compulsory savings and the singapore health system

Why Ireland Needs to Study the Singapore Health System

A Case Study in Health Care Expenditure:

Outline

1. Introduction – Health Care Financing2. Comparison of Ireland and Singapore3. The Singapore Health System4. The Central Provident Fund5. Health Care Financing – The 3Ms6. The Public/Private Mix7. A Worked Example8. Survey of Singapore Opinion9. Can it work in Ireland?

1. Introduction

Targets of Health Systems:• To improve health of the population.• To be responsive to the legitimate demands

of the population.• To protect people from serious financial

losses because of illness.

Major Issues Associated withHealthcare Financing Methods

1. EQUITY Who pays? Who benefits?– Distribution– Access (esp. financial barriers)

2. EFFICIENCY Productivity & Output– Allocation– Production

3. EFFECTIVENESS Actual Outcomes1. Quality of care2. Actual impact on health status of population

• SUSTAINABILITY Economic Viability– Aging population

Methods of Health Care Financing

• Direct payment by individuals (out-of-pocket)• Employment-related benefits• Government financing (general taxes)• Insurance

– Private health insurance– Social insurance

• Medical Savings Accounts

Six Models of Health Care

• National Health Services Model (United Kingdom)• National Health Insurance Model (Canada)• Social Insurance Model (Germany)• Social Insurance with Voluntary Private Insurance

(Australia)• Voluntary Health Insurance (USA)• Medisave with Catastrophic Insurance (Singapore)

2. General ComparisonIreland Singapore

Gained independence 1922 1965Population 4,422,100 4,657,000Size 70280 km2 710 km2

Population density 60/km2 6,814/km2

GDP $191.9 Billion $241.1 BillionGDP per capita $46,200 $51,600Human development index

0.962 0.918

Economic IndicatorsIreland (2008) Singapore (2008)

GDP growth -2.3% +1.2%Unemployment 8.1% +2.3%Inflation +4.1% +4.3%Trade Current account/GDP -4.5% +11.2% Exports $128 Billion $235.8 Billion Imports $91.3 Billion $219.5 BillionPublic Finances Debt/GDP 31.5% 10.5% Revenue $62.0 Billion $28.6 Billion Expenditure $73.1 Billion $27.5 Billion

Labour Force and PopulationIreland Singapore

Labour force 2,200,000 2,960,000 Agriculture 6% 0% Industry 27% 23% Services 67% 77%Median age 35 39

0-14 years 20.9% 14.4% 15-64 years 67.1% 76.7% 65+ years 12.0% 8.9%Fertility rate 1.85 1.09Birth rate (per 1,000) 14.3 9.0Death rate (per 1,000) 7.8 4.5

Health PersonnelIreland (2006) Singapore (2003)

Nursing and midwifery personnel 81,901 19,090 Nursing and midwifery personnel

per 1,000 19.50 4.50

Number of physicians 12,394 6,380

Physicians density per 1,000 2.90 1.50

Number of dentistry personnel 2,414 1,190 Dentistry personnel density per

1,000 0.6 0.3

Number of pharmacy personnel 3,565 1,280 Pharmacy personnel density per

1,000 0.9 0.3

Health IndicatorsIreland Singapore

Life expectancy 78.2 82.0 Male 75.6 79.4 Female 81.1 84.9Infant mortality/1000 live births

5.14 2.31

Mortality between 15 and 65 per 1,000 m/f

88/56 83/50

Health care expenditure per capita

$3,125 $1,140

HCE as % of GDP 8.2 % 3.5%HCE as % of government expenditure

27.0% 7.0%

Comparative Health Expenditure in Singapore and Other Systems

U.S.

Germany

Canada

Australia

U.K.

