MediShield premium a tremendous increase

20 Dec 2004, The Straits Times

Question

Name of the Person: Seah Leong Khai

MediShield premium a tremendous increase

I REFER to the report on the new MediShield insurance scheme announced byHealth Minister Khaw Boon Wan to be introduced in July next year ('NewMediShield plan likely in July'; ST, Dec 13). I fully support this new schemedesigned to help Singaporeans to cope with ever-increasing medical bills. 

However, I am disturbed by Mr Khaw's statement that in the revamped scheme,those covered under the existing MediShield scheme, which is managed by theCentral Provident Fund Board, will have to pay an extra $10 per month inpremium. 

Under the present scheme, CPF members pay $1 a month for those 30 years andbelow, increasing to $5 a month for those between 51 and 60 years old. About1.7 million CPF members are covered by MediShield and MediShield Plus. 

The extra premium members have to pay is a tremendous increase, an incrementranging from as high as 1,000 per cent to 200 per cent. 

Mr Khaw said the extra premium will cover people with huge medical bills byallowing them to pay only 30 per cent of the bills under the new scheme, ratherthan 60 per cent or more under the present scheme. 

I am glad the revamped scheme will benefit those who face increasingly hugehospital bills. But I don't understand how the extra premium is arrived at. Itwill be a shock to a 30-year-old member who pays $1 a month and suddenly findshe must pay $11. 

It was also reported that the existing MediShield scheme is operationally inthe red. This is not correct. 

According to the CPF Board Annual Report, total income including premiumscollected in the MediShield fund last year was $130.7 million, and totalpayouts and expenses were $82.6 million. This shows a surplus of $48.1 millionin one year. 

In the 14 years since MediShield started, the fund has built up a surplus of$524 million. Why then is there a need to increase premiums up to 10 times foreach member? 

At present, members usually pay more and claim less from MediShield fortheir medical bills. I believe this is because of the practice of deductiblesand co-payment. 

Let's look at a simple example. Madam Ah Soh is hospitalised to undergo asimple operation and incurs a hospital bill of $2,000. She is covered underMediShield but can claim only $800 because she must pay the deductible amountof $1,000 and co-payment of 20 per cent of the remaining claimable amount. 

If the Ministry of Health (MOH) is genuinely interested in helping those whoare in need of financial help, it should consider reducing deductibles andco-payment. 

It is usually the poor who cannot even afford the deductible amount whenthey are saddled with hospital bills. The priority of MOH should be to reducedeductibles and co-payment, and to control medical costs in government hospitals.

Reply

Reply from MOH 

Medishield premium increase for the young less than $10 per month 

In "MediShield premium a tremendous increase" (ST, Dec 20), Mr Seah Leong Khai supported the proposed MediShield reform but was disturbed by "the tremendous premium increase". Mr Seah had the wrong impression that all policyholders will be equally subjected to the $10 monthly increase. This would not be so. 

Premium adjustments will be actuarially based. As they are more likely to claim, the elderly will bear higher premium increases than the younger policyholders. Nevertheless, to keep the policy affordable, we will try to keep the maximum monthly premium increases at about $10. The premium increase for the young will certainly be less than $10 per month. 

Mr Seah questioned the need for premium adjustments as he found from the CPF Annual Report that MediShield fund had yielded a surplus of $48.1 million last year. CPF operates three separate insurance plans: MediShield Basic, MediShield Plus A and MediShield Plus B. The CPF Annual Report gave the consolidated financial position of the three plans. Unlike the MediShield Plus plans, MediShield Basic has been in operating deficit since 2002, i.e. the payouts exceed the premiums collected. Hence the need for the proposed premium increases for MediShield Basic. 

Mr Seah suggested that MediShield deductibles and co-payment be reduced. There is a distinction between comprehensive medical insurance and catastrophic medical insurance. The former has low deductible and low co-payment. The latter sets a significant threshold above which the insurance will kick in. 

Not surprisingly, comprehensive medical insurance levies much higher premium than catastrophic medical insurance. Medisave does not support comprehensive medical insurance as it is open to abuses and over-servicing. It is far better for hospital bills below MediShield deductibles to be funded directly out of Medisave. 

MediShield and the current reform pertain to catastrophic medical insurance. With changes in medical cost, MediShield deductibles have to be periodically raised to maintain the catastrophic insurance nature of this policy. Hence, the current reform requires an increase in MediShield deductible level. 

As for co-payment, the reform will seek to reduce the effective co-payment from the current 60% to about 30%. This would bring tremendous benefits to those with major illnesses. 

We will be putting out more details on the MediShield reform, as they become available, on our consultation website at www.moh.gov.sg and welcome all feedback to the website.