A necessary approach to managing healthcare costs in Singapore

Jul 02, 2014 at 10:19 am | Hits: 3610

By Christopher Gee and Yap Mui Teng

The MediShield Life Review Committee’s (MLRC) recommendations have been submitted to the Government, and the committee’s seven-month long engagement and deliberation efforts are now seemingly complete.

It has achieved much, having been tasked in November last year to consider the design parameters for the MediShield Life scheme to ensure adequate insurance coverage for all Singaporeans for life whilst maintaining premium affordability and scheme sustainability. In doing this, it had to engage widely with a range of citizens and stakeholder groups; consider the balance between benefit enhancements and premium affordability; and recommend an appropriate level of pre-funding during one’s working life to help ensure affordable premiums at a time when people are living longer.

There is a case for a more permanent and expanded role for a body such as the MLRC in Singapore’s revamped healthcare sector. Singapore has rapidly changing demographics and a very dynamic healthcare sector with new technology and treatments. It also faces the prospect of cost inflation being significantly higher than wage growth. All these require a standing committee to continually review both the demand and supply aspects of healthcare in the future.

For all its virtues, the marketisation of Singapore’s healthcare system — combined with the national medical coverage schemes — has introduced incentive structures and competitive pressures that may fuel over-consumption, and in turn lead to an uncontrolled upward spiral of costs.

First, like many other jurisdictions, Singapore’s healthcare business model is structured around a fee-for-service, instead of payments for keeping people healthy. Under a fee-for-service model, service providers maximise their revenues the more they treat and prescribe, with only a very indirect linkage between the service provider’s fees and patient outcomes. Second, whilst a system of co-payments can check moral hazard, behaviours may be skewed by rules. For instance, not allowing Medisave to be used for chronic disease therapies and preventive or palliative care leads to an accumulation of conditions until they precipitate into medical emergencies and hospital admissions where Medisave or MediShield can be tapped. Third, intense competition amongst private insurers in an environment of regulated or controlled pricing could lead to the insurers competing on the basis of which is the most generous in paying claims. Although such competition would be commercially unsustainable in the long run, over-consumption fuelled by intense competitive behaviour amongst insurers could drive up costs for all.

What would such a standing committee’s terms of reference be? They could:

1. Conduct regular reviews of benefits and premium affordability in the light of changing healthcare costs, new medical technologies and Singaporeans’ expectations, and make recommendations for adjustments as necessary.

2. Act as an independent body to assess the actuarial fairness of basic MediShield Life premiums as well as any private plans that are established (See Lim, 2014).

3. Collect medical bill records at all hospitals into a centralised database, monitor bill sizes for consistency and review outlier suppliers and bills. The committee should recommend further regulatory action (by the Ministry of Health or the Singapore Medical Council) in the event of irregularity. The committee could make such data publicly available and combine them with outcomes-based data and metrics, which will go some way to reduce the information asymmetries in the healthcare sector.

4. Undertake evidence-based cost-benefit analyses on new medical technologies and assess their suitability for coverage under MediShield Life and for payment using Medisave. The committee’s recommendations would be published and serve as guidelines to assist in healthcare professional and patient decision-making about appropriate medical care.

An example of what such a standing committee would look like can be found in the United Kingdom’s National Institute for Health and Care Excellence (NICE). NICE was originally set up in 1999 as a special health authority to reduce variation in the availability and quality of care in the UK’s National Health System (NHS). It is now established as a Non-Departmental Public Body (similar in standing to a statutory board in Singapore) with the responsibility for developing guidance and quality standards in health and social care. NICE establishes evidence-based guidelines for clinical care that advises the NHS and other providers on the management of medical conditions, and undertakes technology and diagnostic agent reviews and appraisals to help the NHS adopt efficient and cost-effective diagnostic and treatment procedures. It also produces quality standards and a Quality Outcomes Framework, which is a menu of indicators and metrics that measure the quality of care.

Although the NHS is built on different principles to Singapore’s healthcare system, NICE’s role within the UK health system provides a working example of an independent, statutory body within the system that is mandated to consider the fundamental issues of quality, costs and benefits in healthcare.

An equivalent body in Singapore is the Public Transport Council (PTC), the independent body that regulates bus services, bus service operators and bus and rapid transit system fares that was established in law in 1987. Council members of the PTC are drawn from a wide spectrum of society to facilitate a wide representation of views from the public.  The PTC is central in balancing the interests of public transport users, the operators and service providers and the government in its work. The body such as the one we are proposing here would be responsible for reflecting the interests of patients, healthcare providers (both public and private), insurers and the government in providing quality healthcare in Singapore.

Unfortunately, our imagination does not stretch to coming up with a nice – and catchy -acronym for this proposed standing committee. Even so, we believe that it is necessary to have a trusted, independent body that can balance the interests of various stakeholder groups in Singapore’s healthcare system, by regularly considering all the costs, benefits and trade-offs in the decision-making of Singapore’s healthcare system and providing transparency in its work.


Mr Christopher Gee is a Research Fellow and Dr Yap Mui Teng is a Senior Research Fellow at the Institute of Policy Studies. Their research focuses on issues related to demography and the family.

Photo credit: LinkedIn

For more information, click to read ‘5 Key Recommendations of Medishield Life that you need to know‘.

  • Share this article:  

Category: Demography & Family, Editor's Highlights


Related articles