Singapore

Year

Health Systems Performance WHO Rankings, 2000

Ranking Country HCE/GDP (2005) HCE/Capita (2005) Public:Private

1 France 11.2% 10th $4,056 8th 80:20

2 Italy 8.9% 27th $2,845 20th 77:23

3 San Marino 7.3% 62nd $3,591 15th 84:16

4 Andorra 6.3% 84th $2,815 21st 70:30

5 Malta 8.4% 36th $1,295 32nd 78:22

6 Singapore 3.5% 173rd $944 35th 34:66

7 Spain 8.2% 40th $2,263 26th 72:82

8 Oman 2.5%% 184th $325 73rd 84:16

9 Austria 10.2% 15th $3,864 12th 77:23

10 Japan 8.2% 39th $2,690 24th 82:18

Ranking Country HCE/GDP (2005) HCE/Capita (2005) Public:Private

11 Norway 9.1% 26th $6,267 4th 84:16

12 Portugal 10.2% 16th $1,830 27th 72:28

13 Monaco 4.6% 141st $6,343 3rd 74:26

14 Greece 10.1% 17th $2,733 23rd 42:58

15 Iceland 9.4% 23rd $4,962 6th 83:17

16 Luxembourg 7.7% 54th $6,610 2nd 91:9

17 Netherlands 9.2% 24th $3,784 13th 62:38

18 United Kingdom 8.2% 41st $3,065 17th 88:12

19 Ireland 8.2% 38th $3,888 10th 78:22

20 Switzerland 11.4% 9th $5,878 5th 60:40

37 United States 15.2% 2nd $6,714 1st 46:54

Public/Government Sector

Public/Government Sector

Not-for-Profit/Voluntary Sector

Not-for-Profit/Voluntary Sector

Private/Commercial Sector

Private/Commercial Sector

3. The Singapore Health System

Private Hospitals/Groups

Private Hospitals/Groups

Private Practitioners

Private Practitioners

Ministry of HealthMinistry of Health Department of Health

Department of Health

Primary CareHealth Centres/

Polyclinics

Primary CareHealth Centres/

Polyclinics

Secondary CareGeneral Hospitals/ Outpatient Clinics

Secondary CareGeneral Hospitals/ Outpatient Clinics

Tertiary CareSpecialist Hospitals/

National Centres

Tertiary CareSpecialist Hospitals/

National Centres

Public Health Services

Legislation, Regulation and Enforcement/ Health Promotion/

Preventative Services

Public Health Services

Legislation, Regulation and Enforcement/ Health Promotion/

Preventative Services

Strategies and Policies

• Creation of incentives for responsible behavior and efficient delivery of services.

• Promotion of personal responsibility coupled by government targeted subsidies.

• Discouragement of over-consumption through cost-sharing (differentiated pricing/co-payments).

• Regulation of hospital beds, doctors and use of high-cost medical technology.

• Competition by creating a mix of public and private sector providers and foreign participation.

Instill personal and family responsibility(Cost-sharing)

+ Ensure future sustainability with ageingand avoid inter-generational problems

(Savings)+

Achieve risk-pooling and social protection (Insurance)

+Target subsidies and equitable distribution

(Taxation)

Healthcare Financing Strategies

Funding Mechanism

– Ministry of Health subsidies.– Co-payment as a driver for patient-driven cost

management.– Funding via the 3Ms and the 3Es

• Medisave (1984) Eldersave (2010)• Medishield (1990) Eldershield (2002)• Medifund (1992) Elderfund (2000)

“The financing philosophy of Singapore’s health care system is based on shared responsibility, coupled with government subsidies to keep basic health care affordable.”

• Medisave: compulsory savings scheme to help individuals save and pay for their health care expenses.

• Medishield: catastrophic insurance scheme to help meet the cost of large medical bills.

• Medifund: health endowment fund which provides a safety net for the poor and needy.

