Medisave, Medishield ... Medi-crisis?
STANLEY JEREMIAH
IN AN October interview with Fortune magazine, Mr Alan Greenspan was asked what the biggest economic worries were at this point in history. Speaking of America, he said Medicare was the most serious fiscal problem out there.
.
"When the baby boomer retires, we are going to have either to raise taxes very sharply or cut benefits by half," he said. "Prudent policy would be to adjust the longer term now, not when it becomes a serious problem for people who have already retired and are told after the fact that they will not be getting the real Medicare that they expected."
.
We are running into the same problem here in Singapore. In place of "Medicare", read Medisave/ MediShield. Statistics indicate medical inflation — which hit 6.2 per cent in October — is running at almost twice the national inflation rate.
.
In his New Year message, the Prime Minister has indicated that means testing will be used for hospital admission, which means that even if people are prepared to downgrade to a C or B2 class ward, they may have to pay more, because they fail the means test.
.
is just MEDISHIELD suffificent?
.
Currently, MediShield cover, which the Government has said it will improve, has several shortcomings.
.
The MediShield policy, designed to cover only Class C/B2 hospitalisation, has a schedule of benefits, which limits the payout for a certain procedure or operation. There is also a deductible — the first $1,000 to $3,000 of any bill, depending on the ward class — and co-insurance — a 10- to 20-per-cent share of the total bill, depending on the bill size — that the patient will have to bear himself.
.
As a result, a significant portion of medical bills will remain uncovered and Medi-Shield policyholders will be left to pay these amounts from a combination of their Medisave account and cash.
.
We also have thousands of Singaporeans who are not even covered by MediShield. Many Singaporeans do not have adequate funds in their Medisave accounts to pay for their own medical bills, because their Medisave funds have been used to pay the bills of spouses, parents or siblings. The baby boomers have often had to take care of their parents' medical cost.
.
Many Singaporeans rely foolishly on the fact that they have some medical cover provided by their employers. Seldom do they realise that such cover is often woefully inadequate. Looking at a medical institution recently, I realised that their nurses had only between $7,000 and $10,000 in annual hospitalisation cover. This will be adequate only for minor conditions like appendicitis or fibroids, not for any significant medical treatment.
.
More significantly, people fail to consider the fact that the medical cover provided by their employers ceases when employment ends, including when they retire or if they are too ill to work.
.
Post-retirement is when people most need medical cover. A recent Ministry of Health (MOH) survey showed that Singaporeans "suffer eight years of poor health".
.
The current Medisave balance of $33,000 isn't going to pay for eight years of medical treatment even if you also have MediShield, after taking into account payment for the deductibles, co-insurance and anything beyond the amount paid by the schedule of benefits.
.
In the case of a catastrophic medical condition like cancer, it may not even last two years. If the funds in Medisave are used to directly pay for medical bills, there may not be anything left to pay the MediShield premiums.
.
MEDISHIELD'S WEAKNESSES
.
The current MediShield plan has two inherent weaknesses: Firstly, it does not cover you for your lifetime.
.
Secondly, it has a complex structure of deductibles, co-insurance and sub-limits. Like many private shield plans, MediShield should become an "as charged" plan, which pays the bill as charged by the hospital for at least Class C hospitalisation.
.
I question the need for a deductible in the MediShield cover, since patients in Class C or B2 will not be hospitalised unless it is necessary.
.
The effect of imposing deductibles on people who can only afford Class C or B2 treatment is, as someone put it to me, "penalising the wrong party".
.
A level of co-insurance forces healthcare providers to consult patients when there are choices in treatment, as the patient bears some of the cost.
.
This reduces over-servicing by providers and thus reduces claims costs. However, even co-insurance should be subject to an annual limit to protect patients with catastrophic medical conditions.
.
MEDISAVE IS INADEQUATE
.
The idea that Medisave can be used to pay (directly) for medical cost should be banished. At the current rate of medical inflation, it will become totally inadequate.
.
Medisave should be a fund set aside for the payment of medical insurance premiums, post-retirement and perhaps for payment of a limited co-insurance amount.
.
Currently, many employers buy year-to-year inpatient medical insurance for their staff, known as Group Hospitalisation Schemes (GHS). For employers with several thousand employees the cost can run into hundreds of thousands of dollars, if not millions.
.
It is a pity that these funds are not now invested towards providing employees with port-able medical insurance plans, which will see them covered beyond retirement. It will also provide them with much higher limits of cover, sufficient to meet the cost of catastrophic medical conditions like cancer and stroke.
.
MINDSET CHANGE NEEDED
.
