Parliamentary Debate on MediShield Life Review Committee Report – Minister’s Closing Speech

INTRODUCTION

1. Madam Speaker, over these past 2 days, 24 Members have spoken about MediShield Life.  I am heartened by Members’ unanimous support for MediShield Life and what it means – Better Protection, For All, For Life.

2. Many Members spoke passionately of how MediShield Life would help ordinary Singaporeans with large unexpected hospital bills, giving them better peace of mind. A number shared stories of their constituents who were unfortunately struck by serious illnesses and were concerned with how to pay their bills as they had no insurance coverage before MediShield Life. 

3. Members also spoke on related issues such as the Integrated Shield Plans and Employer Medical Benefits. More importantly, Members also raised fundamental issues in healthcare financing, like how we can continue paying for our healthcare now and into the future. 

GOOD AND AFFORDABLE HEALTHCARE FOR ALL SINGAPOREANS

4. Let me start by addressing comments and questions on the larger healthcare system and financing framework in Singapore.

5. I agree with Dr Chia Shi-Lu and Dr Lam Pin Min’s observations about the quality and effectiveness of Singapore’s healthcare system. We have achieved good outcomes, and at lower cost than most other countries. I earlier highlighted the key principles that have guided us through the years, and which remain important: 

a.    First, emphasising cost-effectiveness, with co-payments to guard against over-provision and over-consumption;

b.    Second, ensuring that healthcare is accessible for all Singaporeans, through targeted subsidies; and

c.    Third, maintaining sustainability for current and future generations.

6. These principles continue to serve as the foundation for our healthcare financing system, even as we adapt our system to meet Singaporeans’ changing needs.

7. To meet these challenges, we need to foster greater collective support for healthcare costs. As Mr Sitoh Yi Pin has noted, the Government will raise its share of healthcare spending from one-third in FY 2012 to 40% or more going forward.

8. We are strengthening risk-pooling through MediShield Life, in addition to enhancing subsidies, allowing more flexible use of Medisave, and having expanded coverage of Medifund.

9. I thank Members such as Mr Christopher de Souza, Mr Zainal Sapari and Ms Denise Phua for raising valid concerns about the long-term sustainability of our system. This is a very important issue and I am glad that many Members recognise the need to manage overall healthcare costs.  Patients’ co-payments serve as an important safeguard. In setting co-payments, we need to balance between affordability and the need to focus providers and patients on cost-effective treatments and minimise over-consumption.    

10. In many countries, minimal co-payments have distorted the incentives of patients and doctors.  As it is a third party – government or the insurer – footing the bill, they are less likely to consider the cost of treatment carefully, and may opt for more expensive treatments or drugs which do not lead to significantly better outcomes for patients. The costs are borne by the rest of the society, in the form of higher premiums or taxes.   Dr Chia has warned us against the pitfalls of such systems.

11. Beyond co-payments, we will also need to work with providers and insurers to better manage healthcare inflation, as several MPs have highlighted.

a.    Mr Yeo Guat Kwang called on providers to be prudent in offering healthcare services, while Mr Sitoh Yi Pin emphasized the need to tightly control the scope and delivery of services in subsidised wards. I agree with the Members that providers play a critical role in managing costs.

b.    In the public sector, we will continue to develop and enforce strong clinical protocols, to guide doctors on what is clinically appropriate and cost-effective. Drugs is a good example. We have developed a ‘Standard Drugs List’, or SDL, based on clinical appropriateness and cost effectiveness. SDL drugs are subsidised and the list is regularly reviewed to ensure access and affordability of treatments for a wide range of illnesses. The SDL is a good guide for doctors on which are the effective drugs, based on sound clinical evidence. SDL drugs should be used as a first choice, unless there are medical indications otherwise.  

c.    As Dr Chia has suggested, we will expand the use of Health Technology Assessment.   We will apply it for medical devices and implants used in our public hospitals and the purchase of new costly technologies.  This involves a rigorous review of patient outcomes and cost-effectiveness. We will do so in an efficient and targeted manner, to avoid increasing administrative costs.

d.    A/Prof Fatimah Lateef and Mr Yee Jenn Jong suggested close monitoring of insurance claims and healthcare consumption patterns. We will do so.