Introducing the 3 Ms

Individuals

Health Care Providers

Health Care Services

Government Medisave Insurer

Medifund Medishield

TaxTax

Direct payment and co-

payment

Direct payment and co-

payment

Contribution through CPF

Contribution through CPF PremiumPremium

InjectionInjection

Payment

Payment

Public expenditure

Public expenditure

Payment

Payment

Payment

Payment

Claims Paymen

t

Claims Paymen

t

PremiumPremium

Sources of Healthcare Financing in Singapore

Medisave 8%

Medishield 2%

Private Insurance 5%

Out of pocket 25%

Government subsidies 25%

Employer Benefits 35%

4. The Central Provident Fund

Employers Employees

Medisave Accounts

Central Provident Fund

Ordinary Accounts

Special Accounts

Medical Expenses,Health Insurance

Premiums

Medical Expenses,Health Insurance

Premiums

Retirement SavingsRetirement SavingsHousing, Insurance, Third-Level Education, Approved Investments

Housing, Insurance, Third-Level Education, Approved Investments

CPF ContributionsEmployee Age

Contribution by employer - % of wage

Contribution by employee - % of wage

Total Contribution - % of wage

Ordinary Account

Special Account

Medisave Account

Below 35 14.5 20 34.5 23 5 6.5

35 – 44 14.5 20 34.5 21 6 7.5

45 – 49 14.5 20 34.5 19 7 8.5

50 – 54 10.5 18 28.5 13 7 8.5

55 – 59 7.5 12.5 20 11.5 0 8.5

60 – 64 5 7.5 12.5 3.5 0 9

Above 65 5 5 10 1 0 9

• Contribution rates start at 0% for wages of S$500 per month and rise gradually to the full contribution rates for wages of S$1500 per month.

• Maximum contribution for the private sector is calculated based on a salary ceiling of S$4,500 per month for both the employer and the employee.

• Contributions are first allocated to the Medisave Account, followed by the Special Account. The balance is then allocated to the Ordinary Account.

5. Healthcare Financing - The 3 Ms

• Medisave– Compulsory savings

• Medishield– Voluntary insurance

• Medifund– Social safety net

The First M - Medisave

• Medisave was introduced in 1984 as an extension of the Central Provident Fund (CPF).

• Medisave represents 6–8% of wages (depending on age) allocated from the individual’s CPF account in anticipation of hospitalization and acute-care medical expenditures in later life.

• There is an element of risk pooling among family members, as it can be used to pay for the hospitalization bills of one’s spouse, children, siblings or parents.

Medisave Contribution Limits• One needs to contribute to Medisave Account up to

the prevailing Medisave Contribution Ceiling (currently S$30,500; adjusted annually).

• Any Medisave contribution in excess of the prevailing ceiling will be transferred to the Ordinary Account.

• At retirement if a member has more than the Medisave Minimum Sum (S$25,500), he/she can withdraw the excess amount.

• Any unspent balance in Medisave is passed on to the account holder’s beneficiaries upon his or her death.

Medisave Balances

Medisave Balances

Advantages of MSAs (according to advocates)

• Avoids inter-generational transfers due to population ageing.• Contributes to further growth and sustainability – represents

investment instead of consumption.• Promotes personal accountability and family responsibility

and individual choice. • Has built-in demand-side incentives to contain costs.• Mobilises additional extra-budgetary resources.• Enhances portability and employment mobility. • Supports appropriate pricing of fees and cost-recovery.• Allows for back-up insurance and enhanced protection.• Facilitates competition and choice in the public-private mix.

Disadvantages of MSAs

• Little or no risk pooling.• Persons with catastrophic illness will exhaust

their account quickly.• Low income persons will have very little in

their account.• May not be “equitable”.• Potential high administration costs in

collection, record keeping, and disbursement.

The Second M – Medishield

• Premiums paid using Medisave funds.• Features to induce care with healthcare

spending (deductibles, co-insurance, annual/lifetime limits).

• 60 % of population covered.• 78 % in lowest plan (A), 22 % in two higher

plans.

MedishieldDeductible:

– Patient pays the first $1,500 / $1,000 from Medisave funds and/or cash.

– Medishield coverage begins after the deductible.

Co-Insurance:– Medishield pays majority of claim

(now up to 80%).– Patient pays small co-insurance

amount (c.10%).

