Speech by Mr Ong Ye Kung, Minister for Health, At the Securities Investors Association (singapore)’s 25th Anniversary Members’ Night, 12 July 2024, 7.00pm, At One Farrer Hotel

Mr David Gerald, President of SIAS

Investors, friends, ladies and gentlemen

1. Let me wish SIAS and all its members a happy 25th Anniversary.

2. The event reminded me of another occasion. I was invited earlier this year to attend the REDAS (Real Estate Developer Association of Singapore) Chinese New Year lunch. I went there and asked them, "I am the Minister for Health. What have I got to do with real estate?" They said it was because they were concerned about the health of the industry.

3. On that basis, I could be invited to any event. Today, let me talk about investment in health.

Health, not Healthcare, is an Investment

4. Governments spend a lot on healthcare, typically 10 to 12% of GDP amongst developed countries, and 17% in the United States, with very sub-optimal outcomes. Singapore spends under 5% GDP in healthcare, with widely regarded good outcomes. So our returns on healthcare are not too bad, but this is bound to rise as our population gets older.

5. Is healthcare spending an investment? If you ask most politicians, whether in Singapore or overseas, they would say yes, that the government must invest in healthcare. They say that because it sounds nice to voters. However, I am before an audience of investors and learned people, and if we are more honest, we will know healthcare spending by the government is not an investment. Why?

6. We spend on healthcare when we are sick or injured, and we spend on the hospital and doctors to repair our bodies, and often not to what it was before. I did a knee replacement, and it was never like before when I could play football. Now with a metal knee, I had better not play football. It is not an investment; it is a repair job. If this is an investment, repairing your car is an investment, but we know it is not. So to be honest, most healthcare spending is not an investment.

7. There is only one aspect of healthcare which bears the characteristics of an investment, and that is preventive care. You invest modestly in exercise, better diet, better sleep, don't drink too much alcohol, quit smoking, go for health screenings and vaccinations recommended by MOH, build up your health, leading to bountiful paybacks multiple times later on in life, in terms of many more years of happy, fulfilling lives.

8. That is why we are anchoring our healthcare strategy on preventive care in Healthier SG. So I urge all our good investors out there to invest in your health. The simplest and most effective steps - such as exercising, sleeping better, socialising with friends, consuming less sugar, sodium and fat, quitting smoking - do not cost much at all, instead it saves you money. It does not require us to sacrifice all the things or food we love, although it requires an exercise of moderation in consumption.

9. So let us all be good investors in our own health.

The Complexities of Health Insurance

10. There is another aspect of healthcare that needs to involve very wise financial management, and that is in health insurance.

11. The main purpose of health insurance is to protect ourselves against unexpected catastrophic health events - such as an accident or a severe illness - which will incur a big hospital bill that we did not plan for. Health insurance pays for such unexpected big bills and buying insurance gives us peace of mind should the unexpected happen.

12. That is why the government provides universal health insurance for all Singaporeans, regardless of our health status. Everybody in Singapore has health insurance, which is MediShield Life, and everyone is enrolled automatically - no need to apply, no underwriting, no need for check-ups. If you are a Singaporean, you are in, with the premiums deducted from MediSave. Hence, so long as you work, the premiums are deducted from MediSave. Many Singaporeans do not know you have MediShield Life, and are already covered.

13. What many may not know is that MediShield Life, being a universal basic protection for everyone, is mainly used for subsidised healthcare in public hospitals. One of our design principles is for MediShield Life claims to cover nine in ten subsidised public hospital bills, so that there is very little or no out-of-pocket payment by the patient.

14. Hence, for a typical Singaporean patient admitted for a surgery at say, a Class B2 or C ward, he will find that a large part of his hospital bill - 50%, 60%, 70% - will be subsidised by the government, and the remaining portion will be mostly covered by MediShield Life. There might be a small amount left to be settled, which he can use his MediSave for. All in all, very little out-of-pocket payment if you go to public subsidised hospitals. In essence, this is the S+2M system - subsidies, MediShield Life, MediSave.

