ADJOURNMENT MOTION

ADJOURNMENT MOTION:

Mr Mah Bow Tan: Mr Speaker, Sir, I beg to move,

That Parliament do now adjourn.

Question proposed.

MEDICAL INSURANCE: 6.00 pm

Dr Lily Neo: Sir, may I beseech this House to look into healthcare financing in Singapore to ease the pain of healthcare expenses.

[Mr Deputy Speaker (Mr Chew Heng Ching) in the Chair]

I am sure many Members of this House agree with me that our present system of Medisave where we save and pay as we go financing for healthcare is becoming less adequate to serve our needs. An individual's expenditure on healthcare is, to a large extent, unknowable, both in magnitude and timing. It is, therefore, intrinsically difficult for an individual to make financial provision for episodes of sickness.

Sir, healthcare affordability has been a major concern for many Singaporeans and their concerns will worsen with the expected escalating healthcare costs, in view of our ageing population and the rapid advances in medical technology. Our people would surely value arrangements that protect them from this uncertainty in expenditure. Thus, we need to make drastic changes here to ease the increasing burdens of the nation.

Sir, "risk-pooling" in healthcare finance should be given a bigger role in Singapore. Risk-pooling in healthcare finance is a system whereby collected healthcare revenues are transferred to the purchasing organisations. Pooling ensures that the risk related to financing healthcare interventions is borne by all the members of the pool and not by each contributor individually. Its main purpose is to share the financial risks associated with healthcare interventions for which there is uncertain need. It implies redistributive functions - from the healthy to the sick and from the productive to the unproductive stage of the lifecycle. The most important imperatives for risk-pooling are to establish appropriate and reliable systems of governance, to assure the collection and stewardship of finances and to ensure that providers are reimbursed appropriately. They imply the need for a long-term trust in the institutions of healthcare. I feel that, in Singapore, this role is best assumed by the Government especially for the mandatory national medical insurance.

In Singapore, the bulk of healthcare financing comes directly from households in the form of eitheruser payments or out-of-pocket fees and Medisave. In fact, the National Healthcare Expenditure or NHE proportion is borne two-thirds by the people or the private share and only one-third by the Government. Here we have a system where minor and higher cost risks have been separated and financed through different mechanisms. Individual medical savings accounts (Medisave) provide inter-temporal spread for some ambulatory and hospital expenditures, while a national catastrophic illness insurance scheme (MediShield) is supposed to cover prolonged and expensive treatments. MediShield, however, has failed in its functions. I shall elaborate on this later. Medisave involves no direct risk-pooling and although MediShield does pool risks, the effect, Sir, is less than satisfactory. The trend should be towards larger risk-pools than exist at present. In addition, there is a complex system of co-payments and deductibles, which involve direct out-of-pocket private payments. We should preserve our policy on deductibles and co-payments to ensure individual's responsibility and accountability on the sensible consumption of our healthcare. This will emphasise the principle of individual responsibility for one's own healthcare needs. We definitely must avoid the pitfalls of failed medical insurance in other countries that lead to the moral hazards of excessive consumption of healthcare resources or the "buffet syndrome". Fear of over-consumption can be minimised by adopting best practices.

MediShield pools risks minimally because it covers for catastrophic illnesses that constitute 5-10% of the hospital bills, while leaving a big gap of 90-95% of the rest of thehospital bills with no risk pooling. Sir, we need to close this loophole to ease the affordability of the majority of hospital bills, albeit with deductibles and co-payments in place.I favour solidarity principle reflecting objective securing universal coverage where risk-pooling is mandatory for at least basic public hospital bills. Risk-pooling for only basic public hospital bills without frills such asB and C class wards, will ensure affordable premiums for the majority. This will have the advantage of no Singaporean being left out, complete risk sharing across a nation with minimised variations in expected expenditure and avoiding inefficiencies and inequities associated with adverse selection such as cream-skimming and transaction costs. This will need good managerial control and coordination. Thenotion ofa compulsory risk-pool carries with it an implementation of a curtailment of individual choice as to the nature of the package of healthcare made available. Therefore, those who wish for the enhanced services should be allowed to secure a package of care in line with their preferences, for which they are willing to pay or supplement with privateinsurance, only after contributing to the mandatory basic pool.