The Third M - Medifund

• An endowment fund set up in 1993 with a fund size of $1.6 billion in 2008

• Interest income used to help needy Singaporeans pay for their medical expenses

• Safety net for Singaporeans who cannot afford medical expenses, even after government subsidies, Medisave and Medishield

• Ensures no Singaporean is denied access to basic medical care because of inability to pay

Medifund Payouts

6. The Public/Private Mix

For both primary and secondary care the public/ private mix in Singapore is 80/20.

• Eight public hospitals and five speciality centres

account for 80% of inpatient beds.• 13 private hospitals account for the remaining 20%.• 80% of primary healthcare is provided by private

general practitioners.• Public outpatient polyclinics provide the other 20%.

Public Hospital Subsidies

Types of Beds

% Distribution

% Subsidy

Class A (1 bedded)

7 0

Class B1 (3-5 bedded)

16 20

Class B2 (6-10 bedded)

28 65

Class C (open ward)

49 80

Wards

Patient Bills

72% of patients in public hospitals stay in Class B2 / C wards.

Ward Subsidy Median S$

70th Percentile

90th Percentile

C 80% 580 950 2,270

B2 65% 740 1,180 2,710

B1 35% 1,870 3,170 6,910

A 0% 2,390 3,870 7,820

7. A Worked Example

A patient has gallstones and requires surgery to have them removed.

Step One: How much is in the Medisave Account?Step Two: How much can be claimed from the

account for the procedure?Step Three: How much does the procedure cost?Step Four: The patient’s decision

8. Survey of Singapore Opinion

The Singapore Ministry of Health commissioned a survey to determine public perceptions on healthcare in Singapore.

SingHealth Health Services Research Network undertook the survey design, questionnaire preparation and testing; approximately one-third of the questions were repeated from the 2003 Feedback Unit survey to assess changing public perceptions.

The survey was carried out by nurses from the SingHealth Silver Connections from 4-23 Aug 2006.

Strongly Agree

Agree Neutral Disagree Strongly Disagree

I should be personally responsible for my own health.

15.7 78.4 3.7 2.2 -

It is my personal responsibility to build my own savings to help pay for my healthcare expenses.

4.2 68.6 15.1 11.1 1.0

It is my personal responsibility to buy medical insurance to help me pay for high medical bills.

3.6 54.3 26.2 15.2 0.7

The government should fix the price of medicines in Singapore.

14.4 52.1 21.2 11.4 0.9

Medisave should be used mainly for the person whose account it is

1.4 24.6 9.4 51.1 13.5

Medisave should be used at the discretion of the account holder

15.8 66.0 8.7 9.2 0.3

I am familiar with the way the healthcare system in Singapore works.

1.6 43.6 31.8 22.1 0.9

Healthcare in Singapore is generally affordable.

1.3 43.8 25.6 26.6 2.7

Singapore has a good healthcare system. 4.8 72.1 15.4 7.5 0.2

Is it successful?• Are healthcare policies in Singapore successful?

– Yes• High quality of healthcare services• Increased life expectancy• Low infant mortality• Uses less than 4% of GDP • People are more aware of the need to be responsible for

their own healthcare • Community help / services for the needy

– No• Old people without Medisave / insurance not able to afford

healthcare services• Healthcare costs are continuing to rise• Still very much dependent on government subsidies

9. What’s Needed?Implementing medical savings requires certain pre-requisites:• Willingness and ability to save• High labour force participation in formal employment

– Structural unemployment– Population aging

• Effective payroll collection with efficient fund management and claims processing

• Well-developed information system with security and accounting controls

• Public education for proper use of accounts • Prices!• Information on quality as well as prices Is the positive experience of Singapore transferable to other

economies?

Ireland and Singapore

• Similarities– Small open economies– Ageing and relatively affluent populations– Predominant public sector health care provision– Prior dominant tax-based financing systems

• Differences– Propensities to save and invest– Geography and population densities– Socialised model of social welfare in Ireland– Social and family support systems