15. This also means that for a patient who receives unsubsidised healthcare in a private hospital, you get no subsidy, MediShield Life covers only a small part of your private hospital bill, and most of the bill has to be settled in cash. MediShield Life is not very adequate or useful for patients who seek care in private hospitals. Therefore, these patients need additional insurance.

16. These are offered by private insurance companies, called Integrated Shield Plans or IPs. They are essentially a more generous version of MediShield Life, they ride on top of MediShield Life, and provide additional coverage for private care. Hence the descriptor 'Integrated', as the private insurance is integrated with MediShield Life. Premiums can also be deducted from MediSave, up to a cap and if you have enough in your MediSave account.

17. But even with an IP, some patients may still need to pay a portion of the hospital bill in cash, such as what we call deductibles and co-payment, or drugs and treatments not authorised for claims. To bypass all that and give yourself absolute peace of mind, they buy something else, which are called 'riders'.

18. Riders are not cheap, costing typically one or two thousand dollars a year if you are around 40 years old, and increase steeply with age. You also cannot use your MediSave to pay rider premiums.

19. Notwithstanding, for absolute peace of mind, many Singaporeans will buy all three - MediShield Life, IP, plus riders. I wondered once I came to MOH, how many Singaporeans actually make full use of their multiple layers of insurance and go to private hospitals each time they need care. Did they make use of all the insurance they bought? As it turns out, not very high.

20. About half of patients with IP plus rider protection still end up using subsidised public healthcare when hospitalised or receiving day surgery. Strictly speaking, and from an episodic point of view, these patients only needed MediShield Life and they could have saved on a lot of premiums. But I figured most of us, including myself, want to protect ourselves to the fullest, with MediShield Life, IPs and riders, just in case. That is what our insurance agents tell us all the time, so we buy.

21. I go through all these so as to provide the context of what I am about to explain about healthcare costs in Singapore.

22. We are all experiencing an increase in healthcare costs. We feel the pinch. There are many factors at play. One, healthcare manpower cost accounts for half of the total cost of healthcare, and is rising fast. This is because with the world ageing, except Africa and India, demand for healthcare workers is outstripping supply, and the wages and salaries of healthcare workers are going up, pushing up healthcare costs.

23. Second, technology. That is very interesting. In most industries, technology means you get a better and cheaper product. But in healthcare, you get more expensive but better technology. That is the reality in healthcare and that pushes up healthcare costs as well.

24. We have measures to tackle all these inflationary drivers. Today I will focus on the final major driver for increased healthcare cost, which is health insurance.

25. Health insurance is essential, but if excessive, it changes the behaviour between patients and doctors, and pushes up healthcare costs.

26. How so? The explanation is intuitive and many of us would have experienced this. You see a doctor for a certain condition, and the first question the nurse asks is whether you are covered by IPs and riders. If yes, you may be prescribed more diagnostic tests and more expensive treatments. As a patient, you are happy to receive them, because the insurance company will pay for it anyway. This is the classic 'buffet syndrome'. It is already paid for, so eat more. It is natural human behaviour happening all over the world, especially in healthcare.

Two Reviews of Health Insurance

27. One of MOH's main priorities today is to review the current healthcare insurance schemes, 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. That is a very difficult task.

28. There are two parallel tracks of work. The first is a major review of MediShield Life provided by the Government, and the second involves IPs and riders provided by private insurance companies.

29. The first is underway, and which I have explained earlier this year in Parliament, during the Committee of Supply debate.

30. As hospital bills are getting larger, we need to raise the claim limits for MediShield Life, so that we continue to cover nine in ten subsidised hospital bills for Singaporeans and they are able to manage healthcare costs. Outpatient bills, such as for kidney dialysis, are also rising, and we need to raise the claim limits so that Singaporeans can afford kidney dialysis.

31. All these come at a cost. MediShield Life premiums will go up. The government will find ways to subsidise the premiums and top up MediSave accounts, so that the increase in premiums can be deducted from MediSave for most Singaporeans, without increasing out-of-pocket cash payment.

