Simplify universal health insurance

The MediShield Life problem faced by Seow Ban Yam may no longer be topical in the news cycle, but it is now when enough facts have emerged that we can see the larger picture instead of being entangled by the details.

MediShield Life is a mandatory health insurance program run by the government.

The outline of the matter can be gleaned from this 31 December 2018 story in the Straits Times:  MediShield Life paid just $4.50 of senior’s $4,477 post-subsidy bill. Since the story is behind a paywall (though the details can also be found here at The Online Citizen), I will set out the gist of the matter here for convenience.

Seow Ban Yam, 82, underwent day surgery at the Singapore National Eye Centre (SNEC) in 2018. SNEC is considered a public health facility, albeit a specialist one. The total bill from SNEC came to $4,476.80, made up of three components as can be seen from the image below. The problem is that there is a claim value cap by MediShield Life for each of these components. Of the $4,476.80 charged to Seow, he could only claim $3,005.00.

The second step-back by the insurance then came into play. Of the $3,005.00 that Seow could claim, he had to pay the first $3,000 himself. That’s what’s called a “deductible” in insurance-speak, and it reduced his “insurable amount” to five dollars.

The third step-back then emerged. Of the five dollars that was “insurable”, Seow had to co-pay ten percent, or fifty cents. Thus the final assistance he would get from the insurance was $4.50.

So, of the total original bill of $4,476.80, Seow had to pay $4,472.30 (or 99.9%) out of his own pocket. So much for a social safety net.



Journalist Salma Khalik wrote an opinion piece on 4 January 2019. The thrust of her question was why there was such a big gap between the maximum claimable limit for an operation and what a public hospital could charge for it. In Seow’s case, the claimable limit was only 65.5% of the surgery cost. In other words, she focussed on the first step-back, not taking issue with the second or third.

The Health Ministry responded with a letter that is virtually incomprehensible. Seriously, read it.

It was Tan Kin Lian, the former head of insurance company NTUC Income who cut to the chase, pointing out that

This is a complicated arrangement. l call it the “bits and pieces” payment system – some part paid here, some paid there. No wonder the people are confused with this system.

Source: Tan Kin Lian’s Facebook post 2 January 2019,

The system is so confusing that few would know what the final subsidy is going to be. It’s like buying something from a shop only to be told that you’d need to get an extra part which costs X dollars, and also a power adaptor which costs Y dollars, and oh, by the way, you’ll need a converter and a casing…

What are those shops trying to do? You know. They’re trying to mask the true overall cost of what they’re selling. That’s what a “bits and pieces” method achieves, masking the whole picture. Unlike a shady salesman, it might not be the primary intent of the government to mislead, but it certainly would have been useful from a public communications point of view to be able to put a nice gloss on the MediShield Life insurance scheme — “claim limits were set to cover nine out of 10 subsidised bills”, and “having a deductible for each year and a co-insurance borne by the patient, ensures that MediShield Life remains sustainable” — while in effect paying out less than people might expect.


Patients as proxies for controlling costs

Tan adds, in the same post,

The govt thinks that this is necessary to make the patients responsible to help to control the medical expenses. In reality, most patients are so confused that they are not able to play a part to “control” the expenses. The actual expenses are outside their control.

The only control that they have is to choose the medical facility to go to. After that, they have to face the charges and add-ons for various kinds of treatment.

This is the key uniqueness of healthcare when compared to other socialisable risks. People have next to no control over costs, short of not visiting a doctor and throwing themselves into the void from the tenth floor instead. When a doctor advises a certain treatment, people don’t have the knowledge to decide against it, and the psychology of hope is such that it is extremely difficult to decide against it even if one had some knowledge, e.g. of only a 50% chance of success.

What we need is simple, comprehensive coverage. Forget about setting claim limits procedure by procedure. Forget about deductibles. Just have a simple co-payment system, e.g. one that says:

On an annual basis,

Insurance will pay 50% of the first $1,000 of medical and dental costs;

Insurance will pay 90% of medical and dental costs (based on subsidised and C-class ward rates) beyond the first $1,000.

Provided that care is sought at a public hospital or polyclinic.

This way, everyone will be assured of basic healthcare. Even if a patient is still unable to pay his 10%, there is Medifund to help out. Medifund assists the neediest cases.

However, if a patient wants a higher standard of care over and above the subsidised rate or enjoy a higher ward class, the universal insurance should not be the answer. The patient should either pay the difference himself or take out extra insurance to cover the difference in costs

As for controlling costs, the government should work directly with hospitals and drug companies to do so. Don’t expect the patient to be the proxy to control costs for the government by making him moderate his demand for treatment.

Unavoidably, the government will need to fork out more for healthcare than they are currently doing if we abandon the “bits and pieces” arrangement. So be it.

We’ll need higher taxes, the government will say. So be it again.

We either socialise these costs or we personally pay for them (as Seow found out). The moral argument for socialising costs is a far stronger one.

%d bloggers like this: