“Spend more to keep healthcare affordable”- Today 22 Feb 2013

False dichotomies seem to pervade discussions around public policy. In demography, it is economic growth versus population constraint. In healthcare, it is reckless welfarism and compromise of other state functions versus fiscal prudence and necessary limits on health services. Yes, there will be trade-offs but we have a swathe of middle ground in between the extremes. I hope this contribution published in ‘Today’ today helps clarify that it need not be black or white; gray is a nice color too…


“Spend more to keep healthcare affordable”- Today 22 Feb 2013

Singapore’s health system is lauded internationally for its ability to achieve outstanding health outcomes at very low national spending. Yet, 72% of Singaporeans believe “We cannot afford to get sick these days due to high medical costs” (Mindshare survey 2012). How can this be? Our low national spending on healthcare is the envy of the world, and yet Singaporeans are so worried about healthcare costs.

What makes a great healthcare system? Healthcare planners the world over dream of the ideal health system: high quality, low cost and universal access for all citizens. How would Singapore rank along these dimensions? The quality of Singapore healthcare is top-notch; 850,000 medical tourists in 2012 are testament to our high standards. What about access? Geography advantages us, and unlike many large countries which need extraordinary measures to provide for far-flung populations, Singaporeans are hardly a stone’s throw from a doctor and barely a fifteen minute drive from a hospital.

Our weakness lies in affordability, or at least the perception of affordability. Ironically, why we spend so little may account for why there is so much anxiety.

Individual Responsibility- A double-edged sword. In many developed countries, healthcare is funded collectively. Citizens are enrolled into a national health scheme and funds drawn based on individual need. These ‘solidarity’ schemes are designed to offer medically necessary care without consideration of ability to pay. Singapore has eschewed this path, with then-Prime Minister Lee Kuan Yew strongly asserting, “Subsidies on consumption are wrong and ruinous … for however wealthy a nation, it cannot carry health, unemployment and pension benefits without massive taxation and overloading the system, reducing the incentives to work and to save and care for one’s family – when all can look to the state for welfare.” The government declared health an ‘individual responsibility’ in the 1980s and established Medisave and MediShield, enabling individuals to finance and hence be ‘responsible’ for personal healthcare.

Emphasizing private financing of healthcare through ‘Individual responsibility’ supported by family has been praised for helping Singapore achieve remarkable cost constraints but there has been a very human cost. While the government has successfully mitigated the risk of wanton state spending, the consequence arguably is that financial risk from medical catastrophe has been passed to individual citizens and their families with resultant anxiety. Support from Medifund is possible but only upon application and on a case-by-case basis with no certainty of coverage, complete or otherwise. C-class wards provide subsidies which can be as high as 80%, but paying even the remaining 20% may be impossible for hefty bills; 20% of S$50,000 is still too heavy a burden for low-income Singaporeans. And healthcare costs can be very unpredictable. While virtually every country imposes co-payments to guard against over-consumption, many countries, especially European nations, operate on the reverse principle to Singapore. Co-payments are preserved as with Singapore, but the individual’s share of the total bill is capped, e.g. in Germany at 10% of monthly income, with the government assuming the financial risk for unexpectedly large bills. No need to apply for special dispensations or subsidies. Princeton University economist, Uwe Reinhardt, speaking of the German health system, declared about medical bankruptcy, “That’s almost impossible… I have not ever read of Germans going bankrupt over health care.”

MediShield lifetime dollar coverage is capped at S$200,000 (soon to be S$300,000) with high deductibles and sub-limits on what clinical services can be covered. All these collectively enable relatively low premiums to be imposed, and renders MediShield financially very healthy, but similar to the structuring of subsidies, financial risk is borne by individuals and their families, with no certainty of help from Medifund or other schemes.

The theme is consistent: In our healthcare financing model, safeguards are built first and foremost to ensure system financial viability and sustainability.

