grave" health care service. We have studied the efficacy of these welfare models 30, 40 years after their birth. We have seen their quick degeneration from their first youthful blush to their present pallid state as the cash runs out, and the services run down, unable to meet ballooning demand. We will be silly not to inoculate ourselves against this nationally disabling, degenerative disease.

Where is my evidence for this indicting statement against the health care systems of the advanced countries? I have here a World Health Organization publication written by an English freelance journalist, Peter D. O'Neill, entitled "Health Crisis 2000". Let me quote from its opening two paragraphs:

'As Europe enters the last two decades of the 20th century, the WHO Regional Office for Europe has no option but to warn that there could be a health crisis by the year 2000 unless radical steps are taken by the public, the professions, industry, and the governments of the Region. This is no idle warning. A careful analysis of trends in health and disease, made over the past three years by representatives of the medical profession and the health ministries of the Region's 33 Member States, has produced ominous signs that our health policies since the Second World War have set us on a dangerous course.

The glittering attraction of high technology and the public's demand for "miracle cures" have meant that we have almost abandoned the principle of self-care in a "caring community". We have inflicted wounds on ourselves, in the belief that science, doctors and hospitals would find a cure, instead of preventing the very causes of illness in the first place. Of course we cannot do without the medical care facilities that actually save life, but let us be clear that they do not add to our "health" - they stop us dying. Hospitals can only "cure" probably between 10% and 20% of disease. Instead of promoting health and preventing disease, we have invested the bulk of our health budgets in "disease palaces" [in other words, hospitals] which have really only cured our acute illnesses. Moreover, some countries have not only built hospitals that are too expensive for the return they give in terms of health, they have also built too many.'

Europe faces a health crisis because the welfare model of free medicine has not worked. Free medicine does not reward those who make an effort to stay healthy.

There is really no such thing as free health care - whether in Britain, West Germany or USA. Every person who works pays for the country's health care system. If he gets it free at the point of utilization, it is because he has paid in advance for it, either in the form of taxes, compulsory national health insurance, or voluntary health insurance. The result of this illusion of "freeness" leads to unrestrained growth in demand, spiralling health costs and of course queueing for services. In Britain, a patient was diagnosed as a case of detached retina two years ago. She still has no appointment for her eye operation. She is forced to wait for treatment from the National Health Service simply because she cannot afford the cost of private treatment, and there is a long queue waiting for eye operations. (This case was reported in the 11th August issue of The Listener.) In a sense, she does not have proper access to the National Health Service even though she has paid for the service, in advance through taxes.

As for escalating health costs, the governments concerned can only watch helplessly as more and more resources are poured into what seems like a bottomless pit. I will give you two examples: one from Britain and the other from West Germany.

Britain

In the year 1965, Britain spent a total of o1.3 billion on the National Health Service. In terms of per capita expenditure, it was o23. As a percentage of her Gross Domestic Product, it was 4.1%. The two key figures are o23 and 4.1%. In the year 1981, the total expenditure went up by about 10 times to o13.4 billion. Per capita expenditure has, of course, shot up by about 10 times to o240. And in terms of percentage of her GDP, it has gone up from 4.1% in 1965 to 6% in 1981.

West Germany

West Germany has a Statutory Health Insurance System which covers 90% to 92% of the population. The insurance system is financed by contributions in the form of earmarked payroll taxes as a percentage of wages, 50% from employer and 50% from employee. In terms of percentage to wages, i.e. the rate of contribution as a percentage of wages, in 1970 it was 9.2%. As a percentage of West Germany's Gross National Product, it was 3.7%. In 1982, the contribution rate went up to 12.1% of wages. As a percentage of GNP, it was 5.7%.

In Singapore, we have never been enticed by the permissive "come hither" look of free medicine and free beds. We have always resisted their seductive advances. We charge for outpatient treatment and 'C' Class beds. We have, therefore, restrained spurious growth in demand for medical attention. We have kept costs down to 3.3% of Government revenue, and 1.0% of our GDP. This had misled many a knowledgeable person to conclude that there is no need to revamp our present health system. I have heard arguments that in fact we have underspent on health, and can even afford to increase or subsidize health expenditure further.

This is myopic perception. It is like arguing that we need not save for old age because we are working now. It is like believing that there will be no rain tomorrow just because the sun is out today. Is there any divine law to guarantee that our economy will grow by at least 8% per annum for the next 20 years? Will the number of people over 60 years of age remain forever small? In 1957, only 3.8% of our population was over 60 years of age. Today, it is 7.4%. In the Year 2000, it will be 10%, or one in 10 persons will be over 60 years of age. This Government has an abiding duty to look after the health of Singaporeans, not only today, but 20, 30 years down the road and way into the 21st century. Young Singaporeans are born today. When they grow old, they must not be made to wait one or two years for an eye operation, a hip operation, or for hernia repair.

