MEDISHIELD LIFE: IMMEDIATE REACTIONS

The MediShield Life Review Committee’s final report and recommendations dominated the headlines over the weekend. This was perhaps not wholly unexpected as these are the most major reforms to Singapore’s healthcare system since Medisave in the early 1980s.

Various online commentators including Bertha Henson and Leong Sze Hian have offered their interpretations while the mainstream media have provided wide coverage including a useful set of FAQs in today’s Sunday Times by Salma Khalik. I have been reluctant to comment publicly earlier as I was still going through the report and digesting, but I guess it is worthwhile at this juncture to offer some preliminary thoughts.

What I liked:

I appreciated the almost ‘Socratic method’ that permeated the report. The authors took great pains to frame the decisions from the perspectives of competing and perhaps even mutually exclusive priorities. The tempo and flow of the report was pleasant, moving smoothly from a high level discourse of the issues to summarizing the insights and observations from the many discussions with Singaporeans from all walks of life, and then funnelling into specific recommendations. Careful study of the report would enable even the sceptical reader to understand and appreciate, even if she could not accept the logic of the recommendations.

If reports could have emotions, one could almost ‘feel’ the conflict stirring in the bosom of the Committee members as they wrestled with the trade-offs that were unpleasant but had to be made.

The Committee’s report also confronted head-on many thorny issues without white washing or avoiding contentious topics. Mr Bobby Chin and his committee tackled the feedback from participants in the various feedback sessions and explained candidly why certain suggestions were adopted and others not. For example, lowering the deductibles was a popular call but the Committee decided to maintain the deductible amounts at current levels, explaining doing so would enable “sieving out the smaller bills which can be paid for using Medisave” and that “Most Singapore families have sufficient Medisave or savings to cover the deductible”. Note the phrase “Singapore families” rather than “Singaporeans” emphasizing the retaining of the ethos of family responsibility first in healthcare financing.

Another example would be the decision to not expand the indications for outpatient MediShield Life usage. The Committee did not deny there was justification for such requests, but defended that “MediShield Life’s focus is on large bills, which are of greatest concern to Singaporeans, and where insurance risk pooling is most valuable”. The Committee also opined that “outpatient treatments which incur high cumulative costs like cancer treatments are already covered in MediShield” and that “coverage will be further enhanced under MediShield Life”.

Here I don’t quite agree with the ‘neglect’ of non-cancer conditions but am sympathetic that with a mere 6 months to complete its work, it would have been unrealistic to expect a full review of the myriad clinical conditions that might warrant inclusion. The Committee thus left the door open for MOH to include more outpatient treatments in future. I would think treatments for expensive, chronic conditions such as immunological diseases affecting the nervous system and the joints as well as the various genetic conditions requiring enzyme replacement or special diets would be prime candidates for future additions.

One decision I particularly liked was the inclusion of those with pre-existing diseases into a common risk pool instead of having these Singaporeans housed in a separate pool. In addition to the ‘inclusiveness’ of this decision, I applaud the courage in highlighting as a first principle in this decision-making “Shared Responsibility”. The Committee plainly states:

As Singapore moves towards becoming a more inclusive society, Singaporeans should exercise greater collective responsibility. Everyone, both the healthy and unhealthy, should contribute to the common risk pool.

And in a nod to greater societal inclusion, the Committee recommended the “lifting of exclusions like those pertaining to… treatments related to conditions arising from or due to HIV/AIDS”. Bravo!

What I didn’t like:

Being thanked by name, together with fellow academics like Profs Phua Kai Hong and Eric Finklestein in the report makes it difficult for me to be critical! Seriously, there are three aspects of the report which I was somewhat uncomfortable with. Dislike is too strong a word for a report which I overall consider to be very thoughtfully prepared and presented.

