• Clarification and correction on Singapore’s health system

    Reader CG noticed the questions I was posing on Twitter today to Avik Roy about the safety net component of Singapore’s health system, Medifund. He sent me to two sources (the latter a PDF), which I’ve examined. He also shared his own summary, which is a good enough start to quote.

    From what I can tell from the Minister of Health’s FAQ, it is way different from [US] Medicaid []. Essentially, Singapore set up a fund that collects interest. The interest from this fund is available to the public hospitals to cover the costs for patients who cannot afford services after Medisave [compulsory, personal health savings accounts financed by a payroll tax]. Patients who utilize the lowest classes of hospital ward are eligible to receive Medifund. A committee at each hospital reviews requests to access the fund and determines whether or not a patient can access the fund and the amount they will receive. These committees can take into account historical contributions to Medisave (to encourage personal responsibility, again, according to the MoH website).

    I do not believe there is anything like Medifund for outpatient primary care. As far ask I can tell, the public clinics will provide for some discounted services.

    I think you could make the argument that the Singapore system differs from the post ACA US system in one broad sense. There appears to be a lot of government intervention on the supply and price side of the equation in Singapore while the US has largely chosen to interfere on the payor side. The Health Affairs article makes it sound like there is a public option-like theory when it comes to hospitals and clinics in Singapore. If the government gets more involved with hospitals and clinics, prices would go down across the whole system.

    I admit, I got it wrong on Medifund in my prior post on Singapore. It isn’t very much like Medicaid.

    In addition to Medisave and Medifund, there is Singapore’s MediShield, a government-run, “catastrophic” hospital insurance plan with a deductible of about $1,200 (in U.S. dollars) per year. Premiums are age rated and are shockingly low. Even for an 85 year old they’re below $1,000 U.S. per year. I don’t think this is all due to competition and the structure of the insurance scheme. It seems that Singapore also subsidizes hospital costs directly. So, individual liability is below full cost. As for outpatient care, Singapore subsidizes that directly too. This is basically public insurance with a layer of compulsory savings/personal responsibility.

    I did some further poking around to try to find out to what extent the Singapore government influences health care prices. In the time I spent, I didn’t find any details, only things like this:

    Another key focus of the Government has been to ensure that overall health expenditure does not fall victim to the significant inflationary pressures that have been evident throughout the world. This has been achieved by actively regulating the supply and prices of healthcare services in the country.

    I have no reason to doubt Singapore’s health system is great in many ways. But it is awfully hard to pull apart the components of what makes it cheap. Is it the insurance scheme? No doubt that plays a role. Is it the government influence on prices? That has to matter. And, of course it is cheap to the individual for these reasons and the direct subsidies for care.

    What, if any, of this could reasonably be imported to the U.S.? Almost all of it would be a heavy political lift. More price controls? Compulsory health savings accounts? A program akin to (catastrophic) Medicare for all? Name one insurer or provider that would support any of this. Like it or not, if you can’t get them on board, it ain’t gonna happen. If you think I’m wrong, explain to me how you think winning campaigns for national office are funded. Explain to me how many such campaigns it would take. (Hint: 218 (House) + 60 (Senate) + 1 (president).)

    That’s not to say some of these changes wouldn’t be great, including real campaign finance reform. It’s only to say I don’t see them happening. However, deductibles are growing for employer-sponsored plans anyway. Perhaps Congress could be enticed to simplify and improve health savings account options. Providers might back that if it facilitated more spending. Still, that’s a far cry from a Singapore-like system.

    Some people say they care deeply about helping the poor afford greater access to health care. Some of the same people are also advocating not expanding Medicaid because it isn’t enough like the Singapore system. It is my understanding Avik Roy holds these two views. (I will correct this post if he tells me that is not so.) If you are such a person, then you must believe that a Singapore-like system is coming to American soon. Though I’m not opposed to it, I just don’t see any indication that this could be so.


    • I am so glad that you brought up the fact that Singapore’s hospitals are financed in part by government, and therefore the insurance premiums charged to the public are quite low.

      I have wanted to make that point many tiimes over while reading accounts of hospital billing in other nations.

      Sometimes a well-intentioned observer will point out angrily that he got eye surgery in France for $300 cash, and would have had to pay $20,000 for the identical surgery in New York City.

      I have longed to point out that the French do not have technical miracles or low-wage nurses. What they have is a combination of sales taxes and payroll taxes and general revenue that covers most of the hospital overhead. The patient is only paying what I think economists call the marginal cost of his treatment.

      (I just picked France at random. What I described may be more true of Britain or another northern European nation.)

      Anyways, how does this translate into the American system?

      Let’s say we were determined to subsidize American hospitals with enough tax dollars so that huge, grotesque bills to paitents became a thing of the past.

      I believe that the total budgets of American hospitals are at least $600 billion a year.

      Hospitals receive about $200 billion a year from Medicare and $100 billion a year from Medicaid.

      Therefore if a new tax raised $300 billion, then hospitals would be bascially free. Health Insurance premiums would go down by at least 40%.

      $300 billion is about 6% of payroll. That is a big gulp.

      The public would have the fear that the 6% tax would stick forever, but maybe health insurance premiums would not go down at all.
      So individuals and businesses would be paying more than ever.

      Comments welcome!

      Bob Hertz, The Health Care Crusade

    • Brookings is holding an event (and releasing a book) next week to talk about Singapore’s health system as an example of success in containing health care costs. Worth a second look?



    • Bob – if your point that true costs are masked by subsidies, how do you explain that the US spends roughly 2x share of GDP on healthcare vs. western Europe? Either P or Q or some combination of the two must be affected, assuming reasonably equivalent outcomes.

    • Rahun.l, I am not a scholar in this area, but I will give you my opinion.

      The northern Europeans pay about 16% of payroll for health care, plus valued added taxes that add 10-15% to the prices of all consumer goods.
      (I do not know how much of the value added taxes are dedicated to health care.)

      Whereas Americans pay about 7% of their income in explicit taxes for Medicare and Medicaid, plus widely varying amounts for health insurance, plus out of pocket payments. Sales taxes rarely exceed 7% and are not applied to all purchases.

      So, lookkng at health care from the individual worker point of view, I frandly do not know how we get to a higher percent of GDP spent on health.

    • I think you are also unaware of certain other forms of in built cost reduction in Singapore’s health care system. Singaporean doctors are compulsorily bonded to work in the health care system for 5 years post graduation. This helps to keep costs down.