NEW MEDICAL BENEFITS SCHEME FOR THE CIVIL SERVICE

Dr Richard Hu Tsu Tau: Sir, I will be speaking on a new Government medical benefits scheme for the civil service.

The White Paper on Affordable Health Care has recommended that our health care financing should be based on individual responsibility coupled with Government subsidies to keep basic health care affordable. It recommended that patients should pay directly for part of the cost of medical services which they use in order to avoid the pitfall of over-consumption of medical services which are provided `free' to the patient.

Many employees see employer-provided medical benefits as something which they get over and above their wages. This is a misconception. In reality, the cost of medical benefits is borne by the employees themselves because it is part of the total labour cost. More benefits must mean less pay and vice versa.

Currently, the civil service provides almost free access to unlimited medical services. The Government, as the largest employer in Singapore, will take the lead in moving towards the system recommended by the White Paper by introducing a new medical benefits scheme to coincide with the forthcoming salary revisions for the civil service.

The new scheme is built upon the national system of health care financing, namely, Medisave and MediShield. The Government will make extra contributions to employee Medisave accounts in lieu of hospitalisation benefits. However, as Medisave does not pay for most types of outpatient treatments, the Government will retain outpatient benefits in kind. Civil servants will also be able to use MediShield II to obtain additional insurance protection when this is introduced, should they wish to do so.

Converting medical benefits to additional Medisave contributions has several advantages. It will provide for employees' hospitalisation needs, but at the same time discourage unnecessary consumption. It gives the employee the freedom to choose how to use Medisave funds. He can use them for other family members, or buy more insurance protection with MediShield II. Whereas presently all Division I officers automatically get Class A treatment, the new scheme gives them more freedom to opt for lower class wards if they wish to save money. Similarly, Division II, III and IV officers will not be tied to a particular class of ward, but will have the flexibility to upgrade or downgrade to suit their individual needs. Above all, the additional Medisave contributions will remain in his account and MediShield will still cover him even if he changes employers.

New Officers - Medisave-cum-Subsidised Outpatient (MSO) Scheme

The new package to be introduced by Government will apply to employees who join the civil service on or after 1st January 1994. This new package is called Medisave-cum-Subsidised Outpatient Scheme (MSO). Instead of hospitalisation benefits, Government will pay an additional 1% of gross monthly salary, tax-free, into the employees' Medisave account, up to the normal CPF limit of $7,000 of salary.

As Medisave cannot be used to pay for most types of outpatient treatments, the Government will continue to provide outpatient benefits under the MSO scheme. Currently, civil servants and their dependants get free outpatient treatment. This arrangement creates no incentive for economy. To promote greater individual responsibility in health care, civil servants will co-pay 15% of the outpatient expenses in future. Dependants who are eligible for benefits will co-pay 40%. Total subsidy for outpatient treatment per officer and family will be subject to an annual cap of $350. The amount is based on average expenditure of civil servants who used outpatient services in 1992. This should be sufficient as outpatient expenses are not expected to increase rapidly.

Pensionable officers on the MSO Scheme will continue to receive MSO benefits after retirement.

President and Political Office Holders

The President, Cabinet Ministers and other political office holders will convert to the MSO Scheme from 1st January 1994.

Serving Officers - Comprehensive Co-payment Scheme

The Government will allow other serving officers to opt for the MSO Scheme, but it will not compel them to do so. However, the option, once exercised, is irrevocable.

The Government will revise the co-payment terms for the existing medical benefits scheme in line with the principle of personal responsibility. Currently, civil servants pay 20% of ward charges, while their dependants pay 50% of ward charges. The Government bears the remainder of the ward charges, plus all other hospitalisation charges, namely, investigations, treatment, surgical operations and drugs. From 1st January 1994, civil servants receiving medical benefits in kind will pay 15% of all hospitalisation charges, and not just 20% of ward charges. Dependants will pay 40% of all hospitalisation charges, instead of 50% of ward charges. Officers and dependants on this Scheme will also be required to co-pay for outpatient expenses, at the same rates of 15% for officers and 40% for dependants. However, there will be no cap on the subsidy for outpatient treatment because serving officers have hitherto enjoyed free and unlimited treatment at Government and restructured hospital outpatient clinics.

Female Officers

Some Members of this House have asked for women to be given the same medical benefits as men. The Government has studied this question carefully in formulating the new scheme. The MSO Scheme gives female officers benefits which are closer to their male colleagues. Women on the Scheme will receive the same additional 1% Medisave contribution as the men. They can use their Medisave savings for other family members if they wish.

However, there is still a difference in treatment between female and male officers. Women on the MSO Scheme will not be eligible to claim outpatient subsidy for their husbands or dependent children. Similarly, women on the Comprehensive Co-payment Scheme will not have medical benefits extended to other family members. This is the status quo.

The reason for this is not the cost of extending equal benefits to women, but the principle that in our Asian society the husband is the head of the household. It is his responsibility to look after the family's needs, including their medical needs. This is how our society is structured. It would be unwise to tamper with this structure.

Doctors and Ancillary Medical Staff

Currently, Government medical staff, such as doctors and nurses, receive completely free medical benefits. This is an anachronism. From 1st January 1994, serving and new medical staff will be treated in the same way as other civil servants. Restructured hospitals will also cease providing free medical benefits and instead adopt civil service practices.

Statutory Boards

The new medical benefits package will also apply to statutory boards.

Cost Implications

The current cost of providing medical benefits is approximately 1.4% of payroll. Government estimates that placing new officers on the MSO Scheme will cost about the same, which will be below the 2% cap on tax deductibility on medical benefits for private sector firms.