  1. Community Rated versus Adjusted Community Rated Premiums– In a full “community rated” insurance scheme, an insurer charges everyone covered by the same type of policy the same premium without regard to age, gender, health status, or other factors. Under MediShield Life, we have what is probably best described as an “Adjusted community rated” scheme where premiums are priced differently based on age. This is actuarially very reasonable but I wonder whether we run the risk of premium pricing running amok for senior Singaporeans in the years to come and especially for those blessed with longevity. Will we have mechanisms then to rein in sky rocketing premiums? Or will there be a chasm between the young ‘good risk’ and the old ‘poor risk’? Premiums are moderated in part by large numbers and the larger the risk pool, the better it is able to ‘spread’ extreme healthcare costs amongst the insured. In the MediShield Life actuarial model as currently recommended, we retain the age bands and so dispersion is large. Come 2019 when transition subsidies expire, high income Singaporeans aged between 0 and 20 years would pay an annual premium of S$130 while those >90 years of age would pay S$1,530, an almost twelve-fold difference! One option that might be worth exploring would be ‘rate bands’ which limit the amount premiums for higher risk groups can vary from the index, or base, rate. In Obamacare, the law limits the rate band to 3:1, meaning that an older individual will pay not more than three times what a younger one would pay in premiums. This ‘hitching’ of premium rates would hopefully protect seniors from rampant premium escalations and encourage solidarity and a “more inclusive society”.
  2. Lack of detail of the actuarial analysis– the Government’s commitment to MediShield Life over the next 5 years is an impressive S$4 billion, but in the absence of more detailed actuarial data being made available, these numbers must be accepted by faith and faith alone. At the least, it would be worthwhile to consider releasing data to independent parties on expected medical loss ratios and accumulation of reserves so that experts like academics can validate the numbers. If forced to speculate, I would wager that the Government’s actuarial estimates are conservative and MediShield Life would see very healthy increases in its reserves. How much of this would be due to ‘mis-predicted’ mismatch between estimated claims and premiums, i.e. unplanned, how much of this would be from “Distributing Premiums More Evenly Over Lifetime”, i.e. planned would be impossible to tease out… I only hope that when MediShield Life begins reporting its accounts, there are no extremes in either direction. Too high a claims rate would cause concern of financial sustainability and fears of a ‘populist’ government too soft to make the tough fiscal calls; too high a build-up of reserves would lead critics to accuse the Government of setting premiums too high and adding a MediShield Life ‘tax’ to a populace already struggling with rising costs.
  3. The Responsibility for Cost Control– There were concerns raised in the feedback sessions around rapid rises in premiums for the Integrated Shield Plans and calls for legislation to rein in premium increases. However, the Committee held the position that “recommending premium caps or limits on premium increases would not address the fundamental drivers of premium increases effectively, and may eventually render these Integrated Shield Plans financially unsustainable. This would in turn hurt existing policyholders”. While the Committee encouraged “collaboration between insurers, Government and private medical professionals” to rein in medical inflation, it reported elsewhere that increases (in Integrated Shield Plans) were “driven significantly by rising claims due to (i) as-charged feature of Integrated Shield Plans and (ii) high professional fees in the private healthcare sector”. Whilst it is clear that the saying “The most expensive medical device ever invented is a doctor’s pen” has more than a ring of truth to it, insurers should not be let off scot-free either. My colleague Jim Bonnette gave a lecture in NUS last year titled ‘Forced Innovation: Experiences from the US Health System’ where he described how the US model was so broken that there was no choice but to innovate. What drove this innovation? Remember that the ‘costs’ of healthcare we rail against is the revenue of healthcare providers and the salaries and bonuses of many thousands of healthcare professionals including doctors, nurses and managers. Why would the healthcare system contain itself? Rather, one very significant driver of change was payers changing payment models to hospitals and healthcare providers. Instead of accepting meekly claims submitted by healthcare providers, payers (in the US, this would be mainly insurers) began pushing back, declining to pay for re-work and hospital-acquired infections. The next wave of payer innovation is still shaping the American landscape with payers moving to fixed payments or capitation with bonuses or sharing of savings for good clinical outcomes such as avoidance of hospitalizations, shorter stays and so on. This transformation from ‘fee for service’ to ‘fee for value’ is a positive development. Why did it happen? This wave was enabled not just by payers finally being emboldened (or perhaps desperate enough?) to change payment models but also by technology. Two technology trends in particular, ‘Big Data’ as coined by IBM and ‘Internet of Things’, popularized by Cisco, were vital. The former allows two things: payers to dictate payment based on performance rather than process or input, and providers to utilize analytics to know which patients to proactively focus on, what to do and know what worked and what didn’t. The latter permits caring for such high-cost patients more cost-effectively outside the confines of healthcare institutions. In the Singapore context, perhaps insurers can be ‘pushed’ into ‘pushing’ healthcare professionals to be more cost conscious and mindful of the need for total system cost containment. How can insurers be ‘pushed’? “Premium caps or limits on premium increases” which the Committee eschewed come easily to mind…

It is still early days for MediShield Life and nothing is cast in stone… yet. The Government has accepted the Committee’s report and stated it will table the report as a White Paper for discussion in Parliament next month. I hope parliamentarians will take the time to read through this very well-written report and come to their own conclusions. I hope they will also quickly explain the report and recommendations to their constituents and garner feedback which they can channel into a robust debate. Our health and our children’s health deserve no less.

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