When everyone is pedalling harder and harder to keep going, but no one is happy, you have to pause to ask yourself: Just what is wrong and what can break the cycle?
In essence, this was the message of Health Minister Ong Ye Kung, when he said health insurance was in a “vicious circle”.
Insurers are coming up with “overly generous” policies that pay the full hospital bill.
Patients pay high premiums for this coverage. Some doctors order unnecessary tests and treatments that result in bigger bills and higher claims, fuelling a spiral of rising premiums that raises healthcare costs across the board.
His diagnosis: “The Government is not happy, insurers are not making money, the patients and policyholders are facing increasing premiums. And yet, we are still doing this over and over again. It doesn’t do good to anyone.
“We are chasing after our own tail, and everyone is just getting worse off eventually,” he said bluntly.
What is being done
The Ministry of Health (MOH) is going about it methodically.
Today, Singaporeans are covered by MediShield Life (MSL), with claims limits pegged to the costs of subsidised C and B2 wards in public hospitals. This isn’t enough for those who want private care, so two in three Singapore residents have an additional private insurance Integrated Shield Plan (IP) that pays out higher amounts to cover treatment in private wards. Some also add a “rider” that covers the co-payment or cash amounts that patients need to pay.
Given that so many people are buying private insurance cover, it is clear that many people view MSL coverage as not enough. Hence, one of MOH’s priorities is to expand MediShield Life coverage and increase its limits.
It will also work with the three key groups of stakeholders – insurers, doctors, patients – to curb costs. Get insurers to go for more sustainable offerings, rather than offer high-priced policies promising total coverage that will just ratchet up claims. Go after doctors who make “egregious and inappropriate” claims to clamp down on overtreatment and overcharging. Get patients to feel more assured that existing health insurance is good enough, and they don’t need multiple layers of insurance, often duplicated.
We also need to ask the “why” questions.
Why are so many Singaporeans over-insuring when it comes to their healthcare costs? Why are insurers increasing coverage when many have been losing money? And why are some doctors overcharging?
The situation today is one where no one is happy, as Mr Ong summed up pithily.
One of MOH’s priorities is to review the current health insurance schemes, said Mr Ong, “to ensure that they are adequate in protecting Singaporeans against catastrophic health events, but at the same time to not feed this buffet syndrome too much and drive up healthcare costs unsustainably”.
Why we overinsure
So why do many Singaporeans fork out hundreds of dollars a year to buy private insurance they don’t use? About seven in 10 Singaporeans are covered by IPs. Yet, when they need hospitalisation, many choose not to max out their insurance benefits. Half of patients with IP-plus-rider protection still use subsidised public healthcare when hospitalised or receiving day surgery. In other words, many are paying for insurance they don’t need.
I think the instinct to over-protect themselves stems from Singaporeans’ experience of healthcare costs. MediShield, the precursor to the current MSL, was introduced only in 1990. Prior to that, Singaporeans had to rely on themselves, their cash and MediSave account to pay for healthcare. Lucky ones with good jobs could tap their employer’s medical benefits. Many of us thus grew up feeling insecure about medical bills, as huge bills could bankrupt an individual or a family. The sardonic saying that one can afford to die but not to be sick reflected the anxiety around medical costs back then.
So when health insurance came along with the introduction of MediShield, many people took up the highest coverage they could afford, just in case they needed it. They took up IPs. But an IP has limits and co-payments, so you have to pay cash for the rest. Add a “rider” that takes care of this. Never mind if you don’t need to use it for the next 20 years. The coverage is there, just in case, for peace of mind.
The trouble, as Mr Ong said, is that absolute peace of mind is very costly, but Singaporeans may not be aware of it.
Another odd behaviour is that many Singaporeans buy expensive private insurance when they are young, when they don’t need it. And those who already have company benefits may cough up money to add another layer of private insurance. Why?
While it sounds odd, such behaviour is easy to understand when you realise that insurers can deny coverage for existing medical conditions. Hence, smart Singaporeans don’t wait till middle age, when they are more likely to have medical conditions, to buy cover. They buy cover when they are young, and hold on to their private insurance as they age. Once they sign up with one insurer, they also find it practically impossible to switch, and are stuck with the same insurer.
