MediShield can afford to provide better protection

The changes to MediShield announced yesterday are a step in the right direction. However the enhanced coverage will come at a cost — almost all of which will be borne not by the government, but by policyholders themselves. I believe MediShield can take on greater risks on behalf of Singaporeans, while still maintaining healthy margins to build up its reserves, if it can be operated more like a national social health insurance scheme, than a commercial, profit-oriented one.

The changes to MediShield announced yesterday are a step in the right direction. However the enhanced coverage will come at a cost — almost all of which will be borne not by the government, but by policyholders themselves.

Among the changes announced are an increase in the lifetime claim limit from $200,000 to $300,000, upping the annual claim limit from $50,000 to $70,000, raising the maximum coverage age from 85 to 90 years, and removing the maximum entry age (currently at 75 years). Newly diagnosed patients who require inpatient psychiatric treatment will be covered at $100 per day up to 35 days per year. The decision on whether to cover babies with congenital conditions has been deferred pending the outcome of the ‘National Conversation’.

The actuaries from the Ministry of Health (MOH) have done their calculations and concluded that to fund this enhanced coverage without the need for government subsidies, policyholders will have to pay between $17 and $251 more in premiums per year. Deductibles (the out-of-pocket expense payable before receiving any benefits) will go up from the current $1,000 in C-class wards to $1,500, and from $1,500 to $2,000 for B2 wards or higher. To pay for the higher premiums, Medisave withdrawal limits for premiums will be raised from $800 to $1,200, depending on the policyholder’s age.

This change will amount to a 50% hike in deductibles for C-class ward patients, most of whom are from the lower income groups. They will have to fork out more in cash or dig into their Medisave to pay the increased deductibles and premiums. The elderly will see a bigger premium hike than the young, since MediShield is not cross-subsidised across age groups. Hence, the elderly will see a premium hike just at a time when they are approaching, or have reached, retirement age, when their income and Medisave contributions have declined.

To assuage the concerns over the higher premiums and deductibles, the government will provide a one-time top-up of $400 to Medisave, announced in Budget 2012. However, this does not even cover the $500 hike in deductible for one hospital visit, and for subsequent years, policyholders will be left to themselves to fund the increased premiums and deductibles.

I do not believe their is a need for such steep increases in costs for policyholders. Between 2001 and 2010, MediShield collected $2.11 billion in premiums and paid out $1.26 billion in claims (these figures were provided to me in Parliament by the Health Minister). This amounted to $850 million more collected than disbursed over the past decade. [Correction (17/10/12): I had earlier written “2006 to 2010”. It should be “2001 to 2010”.]

The MediShield scheme benefits from a huge base of policyholders (92% of Singaporeans) most of whom pay their premiums out of their forced medical savings (Medisave). It has huge economies of scale and faces little competition for customers. I believe MediShield can take on greater risks on behalf of Singaporeans, while still maintaining healthy margins to build up its reserves, if it can be operated more like a national social health insurance scheme, than a commercial, profit-oriented one.

Author: Gerald Giam

Gerald Giam is the Member of Parliament for Aljunied GRC. He is a member of the Workers' Party of Singapore. The opinions expressed on this page are his alone.

8 thoughts on “MediShield can afford to provide better protection”

  1. Can Medisave operate as a non profit scheme? Can GOS budget subsidise the medisave so there will be no increase? Can GOS ensure same amount for the medisave premium so the old and young pay the same ? old people are usually unemployed and should not have to pay more than the young.

  2. sorry gerald, are u and everyone being tooooo nice?

    I really think I am getting ripped off badly!

    * They have reserves which are not depleted
    * raise premiums in excess of projected cost
    * Always front running profits, inorder to prevent any deficits
    * changes medisave rules again without impunity

    This is too much!

  3. It is good that this has been raised, although not much can be done to oppose such a move at this stage.

  4. Medisave and medishield do not cover pre existing illness.It also does not pay 100%of the bill.What is needed is having a universal health care that covers pre existing illness as well.This can be done by using both the medisave and medishield into a single health insurance.The premium paid will not be refundable to the relatives upon the death of the patient.There are many ways to prevent abuse this system.There could be exclusion to use this insurance for cosmetic surgery,abortions,check up etc.
    All patients will be warded into specialty wards instead of being warded by class system.Patients who want 5 star treatment can go to private hospitals.It is also ridiculous to have a means test for patient who want be admitted to c class beds.Not all patients who live in private houses have the money to splurge on a very hefty medical bill .Our health minister paid only $18 for a stent which would cost $20,000 in aA.class ward.These patients depend on their savings for retirement but a catastrophic illness can wipe out their entire savings.
    Health costs have been escalating at a rate similar to housing.

  5. I do not see “true” responsibility of the Government in providing the citizens with ample and proper medical coverage if all the cost of the Medishield is borne by the policyholders themselves.
    Why the Government is so stingy towards it’s own citizens ???

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