12. However, we will need the support of our healthcare professionals, providers, patients and families to do this effectively.  To better manage healthcare inflation, we will need to curtail unfettered choice, which does not translate into outcomes.  We must work together to keep a lid on healthcare inflation.

13. I am encouraged by Mr Faisal Manap’s compliments for the Health Promotion Board’s programmes. We will continue to strengthen our efforts in this area, guided by the Healthy Living Master Plan. As suggested by Mr Teo Siong Seng, employers and other stakeholders can also play an active role in this, by promoting a healthy lifestyle and greater work-life balance at the workplace.

14. As Ms Ellen Lee has mentioned, Singaporeans must ultimately be responsible for their own health. This includes going for recommended screenings regularly, and following the treatment for chronic conditions. This will avoid unnecessary costs by picking up and managing chronic conditions early and reducing the risk of progression to more serious complications that may require hospitalisation.

 MEDISHIELD LIFE

 Better Protection Through Better Benefits

15. Let me now turn to comments specifically on MediShield Life. 

16. Several members have asked about the benefit features for MediShield Life, including the scope of what it covers. The MediShield Life Review Committee decided that MediShield Life should continue to focus on large hospital bills, to maximise the benefits of risk-pooling while keeping premiums affordable. Costly outpatient treatments, like dialysis and cancer, are currently already covered by MediShield.  The higher claim limits, lower co-insurance rate, and the removal of the lifetime claim limit will further help cancer and dialysis patients with their bills.

17. Dr Lam and Mrs Chiam asked about funding and affordability for community hospitals and palliative care. Members will recall that subsidies for community hospitals and long-term care services were increased across the board in 2012. With MediShield Life, the daily claim limit for community hospitals will increase from $250 a day to $350 a day.  Medisave limit for community hospitals is generally adequate, and for patients having difficulties, we can consider their appeals on a case-by-case basis and we will exercise some flexibility. However, MediShield Life will not cover palliative care, which will continue to be affordable after Government subsidies and expanded use of Medisave, as recently announced.

18. MediShield Life will also not cover long-term care such as nursing home and home care, which are covered separately by ElderShield and the Pioneer Generation Disability Assistance Scheme. 

19. My Ministry will review the scope of MediShield Life coverage from time to time taking into account changes in how medical care is delivered and new information on patient outcomes and effectiveness, while keeping an eye on premiums.

20. Ms Mary Liew asked whether there could be an annual cap on out-of-pocket payments.  MediShield Life will be paying out significantly more, but we should continue to be mindful of the need to manage costs, and a cap on out-of-pocket payments may encourage unnecessary consumption beyond the cap.  Hence some level of co-payment will remain.  For those who still face difficulties after subsidies, Medisave and MediShield Life, Medifund help will still be available. 

21. Let me now move on to address questions about premiums and premium affordability. Dr Lily Neo and Ms Tin Pei Ling asked how MediShield Life premiums are determined. 

22. Premiums are priced based on established actuarial principles and approaches, and they are done by an actuarial consultant, Deloitte Actuaries & Consultants in this case.    Premium pricing takes into account several factors, including:

a.    The benefits and expected claims experience, which takes into account future changes in demographics, utilisation rates and costs of medical treatment;

b.    Provision for premium rebates for policyholders when they grow old is also included ;

c.    And provisions for reserves, capital and administrative costs for the scheme as well.  

23. Three main factors have led to higher MediShield Life premiums – better benefits, bringing everyone into MediShield Life and spreading MediShield premiums more evenly throughout one’s lifetime. Let me explain each in turn.  

24. First, better benefits. With better protection, MediShield Life payouts will increase, and premiums will have to increase, to support the higher payouts.  

Providing Universal Coverage For All

25. Second, a small part of the premium increase goes toward bringing all Singaporeans, including those with pre-existing conditions, into MediShield Life, with Government supporting the bulk of the additional costs.

