By Jeremy Lim, Published TODAY, 11 Jun 2014
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When Prime Minister Lee Hsien Loong announced the establishment of MediShield Life at the National Day Rally last year, he articulated three objectives: Universal coverage, coverage for life and better protection against very large hospital bills. The recommendations of the MediShield Life Review Committee clearly achieve these, but will MediShield Life be financially fair to all Singaporeans? And just what does “fairness” mean?
There are three major stakeholders in this reform of MediShield, the most significant since it was launched in 1990: The 93 per cent of Singaporeans currently enrolled in MediShield, the 7 per cent who are today outside the scheme and the Government. Which groups will be better off, which groups worse off? And will all this be for the greater good?
PAYING FOR UNIVERSAL COVERAGE
In structuring MediShield Life, the review committee and its chairman, Mr Bobby Chin, have pushed for the additional costs of bringing the 7 per cent into MediShield Life to be borne largely by the Government. Currently enrolled Singaporeans would contribute no more than 3 per cent of current premiums towards including the 7 per cent in the scheme. The newcomers do not get a free ride either; their premiums will be 30 per cent more than that of their counterparts for 10 years.
The review committee has exercised sagacity in this arrangement. The 30 per cent additional premium should not prove unduly onerous on the newcomers and is an attempt to be fair to the 93 per cent who have been paying premiums all these years. Of course, some may ask why the 93 per cent should even have to pay extra. After all, the Government currently helps pay for the 7 per cent through subsidies and other schemes and some among them are out of MediShield due to poor lifestyle choices such as smoking and lack of exercise.
New York Times writer David Brooks, commenting on the Bergdahl prisoner swap, puts it eloquently in words equally applicable to us in Singapore: “The debt we owe to fellow (Singaporeans) is not based on individual merit. It is based on citizenship, and loyalty to the national community we all share.”
If we want to build a better Singapore, this means looking out for one another and digging into our pockets for our fellow Singaporeans, for no less a reason than a common nationhood.
ARE EXPANDED BENEFITS WORTH PREMIUM INCREASES?Critics have challenged the projected medical loss ratio (the ratio of claims to premiums) as being much too favourable to the insurer. An insurance veteran estimated the increase in premiums to be 90 per cent but the increase in benefits to be only 43 per cent in dollar terms.
Regrettably, the intended medical loss ratio cannot be definitively demonstrated without going through the actuarial model and assumptions the Government used in coming up with the premium increases and benefits.
No one disputes that MediShield Life must operate on sound financial principles, but many have the niggling suspicion that MediShield Life premiums, like its predecessor MediShield, will prove to be too conservatively computed.
The current MediShield scheme, despite running on a not-for-profit basis, has built up reserves of more than a billion dollars since inception, on a medical loss ratio of just 63 per cent, said Nominated Member of Parliament Gerald Giam. Most insurers globally operate with ratios of above 85 per cent, meaning that for every dollar collected in premiums, eighty-five cents are paid out in claims.
What is needed, then, to win stronger informed public support for MediShield Life? It would be worthwhile for the Government to put out its assumptions, including financial projections, so its commitment is clear in dollar terms.
The Ministry of Health has stated the Government “will bear most of the cost of bringing in those with pre-existing conditions”. What does this mean in dollars? I am sure the vast majority of the 93 per cent asked to pay 3 per cent more in premiums will do so with far more enthusiasm if they see how much more the Government is bearing the cost, in real-dollar terms.
Releasing more data for public scrutiny will also dampen criticisms of excessive premium increases. The last thing the Government needs if its projections are indeed too conservative is for MediShield Life reserves to balloon into the billions. An honest mistake today will be construed tomorrow as a disingenuous attempt to shore up the Government’s finances even further to the detriment of citizens already trying to cope with high costs of living.
Why not invite independent academics and actuarial firms to review its analysis and offer their views? Even better, why not release the data to Members of Parliament, so they can engage with experts and constituents before the parliamentary debate on MediShield Life?
I dedicated my book Myth Or Magic: The Singapore Healthcare System to my children, hoping that their world will be for all people, with fewer “struggling to cope” and more “daring to hope” and one marked by “less me and more we”.
MediShield Life is the seminal expression of ordinary Singaporeans working hand in hand with the Government to build a better Singapore for all Singaporeans. Mahatma Gandhi once said: “Truth never damages a cause that is just.” We should not let such a noble scheme start off on a cynical footing.
Dr Jeremy Lim is a partner in global consulting firm Oliver Wyman and leads its health and life sciences practice in Asia.