32. This is one major review. Mrs Fang Ai Lian is leading the MediShield Life Council to help us to work out the details. She is an expert, and I trust her fully. All these will be done in the second half of this year.

33. As for IPs and riders, MOH has been analysing the situation. Our conclusion is that there is very intense competition between private insurance companies that, I think, is risking a race to the bottom. They have been offering very attractive terms to encourage sign-ups and win market share. This includes IPs that promise no claim limits, and riders to protect policyholders from co-payment.

34. These features look generous and very attractive and give absolute peace of mind, but they have also aggravated the buffet syndrome and are pushing up healthcare costs.

35. This in turn is pushing up premiums for IPs and riders significantly, costing thousands of dollars every year, even though as I mentioned earlier, about half of holders of IP and riders actually end up using subsidised healthcare in public hospitals.

36. I checked the latest financial reports of insurance companies released just a couple of months ago. With escalating claims, insurance companies are hardly making profits on their health insurance portfolio.

37. In the meantime, the government is very worried about escalating costs to our system, and the premium burden for our patients.

38. Surely this does not make sense. 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.

39. I think we may be in a health insurance vicious cycle, of overly generous insurance policy design, buffet syndrome leading to more non-critical or even unnecessary tests and treatments being prescribed, which in turn leads to bigger bills and higher premiums for all. We are chasing after our own tail, and everyone is just getting worse off eventually.

40. Remember that in healthcare, how we pay, determines how much we pay. There is a very intricate dynamics. You try to pay for healthcare costs like a buffet dinner, ultimately it is not going to work. We all become obese and unhealthy.

41. At some point, we need to collectively try to break this vicious cycle. There is no easy way out. I think it will first require MOH to strengthen our enforcement against errant doctors who overcharge. We recognise that the buffet syndrome is human nature, but we need to take actions against doctors who make the most egregious and inappropriate claims. The great majority are really good people, but the very small minority are not doing right. We are starting to do this through the new Claims Management Office that we have just set up.

42. Private insurance companies will have to take a hard and realistic look at their product design, and rein in overly generous and unsustainable terms like no claim limits and very low or zero co-payment. They need to start thinking of offering alternatives that are more sustainable in the long run and which will actually cost everyone less in the long term.

43. We will also need a stronger effort to educate consumers on healthcare security, how MediShield Life as basic protection may already serve the needs of many, and if you need something more, you can buy an IP. Do you really need a rider? We need to educate consumers on what kind of commercial products are out there, so they can choose the right one in the right phase of life. Absolute peace of mind is important, but we need to educate consumers to know that absolute peace of mind is costing you a lot, that you may not be aware of.

44. It is important that we know the situation we are in, so that we can work towards a more sustainable long-term solution.

Closing

45. Let me end by saying something about SIAS. Over 25 years, SIAS has established yourself as a trusted voice of the retail investor community. You have promoted the practice of good corporate governance by listed companies and charities. You helped resolve many thorny issues in the Boardroom rather than the Courtroom. You have given all small investors a voice to be reckoned.

46. In 2019, SIAS collaborated with the Singapore Exchange to publish best practices for shareholder meetings to help foster effective communication between board and shareholders.

47. In investor education, you have been relentless in pursuing your vision of an educated, engaged and empowered investment community. You are a long-standing partner of MAS in MoneySense and have helped many Singaporeans improve their financial health.

48. Having been a board member of MAS for several years, I got to know the work of SIAS. It has investors' interests at heart that I believe strongly, which makes it a well-intended, pure-hearted organisation.

49. Having worked in MOH for several years, I would also say that many healthcare professionals, doctors, nurses, our healthcare institutions and community care organisations are similarly well-intended and pure-hearted. They also operate and serve in the best interests of patients.

50. It is perhaps because of this common ethos that I got invited here today. Our roles, while different, compel us to fulfil our imperatives. For SIAS, continue to advocate for the small investors. MOH continues to build a sustainable and high quality healthcare system for Singaporeans, which has to include reining in an unhealthy buffet syndrome of health insurance.

51. I wish you a happy 25th Anniversary.