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Medishield Life: How the Scheme Got so Complicated

TAN KIN LIAN- A government minister had promised that subsidy for Medishield Life will be hassle free. This may be the case for those who fall within the rules for subsidy, but it will still be complicated for other people who do not get the subsidy and do not know where the line is drawn. It will be a complicated affair.
Things are getting into a big mess with our convoluted system of paying for medical care. The payment comes from different pockets – employers, self-payments, Medisave, Medishield, insurance, Medifund and now “government subsidy” for premiums.
There could be a few countries that have such a convoluted system, but it seemed that Singapore is among the worst!
But, things were much easier in the earlier years, prior to the introduction of Medisave in April 1984. After that, things get more and more complicated as the years go by.
Pre-Medisave days
How was it like in the pre-Medisave days? Most people have access to public hospitals and pay fairly modest charges. The wards in public hospitals were subsidized up to 80 percent and the charges were modest. I do not recall the public being worried about to pay expensive medical bills.
Those who were wealthy could use private hospitals. They did not complain about the charges.
A part of the CPF savings was diverted to the Medisave account to be used to pay medical bills. Initially, this represented 6% of the salary or about 20% of the monthly contributions to CPF. In later years, the share of Medisave increased.
This turned out to be a bad idea as people started to use this source of funds, even when they do not need to. They send elderly parents to higher class wards which incur higher charges.
At the same time, the public hospitals were being restructured. A lot of funds were used to upgrade the hospitals and to construct new facilities. The charges in the restructured hospitals must have increased significantly over the years.
In the earlier years when the charges were modest, the public hospitals provided a benchmark for the private hospitals. While the charges in the private hospital could be higher, the public has a choice to go to the public hospitals if they find the private hospitals to be unaffordable.
When the restructured hospitals increased their charges, it set the trend for the private hospitals to increase the charges more. The fees started to escalate.
With escalating fees, the Medisave accounts were insufficient to meet the more serious cases of illness.
The Medishield insurance scheme was introduced in 1990.
There were several flaws in the structured of Medishield that remained unresolved today.
Medishield was designed for the subsidized wards. The deductible was set at an unrealistically high level. This must have followed the practice in America, but the situation is different. A high deductible is needed in the American system as it covers all in-patient and out-patient treatments and there is no government subsidy for health care.
When Medishield is applied in the Singapore context, there is no need for a high deductible, as it applies mainly to inpatient treatment and outpatient treatment for cancer and kidney dialysis.
Medishield also did not address the needs of patients who like to use higher class wards, rather than the subsidized wards which became more crowded and carried a stigma.
Medishield Plus was introduced to cater for people who preferred to be treated in higher class wards.
When Medishield was first introduced, it covered everyone with a Medisave account, but they were allowed to opt-out of this plan. Some people opted out because they were already covered by their employers. Others could not join the plan at that time because they were self-employed or unemployed and do not have a Medisave account.
When the uninsured people wanted to join the scheme at a later date, they were rejected if found to have a pre-existing health condition.
Private Shield
Matters became even more complicated when private insurance companies were encouraged around 1995 to introduce insurance plans that have lower deductibles, lower co-insurance payments and to offer “riders” to cover these compulsory payments.
The premiums were these approved plans could be paid out of Medisave savings. The Medishield Plus plans, which were previously handled by the government agency, were transferred to the insurance companies.
The terms and conditions of these private insurance plans were not standardized. Many members, who moved from the Medishield to the Private Shield plans, found that their claims were rejected due to non-disclosure of pre-existing medical conditions, including those conditions that they were not aware of.
Integrated Plans
The health minister responsible for Medishield found that the private insurers were picking the healthy cases and leaving the unhealthy cases to remain insured under Medishield. He introduced the concept of the integrated plan, which required the private insurers to insure the basic portion of their plans back to Medishield. This was a further complication, but appeared to have been sorted out reasonable well.
Medishield Life
In 2013, the prime minister announced changes to Medishield to cover everyone, including the unhealthy ones that were rejected previously and to include pre-existing illnesses. A Medishield Life committee was formed to study the issues and to recommend the changes. The recommendations have now been published.
As feared by the public, the insurance premiums for Medishield Life, payable by the insured members, are expected to increase. The estimated increase was estimated to be 90 percent. This confirmed the worst fear of the people and led to government promises of subsidies that would keep the premium affordable.
My observations
I am afraid that matters will get worse from now and will be worse than anticipated by the Medishield Life committee. In my view, the proposed changes to Medishield did not address the root cause of the problems of Medishield, i.e.
a) How to control the escalation of medical charges and help the patients to seek the most appropriate treatments
b) How to simplify the complicated structure of payments from multiple sources and reduce the administrative costs
The major portion of the cost of health care continues to be borne by the government through their subsidy for health care and by the public from their Medisave accounts and by cash.
The share of the total cost paid through the Medishield and private insurance schemes is still a small portion. It is taking up more time and attention than it really deserves. It is so complicated that many people see the issues from different angles and there is no clear vision on what the problem is all about.
This article is courtesy of Mr Tan Kin Lian. The original article can be found here.


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