Comrade Freddie Tan, President of Singapore Bank Officers’ Association
Distinguished guests
Ladies and gentlemen,
Good Evening,
First, let me congratulate you on the 40th Anniversary of your union. For forty years the SBOA has represented the interests of bank officers, and is as strong as ever.
This evening, I would like to share with you my thoughts on a subject that affects all of us and has been in the news lately. The subject matter is the financing of our healthcare costs when we are hospitalized. This has been an issue of great concern to all of us because we have seen retrenched workers hospitalized and therefore no longer covered by company medical benefits. It is hard on those in such an unfortunate position. Therefore we strongly feel that there ought to be a portable medical benefit scheme that would protect workers at all times, including when they are unemployed.
How should such a portable medical benefit scheme be drawn up? We must first understand how hospitalization costs are funded.
The principles behind our national policy on healthcare financing are that the state should take care of the lower income, and progressively less for those more well off. As such, charges for Class C wards in public hospitals are subsidized 80%. This subsidy falls until Class A, which would not be subsidized.
The individual or his family should bear the balance after state subsidy. The Medisave scheme was set up in the early 1980s to help the individual pay for this balance of medical bills after the state subsidy. Part of our CPF savings was apportioned to our Medisave accounts.
Medishield Scheme
However, the individual may not be able to save enough in Medisave to pay for a large hospital bill arising from a serious illness. Hence, the need for a medical insurance scheme. Not everyone will be struck by a serious illness. Therefore it makes good sense to pool the risks i.e. participate in an insurance pool to keep premiums affordable.
Medishield was introduced in July 1990 as a basic and low-cost catastrophic medical insurance to help Medisave account holders meet the cost of treatment for serious illnesses. Medishield Basic scheme is an opt-out scheme for all Medisave account holders with coverage up to 80 years old. Premiums for Medishield were kept low and affordable to encourage participation. Annual premiums vary ranging from S$12 for those below 30 years old to S$390 for those between the age of 79 and 80 years old.
The Medishield Plus scheme is an add-on scheme with more comprehensive coverage. Medisave savings can be used to pay the premiums of Medishield as well as other Medisave-approved medical insurance schemes.
Medishield reimbursements were determined based on a system of deductibles and co-insurance, to exercise control over inflation of medical costs from over-use or abuse. The three criteria were:
Claimable Limits. The portion of the patient bill that is eligible for reimbursement and is primarily determined by the maximum limits for per day of hospitalization, procedures and approved treatments.
Deductible. This is the claim amount below which no reimbursement would be made from the Medishield. Deductible is necessary to sieve out small claims which can be paid using Medisave or cash, as well as keep premiums affordable.
Co-insurance.Medishield will pay 80% of the claim amount in excess of the deductibles and the insured will pay the remaining 20% co-insurance.
Apart from Medishield Basic and Medishield Plus, members can also choose from other Medisave-approved medical insurance schemes offered by private insurers, such as NTUC Income's IncomeShield, American International Assurance International Company's HealthShield Plus, Great Eastern Life Assurance Company's SupremeHealth, Overseas Assurance Company's MaxHealth and Asia Life Asia PreferredCare.
So we do have a national healthcare funding scheme, in the form of Medisave and Medishield that is in fact the basic portable medical benefit scheme.
However, since its inception in 1990, Medishield premiums, deductibles have not been updated. As we are all aware, medical costs have gone up, people are living longer and medical technology has advanced, hence it is not realistic to maintain the premium and deductible levels set in 1990. In a sense, Medishield has become dysfunctional, unable to meet its original objectives. Medishield has on average been paying less than 40% of the large bills instead of the original target of 80%. This is one of the key reasons why people have been worried about hospital bills. Medishield Basic has also been in deficit for several years. Last year, it collected $54 million in premiums but paid out $65.3 million in claims. This cannot continue.
Principles of Change
Let me outline some of the desirable principles of change. To me, there are several:
Worry About Large Medical Bills
Firstly, we need to remove the worry and psychological burden from families that a large hospital bill will cause financial hardship or worse, bankruptcy for the family. We need to provide Singaporeans with a peace of mind that, if for whatever reason they require extensive medical treatment, their medical bills will be adequately taken care of. This is the original intent of Medishield and it must continue to be so. For example, if a C class patient incurs a large medical bill of $50,000. He or she has to pay $10,000 after medical subsidy of 80%. Out of this $10,000, Medishield covers only 40% which is $4,000. Imagine a low income worker earning $1,000 per month being saddled with a $6,000 medical bill! Not many low income workers have that much money in their Medisave account. Even if one has, what about follow-on surgeries or other medical problems or medical bills of dependents that crop up in future? So Medishield as an insurance scheme must take care of these large medical bills and remove the worry from the people.
Medishield premiums have been unchanged since 1990 so it will have to increase. However, we also want to keep premiums affordable. Minister Khaw Boon Wan has indicated that the increase in premiums could be less than $10 per month. Lower income workers will find this increase a significant sum. But if we do not increase the premium, then it is difficult to provide adequate cover for the big bills. Furthermore, if we keep the premium increase low, we unfortunately have to expect the deductibles to go up. Currently, the deductibles for C class ward is $500 and B2 class $1000. How much the deductibles will go up remains to be seen.