What is required is a mindset change on the part of both employers and employees. Both must focus on the longer term.
.
Medical cost as a percentage of total remuneration cost will rise disproportionately because medical inflation outstrips national inflation.
.
In the long run, employers cannot continue to increase spending on medical benefits at current levels. It is not sustainable. The only available option has been to cut back on the level of medical benefits, leaving employees more exposed in the case of a serious medical condition. The Civil Service was the first to impose such measures by using schemes such as the MSO scheme (Medisave cum Outpatient Scheme).
.
Employees and unions, on the other hand, have taken for granted that they have not had to directly contribute towards the cost of insuring or financing medical benefits and remain reluctant to take up this responsibility.
.
Yet, as a result of failing to co-share in the payment of premiums, employees have become even more vulnerable. They are left with limited company medical schemes, which leave them and their dependants exposed to the prospect of having to pay for all medical cost over the limited cover provided by the employer.
.
This is a risk most people cannot take. There are very few people in Singapore who can, like the former NTUC Income CEO Tan Kin Lian, say they can pay the medical bills out of their personal savings.
.
If the employee has his own portable plan to supplement the employer's GHS plan, there is duplication of cover to some extent and therefore duplication of premiums. This is not cost-efficient.
.
We should work to ensure that all dollars spent on medical cost are efficiently deployed. This includes premium dollars on medical insurance.
.
The danger of people being medically uninsured is a very serious one. Business Week, in a recent issue, highlighted the plight of thousands of Americans with little or no medical insurance who are being squeezed by financial companies who had taken over their debt from the medical providers.
.
"As doctors and hospitals turn to GE, Citi and smaller rivals to finance patient care, the sick pay much more," said the article. "Hospitals are transferring patient accounts to banks and finance firms that impose interest rates as high as 27 per cent."
.
This is a picture of the United States today. We may face the same situation if something is not done to address the way Singaporeans, particularly the baby boomers, finance their medical cost.
.
The writer is a lawyer and chartered insurer who is immediate past president and council member of the Singapore Insurance Institute.
little or no medical insurance who are being squeezed by financial companies who had taken over their debt from the medical providers.
.
"As doctors and hospitals turn to GE, Citi and smaller rivals to finance patient care, the sick pay much more," said the article. "Hospitals are transferring patient accounts to banks and finance firms that impose interest rates as high as 27 per cent."
.
This is a picture of the United States today. We may face the same situation if something is not done to address the way Singaporeans, particularly the baby boomers, finance their medical cost.
.
The writer is a lawyer and chartered insurer who is immediate past president and council member of the Singapore Insurance Institute. STANLEY JEREMIAH
IN AN October interview with Fortune magazine, Mr Alan Greenspan was asked what the biggest economic worries were at this point in history. Speaking of America, he said Medicare was the most serious fiscal problem out there.
.
"When the baby boomer retires, we are going to have either to raise taxes very sharply or cut benefits by half," he said. "Prudent policy would be to adjust the longer term now, not when it becomes a serious problem for people who have already retired and are told after the fact that they will not be getting the real Medicare that they expected."
.
We are running into the same problem here in Singapore. In place of "Medicare", read Medisave/ MediShield. Statistics indicate medical inflation — which hit 6.2 per cent in October — is running at almost twice the national inflation rate.
.
In his New Year message, the Prime Minister has indicated that means testing will be used for hospital admission, which means that even if people are prepared to downgrade to a C or B2 class ward, they may have to pay more, because they fail the means test.
.
is just MEDISHIELD suffificent?
.
Currently, MediShield cover, which the Government has said it will improve, has several shortcomings.
.
The MediShield policy, designed to cover only Class C/B2 hospitalisation, has a schedule of benefits, which limits the payout for a certain procedure or operation. There is also a deductible — the first $1,000 to $3,000 of any bill, depending on the ward class — and co-insurance — a 10- to 20-per-cent share of the total bill, depending on the bill size — that the patient will have to bear himself.
.
As a result, a significant portion of medical bills will remain uncovered and Medi-Shield policyholders will be left to pay these amounts from a combination of their Medisave account and cash.
.
We also have thousands of Singaporeans who are not even covered by MediShield. Many Singaporeans do not have adequate funds in their Medisave accounts to pay for their own medical bills, because their Medisave funds have been used to pay the bills of spouses, parents or siblings. The baby boomers have often had to take care of their parents' medical cost.
.
Many Singaporeans rely foolishly on the fact that they have some medical cover provided by their employers. Seldom do they realise that such cover is often woefully inadequate. Looking at a medical institution recently, I realised that their nurses had only between $7,000 and $10,000 in annual hospitalisation cover. This will be adequate only for minor conditions like appendicitis or fibroids, not for any significant medical treatment.