The Minister for Health earlier in this House mentioned that he will keep MediShield, albeit returning it to its original purpose. How is MediShield going to solve Singaporeans' concern on the basic issue of medical cost affordability? Sir, that is my worry. I would like to share with this House the various flaws of MediShield and how it has failed to serve Singaporeans' medical needs.

MediShield is an opt-out scheme with many of those most vulnerable being left out. MediShield does not have good population coverage because it is available only to CPF account holders. Since only 59.6% of the labour force contributes to CPF, the other 40% of the labour force are not covered under MediShield. This does not take into account the proportion of the population not in the labour force. Of the three million CPF accounts, only 1.3 million are active. Sir, there are only 1.33 million MediShield and 0.3 million MediShield Plus accounts as of 31st March 2004.

Apart from only covering catastrophic illnesses, MediShield imposes low annual and life-time limit coverage which defeats the purpose of giving assurance to Singaporeans on the affordability of their medical needs in the public hospitals. Basically,MediShield coverage provides for the bare minimum and, in some cases, only covers a fraction of the actual cost of treatment. MediShield pays $150 a day for hospitalisation. It has a maximum claim limit of $30,000 per policy year and $120,000 in a lifetime. If this cap is used up, either in the year or in the lifetime, the individual cannot claim any more.

The Minister for Health earlier said that he would adjust the premium of MediShield and raise the annual and lifetime limit of MediShield. Sir, there are still other basic issues that are not addressed under MediShield such as the affordability of the majority of hospital bills and catastrophic hospital bills beyond the stipulated limits of coverage. The Minister said that he will keep the MediShield to cover catastrophic illnesses or 5-10% of hospital bills.This will be, effectively, not expanding the risk-pooling advantage of insurance and the majority of the hospital bills will still have to be paid out-of-pocket finance or Medisave.The burden of healthcare will be increasingly difficult to be served by Medisave, especially in ourincreasing ageing population and with the trend of smaller families to share the health burden of each family. Sir, even the non-catastrophic hospital bills can be heavy for many families for one episode, let alone many episodes of illnesses. For example, for B and C class wards, the 50th percentile to 90th percentile of each hospitalisation bill for asthma is about $1,000 and $2,800, and for non-catastrophicday surgery about $4,000 and $5,000, respectively.

MediShield's public risk-pool or financial viability is threatened with cream-skimming by private insurers. Several insurers have devised insurance products designed along the lines of MediShield. These insurers offer some differences. For example, the coverage is for longer than the 80 years offered by MediShield and the coverage also offers better claimable amounts. However, their insurance premiums are significantly higher. Private insurers, in maximising their profitability, have cherry-picked their customers - insuring mainly the low-risk group, the young and healthy and leaving the high-risk group, the old and infirm to MediShield. Sir, this begs the question whether, hereafter, is it not better for the Government to assume the bigger role in expanding our healthcare insurance rather than leaving this expansion to private insurers? Would not Singaporeans feel more secured to have their life-long medical insurance in the hands of the Government?

MediShield also has an age-limit coverage of 80 years which does not serve us well in view of our ageing population and the longer life-span of Singaporeans which is projected to increase further. This is all the more critical when usually it is in the last year of a person's life that the need for medical care is most acute. It is noteworthy that there were about 45,000 people aged 80 years and above last year.

Therefore, Sir, the present MediShield with all its deficiencies - the most pressing of which is the coverage for the majority of 90-95% of the basic hospital bills - leaves much to be desired. MediShield will need drastic overhaul if we were to keep it.

It will be most unfortunate if we repeat the past mistakes in our experience with MediShield. Time is pressing on, in view of the various factors mentioned earlier, for us to devise a viable insurance scheme that can look after the medical needs of Singaporeans in the public hospitals and their long-term medical needs to give that assurance and peace of mind. Here is our chance to make good this time, and I hope we can be bold, thorough and not leave undesirable gaps from this major review of medical insurance.

