MEDICAL FUNDING FOR THE ELDERLY IN SINGAPORE

Medical Funding for the Elderly in Singapore



Medical Funding for the Elderly in Singapore

CHAPTER I: INTRODUCTION

Introduction

Health carecosts areescalating rapidly in many countries. This reflects several factors, such as aging populations, changing diseasepatterns, high-cost technology and prescription drugs. But, it is also a consequenceof health financing systems. Traditional indemnity insurance, which guarantees third-party payment for serviceprovided, contributes to thesecost pressures sincepatients and physicians areshielded from thereal cost of thosepayments. In an effort to contain costs, governments, employers and insurers havemodified payment schemes and coverage. This increasingly leads to rationing, restricted consumer choiceand, in somecases, denial of care.

Singapore's '3M' health financing system combines universal medical savings accounts (MSAs) with uniquesupplementary programs to protect thepoor and address potential market failures in health financing. Theresults havebeen impressive, with excellent health outcomes, low costs and full consumer choice of providers and quality of care. This note describes Singapore's experience and its possible application to other countries.

Background

Despite Singapore's small size, with only 3.22 million residents in a land area of 660 square kilometers, the country has been a stellar economic performer, rising from impoverishment only 40 years ago. Its per capita GDP increased from US$427 in 1960 to US$24,740 in 2000, one of the highest in the world . In the 1990s it enjoyed strong economic growth (7.7 percent annually in real terms), low inflation (1.7 percent annually), and low unemployment (3.1 percent in 2000).

One of the most notable features of Singapore's transition has been the reform of its health financing system over the past two decades. In the early 1980s, the Government was faced with rising demand for increased healthcare funding. Until that time, health care (which accounted for 2.5% of GDP in 1980) was funded by a combination of direct government funding of state-owned hospitals and polyclinics, plus private funding, principally in the form of out-of-pocket spending. The Government faced rising pressures for more health care funding, related to its rapid economic growth and aging population.

In 1981, the Government initiated a consultative process with stakeholders and the public to reform the health care financing system in a manner which would be fiscally sustainable. National health insurance was considered but rejected due to the experience in other countries. The main drawbacks cited were excessive demand associated with third-party payer systems and the lack of incentives for individual responsibility and provider efficiency. Rather the Government's objectives were to promote individual responsibility towards healthcare, shift a greater share of the financing to individuals and employers, and ensure a fiscally sustainable health care system in the face of an aging population.

CHAPTER II: LITERATURE REVIEW

The policy dialogue of the early 1980s led to the issuance of the National Health Plan in 1983 and the introduction of the Medisave program in 1984, the first pillar of its now-famous '3M' system of health care financing. Over the past two decades, the Government has added complementary programs to protect the poor and address potential market failures in health care financing, while adhering to ...