Co-payments in healthcare (Commentary in ‘Today’ 28 Jan 2013)

A friend and respected colleague in the Lee Kuan Yew School of Public Policy once commented, “Singapore policy makers worship at the altar of moral hazard”. While co-payments are a powerful tool, I sometimes feel we have gone overboard and mistaken the means for the end. And like all tools, they are appropriate in some instances and plain foolish in others. I wish we could tell the difference…


Revisiting co-payments (Today 28 Jan 2013)

Co-payments are sacrosanct in Singapore healthcare. Since the debut of co-payments in government polyclinics in 1960, the application of co-payment has been extended to virtually all healthcare services.

Co-payments are sacrosanct in Singapore healthcare. Since the debut of co-payments in government polyclinics in 1960, the application of co-payment has been extended to virtually all healthcare services.

Why co-payments? The economic literature is rich with insights on the utility of co-payments and there are very good reasons for co-payments, but not in every healthcare setting and definitely not as an unthinking blanket policy.

In the Singapore setting, the most important objectives are probably mitigating moral hazard and optimising limited government monies. Let us examine them and explore whether and how co-payments can be re-looked.


Moral hazard is the phenomenon where patients consume more than they should because someone else is paying. The 1993 White Paper on Affordable Health Care states emphatically: “To avoid the pitfall of ‘free’ medical services stimulating insatiable demand, patients pay directly for part of the cost of medical services which they use.”

As for targeting scarce subsidies, even the richest governments have finite resources, and Singapore is no different. Imposing co-payments enables some degree of cost recovery. In Singapore, cost recovery has been substantial with government spending on healthcare today making up roughly a third of total system spending, and private monies comprising the other two-thirds. This is the reverse of many developed countries, which, while critics decry as economically regressive, likely in no small measure contributes to the Singapore Government’s healthy finances — especially when contrasted with many European countries struggling to meet pension and other public service obligations.

Are there downsides to co-payments? Ultimately, co-payments are a tool, a means to an end. The “end” here would be appropriate, financially responsible health service utilization.

Co-payments should dissuade over-consumption, burdening of the state and extending waiting times for everyone else, but should not discourage medically necessary care and definitely not cause patients to fall into the crevice of medical bankruptcy.

Easier said than done. Co-payment application must evolve as society evolves and as policy makers understand better behavioral sciences and their applications in public policy.


One way to conceptualize health services is to categorize them in five areas: Preventive care, acute ambulatory care, hospital services, long-term care and palliative care. Are co-payments as a policy instrument equally relevant in all five areas?

In acute care and hospital services where patients are in pain, co-payments make sense for the reasons cited above, and genuine patients generally would not defer care for financial reasons.

Co-payments also help to discourage over-consulting which can be seen in comprehensive insurance schemes. In countries with very low co-payments, physician consultations per citizen are significantly higher than in countries with higher user fees.

In preventive services such as cancer screening and regular diabetic follow-ups, co-payments are less useful and perhaps even detrimental. Citizens are already reluctant to seek healthcare due to the “silent” nature of their conditions and in screening, we are trying to motivate perfectly asymptomatic people to subject themselves to uncomfortable measures such as mammograms and Pap smears.

In Singapore, only 40 per cent of women undergo regular mammograms, a far cry from the 70 to 80 per cent needed for effective national screening. Co-payments are arguably not needed here as the inherent behaviour is already avoidance, and the financial outlay just adds one more “reason” to defer care.

Is it then to conserve subsidies? That would be penny-wise and pound-foolish. Screenings and good control of chronic conditions are meant respectively to detect disease early and prevent complications, which save individuals and society money in the long term.

What about long-term care? Poorly utilized and delivered long-term care services simply drive patients into hospitals with complications such as bed sores and lung infections. Again, blunt imposition of co-payments is being penny-wise and pound-foolish.

Some degree of co-payments is useful to reinforce responsible service utilisation and appreciation of the true costs of services, but co-payments cannot be so high as to deter appropriate care and encourage cutting corners.


Finally, let us look at palliative care. Often patients would have spent much of their life savings by the time they reach this stage, and co-payments may impede acceptance of such services.

In palliative care which emphasises so much holistic care and dignity, conserving subsidies through an intrusive means test involving siblings and children and detailed inspection of family incomes is simply bad practice.

As for moral hazard, can a dying man over-consume palliative care services? St Christopher’s Hospice in England, the birthplace of modern palliative care, has not imposed co-payments. Why not? Surely it would make the service more efficient and help the staff spend less time fundraising?

Founder Dame Cicely Saunders, spiritual leader of the palliative care world until her death in 2005, said: “You matter because you are you, and you matter to the end of your life. We will do all we can not only to help you die peacefully, but also to live until you die.”

Co-payments in healthcare are a powerful policy tool. Applied appropriately, they drive economic and operational efficiency, enabling services to function well with reduced wastage and over-consumption. Applied blindly as a matter of ideology, they can be ruinous to the humane functioning of our healthcare system.

Dr Jeremy Lim has held senior executive positions in both public and private healthcare sectors. He is currently writing a book on the Singapore health system. This is the third in a series on health policies in Singapore.


One comment

    -31 JANUARY 2013

    In his commentary, “Revisiting co-payments” (Jan 28), Dr Jeremy Lim called co-payments in healthcare a powerful policy tool that can “drive economic and operational efficiency, enabling services to function well with reduced wastage and over-consumption”.

    NTUC Income agrees with this position. In 2002, we were the first to launch an insurance rider for IncomeShield, our Integrated Shield Plan. The rider provided coverage for 100 per cent of the co-payment the insured might incur from a claim.

    We withdrew this rider in 2008, as our experience showed that the frequency of claims was persistently higher than average — an indication of over-consumption.

    It confirmed the belief that without co-payment, people consume much more healthcare than they would if they were paying for some or all of it.

    With the withdrawal of Plus Rider, we launched Assist Rider, which required a 10 per cent payment of the claimable amount, subject to a maximum annual limit. Our experience with this is more consistent with the average claim frequency.

    This suggests that although co-payment is often a small portion of the full cost of services consumed, it serves to encourage people to be more responsible in seeking medical care.

    Also warranted is Dr Lim’s warning that co-payments “should not discourage medically necessary care and definitely not cause patients to fall into the crevice of medical bankruptcy”.

    Insurers, healthcare providers and the Government must continue to work together to strike and maintain the right balance.

    Co-payments must be priced low enough so that people are not discouraged from seeking the care they need, but high enough to promote responsible medical consumption.

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