Until today, a lot of people assume that the 3M system, MediSave, MediShield, MediFund, are adequate safeguards in place to make healthcare affordable in Singapore.
However, many Singaporeans now find healthcare no longer affordable.
The truth is, the 3M system is not only redundant, but suffers from inefficiencies which make it inadequate safety nets for the provision of heathcare costs.
Let us examine why:
MediSave
According to CPF Board, we contribute 7-9% of income to Medisave. With a median income of $3480 (annual $42,000), and a resident workforce of 2.11 million, that amounts to $6.2 to $7.95 billion. Combined with the $2.2 billion subsidies that MOH provides, this is enough to foot healthcare costs of up to $8.4 to $10.2 billion.
In 2012, our total healthcare expenditure was $12 billion. Of this, $4.31 billion was medical tourism revenue. This leaves $7.69 billion of Population healthcare expenditure. Assuming that our 1.4 million out of 5.31 million, foreigners spend proportionally on healthcare,our resident healthcare expenditure amount to about $5.5 billion.
It is funny that Singaporeans do not have enough medisave to pay for medical treatment, given that resident healthcare expenditure accounted for only 50-70% of total medisave contribution, plus government subsidy!
The truth is, most likely, MediSave is a Selfish scheme. With medisave, the majority of people are healthy and pass away when they have surplus in their accounts, but for those who are sick, they are gravely in debt.
So as a result, the surplus money in the medisave, since it can only be used to foot medical expenditure, is wasted! Of course , it is given to offspring, but the majority of offspring turn out to be healthy as well!
Another reason for this is the Medisave ceiling, $43,500, amounting to 12 years of median income. Once you hit this limit, you can't save any more money, you must save the remaining in bank deposits which pay 0.1% interest rate, watch your real savings decrease, and when a $200,000 hospitalisation bill hits you later on, you find yourself unable to pay.
It is also funny that, given GIC makes 6.9% returns on its $300 billion portion of the reserves, that the Singapore government can't guarantee interests rates of 4% on more than $43,500 of medisave savings!
MediShield
A lot of people assume that medishield will bail them out of their worst illnesses, but this is hardly the case. According to the financial report of MediShield:
Medishield payouts covered only 5% of resident healthcare expenditure. This is as good as your insurance scheme subsidising $50 out of your $1000 bill!
But more shockingly, the MediShield has been accumulating surplus, or profit, of 40% in excess of claims paid.
The MOH minister justifies this by building reserves to buffer against increasing healthcare costs, but no other insurance company in the world has premiums exceeding claims to such a degree.
According to Financial Expert Leong Sze Hian:
"Commercial insurance companies, he said, usually work on 'a loss ratio of over 100 per cent', which means they pay out more in claims than they collect in premiums.
Their profit comes from investment income generated during the time between premiums paid and claims made."
And despite this, MediShield Premiums have been increasing. MediShield premiums will increase by 450, 511 and 309 per cent compared to 2005, for age 30, 50 and 70 respectively. (“It’s worth paying more for quality health care”, Straits Times, Jul 21)
And also as a result of this, the cumulative and year on year growth of MediShield Premiums have more or less kept pace with the growth in payouts.
Bottom line, it is pointless to save anything for reserves, since MediShield is unlikely to be in deficit anytime soon. So why is it making such a huge surplus?
If MediShield does go into deficit, then how long will the reserves be sufficient? Not forever, premiums will still have to be increased after a few years! At todays rates, the reserves will only foot 4 years of 40% deficit.And I think that our "fiscally prudent" Government will never allow Medishield to be in deficit anyway!
Should we be made to pay for years and years of surplus so that the future generation can enjoy just a few years of deficit claims? I think not!
MediFund
And still, a lot of people think, if they die die are unable to pay, they can rely on medifund. But that is a myth!
If not, we would not have to rely on charities such as NKF, Red Cross and PSC, to foot healthcare costs for the poor any more!
Truth is, the rigourous selection criteria for medifund selection means that you only get to enjoy subsidies, and I repeat, subsidies (up to 50%) , not complete payment, only if you have no assets left!
Leong Sze Hian sums it up in this video:
https://www.youtube.com/watch?v=ehxbmJkV4aI
from 15:00 onwards.
Basically, all your families' medisave must be zero, which means that to qualify, they also cannot pay for their own healthcare costs (how absurd is that!), you must have less than $4000 in assets, which means that if you are sick and jobless, in less than one year, you have no money left to pay for even food!
But the real hypocrisy comes from the fact that, the government treats Medifund as an endowment fund, not a real direct subsidy.
Let me explain:
In an endowment fund, only the interest from the capital sum, can be used to pay for the benefits. That means, you must accumulate $100 billion in reserves, save for don't know how many years, in order to have $3.9 billion in benefits, assuming interest is at 3.9%, the GIC's real rate of return. (Of course, you can't have 6.9% the full nominal interest payout, otherwise the value of the reserves will shrink!)
But thats not all! For the past few years, the government has been secretly topping up the mediFund. In 2012, the medifund top up was $600 million. This year, it is $1 billion. Total capital sum , $3 billion, 2012. However, payout has only averaged $98 million. Interest rate? 3.2%. Ratio of payout to top up? 12%
And thats still not all. About $86 million has been transferred from medifund to the protected reserves. The rationale for this, we will never know.
http://yourhealth.asiaone.com/content/medifund-payout-16-90m
Shouldn't the top up go directly to the payout, so more patients benefit?
When will our savings in our MediFund finally benefit us? When will be the day when, the interest payout finally exceeds the top up amount?
Perhalps when your grandchildren grow old! Or, Given that top up is likely to increase at the same rate as inflation (tax revenue), which is 4.5% per annum, as the projected table shows, maybe never at all!
Abel Tan
Junior TRS Editor