MOH Budget Speech (Part 1) - Can Good Healthcare be Cheap or Even Free?

07 Mar 2006

By Mr Khaw Boon Wan, Minister For Health

Venue: Parliament

"Can good healthcare be cheap or even free?"

1 I thank members for their comments and suggestions on how we can improve on our healthcare system.

No Free Lunch

2 Our system is not perfect, but it is not bad. The World Health Organisation ranked Singapore number 6 out of 191 countries on overall health system performance. Only two Asian countries made it to the top 10 list: Singapore (#6) and Japan (#10). We must have done something right.

3 Singaporeans acknowledge our high medical standard but many hope that it could be cheaper, or even free, at least for the poor. I will do my best to meet their aspiration, but such heavy subsidy has to be highly targeted for the poor and not something freely available to all in a uniform way. Despite good intentions, cheap healthcare for the masses ends up being of low standard, hurting the poor and needy the most, because unlike the rich, they cannot afford alternative private healthcare.

4 There are two ways that a government can render healthcare free or cheap. One, the government pays the bills out of the taxes it collects from the people. Or, the insurers pay for them out of the insurance premiums they collect from the people. Either way, it is the people who pay for healthcare. So the so-called free healthcare is actually not free.

5 But because healthcare in such systems can sometimes appear to be free, it causes two problems: the buffet lunch syndrome of over-consumption by patients; and the motorcar repair-shop syndrome of over-servicing by providers. As a result, the US spends 16% of its Gross Domestic Product on health, and the UK spends 8% of GDP - but they have very little difference to show in their health status. Instead, there were large-scale disappointments on both sides of the Atlantic. Nearly 50 million low-income Americans go without medical insurance as many cannot afford the premiums. In the UK, long waiting times for surgeries are common complaints.

6 Our health is not poorer than the Americans or the British. In fact, in some areas, we fare better. We live longer on average (79.3 years) than the Americans (77.0 years) or the British (79.0 years). Our infant mortality rate (at 1.9 per 1,000 live-births), is much lower than the US (7.2 per 1,000) and the UK (6.0 per 1,000). And we have achieved this commendable outcome at a lower cost, at 4% of our GDP. This does not happen by chance.

Unique Healthcare Model

7 We have over the years evolved our own model of providing and funding healthcare. We have no ideological bias. On funding, we are neither in love with the British taxation-funded model, nor the American insurance-funded model. On delivery, we neither favour public hospitals run by civil servants, nor prefer private for-profit models.

8 We have forged a middle way, going for a mixed system of public and private sectors. We tap and incorporate the strengths of each sector and allow both to flourish. Such a mixed system offers the best outcome for our people, giving them choices as public and private compete for patients, thus keeping the medical standard high.

9 Last month, the New York Times carried a commentary on the Canadian healthcare system. It reported that their publicly-funded health system was "gradually breaking down", with public hospitals sending growing numbers of patients, whom they can no longer cope, to private hospitals which are cropping up despite laws against their existence.

10 In Canada, private hospitals are technically illegal as no hospitals are allowed to charge patients for treatment they would otherwise receive free of charge in a public hospital. But in response to public demand, private hospitals are openly defying the law. This is how one private hospital medical director lamented about their healthcare system: "This is a country in which dogs can get a hip replacement in under a week and in which humans can wait two to three years."

11 The Canadians dread the excesses of the private model that they see in their American neighbour. That is why they embrace the public model. But now they appear to have come to the conclusion that both systems were wrong and a mixed system is more viable.

Managing Medical Inflation

12 I know Singaporeans worry about healthcare cost. This is a common worry all over the world. I am afraid healthcare cost will continue to rise. Why? Because new technology and new drugs will continue to come out of the research laboratories, at great cost, even as they bring about some improvements in healthcare.

13 It is actually quite easy to run a cheap public healthcare system. There are many such examples in our region. We can keep our hospitals cheap by denying our patients of medical advancements, thus pushing patients to private hospitals. But I will never accept such an approach for Singapore, for the simple reason that the poor cannot afford the private hospitals. My job is to ensure that the poor and the very sick get a good standard of healthcare.

14 I therefore agree with Mdm Halimah that we should not allow medical cost to escalate beyond our ability to pay. Mdm Halimah noted that medical inflation was 5.9% in 2004, higher than general inflation rate of 1.7%. Medical inflation comprises various items. Besides medical fees, it includes dental treatment, drugs and Chinese herbs. I was personally upset too, but I went to probe and discovered that for 2004, the spike in medical inflation was due to a doubling in TCM consultation fees from an average of $4 in 2003 to $8. Without this jump, the medical inflation rate would have been 1.3%, even lower than the general inflation rate of 1.7%. Mdm Halimah would be pleased to note that the medical inflation rate for 2005 was 0.4%, again lower than the general inflation of 0.5%.