26. Several Members have asked how the Committee decided on the additional premium of 30% for those with pre-existing conditions. Those with pre-existing conditions would need to pay more, in fact a lot more than 30%, to reflect their higher risks.  However, the committee recommended a 30% additional premium so that it will not be overly onerous.

27. The Ministry is currently reviewing the types of pre-existing medical conditions which will be subject to additional premiums, and will share more details in time to come.

Better Distribution of Premiums over Our Lifetime

28. Third, for the working-age groups, part of the increase is to pay for old-age premiums in advance, to achieve a more even distribution of premiums over our lifetime, as highlighted by Ms Ellen Lee. This helps to cushion the impact of future premium increases during their own retirement years.

29. This is quite different from what some have suggested: to cap premiums for the elderly or have flat premiums across all age groups.      

30. Because this means that the older generation will be contributing less than the payout from Medishield Life, and the deficit will have to be paid for by the younger generation. Given our ageing population, this is not advisable, as it entrenches an intergenerational cross-subsidy, where the young carries the burden to pay for the premiums of the old. With a growing number of elderly being supported by a shrinking number of younger policyholders, premiums of the younger generation will keep escalating, imposing an increasing burden on our children’s generation. This will not be sustainable.

31. Instead, what we have done is to determine the premium on an actuarial basis, as recommended by the Committee, while putting in place government subsidies and additional support to help the older generation and the needy with their premiums.   

Affordable Premiums

32. Some Members, including Mrs Lina Chiam, have also voiced concerns about premium affordability, and asked whether Government support could be extended beyond the first four years of transitional subsidies. Let me reiterate and clarify that Premium Subsidies for the lower- to middle-income, covering up to two-thirds of the population, are a permanent feature of MediShield Life and will continue to be provided, beyond the first four years. Pioneers will also enjoy the special Pioneer Generation premium subsidies for MediShield Life, for life.

33. Some MPs, such as A/Prof Lateef, have questioned the use of Annual Value in assessing eligibility for premium subsidies. Subsidies have to be targeted at those in greater need. Hence, MediShield Life premium subsidies are provided based on per capita monthly household income and Annual Value (AV) of homes. Annual Value is a relevant consideration, as among those with the same income, those who live in homes with a higher AV would generally be better off than those who live in homes with a lower AV.  While this approach is not perfect, it strikes a balance between being more precise in assessing applicants’ means, while keeping the process simpler for most applicants.

34. The $21,000 threshold for Annual Value covers all HDB flats and some lower-value private properties. Those genuinely needy but living in homes with AVs beyond the eligibility criteria for premium subsidies can appeal and they will be assessed on a case by case basis, taking into account specific family circumstances. If they are Pioneers, they will still be eligible for the Pioneer Generation Package, regardless of income or AV.

35. Mr Gerald Giam called for the Government to consider automatically extending premium subsidies to those who are known to be needy and already on Government help schemes. Indeed, this is our intention. Assessment for premium subsidies will be done in as simple and convenient a way as possible. We will share the details when ready.  

36. For those who are unable to afford their premiums after Premium Subsidies, the Government will also provide Additional Premium Support, similar to how Medifund helps Singaporeans with medical expenses in the public healthcare institutions today. No Singaporean will drop out of MediShield Life because of inability to pay for premiums.

37. The Government has planned its budget to include higher subsidies under MediShield Life. We do not plan to raise taxes for the purpose of paying for these MediShield subsidies. Whether taxes have to be raised in future depends on our overall spending and our overall revenues in Government.  

38. The Minister for Finance has stated during this year’s Budget debate that over the next decade, total healthcare spending will go up significantly. The Government will work with the healthcare providers to contain healthcare cost increases. It will also ensure it has the revenues over the next decade to fund this increase.

39. Even with MediShield Life taking on a larger share of Singaporeans’ healthcare expenses, I would like to assure Members that the Government will not cut down on Medifund assistance.   There will still be some who will need extra help. The amount that the Government has set aside for Medifund assistance will continue to be available to help any Singaporean who falls into difficulties with their healthcare expenses, including for outpatient care and intermediate and long-term care.   