.
More significantly, people fail to consider the fact that the medical cover provided by their employers ceases when employment ends, including when they retire or if they are too ill to work.
.
Post-retirement is when people most need medical cover. A recent Ministry of Health (MOH) survey showed that Singaporeans "suffer eight years of poor health".
.
The current Medisave balance of $33,000 isn't going to pay for eight years of medical treatment even if you also have MediShield, after taking into account payment for the deductibles, co-insurance and anything beyond the amount paid by the schedule of benefits.
.
In the case of a catastrophic medical condition like cancer, it may not even last two years. If the funds in Medisave are used to directly pay for medical bills, there may not be anything left to pay the MediShield premiums.
.
MEDISHIELD'S WEAKNESSES
.
The current MediShield plan has two inherent weaknesses: Firstly, it does not cover you for your lifetime.
.
Secondly, it has a complex structure of deductibles, co-insurance and sub-limits. Like many private shield plans, MediShield should become an "as charged" plan, which pays the bill as charged by the hospital for at least Class C hospitalisation.
.
I question the need for a deductible in the MediShield cover, since patients in Class C or B2 will not be hospitalised unless it is necessary.
.
The effect of imposing deductibles on people who can only afford Class C or B2 treatment is, as someone put it to me, "penalising the wrong party".
.
A level of co-insurance forces healthcare providers to consult patients when there are choices in treatment, as the patient bears some of the cost.
.
This reduces over-servicing by providers and thus reduces claims costs. However, even co-insurance should be subject to an annual limit to protect patients with catastrophic medical conditions.
.
MEDISAVE IS INADEQUATE
.
The idea that Medisave can be used to pay (directly) for medical cost should be banished. At the current rate of medical inflation, it will become totally inadequate.
.
Medisave should be a fund set aside for the payment of medical insurance premiums, post-retirement and perhaps for payment of a limited co-insurance amount.
.
Currently, many employers buy year-to-year inpatient medical insurance for their staff, known as Group Hospitalisation Schemes (GHS). For employers with several thousand employees the cost can run into hundreds of thousands of dollars, if not millions.
.
It is a pity that these funds are not now invested towards providing employees with port-able medical insurance plans, which will see them covered beyond retirement. It will also provide them with much higher limits of cover, sufficient to meet the cost of catastrophic medical conditions like cancer and stroke.
.
MINDSET CHANGE NEEDED
.
What is required is a mindset change on the part of both employers and employees. Both must focus on the longer term.
.
Medical cost as a percentage of total remuneration cost will rise disproportionately because medical inflation outstrips national inflation.
.
In the long run, employers cannot continue to increase spending on medical benefits at current levels. It is not sustainable. The only available option has been to cut back on the level of medical benefits, leaving employees more exposed in the case of a serious medical condition. The Civil Service was the first to impose such measures by using schemes such as the MSO scheme (Medisave cum Outpatient Scheme).
.
Employees and unions, on the other hand, have taken for granted that they have not had to directly contribute towards the cost of insuring or financing medical benefits and remain reluctant to take up this responsibility.
.
Yet, as a result of failing to co-share in the payment of premiums, employees have become even more vulnerable. They are left with limited company medical schemes, which leave them and their dependants exposed to the prospect of having to pay for all medical cost over the limited cover provided by the employer.
.
This is a risk most people cannot take. There are very few people in Singapore who can, like the former NTUC Income CEO Tan Kin Lian, say they can pay the medical bills out of their personal savings.
.
If the employee has his own portable plan to supplement the employer's GHS plan, there is duplication of cover to some extent and therefore duplication of premiums. This is not cost-efficient.
.
We should work to ensure that all dollars spent on medical cost are efficiently deployed. This includes premium dollars on medical insurance.
.
The danger of people being medically uninsured is a very serious one. Business Week, in a recent issue, highlighted the plight of thousands of Americans with little or no medical insurance who are being squeezed by financial companies who had taken over their debt from the medical providers.
.
"As doctors and hospitals turn to GE, Citi and smaller rivals to finance patient care, the sick pay much more," said the article. "Hospitals are transferring patient accounts to banks and finance firms that impose interest rates as high as 27 per cent."
.
This is a picture of the United States today. We may face the same situation if something is not done to address the way Singaporeans, particularly the baby boomers, finance their medical cost.
.
The writer is a lawyer and chartered insurer who is immediate past president and council member of the Singapore Insurance Institute.