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.