ALTERNATIVE MEDICAL BENEFITS SYSTEM

Mr Ahmad Mohd Magad asked the Minister for Manpower what is the progress in the implementation of the Alternative Medical Benefits System, which was proposed by the Tripartite Committee on the Extension of Retirement Age in 1995.

The Minister for Manpower (Dr Lee Boon Yang): Mr Speaker, Sir, in November 1995, my Ministry appointed a Tripartite Committee to review the minimum retirement age and the cost implications of a higher retirement age, including the desirability to move away from the employer-provided medical benefit system. The Committee recommended raising the minimum retirement age from 60 to 62. This was implemented with effect from 1st January 1999. The Committee also recommended several measures to help enhance the employability of older workers so that the extension of retirement age would not undermine cost competitiveness of the employers. These measures include the capping of retrenchment benefit payment, the implementation of the base-up wage system, and the replacement of the existing employer-provided medical benefit scheme with an Alternative Medical Benefit Scheme. Progress has been good in voluntary adoption by employers and unions of the capping of retrenchment benefit and base-up wage system.

However, there has been no progress in the case of the Alternative Medical Benefit Scheme. Under this Scheme, as proposed by 1995 Tripartite Committee, existing employees will be given average in-patient expenses for the past three years plus 1% of salary as an additional contribution to their Medisave account. New employees will receive an additional 1% of their salary also to be contributed to their Medisave accounts. For outpatient expenses, existing employees will receive a salary adjustment of 1% or some other mutually agreeable and appropriate level in return for co-paying their outpatient expenses.

Sir, both unions and employers had encountered difficulties in applying this idea. The unions had difficulty in persuading existing employees, particularly the older ones, to opt into the scheme because they were not willing to give up the comprehensive medical benefits which they currently enjoy. As the trade-off benefit for new employees is lower at 1%, unions were also concerned that the older retrenched employees, who would be regarded as new employees when they join another company, could end up with insufficient Medisave to meet their in-patient expenses. On the other hand, employers were concerned about the additional cost of implementing the Alternative Medical Benefits Scheme. They were concerned that not all existing employees would opt into the new scheme. Employers would then end up having to operate more than one medical benefit scheme, which is administratively very cumbersome. Some employers, lacking a long-term outlook, felt that the current medical benefit system was not too onerous and therefore saw no reason to change.

Sir, we are concerned that changes in the labour market and the rapid ageing of our workforce will, over the long-term, create severe problems for the present employer-based medical benefit system. The traditional employer-provided medical benefits tend to reduce job mobility for older workers and those with poor health, by tying them to their current employers and medical benefits. Under this system, a worker who loses his job would automatically lose his medical benefits. This would not matter if he is young and in good health. He can find a new job quickly and be covered by medical benefits provided by his new employer. However, if he is an older person and not in good health, a new employer will be reluctant to employ him and accept the burden of higher medical expenses. This could happen even if the medical benefits were provided in the form of a group medical insurance, because group medical insurance policies are tied to the employer and not transferable to a new employer.

Sir, with increasing technological changes and business competition, companies often have to make quick changes to their structures, operations, marketing strategies, manpower requirements and skills in order to survive and prosper. This means that business re-organisation, restructuring and retrenchment will be common occurrences in the future. The concept of life-long employment will no longer be relevant. Even in Japan, where life-long employment has long been a sacred cow, companies are having to retrench workers in order to survive.

In Singapore, our workers must also expect to change jobs several times in their lifetime. Hence, it is in their interest to have up-to-date skills and benefits which are portable, that means, they can transfer those benefits or accumulate the benefits and transfer them to their new job if they have to switch jobs. We should therefore move away from the employer-provided medical benefit system and replace it with a portable system, which allows employees to save for their future medical needs. The Alternative Medical Benefits Scheme proposed by the Tripartite Committee seeks to make medical benefits portable and encourage employees to take individual responsibility towards their own health. It is in the interest of both employers and workers for such a scheme to be adopted widely.

Sir, my Ministry will establish a follow-up committee, including the Singapore National Employers' Federation, NTUC and MOH to review the concept of a portable medical benefits scheme to speed up its application. The Committee will look into ways to promote the Alternative Medical Benefits Scheme, including tax incentives for additional Medisave contributions and cost of employer-provided medical benefits, including outpatient benefits.

Mr Chiam See Tong (Potong Pasir): Sir, instead of the portable medical benefits scheme, is the Government willing to amend the Employment Act to give the workers a medical scheme under the statutory provisions?

Dr Lee Boon Yang: Mr Speaker, Sir, when I announced the recommendations of the Tripartite Committee - I believe this was in 1996 - I did say that we would like to implement an Alternative Medical Benefits Scheme on a voluntary basis initially. Whether there is a need to legislate or provide an Alternative Medical Benefits Scheme in the Employment Act is something that the Committee will also look into when they convene to study this issue. 1.30 pm

Mr Speaker: Order. End of Question time.

[Pursuant to Standing Order No. 21(3), Written Answers to Question Nos. 10, 14-15, 19-21, 23-32 and 34 on the Order Paper are reproduced in the section, "Oral Answers to Questions Not Reached" (Cols. 781 - 798). Question Nos. 9, 11-13, 16-18, 22 and 33 have been postponed to the next sitting of Parliament.]