Medishield and the Role of Insurance in the Singapore Healthcare System

singapore healthcare
Welcome back to our special look at the Singaporean healthcare system. Today we take a more in depth look at the creation of Medishield and explain what this second layer of healthcare protection is to the average Singapore.
"MediShield is a low cost basic medical insurance scheme. Introduced in 1990, the government designed MediShield to help members meet large Class B2/C hospitalisation bills, which could not be sufficiently covered by their Medisave balances. To avoid problems associated with first-dollar, comprehensive insurance leading to unnecessary over-consumption of healthcare services, MediShield operates with co-payment features such as  co-insurance and deductible where patients share part of the responsibility for his medical expenses. The co-insurance and deductible can be paid using Medisave or cash.
Premiums  for MediShield can be paid by Medisave. A very large medical bill can easily wipe out your Medisave balance. For this reason, you are advised to take up MediShield or an appropriate private Integrated Shield Plan in order to stretch your Medisave dollars. " - Ministry of Health Website
Two famous healthcare models are an anathema to Singaporean policy makers: 
1. The free healthcare like the British NHS. 
2. Healthcare with runaway pricing like the American model that keeps accessibility out of reach for a segment of the population.
That is why Singapore chose to walk a different path from the west and embraced the idea of "individual responsibility" by implementing a co-payment combined with government subsides healthcare model. Government subsidized healthcare was initially seen by policy makers as the best way to cushion the impact of healthcare bills on the general populace. However, circumstances soon showed policy makers that subsidized healthcare was an insufficient solution for problem before the people: patients with prolonged hospitalizations simply could not afford to rely only on subsidies, Medisave and family support. The government created MediShield in 1990 to provide an additional layer of protection for Singaporeans.
So why was MediShield created? The speech made by then Health Minister Yeo Cheow Tong in the year 2000 puts the matter into perspective: "used prudently, account holders would find their MediSave funds adequate for their hospitalization expenses. However, those suffering from major illnesses requiring prolonged hospitalization may run the risk of rapidly depleting their Medisave funds. They may be left with insufficient funds for their old age hospitalization expenses as well as that of their family members." Yeo Cheow Tong, Singapore Paraliament reports, Hansard, Central Provident Fund (Amendment)
It was a tacit admission by policy makers that Singaporeans faced the very real prospect of financial ruin in the event of catastrophic illness. It was also a recognition that the state itself was also staring at the possibility of hospital costs spiraling upwards thanks to the fact that other patients would be saddled with paying the costs for patients who default on their bills. If this scenario sounds familiar to you it should. It's one of the reasons why American healthcare costs have spiraled out of control.
So in spite of the government's emphasis on healthcare being an individual responsibility, it realized that risk pooling was still needed to enable Singaporeans with a means to cope with the massive bills that come catastrophic illness and prolonged hospitalizations. MediShield was introduced to address this problem. Then Health Minister, Mr. Yeo Cheow Tong spoke of three considerations in that went into the creation of MediShield:
1. Low premiums to benefit all Singaporeans, especially the low income earners.
2. Simple in design to allow both easy understanding and inexpensive administration.
3. The scheme must not encourage over usage of hospital services.
MediShield today does what it was intended to do very well: Cushion the financial burden of prolonged hospitalization. The example highlighted on the CPF website is illuminating: A Singaporean hospitalized for 10 days in a Class C ward for a stomach operation racks up a bill of $5,850 after government subsidies. MediShield covers $3,665 or 63% of the amount. The patient's out of pocket share, which incidentally can be paid by a combination of cash and MediSave comes up to $1,500 in deductibles and a mere $685 in coinsurance. The problem however, is that the example quoted by the CPF website doesn't exactly tell the reader how much do they have to actually pay if they do not understand insurance lingo. That problem however, stems from the fact that most people are not familiar with medical insurance and it's lingo. There is some consolation though. MediShield premiums are affordable with the premium for a 35 year old Singaporean standing at $105 per annum. 
The one flaw with MediShield is that it's high deductibles (the portion of the hospital bill you have to pay), meant to deter overconsumption is what creates the perception amongst Singaporeans that they cannot afford to be hospitalized. Coming up in our next part we look at why MediShield is not a compulsory scheme like MediSave.
A Special Look At The Singapore Healthcare System

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