How do we discharge our duty? First, we have to maintain medical standards, both now and in the future. Then we have to make sure that there are enough funds to pay for good doctors, nurses, facilities and medicine, in order to maintain standards. If the Treasury runs dry, standards must go down as doctors and nurses leave for greener pastures in the private sector, and even overseas. When standards go down at the public hospitals, the average Singaporean must suffer, like our British patient with the detached retina who cannot afford the cost of private treatment. We have no intention to let him suffer in the future. We must therefore save when we can, put a few dollars aside every month when we are working, save as an individual, as a nation. This is the basic idea of Medisave - to provide funds for our citizens to pay for their future health needs, for them to buy an umbrella when it rains; and even before it rains. If our Singaporean patient has funds in his Medisave account, he can even choose private treatment if he likes!

We must all be more aware of the true cost of medical treatment. An appendix operation costs about $2,000. But the patient pays only about $200. We therefore think surgery is cheap. It is not! There must be a better relationship between fees charged and the cost of treatment. Otherwise, the health care service must sooner or later run out of cash. And when cash runs out, standards must go down. We have no choice but to gradually reduce the level of subsidy. But let me make it clear that in absolute dollars and cents, there will be no reduction. In fact, we expect the absolute quantum of overall subsidy to go up.

Let me explain. For every $100 we spend on a 'C' Class patient, we now charge him approximately $10. We subsidize him $90. We will not reduce the present absolute quantum of subsidy of $90. But if costs go up to, say, $115, there must be a more equitable sharing of the increased cost of $15. Let us say he bears $10 and the Health Ministry or the State $5. He will now pay $20. We continue to subsidize him $95. This will go on each time there is a cost increase. In other words, although the patient will have to pay more, the subsidy will in fact also increase.

May I emphasize that this formula for cost-sharing will not be implemented mechanically and insensitively. How much of the cost increase at each occasion should be assumed by the patient will have to take into account his ability to pay. We will have to see the balance in his Medisave Account; of course on a national basis.

May I also add that we are talking only of annual operating costs. Capital expenditure on land and hospital facilities will not be reflected in hospital fees. Each hospital bed costs about $400,000. This cost will not be amortized or defrayed into fees. Capital expenditure will continue to be funded from general revenue. So will expenditure on prevention. In 1982, the Ministry spent $304 million on health care. Fees collected from OPDs and hospitals amounted to $72 million or 23.7% of the Ministry's operating cost. Even with increased fees, we do not expect the absolute gap between expenditure and revenue of $232 million to be reduced in future. We expect it to increase because of expenditure on preventive programmes and the chronic sick. This gap will continue to be funded by general taxation, which means those who earn more pay more. The lower income wage earners will, therefore, still be heavily subsidized for their health needs.

It was our intention to implement Medisave from 1st July this year. This would have meant increasing CPF rate from 45% to 50%, distributed as follows: Ordinary account : 40% Special account : 4% Medisave account : 6%

Due regard, however, was given to the state of the economy, the capacity of the employers to absorb the cost increase, and the desire not to reduce the employees' take-home pay. Accordingly, CPF rate has gone up by only 1%, to 46%, distributed as follows: Ordinary account : 40% Special account : 6%

There is no need for us to defer the implementation of the Medisave Scheme until the CPF rate has gone up to 50%. To do so is to hinge Medisave on the uncertainty of future economic performance and wage increases.

To get the Medisave going immediately, the Government is allowing the Special Account to be used for Medisave pur- poses. However, at the age of 55, an account-holder must leave behind a minimum of $10,000 or the actual balance in his Medisave Account, whichever is less. This will allow wage earners immediate access to funds for their hospitalisation needs, because you can now make use of your Special Account.

My Ministry fully sympathizes with the small minority who, through no fault of their own, may not have enough in their Medisave Accounts to meet their entire hospitalisation needs. They need not lose any sleep over this. They will be treated first and allowed to settle their hospital bills from future contributions into their Medisave Accounts. Moreover, the genuinely poor needing frequent or prolonged hospitalisation can seek a remission of their hospital bills. In other words, within the limits of our resources, all Singaporeans will have proper access to medical treatment, regardless of his ability to pay.

Sir, Medisave as presented in the Blue Paper is not something fixed and final. We will work it and through actual experience identify the problem areas. It has, therefore, the flexibility to accommodate further refinements and additional features.

Medisave is not the panacea to our health care problems. But it will at least ensure that the vast majority of us have enough funds, at all times, to pay for a high standard of hospital care. For those who do not, the State provides the safety net. May I conclude by emphasizing that it is not the present we are worried about. It is the future. We want to ensure that Singaporeans will always have a good health care system to turn to.

Sir, I beg to move.

Question proposed.

Mr Speaker: At this stage I shall take the Suspension so that Members can think about what they are going to talk. I suspend the Sitting and will take the Chair again at 5.00 p.m.

Sitting accordingly suspended at 4.28 p.m. until 5.00 p.m. Sitting resumed at 5.00 p.m.