40. Let me now touch on pensioners. Mr Png gave the impression that pensioners will be worse off by being included in MediShield Life mandatorily, and gave several examples of how that is the case. In a press release on Friday as well as in his Parliament reply yesterday, DPM Teo has made it clear that pensioners will not be worse off in their medical benefits, which means that all their benefits will remain the same. In addition, under MediShield Life, his spouse will now receive Medishield Life coverage, for life. Under the current pension scheme, a pensioner’s spouse will lose coverage when the pensioner passes away. But going forward, the spouse will now be covered under MediShield Life, for life even after the pensioner has passed away. I hope Mr Png is now assured that pensioners will not be worse off, and that he will help us reach out to these pensioners and assure them that they are not worse off.

Ensuring Sustainability of MediShield Life

41. Let me now turn to the long-term sustainability of MediShield Life, which Dr Janil Puthucheary, Mr Yeo, and Mr Giam spoke on. MediShield and MediShield Life as long-term health insurance schemes ensure sustainability by setting aside sufficient reserves. The reserves enable MediShield to honour not just current-year claims but also long-term commitments such as continuing claims for dialysis and cancer treatments, and premium rebates for the older age groups.  It would not be responsible to all Singaporeans and policyholders if yearly premiums for MediShield just exactly balanced yearly payouts, for this would mean that it cannot meet any continuing commitments for long-term dialysis patients or premium rebates. I am glad to note that Mr Giam agrees that MediShield Life should be financially sustainable and have adequate reserves.

42. Now in assessing premium adequacy, we cannot consider only claims incurred in the current year. This looks only at current cashflow without considering the long-term claim liabilities, for example, for conditions which are already receiving payouts, leading to the misconception that MediShield is collecting more premiums than needed.

43. As Dr Puthucheary has explained, the incurred loss ratio is a more appropriate measure, as it compares total premiums to the total monies required to ensure that the Fund is able to meet both current-year claims and also its liabilities into the future. MediShield Fund’s incurred loss ratio over the last five years (2009 to 2013) was 96%, as Dr Puthucheary pointed out – just sufficient to ensure sustainability of benefits but not excessive.

44. Apart from reserves held for expected future claims, insurance schemes also need to set aside capital to ensure sufficient buffer against adverse scenarios beyond projected claims.

45. Mr Giam asked about the rationale for the Capital Adequacy Ratio, or CAR, of 200% that the MediShield Fund targets to maintain. The CAR compares an insurance fund’s financial resources with the capital it is required to hold under regulations set by the Monetary Authority of Singapore.  MAS requires funds to meet a minimum threshold CAR of 120%. Below this threshold, regulatory intervention may be taken against the fund. Most commercial insurers typically aim for 200% or higher as a result of this risk. No prudent insurance fund operates by holding only the absolute minimum requirement, as otherwise any small variation in claims would immediately cause a breach.  A target CAR of 200% is broadly in line with industry practice and was recommended by MediShield’s appointed actuary to ensure that the Fund is able to meet its liabilities to policyholders even in adverse scenarios. MediShield Life’s CAR is currently 157% as of the end of 2013.

46. The Member also asked about adverse scenarios that the Fund is expected to cope with. Adverse scenarios include worse than expected claims experience or a sharp drop in investment returns.  In 2008 for example, the CAR fell to 148%, and if the economic crisis then worsened further, we could have breached the minimum requirement.  The capital gives peace of mind that MediShield can continue paying out on benefits during adverse scenarios without having to make sudden adjustments to premiums.  This provides more certainty to the public. I am keenly aware of the impact on premiums, but I would rather have sufficient reserves in Medishield Life and provide the necessary premium support and subsidies, than to put Singaporeans’ healthcare protection at risk.

47. MOH and CPF Board will continue to ensure that the MediShield Fund adheres to actuarial principles with premiums priced on a sound and sustainable financial basis. Members can then be assured of the Fund’s ability to honour claims in the future.

