News analysis
MediShield Life review takes in sober reality of rising medical costs in an ageing society
SINGAPORE – The recent review of MediShield Life revealed what the healthcare priorities are in the coming years: ensure adequate coverage of large hospital bills, which will continue to go up, and enable the shift towards providing more care in less costly non-hospital settings.
Both these priorities reflect the realities of an ageing Singapore, coupled with the increasing availability of pricier new treatments and rising manpower costs. Despite the national effort to focus on preventive care, healthcare costs will continue to rise.
With claim limits raised for hospital stays, treatments and the policy year, the national insurance plan will once again cover nine in 10 subsidised bills, as it was designed to do.
At the moment, it covers fewer than eight in 10 such bills because claim limits have not kept pace with medical costs.
Patients can be more assured that big hospital bills will be covered.
At the same time, new outpatient treatments and home-based care have been added to the coverage to keep a lid on costs. This will help shift care outside of hospitals, said experts. Claim limits have also been raised to accommodate higher outpatient and community hospital bills.
But the changes that industry experts are waiting to see for the effect they will have are the reductions in the amount of a private hospital bill that MediShield Life will cover.
To ensure that more expensive bills from private hospitals and Class A and B1 wards do not draw bigger payouts at the expense of subsidised Class B2 and C wards, private bills are reduced to the equivalent of a subsidised bill before MediShield Life payouts are computed.
The pro-ration factors have been adjusted so that a smaller proportion of private hospital and Class A and B1 ward bills will be covered by MediShield Life.
For instance, the 25 per cent pro-ration for a stay in a private hospital will fall to 16 per cent, while the 35 per cent pro-ration for a Class A ward stay will dip to 25 per cent.
In an example from the Singapore Actuarial Society (SAS), a 60-year-old Singaporean who had an 18-day hospital stay for a hip replacement incurred a bill of $36,750 at a private hospital. That comprised $18,000 for daily ward and treatment charges, a $12,750 surgical procedure fee and a $6,000 implant.
Based on the current 25 per cent pro-ration factor for the three elements and after accounting for the deductible and co-insurance amounts the patient paid, the MediShield Life payout would be $4,980, or 14 per cent of his total bill.
With a revised pro-ration factor of 16 per cent for the stay, and 10 per cent for the surgical procedure and implant, as well as the revisions in deductible and co-insurance, the MediShield Life payout for his bill would fall by 77 per cent to $1,130.
The rest would be borne by his Integrated Shield Plan (IP) or company insurance, his MediSave funds and/or cash.
Roughly 2.9 million people here, or some 70 per cent of Singaporeans and permanent residents, have IPs to cover stays in higher-class A or B1 wards in public hospitals, or private hospital stays. Of this group, two in three have an add-on rider plan to reduce their out-of-pocket expenses such as deductibles and co-insurance.
SAS president Alex Lee said IPs will have to shoulder a bigger share of the payout on private hospital bills and Class A and B1 bills.
As a result, IP premiums can be expected to rise, which could lead some people holding private IPs (and riders) to rethink their plans or riders.
In the past 10 years, IP insurers’ profits on long-term medical insurance were approximately 2 per cent of the premiums received from policyholders, SAS said.
Insurers’ profit margins are unlikely to be sufficient to absorb the effects of the changes to the pro-ration factor.
“IP insurers will need to adjust parameters and premium rates of their IPs and riders to cope with the increased share of bills,” SAS said in an Oct 18 media statement, issued in response to the latest MediShield enhancements, which it supports.
“Policyholders’ behaviour too will change in response to the actions by IP insurers – some may rationalise their need for IPs and riders, while others may change the settings and/or ward class they seek treatment from.”
Will people rethink their IPs?
In a nutshell, people must be prepared to pay more in premiums.
The MediShield Life Council has recommended premium increases of up to 35 per cent, or an average of 22 per cent over a period of three years from April 2025 to March 2028.
The Government will provide an additional $4.1 billion in support measures for three years beginning from April 2025, which will more than offset premium increases for more than nine in 10 Singaporeans. However, premiums are likely to still go up beyond 2028.
Health Minister Ong Ye Kung has said that overly generous plans contribute to unfettered spending on tests and treatments, which drives up healthcare costs.
About half of IP policyholders with riders still opt for subsidised public healthcare when hospitalised or getting day surgery, which raises the question of whether many people even need pricier plans.
Associate Professor Wee Hwee Lin, director of the Centre for Health Intervention and Policy Evaluation Research at the NUS Saw Swee Hock School of Public Health, said the review aims to prevent shocks from large hospitalisation bills, and the increase in deductible and co-insurance – the portions borne by policyholders – could serve to remind individuals they have a part to play in consuming healthcare responsibly.
Health economist Phua Kai Hong, an adjunct senior research fellow at the Institute of Policy Studies, suggested raising deductibles to deter unnecessary consumption.
But apart from cost containment measures aimed at consumers, measures also need to be aimed at the supply side, like doctors and insurance agents, who are the ones patients rely on for advice and guidance, Dr Phua said.
He has said that healthcare costs are going up mainly because of new, yet-unproven treatments like cancer drugs that fall within the patent period. There needs to be local evidence to prove these treatments’ cost-effectiveness, he said.
It is a fact that healthcare costs will keep increasing, as technology and treatment options develop. There will be more thorough scans, more precise blood tests and newer medication, said breast surgeon Tan Yia Swam, a former Nominated MP.
Individuals should have a good understanding of their health insurance coverage and the care they want, she said. Along with this, they should know the limitations of their plans, such as the lower coverage offered for doctors not on their insurer’s approved panel.
Still, while premiums are sure to rise, especially for older Singaporeans, it is important that IP premiums be priced at a level that enables the current 70 per cent of the Singapore resident population holding IPs to continue with their plans, said Adjunct Associate Professor Jeremy Lim from NUS Saw Swee Hock School of Public Health.
This is necessary to help to spread the clinical workload.
He said it would be less than ideal to end up in a situation where demand for subsidised services outstrips supply, and IP owners crowd out or compete with true subsidised patients for public healthcare.
Prof Lim suggested that premiums could be “front-loaded” to have policyholders pay more in the earlier years, so that senior year premiums will become less onerous.
SAS’ Mr Lee said the society is of the view that adjustments should be made to MediShield Life claim limits, deductibles and premiums annually, using annualised rates determined during each review, instead of via large increases once every few years at the end of each review cycle.
This would not only provide the public with a useful anchor for budgeting and setting investment goals to fund future premiums, but also help insurers set premium rates more accurately, he said.
MediShield Life is reviewed every three years, except for the latest review, which was delayed by a year because of the Covid-19 pandemic.
The recently announced MediShield Life enhancements recommended by the MediShield Life Council have been accepted by the Ministry of Health, and will kick in progressively from April 2025.
The review sent a signal that things cannot continue as they are, or coverage will always be playing catch-up with costs.
Mr Lee said the knock-on effect for IPs and riders from the latest round of changes is expected to be significant, but it could offer a valuable opportunity to policyholders to reflect on the level of care they really need and can afford.
“Oftentimes, people pick the plan that they can afford today without projecting sufficiently into the future. It is time for them to make such a projection,” Mr Lee told The Straits Times.
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