15 But some medical inflation is to be expected as medical and nursing staff like other workers receive some wage increases. Last year, general wages in Singapore rose by 3.5%. This must in due course have an impact on medical inflation. In any case, inflation control cannot be decreed by law or achieved through moral suasion. It won't work. The most effective way is through the market.

16 First, we should ensure that wage increases in healthcare sector keep in step with general wage increases. This requires us to match medical manpower with demand. If demand rises while we restrict the supply of doctors, nurses, pharmacists and therapists, their wages must surely go up sharply.

17 That is why we watch over the supply and demand of doctors. At present, we are slightly short in some specialities though the situation is tolerable. But I see significant shortages going forward, if we succeed in our drive to promote biomedical research and Singapore as a regional medical hub.

18 I note Dr Lily Neo's comment that we could have moved faster on SingaporeMedicine. I believe in that too. Our efforts in the last 3 years have shown results. Foreign patients coming here to both our private and public sector institutions have grown on average by 20% per annum and the trend remains strong. Dr Loo Choon Yong can testify to this. We will press on.

19 I know this will increase staffing pressure on public hospitals. But we can try to achieve both objectives. We are ramping up the recruitment and training of medical specialists. The Singapore Medical Council (SMC) will be expanding the schedule of recognised medical degrees. Currently, it recognises 71 medical degrees, largely from the British Commonwealth.

20 I have shared my view before that the top medical schools of the world ought to be on our schedule, not just from the US and UK, but also from Europe and Japan. We should also include the top medical schools from India where some of their graduates have gone on to head clinical departments in the US. There is no reason to exclude these top medical schools and their graduates from coming here to help us make Singapore a regional medical hub. The SMC is actively reviewing the subject and will progressively expand the list. I expect to make the first announcement soon.

21 But medical manpower is not just about doctors. It is also about nurses, pharmacists, radiographers, other health sciences professionals, even patient care assistants. We should make sure that their supply keeps up with demand.

22 Second, I agree with Dr Lily Neo and Mdm Halimah that we should push our hospitals and clinics to be more efficient. There is no ground for inefficiencies or wastages or duplications. We will continue to encourage innovations and skunk works and share best practices. Last year, I mentioned a major skunk works in AH where it partnered with Microsoft to exploit the benefits of IT. Within a year, they successfully computerised the operations of the A&E department. The software is intuitive and allows new doctors posted to the department to become conversant with it without the need for extensive training. It is also flexible and allows doctors and nurses to easily make continuous process improvements. I want to record my thanks to Microsoft for their help. I understand that Microsoft has decided to extend their skunk works to Changi General Hospital and even enlarge the scope to include the community hospitals and nursing homes that partner CGH in providing integrated care.

23 Hospitals are expensive resources. To keep cost affordable, hospitals need to use their beds efficiently. For example, discharging patients from beds, get the beds cleaned up and get new patients in the beds, is a complex process involving many groups of staff. By standardising policies, streamlining processes and using WIFI technology provided by Cisco Systems and Fujitsu, AH has reduced processing times by 30%. This means less waiting for patients. Today, half of the patients admitted to AH are settled into their wards within 30 minutes.

24 AH and Cisco Systems are now exploring how WIFI and VOIP (Voice over Internet Protocol) technologies can be used to reduce the time it takes for doctors and nurses to respond to medical emergencies. This can make a real difference in life-and-death situations.

25 Third, the market works best when consumers are well informed. Hence I got MOH to compile and publish hospital bill sizes two years ago. I am pleased with the outcome. I am now ready to push this initiative further, in two ways.

26 One, I will extend the exercise to private hospitals. They have so far joined the initiative on a voluntary basis, but the submitted data is often incomplete and sometimes misleading. I am considering getting their fullest participation, to disclose their hospital bills on a fully comparable basis when they submit Medisave claims on behalf of their patients. This will be welcome by their patients, I am sure. Such transparency will also help convince their foreign patients that Singapore offers very competitive pricing for healthcare services.

27 Next, in response to the call by Mdm Halimah, I will expand the initiative to include qualitative outcome data such as surgery complication rates and success rates. Like the bill size exercise, I will begin with public hospitals to gain sufficient experience, before extending it to private hospitals in due course. We are concluding a study on cataract operations and the data will be released soon. Mdm Halimah asked about quality accreditation. All hospitals here must comply with the standards under our PHMC (Private Hospitals and Medical Clinics) Act. JCI accreditation is an added external endorsement that our local hospitals are comparable to international standards. All our public general hospitals have obtained their JCI accreditation. The specialist centres and the private hospitals are at various stages of this quality journey.