Defenders of the system will point out the many financially struggling ‘welfare states’ and proclaim Singapore must never go there. But it should be noted that between where we are today and the ‘fiscal extravagance’ of the welfare states, there is a huge middle ground. Singapore’s total public spending as a proportion of GDP is only 13%, a far cry from the 40% that Finland spends. Singapore’s government spending on healthcare is just above one-third the total, with a long way to go before even sniffing the four-fifths that is the UK. Health Minister Gan Kim Yong’s commitment, following the release of the Population White Paper to “look at how we can restructure our primary care sector, our hospitals including our intermediate long-term care sector”, i.e. the entire healthcare landscape, is reassuring especially when juxtaposed against earlier comments on looking at healthcare affordability from the patient’s perspective. Times are changing…

“To live well, live long & with peace of mind” is the mission of the Ministry of Health. How can we balance ‘individual responsibility’ with ‘peace of mind’? The former has enabled Singapore to maintain impressively low spending on healthcare but has eroded the latter. Between 13 and 40 per cent, between one-third and four-fifths, where do we want to be?



Public Spending as % GDP

National Healthcare Expenditure as %   GDP

Government Spending on Healthcare as %   of Total Healthcare Spending

















United Kingdom




United States of America




High-income OECD Countries (Aggregated)




Data source: World Bank (2010 statistics)



One comment

  1. Some feedback from readers of the post with my response at the end. There are no perfect or even good answers but the important thing to me is that we continue to discuss and engage with each other so that society can come to decisions it collectively is comfortable with.

    A: Another nice article that will trigger more questions from all stake holders:
    1. Where the $ come from:
    Higher healthcare spending from higher taxes? Or higher GST? Or compulsory national insurance from all citizens?
    2. More controversially, what To spend on?
    Higher salaries for healthcare workers? More across the board subsidies? Or focus in expensive diseases like HIV, viral hepatitis, chemotherapy, major surgeries?
    And who decides the fairest way to distribute the subsidies
    I recalled a Bangladesh hepatologist telling me the country had done their first live donor liver transplant a few years back. The procedure involved 20 senior specialists. The surgery was successful but my friend wondered if the money and resources spent on one patient should have been spent in 100 patients with heart disease or diabetes
    That’s why we need health economists like you to recommend the best option (s)
    B: Good article, Jeremy. Much ties in with our revenue system though. Are we prepared to pay higher taxes so that more can be spent on healthcare? Somehow, I doubt that the majority of us are that altruistic …
    C: Well said. It’s an issue with many moving parts, but it seems beyond argument that we could spend more without approaching the slippery slope of unbridled welfarism.
    D: Actually this is my counter argument.
    If public healthcare is so expensive, why are public hospitals and polyclinics so crowded?
    If we lower healthcare costs in public hospitals, we would likely expect more overcrowding.
    Before lowering healthcare costs, we should build more hospitals and polyclinics or we should have portable subsidies.
    That way we can lower healthcare cost and at the same time not risk worsening of increased demand.
    In summary, we have to spend more by allowing portable subsidies in private healthcare and at the same time build more polyclinics and public hospitals. Only then would lowering healthcare costs be feasible.

    Jeremy Lim Thanks for comments everyone. Some immediate responses: 1. Funding is not the terrifying concern it is made out to be. Some numbers- MOH operating budget is S$3.5 billion which is about the same size as the projected 2012 Singapore government budget surplus. What this means is if all the surplus goes to healthcare, we could double healthcare spending without raising any taxes. Net Investment Returns Contribution which under the constitution cannot exceed 50% of total returns is about S$7 billion. I’m not persuaded we as a country still need to accummulate more reserves deliberatedly and there should be leeway to increase the 50% to say 60% and that would add a billion or so. 2. On what to spend on, even keeping the existing framework, the government can afford to shift the financing share from one-third government to maybe two fifths or even half with no changes in what to subsidize. The issue then would be how much to subsidize Singaporeans so that healthcare is not excessively onerous whilst still preserving co-payments. 3. Public hospitals and polyclinics are so crowded because there is under-capacity and government subsidies are site-specific. Having portable subsidies would increase the supply side of the equation and if done well, also create a genuine market in healthcare services which can potentially lower costs if payers are smart in using their position to influence the delivery models in healthcare.

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