48. We have also heard concerns from Members such as Mr Ang Wei Neng and Mr Gan Thiam Poh about the capacity in the public hospitals if more people turn to subsidised care, especially with the introduction of MediShield Life.  As part of our Healthcare 2020 Master Plan, we have laid the groundwork to add significantly more capacity to improve access and meet the long-term demand for healthcare services, including subsidised beds.

49. Beyond building more acute beds, we need to transform the model of care, as Dr Lily Neo has noted, to one that is less reliant on acute hospital care, closer to the community, and allows our elders to age in place and live their golden years with or close to their families. This means providing appropriate care to patients in the right setting, through primary care and community-based long-term care providers. We are also expanding capacity and capability in these areas. Altogether, from now until the end of 2020, we will add over 11,000 more acute hospital, community hospital and nursing home beds. 

RELATED ISSUES

Integrated Shield Plans

50. Let me now turn to Integrated Shield Plans. A number of Members also spoke about the need to better regulate the IP insurers. We will study the Committee’s recommendations and suggestions to strengthen the current regulatory and accountability framework for IP insurers, while being mindful not to over-regulate the IPs, as imposing requirements which are too onerous could limit choice or result in higher premiums for policyholders.

51. I am heartened that many members, including Mr Ang and Mr Sitoh, have welcomed the proposed standard IP Plan providing coverage based on B1 charges. Members have raised many useful points and suggestions, which we will take into account when we design the B1 plan. We will release more details after studying this issue carefully.

Employer Medical Benefits

52. Many Members expressed support for the idea of portable medical benefits. As I had mentioned yesterday, the Government encourages employers and unions to work together to move towards portable medical benefits, and tap on MediShield Life’s national risk-pool to provide lifetime medical coverage for workers beyond retirement.  Incentives are already in place today for employers with portable medical benefits, as they receive an additional tax deduction of up to 1% of their expense on the Portable Medical Benefits Scheme. I thank Mr Teo for his suggestion on working with the business community to reach out to more employers. The tripartite work group, which held its first meeting last Friday, will study this in greater detail, and see how we can better support companies and workers in making this shift.

Implementation

53. Madam, even as we conclude our debate on MediShield Life, there is still a lot of work to be done from now until the end of 2015 when MediShield Life will go live. My Ministry and the CPF Board will work hard to ensure that the  implementation of MediShield Life goes smoothly.

54. The engagement of fellow citizens will also not stop, but will continue in many forms. My SMS has earlier elaborated on our efforts.  Dr Lam, Ms Ellen Lee, Er Lee Bee Wah and Dr Neo have all highlighted the importance of ensuring that Singaporeans have a good understanding of our healthcare financing system and how MediShield Life works, so that they can better plan and prepare for their healthcare needs. We will step up our engagement and outreach efforts on Medishield Life, as well as the Pioneer Generation Package, and other healthcare financing changes, so that Singaporeans can better understand and benefit from these changes.

CONCLUSION

55. We have covered a very wide range of issues in this debate, from the broad changes in our healthcare financing framework to the detailed design and implementation of MediShield Life. I would like to thank Members for their many thoughtful comments and useful suggestions.

56. I am glad that Members agree on our key objectives of building a healthcare system that achieves quality outcomes, while being cost-effective, accessible to all and sustainable for current and future generations.

57. But to turn the ideas into reality requires a blend of three important things:

a.    Listening with our Hearts – to know what worries Singaporeans;

b.    Thinking with clear Heads – to balance among competing needs and objectives, and 

c.    Being Hands-on in implementation and delivery.

58. As Mr Christopher de Souza and many other Members have highlighted, we need to ensure that our healthcare system is sustainable and effective, not just for the next five or ten years, but for generations ahead. This requires good governance, long-term policy planning and a strong economy, with good jobs for Singaporeans. Only then would we be able to generate the growth and revenue for us to continue enhancing and strengthening our healthcare financing framework, including making MediShield Life a reality.  It is not just the Ministry of Health making things work, but a whole of government team, with all Singaporeans playing our parts.

59. Let me once again urge Members to support the motion and give Singaporeans better protection, for all, for life. Thank you.