Converting serving officers to the Comprehensive Co-payment Scheme will mean that the officers have to bear additional medical costs, amounting to 0.3% of the current manpower bill. It is, however, not Government's intention through this exercise to cut down on its manpower costs. The Government will continue to offer an attractive overall remuneration package to civil servants, competitive with the private sector, in order to retain and reward good officers and to attract fresh talent. Salary revisions for the whole civil service, which generally will more than offset the conversion to the Comprehensive Co-payment Scheme, will also be effected from 1st January 1994. Details of the salary changes will be announced when they are ready.

The new medical benefits arrangements for civil service will promote personal responsibility for health and help to control rising health costs. We encourage the private sector to follow the lead taken by Government and convert their medical benefits in kind to additional Medisave contributions.

Encik Othman bin Haron Eusofe (Marine Parade GRC): Mr Speaker, Sir, may I just ask the Minister for some clarifications?

Firstly, do I take it that all serving officers will continue to enjoy the same level of medical benefits, except that now they would have to make some co-payment? The level of medical benefits will be retained, as what they are presently enjoying, but they have to make some co-payment.

Dr Richard Hu Tsu Tau: Yes, except for this co-payment scheme.

Encik Othman bin Haron Eusofe: Second point, Sir. What is the position of pensioners who are now already enjoying some medical benefits?

Dr Richard Hu Tsu Tau: Pensioners will continue to receive their existing benefits which they received at the time of retirement. So that status quo is maintained.

Mr Loh Meng See (Kampong Glam GRC): May I seek some clarifications from the Minister?

Does it mean that a civil servant can now opt to go to private sector GPs or get OPD-equivalent kind of treatment now that you have provided the co-payment system?

With regard to the pensionable staff, the Minister said that the cut-off point is 1st January 1994. Pensioners who retire on the eve of 1st January 1994 will enjoy whatever benefits that they already have. What about people who retire on 2nd or 3rd January 1994? How do you phase them out so that the forfeiture of some of the benefits will not be too painful?

The Minister mentioned about the cap of $350 for outpatient expenses. What happens if the full sum is not used? Is it possible to provide incentives for non-use to the officer concerned, because you have saved that amount of money?

One last question, Sir. There is a cap of $7,000 of salary for CPF contribution. It would appear to me that the higher salaried staff may lose out because of the limit. Is it fair that because of the salary limit imposed that these people will not enjoy the 1% compensation in medical benefits?

Dr Richard Hu Tsu Tau: I will take his three points raised in turn.

Firstly, those who retire on 31st December 1993 will enjoy the existing benefits. Those who retire after 1st January 1994 would of course receive the new terms under the new package. But I have said that any loss of benefits would be more than made up by the civil service salary adjustments. That is part of the total package. I have said earlier that we view the total remuneration package of civil servants, or the private sector, as a combined package. You look at medical benefits as part of your total remuneration. And in devising this scheme, full allowance has been made for the increased cost to the civil servant in the conversion process, and this is more than made up for in the salary revisions which are planned.

Mr Loh Meng See: Sir, the civil servant who is going to retire after 1st January, I would presume, will enjoy the notional or, at least, the increased salary revision he is going to get, and that the retirement pay will be based on the new revised salary.

Dr Richard Hu Tsu Tau: This is for retirement before 1st January?

Mr Loh Meng See: After 1st January.

Dr Richard Hu Tsu Tau: If the new pay package takes effect from 1st January, then of course that would be his salary base.

The third point raised is whether, if the cap of $350 is not used, it could be returned to the officer. There is no provision for that at the moment because this is a statistical figure, which is an average cost.

Mr Loh Meng See: What about the $7,000?

Dr Richard Hu Tsu Tau: The $7,000 cap is imposed in the same way that we limit the contributions to CPF on the principle that those who are earning above $7,000 are already sufficiently remunerated. The salary adjustment built into the package will more than allow for the small loss they may incur by not receiving the 1% Medisave on the balance of their pay above $7,000

Mr Loh Meng See: Sir, I am afraid that the $7,000 is based on the gross salary and many civil servants may be affected by the salary revision and cross over the $7,000 mark, and you actually have more people not receiving the compensation.

Dr Richard Hu Tsu Tau: The cap is necessary. Otherwise the ratio between Division IV officers' compensation of the 1% and those who are in the higher salary range would be too large and therefore inequitable. I can assure the Member that any perceived or real loss of benefits due to the cap will be more than covered by salary adjustments.

Mr Tong Kok Yeo (Nominated Member): Mr Speaker, Sir, I wish to ask the Minister whether the revised salary will be on condition that the employee opts for the MSO Scheme. And secondly, whether the maternity benefits for female employees will also be incorporated under the MSO Scheme, namely, female employees will not be entitled to the medical charges incurred for maternity cases.

Dr Richard Hu Tsu Tau: On maternity issue, I am not clear. I do not have the actual facts. I have to obtain the facts and let him know.

Serving officers have two choices. They can either opt for the MSO Scheme, in which case the terms of the MSO Scheme will apply to them, or they can elect to remain on the present scheme, in which case they would have to accept the Comprehensive Co-payment Scheme. So these are the two alternatives. He is free to choose.

Mr Tong Kok Yeo: What I am asking is if he chose to remain in the existing medical benefits scheme.

Dr Richard Hu Tsu Tau: He will still receive salary adjustments.

Dr S. Vasoo (Tanjong Pagar GRC): Some clarification from the Minister, Sir. What are the anticipated implications of such proposals on the civil service itself?

Dr Richard Hu Tsu Tau: When the civil servants see the entire package, including the salary adjustments, I think there will be no grounds for concern. Incidentally, the civil service unions have been told this morning about the broad outline of the new Scheme.