In a national public insurance scheme, the probability for our Government subsidising the premium, especially for the needy and/or non-working, must be on the cards. Sir, more attention should be paid to the less well-off in our society and, in view of our fast ageing population, it is better to help with a small outlay in terms of insurance premium and through risk-pooling at the outset than for the Government to carry the heavy burden later on.

In Singapore, the major providers of healthcare are Government-managed public hospitals. Nevertheless, attention should be paid to the uniform standard and levels of care in any chosen package of healthcare services and mechanisms in place to reduce supplier-induced demand. Block contracts have been introduced in other countries to reduce the incentives to induce supply.

Care should also be heeded to prevent the over-consumption incentives in the design of medical insurance. The claimable amount stipulation only with hospital stays will be such an example. Patients should not be encouraged to stay in hospitals due to the design of insurance for claim purposes as many illnesses can nowbe treated as day surgeries without hospitalisation. Some severe illness may not require hospitalisation such as cancer or strokes.

In our health insurance expansion planning, some incentives should be incorporated to rally Singaporeans towards keeping fit and healthy. The other issue in the health insurance expansion is to ensure coverage for Singaporeans when they are in dire need, such as when they are without jobs, and between jobs or portable medical benefits.

Ideally, medical insurance should also have the component of preventive medicine in order to prevent people getting more illnesses. One good example, Sir, is the control of the metabolic syndrome which has been estimated to be able to reduce national disease burden by 50%, making it the single most important syndrome to work on. The metabolic syndrome is made up of hypertension, diabetes, lipid disorders and obesity. Therefore, it will be good if two chronic diseases such as diabetes and hypertension affecting about 10% and 25% of the adult population, respectively, can be considered by some coverage to ensure good compliance and control so as to reducecomplications such as heart diseases, strokes and renal failure.

Our Government is funding about 30% of the total healthcare expenditure mostly through subsidising patients in public hospitals. It should be the Government's priority to fund disease prevention instead of just looking after end stage diseases. Government may consider it necessary to increase the scope of coverage to make it applicable to a wider population by keeping premiums affordable and also to take advantage of a larger risk pool to provide more comprehensive coverage.

Sir, in our efforts to help parents to raise families, one worthwhile consideration is on our pro-natalist importance where couples are insured for procreation anomalies such as complicated pregnancies, premature babies and infertility.

Lastly, I shall mention another of our present insurance scheme, ie, Eldershield. It was implemented about two years ago and is an insurance plan to help older people who have become disabled. This opt-out scheme will entitle a subscriber to draw $300 a month for up to five years if the subscriber is unable to carry out unaided at least three of the daily activities. Those eligible for claim are usually heavily dependent individuals who find $300 per month inadequate for their care. The time limit of five years is restrictive as many of the severely disabled usually have problems in recovery. Many of the elderly opted out of Eldershield as they cannot afford the high premium for their age group. Therefore, there should be a review on Eldershield.

Sir, in conclusion, I am glad that it is the Minister for Health's top priority to expand the insurance schemes and I hope to see good medical insurance schemes in place soon that can solve the healthcare affordability issues well and remove the concerns of Singaporeans on their healthcare needs hereafter.

The Minister for Health (Mr Khaw Boon Wan): Mr Deputy Speaker, Sir, I thank Dr Lily Neo for her adjournment motion on medical insurance. Her deep concern for Singaporeans' ability to pay for good medical treatment is well known. She has, in this House, expressed her concern on various occasions. And just earlier today, we had a fairly good discussionabout it.I too share Dr Neo's deep concern. How I wish it were possible to provide good medical careand to do it cheaply. But, alas, we all know that this is not possible.