However, the deductible can be paid from Medisave, so most workers should be able to accumulate enough in their accounts to pay for the bill even with a higher deductible. This higher deductible should be something the low income worker and his family can cope with. While it will be a bit more difficult for them, the plus side is that we can free them from the worry of the much higher bills, which will be then be paid by the revised Medishield.
Help the Lower Income
Secondly, Medishield should include everyone. This is because Medishield is an insurance scheme. As with any insurance scheme, a group of people are pooled together so that costs are lowered, risks are diversified and healthy ones offset those who need medical care. If we have a system whereby one group opts out for alternative insurance schemes simply because they can afford to, then the poor in Singapore will be left out. We need to take care of the lower income. Therefore, the Medishield Basic scheme should include everyone so that medical insurance risks can be pooled together, and the premium kept low. The phenomena of ‘cherry picking’ and ‘self-selection’ can then be avoided. Fortunately, less than 10% of Medisave account holders have opted out of Medishield. Hence, this calls for a single agency in Singapore to provide basic medical insurance instead of competing agencies. But that does not mean there is no room for private medical insurance providers. Private medical insurance can provide insurance for Singaporeans who desire additional insurance cover for areas Medishield does not cover.
Principle of Co-payment
Thirdly, we will need to retain the principle of co-payment. Why co-payment? Why not full medical insurance cover? This is something which we must avoid as a nation. The United States is a good example if full medical insurance cover is provided. Once there is full medical insurance cover, patients will be inclined to seek medical treatments whether it is necessary or not. Doctors are also inclined to provide as many treatments as possible. This is because doctors then earn more and it also prevents them from being sued for under providing medical care. And when claims go up, what do the insurance companies do? They have to raise premiums. This creates a vicious cycle and will be impossible to stop once started. In fact, more than 14% of Americans are priced out of medical insurance cover because they cannot afford to pay.
Duplication
Fourthly, we should avoid duplication of coverage. Last Tuesday, 5 Oct 04, while driving, I tuned in to a News Radio broadcast during their phone-in session. One caller apparently said that since banks provide such good medical benefits, it is double coverage, and wasteful. There is no benefit to the individual. The opinion of that astute caller was correct. It is wasteful, and therefore modification should be made. But to avoid waste, it does not mean that if we work for a bank with generous medical benefits we should opt out of Medishield. What happens if we should leave the bank, for whatever reason? I believe the experience of the past few years is still fresh in our minds, and we know how difficult it can be for an employee who lost his job, and has no employer to pay his hospital bill if he falls ill. Therefore there has to be a basic system that covers the individual, whether employed or not. Then for the employed, the employer’s benefit can ride on the national scheme. The employee can use what the employer is willing to provide to buy additional insurance coverage from private insurers. This way, with a small resource constrained country like Singapore, we do away with duplication and ensure that all our resources are put to proper use.
Means Testing
Fifth and last, medical subsidies should not be blindly applied to one and all. The lower income and less fortunate should receive more help than others. Savings from lesser subsidies to the better off will help prevent increases in C Class rates. Linking the healthcare subsidy to a needy individual as opposed to a bed category will also allow the subsidy to be portable. Patients who are means tested and receive a subsidy can also choose to be treated in public or private hospitals. The resulting market competition amongst public and private hospitals may even lead to more cost-effective pricing by the hospital care providers. But means testing is a sensitive subject and raises a lot of issues. For example, what criteria to be used for means testing, what level of subsidy to provide for each group, cost of administration etc. This subject should be thoroughly discussed to see how it can be implemented. But the principle of means testing is the right way to go.
With means testing, there is plenty of scope for private insurers to offer products to help the higher income earners manage their hospital charges. It will be prudent for individuals who belong to the higher income category, like members of SBOA, to cover themselves. You may do so by making better use of what your employer is now spending for hospitalization, possibly to pay for insurance cover over and above Medishield.
Conclusion
Statistics have shown that every year, 1 in 10 Singaporeans need to be hospitalized. We do not know who or when. Therefore, Medishield reform affects all of us whether young or old. I encourage all of you to think about this issue and to provide feedback to Minister Khaw Boon Wan as Ministry of Health has sought for public feedback on this issue. This way, we can all develop a robust Medishield system that will provide for our medical needs when the time comes. We should not wait till a medical illness strikes us before being interested in our healthcare system or believe in “Other People’s Problem” syndrome.
Finally, let me congratulate the Executive Committee and members of the Singapore Bank Officers’ Association once again on your 40th Anniversary celebrations. You have contributed much to the development of the financial services industry in Singapore. The financial services industry in Singapore has been and continues to be a key pillar of our economy accounting for up to 12% of our GDP. The harmonious tripartite relationship and success in pushing for key initiatives such as wage restructuring and flexibility continue to attest to your willingness to embrace changes and meet challenges head on. I wish the Singapore Bank Officers’ Association all the best in your future endeavors.
Thank you very much and please enjoy the rest of the evening.