Fixing the problem
What would make Singaporeans avoid these behaviours of hoarding insurance?
In my view, MOH should be bold and make three key changes.
1. Get MediShield Life to cover B1 wards
To address concerns that MSL is inadequate, MOH should expand MediShield Life coverage and raise its claims limits. For example, it should include coverage up to the B1 level. When MediShield was introduced in 1990, claims limits were pegged to treatment costs for Class C and B2 subsidised wards. These wards are not air-conditioned. Today, many Singaporeans work, sleep and take public transport in air-conditioned comfort. It should not be considered extravagant for the national insurance scheme to permit Singaporeans to recover from illness in an air-conditioned room in hospital, rather than sweat it out in the hot, humid climate. This can be done by raising MSL coverage to include B1 wards, which are multi-bedded wards in an air-conditioned setting.
Today, MSL coverage stops at class C and B2 wards. Those who want B1 coverage can buy a standard B1 plan offered by private insurance. Like other private plans, these plans do not offer policyholders as much security as MediShield Life, as applicants can be rejected on medical grounds and the plans are not portable. To prevent such cherry-picking by insurers and increase Singaporeans’ sense of health security, it is better if B1 coverage is brought under the MSL umbrella. Singaporeans can be offered a choice: Pay standard MSL premiums for MSL coverage for Class C and B2, or pay higher premiums for Class B1 under MSL.
2. Make health insurance policies portable
Next, MOH should address Singaporeans’ fear of losing health cover as they age or when they want to change insurer. This can be done by making health insurance policies that are pegged to MediShield Life portable, so you can switch between insurers.
To protect insurers, a waiting period can be imposed for new cover. This is the practice in Australia, where private insurance sits on top of the state-funded Medicare system. When you switch insurers, you typically wait 12 months before your existing condition can be covered. This deters patients from opportunistic shopping for the best coverage after a serious diagnosis, while allowing them a greater choice of insurer.
Making health insurance portable is highly complex, but other jurisdictions already offer this. There are some common workarounds to ensure all insurers compete on a level playing field, such as having a centralised database of claims and exclusions. Insurance should be based on community rating (risk pool across a big group of people), not individual rating (where you turn down an individual because of his medical history). A risk equalisation mechanism could smoothen the impact of very large claims on insurers, by pooling these separately and then sharing the burden and spreading the costs across the whole sector. It should not be beyond the capacity of Singapore’s health regulators to do the necessary to make IPs portable.
Making health insurance portable will rejuvenate the market and empower patients. It could, however, also spur excessive competition, to the detriment once again of all.
3. Reinstate deductibles and co-payment for all IPs
This is where the third tranche of reforms is needed, to restore sustainability to the market. To rein in over-zealous competition, and make underwriting more predictable and sustainable, MOH should go back to the principles of co-payment in all IPs.
About 20 years ago, insurers started introducing “as-charged” plans that paid for the full hospital bills, doing away with claims limits and co-payments. This is like giving a blank cheque to doctors and patients. Claims went up. Today’s spiralling costs that drive up premiums are a direct result of allowing such policies.
MOH should do away with the blank cheque “as-charged” plans. Instead, subject all IPs to stricter deductibles and co-payment. To be fair, MOH has begun to do so, by requiring policies with riders to include a modest 5 per cent co-payment.
It should go further. It should require deductibles of at least $1,000 or more, and co-payments of at least 10 per cent. After all, those who are buying the high-priced riders for as-charged plans are the ones best able to afford such out-of-pocket payments.
Policyholders who have forked out large sums for as-charged plans may cry foul – but it can be pointed out to them that they will benefit from having portable plans and can switch insurers. Insurers may be persuaded to agree to portable plans, if they can reinstate co-payments, and set limits on claims.
These three reforms can cut out the buffet syndrome and restore Singaporeans’ sense of health security.
It requires bold regulation and strong political will to reform the sector and will need the buy-in of insurers, doctors and the public.
It took the insurance sector some 20 years to slide down the slippery slope of excessive coverage, to the unsustainable “vicious circle”. Singaporeans shouldn’t have to wait that long to get their health insurance back into shape.
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