I have seen Class C wards in a neighbouring country charging patients only a few dollars a day. But at what standard of care? On the other hand, I have seen in the United States a very high standard of medical care, but also very expensive. Just last month, one of my hospital colleagues sent me an email about her recent experience in a US hospital in Illinois. She was there on a study trip when she had a bout of abdominal pain and was admitted. The hospital kept her under observation forfive hours, gave her three bags of intravenous saline, a painkiller injection and two CAT scans to exclude appendicitis and cystitis. Her total bill was US$5,600 for five hours of observation, and that is almostS$10,000. Her two CAT scans cost her US$3,700, about S$6,400. Whereas our Class A rate in Singapore for the same scans would only be S$850, eight times cheaper. Knowing the business, her first instinct was to question the hospital on the outrageous bill size. Then she decided not to bother as she had bought a medical insurance policy upon arrival in the United States, andthe whole bill would be settled by the insurer.

This is the perverse outcome of a system that is fuelled by medical insurance. Having paid for the premium, you no longer worry about how big the hospital bills are. And as hospitals are largely reimbursed based on procedures and volumes, they have every incentive to service the patients to the hilt. This is particularly so since any under servicing which leads to mis-diagnosis might lead to a legal suit for medical negligence. So, as a result, the average American spends nearly US$5,000 in medical resources each year, more than the combined total spent on cars, TVs and computers. Consequently, insurance premiums are so high that over 40 million Americans are reportedly priced out and suffer the risk of having no insurance coverage and is now one of the issues in the American Presidential election.
In Singapore, we took a different path. Rather than relying on one single source of funding for healthcare, we tap on multiple sources - Government subsidy, personal savings in cash, personal savings in Medisave, insurance, employer medical benefits, charity dollars. In this way, we do not put all our eggs in one basket and we reduce the adverse impact, if any, of a particular source of funding.

Likewise, in the provision of healthcare, we tap on multiple operators - public hospitals, private hospitals, community hospitals run by voluntary welfare organisations, and each one offering multiple levels of care - Class A,B1, B2, C wards. So Singaporeans have a range of services to choose from, depending on their means. But at the most basic level, we will ensure that our ClassB2 and Class C wards are of good standard and affordable. Affordable does not mean cheap. Affordable means leveraging on Medisave and MediShield, and ensuring that they are generally adequate to cover medical expenses, and those who run out of Medisave and MediShield cover will get support from Medifund as a last resort.
It is against this backdrop thatI began this inquiry into the role of medical insurance. Dr Neo has argued on many occasions in this House for an expanded role. I agree with her. But when we broaden the role of medical insurance, let us be aware of the perverse effects. Medical insurance is not all roses. There are thorns here and there. The abuses of over-consumption and over-servicing are real and prevalent, and that is why my recommendation isthat we should never go for comprehensive medical insurance; in other words, insurance from first dollar up.

The Government will continue to subsidise medical treatments heavily in Classes B2 and C. So, for subsidised patients,this will be the first source of funding and, in fact, the largest source of funding. After Government subsidy, the balance of the bill should be paid with Medisave and out-of-pocket. For most hospital bills, there would be enough in Medisave. So, not to worry. But there are some very large hospital bills when medical insurance must kick in after a certain threshold in bill size has been crossed. This threshold is what the insurance industry calls a "deductible". To minimise the abuse of medical insurance and to keep premiums affordable, the deductible should not be too low.
When MediShield was first introduced, the deductible at $1,000 then was an appropriate threshold. But as the deductible has not been adjusted over the last 12 years, the MediShield threshold is now too low relative to the current medical bill sizes. We should therefore raise the threshold to reflect current costs, and return MediShield to its original purpose of only looking after the very large bills but look after them adequately.

I thank Dr Neo for her commitment to healthcare issues and her continuing support of my Ministry’s work. We will consider all her inputs and and her points made just now. Time does not permit me to respond to them, and we will continue this discussion elsewhere. In fact, I have started discussions with the labour unions and with the insurance industry and I will continue to do so over the next few months. Let us strive to tap the benefits of medical insurance, but let us avoid the adverse effects that we see in countries like in the United States. Let us have the roses but, hopefully, we can avoid the thorns.