Reader Whatever sends along an article on the health system in Singapore written in The American:
The People’s Action Party has ruled Singapore since the British left, and is led today by Prime Minister Lee Hsien Loong, the son of founder Lee Kuan Yew. It calls the health system it has put in place the “3M” framework: Medisave, Medishield, and Medifund.
Medisave, which covers about 85 percent of all Singaporeans, is a component of a mandatory pension program. Employees typically pay 20 percent of their wages into the Central Provident Fund (CPF), while employers pay 13 percent. (Since 1992, the self-employed have also participated.) At the beginning of 2007, CPF had over $1 billion in surpluses.
In Singapore’s system, the primary role of government is to require people to save in order to meet medical expenses they don’t expect.
Medisave accounts can be used to pay directly for hospital expenses incurred by an individual or his immediate family. Limits are in place on the extent of Medisave funds that can be used for daily hospital charges, physicians’ fees, and surgical fees. The idea is to cover fully the bills of most patients in state-subsidized wards of public hospitals. Beyond that, individuals dip into their own pockets or use benefits from insurance plans (see more on this below). Medisave can also be used for expensive outpatient treatments such as chemotherapy, renal dialysis, or HIV drugs.
Medishield, the second part of the program, is a national insurance plan that covers the higher cost of especially serious illness or accident, which in Singapore’s system is described as “catastrophic.” Singaporeans can choose Medishield or several private alternatives, some offered by firms listed on the Singaporean stock exchange. Premiums for the insurance plans, including Medishield, can be paid using Medisave accounts.
Medifund, the third part, was established by the government for the roughly 10 percent of Singaporeans who don’t have the means to pay for their medical needs, despite the government’s subsidy of hospital and outpatient costs. The fund was set up in 1993 with $150 million, with the budget surplus providing additional contributions since then. Only interest income, not capital, may be disbursed.
Finally, there’s Eldershield, an addition to the 3M structure that offers private insurance for disability as a result of old age. It pays a monthly cash allowance to those unable to perform three or more basic activities of daily living.
Nearly all Singaporeans contribute directly toward each treatment, including prescription drugs, through patient co-payments of 20 percent for amounts above deductible levels. The money to meet deductibles and co-payments can come out of a person’s Medisave account.
Additional material and comments are below the fold:
In Singapore’s system, the primary role of government is to require people to save in order to meet medical expenses they don’t expect. While the Singaporean government does regulate prices and services, its hand is nowhere near as heavy as that of governments with extensive nationalized healthcare, such as the United Kingdom or Germany.
John Tucci, head of general insurance consulting for North Asia for Watson Wyatt Insurance Consulting, says, “The use of compulsory savings has been very successful as the main source of private funding for hospital expenses.
“Another key focus of the government has been to ensure that overall health expenditure does not fall victim to the significant inflationary pressures that have been evident throughout the world. This has been achieved by regulating the supply and prices of healthcare services in the country.” Even the United States rations treatments and sets prices both through government regulation and purchasing and through private insurance rules.
The United States spends 15.4 percent of its GDP on healthcare, while Singapore spends just 3.7 percent.
Tucci warns that it may be hard to replicate Singapore’s system in the United States. After all, Singapore has a small, concentrated population, with a “backdrop of political stability, enabling successive governments [all of the same party] to introduce consistent measures relating to individual responsibility, compulsory savings, and regulatory control of healthcare services and costs.”
The public healthcare facilities in Singapore have been clustered, since 2002, into two integrated networks, each government-owned and managed as nonprofits: the National Healthcare Group (NHG) on the western side of the city-state, and Singapore Health Services (SingHealth) on the eastern side. Each provides a full range of services, running the public hospitals and specialty centers as private companies.
The Health Ministry says that these clusters “provide cooperation amongst the institutions within the cluster, foster vertical integration of services, and enhance synergy and economies of scale. The friendly competition between the two clusters spurs them to innovate and improve the quality of care while ensuring that medical costs remain affordable.”
Each of the networks also benchmarks against international standards and publishes exhaustive performance figures. In its 2007 report, NHG says its vision is “adding years of healthy life.” The goal, the report says, “departs from merely healing the sick to the more difficult but infinitely more rewarding task of preventing illness and preserving health and quality of life.”
Meanwhile, 80 percent of primary healthcare needs are met by private general practitioners and 20 percent by public outpatient “polyclinics” of hospitals, chiefly those run by the two clusters, NHG and SingHealth. Within the private general practitioner sector, a significant proportion of patients—about 12 percent of them—consult traditional Chinese practitioners.
Phua Kai Hong, associate professor of health policy and management at the Lee Kuan Yew School of Public Policy at the National University of Singapore, describes the crucial social setting that enabled the country to create its remarkably successful health system: a dynamic economy (with 7.5 percent GDP growth in 2007 and an average income per person of about $34,000, or three-quarters that of the United States), strong family ties and social support systems, a high propensity to save and invest, a rapidly aging and affluent population, and an absence of socialized models of social security, social insurance, or healthcare.
He lists five core prerequisites for countries that may want to emulate Singapore’s system: a willingness and ability to save; high participation in formal employment; effective payroll collection with efficient fund management and claims processing; a well-developed information system with strong security and accounting controls; and effective public education in the proper use of medical accounts.
Within the private-public mix, he says, most people lean toward the private system for primary care and the public system for hospital care. There are 13 public-sector specialty centers and hospitals in Singapore and 16 private-sector hospitals. But 74 percent of the beds are within the public sector. The government has also introduced low-cost community hospitals for intermediate healthcare for the convalescent and aged.
Why does Singapore’s system work? Phua cites these principles: “the creation of incentives for responsible behavior and the efficient delivery of services; the discouragement of overconsumption through cost-sharing; the regulation of hospital beds, doctors, and the use of high-cost medical technology; the promotion of personal responsibility; targeted government subsidies; and the injection of competition through a mix of public- and private-sector providers.”
Medical savings, he says, are now being accumulated to ensure that the Singaporean society of the future will be able to look after its own health needs even with a steady rise in the population of elderly people.
But, he adds, there remains room for further evaluation of clinical quality and outcomes as the system continues to evolve.
Rdan here: The article reads like a sales pitch, but perhaps adds to the debate on what is possible for ‘savings’ to happen concerning healthcare costs.
1. If Social Security creates a huge fuss at 6+% collection rates in the US, can you imagine a proposal for 20% (consumers) and 13% (employers)collections even if it saved money.
2. Singapore has a history of what we would consider draconian solutions. In this case the governments mandates private savings accounts in a public-private mix. Does anyone have additional information?
Update: A factual description of the MSA in Singapore is here.