Cap co-insurance so Class C patients pay less

11 Feb 2005, The Straits Times

Question

Name of the Person: Leong Sze Hian

Cap co-insurance so Class C patients pay less

I REFER to the articles, 'Patients to pay higher initial amount from July' by Ms Salma Khalik, 'Don't leave the uninsured out in the rain' by Ms Chua Mui Hoong (ST, Feb 4); and  'To go or not to go over the counter' by Dr Andy Ho (ST, Jan 27).

The deductibles for MediShield will go up by $500. Monthly premiums will also increase by up to $11.25, so that the payout for large bills can be around 70 per cent compared to the current 40 per cent. 

The increase in the deductibles and graduated reduction in co-insurance mean that while the minority of people with higher bills will pay less, the majority with lower bills who opt for Class C wards will have to pay more or not be able to make a claim because their bills do not exceed the higher deductible. 

I would like to suggest a cap on co-insurance instead, as increasing the bill payout to 70 per cent does not really relieve the Class C patient's burden very much if, say, the medical bill is $20,000. 

In this example, the patient will still have to fork out $3,200. By capping the co-insurance to, say, $1,500 for Class C, patients will never have to pay more than $1,500 plus the deductible. This co-insurance cap may be higher for Class B2 and B1 wards, with no cap for Class A. 

Instead of the current system of separating the funding, payout and accumulation of surplus premiums for the MediShield and MediShield Plus schemes, they should be taken in totality. 

In this way, the general principle of pooled sharing of risks is such that those who choose to and can afford to pay more in Class A and B wards can provide some subsidy to Class C patients. 

The outcome may then be that those with lower bills in Class C may not need to pay more compared to under the current MediShield scheme. 

The fact that MediShield has accumulated profits of more than half a billion dollars may also be a contributory factor to the low payout ratio. 

I understand that most countries' national health insurance schemes operate at a deficit, so why does MediShield operate at a profit? 

Although the basic MediShield was in operational deficit for the last two years, when combined with the MediShield Plus schemes, was the total in deficit too since MediShield Plus is operating at a surplus? 

Now that MediShield Plus will be hived off to a private insurer, will the surplus accumulated be transferred to MediShield and, if so, what is the estimated amount? 

Instead of subjecting the 440,000 Singaporeans without health insurance to underwriting if they want to get into MediShield, I propose that with the MediShield Plus surplus and the increased pool of those insured under MediShield, it may be actuarially viable to 'let the uninsured opt in and charge premiums based on the community rating of the total 2.7 million pool, and not discriminate against the old and sick'. 

The higher minimum deductibles of $2,000 for Class B1 and $3,000 for Class A may mean more patients not being able to claim or having to pay out-of-pocket for higher sums because of the higher deductible. 

The change is to promote a 'more competitive and innovative private insurers' market'. But is it not in a sense self-contradictory because private insurers are being mandated to increase deductibles, instead of lowering them to become 'more competitive and innovative', as was the case when MediShield Plus was opened up to private insurers who managed to reduce the deductible from $2,500 to $1,500? 

How much of the current under-coverage may be due to the high prices of drugs and pharmaceuticals here? 

I understand that in the award of drug tenders, medicines that can cost as much as 10 times more than generic drugs may be selected for use. 

If there are generic drugs that are already approved and available here, we may need to give greater scrutiny to the award of tenders that are vastly more expensive. 

Dr Ho said that in Britain, going over-the-counter would slash the National Health Service's annual bill of 700 million (S$2 billion) for statins alone, and 'that is why it is imperative that the Health Sciences Authority must make its own decisions fully aware of the economic and political pressures under which switches come about abroad'. 

Health-care costs rose 11.1 per cent in the last five years, much higher than the 2.5 per cent increase in the consumer price index ('Why S'poreans complain about the cost of living'; ST, Feb 4). 

According to The Straits Times Interactive Poll (Jan 31), 24 per cent voted 'I'm not likely to consider signing up (for MediShield) even with the changes', and 19 per cent voted 'I'm in the scheme but will get out of it'. 

This is perhaps indicative of the public's sentiment and dissatisfaction. 

Accordingly, I think we need to try to cut costs too, instead of just raising premiums and deductibles, and accumulating surpluses.

Reply

Reply from MOH 

MOH: Why financial viability of MediShield should not be compromised 

In "Cap co-insurance so Class C patients pay less" (ST, Feb 11), Mr Leong Sze Hian offered several suggestions for the MediShield reform: (i) cap the co-insurance, (ii) use MediShield Plus to cross-subsidise MediShield Basic and (iii) focus on cutting healthcare costs. 

We share Mr Leong's concerns about the financial burden of large hospital bills on Class C patients. That is why the Government subsidises 80% of the costs of treatment in such wards. 

While capping the co-insurance will further ease the financial burden, this must be funded by higher premiums. The necessary premium adjustment will then exceed the current maximum monthly increase of $11.25. The elderly Singaporeans may find such premium increases unaffordable. 

Mr Leong is mistaken in thinking that MediShield Plus has made huge surpluses to be able to cross-subsidise the additional benefits for MediShield Basic. As a long-term medical insurance plan, MediShield Plus must set aside reserves from its operating surpluses to cover future obligations and contingencies. 

The tender of MediShield Plus will not free up these reserves. After the tender, MediShield will remain the basic tier of insurance for all MediShield Plus policyholders. MediShield will continue to provide basic medical coverage at the Class B2/C level. These long-term obligations have to be backed by adequate reserves. 

Mr Leong is also mistaken in noting that "most countries' national health insurance schemes operate at a deficit". No insurance scheme can function with sustained losses. Either premiums have to be raised or the scheme will eventually go bankrupt, to the detriment of all policyholders as they risk losing their medical coverage. 

As an example, Taiwan's National Heath Insurance (NHI) had to raise premiums in 2003 after its initial years of operating surpluses turned into deficits. Since then, its finances have continued to worsen. Further premium hikes are now being considered to save the programme from financial collapse. 

Therefore, even as we seek to maximize benefits for policyholders, we must not compromise MediShield's financial position. For long term viability, MediShield premiums must be sufficient to fund payouts and the cost of running the scheme, with adequate reserves set aside for future obligations. 

Mr Leong questioned the need for the deductible increase, as he felt that it would make the private insurers less "competitive and innovative". In drawing this conclusion, Mr Leong has somehow linked the deductible level with the degree of competition and innovation in the industry. But the two are not related. 

MediShield and the Medisave-approved private medical insurance schemes are catastrophic medical insurance plans. Their deductibles must be adjusted periodically with changes in medical cost, so that the policies kick in only for large bills. 

Market competition will come about not through lower deductibles but through a proper industry structure, where new players can enter the market and compete with existing ones for the benefit of all policyholders. That is why we are restructuring the industry to allow all private insurers to compete in the provision of enhancement plans on top of the basic MediShield tier. Such competition among the insurers will then drive the industry towards a wider range of innovative and competitively priced insurance products. 

In parallel with these changes, the Ministry will continue to manage medical costs without compromising patient care. We have published bill sizes and quality indicators to allow Singaporeans to make informed choices on where to seek treatment, and provide healthcare providers with comparative benchmarks. As for drug purchases, these are consolidated to exploit bulk discounts, with selection based on price and other factors such as safety, quality and efficacy. 

Patients too must play their part and moderate their expectation of the public healthcare system. 

If we succeed on both fronts, then we can avoid frequent and major adjustments in deductibles and premiums.