28 Making the market work better is the best way to help manage healthcare cost. When customers vote with their feet, healthcare providers will sit up and work to fight the competition. That was how LASIK surgery fees dropped from $2,300 on average in 2003 to below $1,400 now, saving patients nearly a thousand dollars per surgery.

Subsidies and 3Ms

29 At the same time, we must continue to remind Singaporeans to: (a) save up for their healthcare needs; and (b) insure themselves against catastrophic illnesses. Mdm Halimah asked if our healthcare model can cope with the ageing of our population. In particular, will the healthcare needs of our future elderly be well looked after? This is a dynamic situation with many unknowns: new medical advancements, changing population attitude, economic growth. That is why we need to periodically review and update our 3M system. Last year, we updated MediShield. This year my focus is on Medisave.

30 Our healthcare system is unique in the world because of Medisave. Medisave has entered its 21st year. Every year, the average Medisave balance of Singaporeans gets bigger. Among working Singaporeans, 4 out of 10, or nearly 500,000 have Medisave balances exceeding $25,000. This happy outcome applies to low-wage workers too. Those nearing retirement have an average of $12,545, enough for many hospitalisations.

31 In their earlier manifestos (1994/1998), the Workers' Party wanted to abolish Medisave. "Phase out the Medisave Scheme as soon as possible", they said. Luckily they did not succeed and Singaporeans made the right choice. As a result we now have collectively $35 billion in our Medisave Accounts, for many, many rainy days ahead. The Workers' Party has since achieved some enlightenment. Their latest manifesto (2006) no longer wants to phase out Medisave. They propose that Medisave be used for "a comprehensive Public Health Insurance scheme".

Robust Healthcare Insurance Market

32 We do allow Medisave for medical insurance. But Medisave must not unwittingly support comprehensive medical insurance which will only lead to disappointment and very high healthcare costs. This is not a theoretical argument. We only need to examine the experiences of those countries with such comprehensive medical insurance schemes. Let's not repeat the mistakes of others.

Updating Medisave

33 I am enhancing Medisave. From April 1, the daily withdrawal limit will be raised from $300 to $400. This will benefit many patients, particularly the middle income groups, and save patients hundreds of dollars per admission.

34 This is the first step. My next step is to allow Medisave to help cover costly outpatient treatments. But this is not straightforward. If we are not careful, Medisave accounts will be prematurely depleted, becoming insufficient for hospitalisation. That would be tragic. Meanwhile, I have noted Mdm Halimah's suggestions on this subject.

35 In this exercise, I will give priority to chronic diseases. I will discuss more on this later.

36 In response to Chiam's comment on Medisave for IVF treatments, patients are allowed to claim up to $6,000 per cycle from their Medisave accounts. The decision to limit the MediSave claims for IVF to 3 cycles was based on facts. International and local data have shown that the success rate for IVF declines sharply after the 3rd treatment cycle.

ElderShield

37 I thank Mdm Halimah for her suggestions on how to improve ElderShield. We are bound by the contract governing ElderShield which does not allow changes for 5 years. The 5-year period will run out in September next year. But I will begin the review process this year. I will certainly bear in mind the suggestions of Mdm Halimah.

Means-Testing

38 Dr Chong Weng Chiew would like means-testing to be implemented as soon as possible for public hospitals. I took the advice of Dr Lily Neo two years ago, and decided to defer means-testing until after I have tackled MediShield and Medisave. So this looks like an assignment for next year or the year after.

Drug Costs

39 Dr Tan Cheng Bock and Mr Low Thia Khiang spoke on the cost of drugs. Dr Tan quoted an example of a patient being referred to a polyclinic from NUH thinking that it would save him money, only to find that his drug bill at polyclinic costs more than at NUH. I have looked at the example which he handed to MOH. Of the 9 medications in the bill, some were cheaper at the polyclinic. The costlier drugs tend to be cheaper in polyclinics. As polyclinics and SOCs are different corporate entities, identical items may not attract identical prices. But on an overall basis, we should ensure that the total treatment cost in a polyclinic is less than that in an acute hospital for the same treatment. Otherwise, there will be no incentive for patients to move out of expensive acute hospitals.

40 Finally, Dr Lily Neo has made a number of comments on step-down care, homecare and heart diseases affecting women. We will respond to these points later today.