(Paper Cmd. 3 of 2001)
Sir, I want to thank the Members for raising the issue of healthcare costs and the affordability for Singaporeans. This gives me the opportunity to reassure Members that the Government is indeed committed to providing good and affordable basic medical services to all Singaporeans. This commitment is clearly set out in the 1993 White Paper on Affordable Health Care and we intend to meet this commitment. First, I must say that I am very happy with my Ministry's budget this year. It has been increased by 30%. Mr Bernard Chen has asked how we intend to use the additional funds. We will put the additional money to good use. We will increase the budget of our two healthcare clusters. Specifically, we will increase the budget of the primary care sector by 28%, the acute medical sector by 14% and the psychiatric medical sector by 26%. The additional budget will be used to offset increases in manpower cost. I think several Members raised the importance of paying our medical staff appropriately according to market rates. The money will also be used to strengthen quality assurance programmes and to also implement new initiatives. My Ministry will also increase the budget for health promotion activities by a very significant 68%. The funds will be used to strengthen preventive healthcare, health promotion and public education, to prevent the onset of chronic diseases. This is what Dr Lily Neo said, "setting the foundation to keep future healthcare cost down." In addition, we will also set aside $75 million for specific national programmes, such as the health services development programme, setting up the various disease registries and so on. Funds will also be set aside specifically to train our medical undergraduates and specialists. Let me now turn to healthcare expenditure. Dr Lily Neo and Dr Wang Kai Yuen have commented about our low level of national healthcare expenditure (NHE), which is about 3%-odd of our GDP compared to other major developed countries which can range from about 7% in UK to 14% in the US. Dr Wang asked specifically how we can spend so little and yet achieve so much. I must first say that we cannot claim full credit for this performance. There are several factors in our favour, some of which have been pointed out by Dr Wang. We are an urbanised society, compared to many big countries which have a rural sector, which will cost quite a lot more to service. We have, right from the onset, laid a very good foundation in very stringent and good environmental health, and that has, of course, given us a good starting point, and public healthcare is therefore lower. At the same time, another key factor is that we have a relatively young population, compared to many of these developed countries. Our aged population, those aged 65 and above, constitutes about 7%. In many of the developed countries, it is closer to 10-12%. We have a much younger population. So we can expect that when our population ages, the national health expenditure will increase correspondingly. Another reason is our strong economic growth in the last 20 years, which averaged about 8% per annum, compared to our population growth of less than 2% per annum. In this way, we could enjoy significant improvements in our healthcare every year without the percentage share of GDP going up by very much. But as we move forward, as our economy matures and growth slows down, we can therefore expect the NHE, as a percentage of GDP, to correspondingly increase. Another very important reason is our prudent policies in the provision and financing of healthcare. This has played a significant role in containing healthcare cost increases. If we lose this discipline, we can expect healthcare cost to soar. Sir, all in all, I can say that our national healthcare cost is low and indeed we should be happy that our national healthcare cost is low, because this correspondingly means that the average Singaporean household needs to pay only about 3% of their household expenditure, or about $93 per month, on healthcare services. Based on an average household size of 4.2, each household member therefore spends about $22 per month on healthcare. To put this in perspective, this amount is less than the average amount that the average Singaporean spends on recreation and entertainment. So, because our national healthcare cost is low, the burden on individual household is also low. Of course, this is looking at the macro level. When we look at the individual level, we have to make sure that our medical financing framework caters for the family who has to pay a high bill because of a particular episode. I think Members agree that we should not look at how much we spend to evaluate our healthcare system. When we evaluate whether a national healthcare system serves its citizens well, we should not look at the inputs but we should look at what we achieve. I think there are many parameters, which I will not go through in detail. I would just say that these parameters are adopted by the World Health Organisation. They did an assessment of all the countries in the world. Among 191 countries, they came to a conclusion that our healthcare system is ranked 6th in overall cost effectiveness. That means they looked at our output, the clinical outcomes of service, our waiting times, sense of equity, sense of accessibility. They looked at all these factors and looked at our inputs, and they ranked us 6th. So I think we have done well. The other key macro parameter which Dr Lily Neo and Dr Wang pointed out is the public share of the national healthcare expenditure. They observed that the public share is about a third, compared to other countries which will range from probably half for the average to maybe 70-80% for countries which adopt a national health system kind of approach. Sir, if we look at the healthcare systems around the world, we probably can put them in a spectrum. On the one hand, we have a very equitable, open to all, everybody enjoying the same type of service, epitomised by the National Health Service of the UK. On the other end of the spectrum, you probably look at the voluntary health insurance system, as practised in the US, and somewhere in between, most of the other systems will fall in. Most of the developed European countries will be closer to the British end of the spectrum. Because of that approach, the share of the public sector will be higher. In Singapore, the public sector share is one third. This is because of the way we organise the healthcare financing. We ask every Singaporean to pay into their Medisave and then they pay the bills from their Medisave. If you can imagine that instead of contributing 6% into the Medisave account we ask them to pay 3% of their salaries into a national insurance system, as a medical payroll tax, and that is then used to fund the system, you will see the share of the public sector going up. So I do not think we should read too much into this sharing of the national healthcare expenditure between the public sector and the private sector. It is how you organise the medical financing framework. It is more important to look at the output. Notwithstanding what I said about our low national healthcare expenditure, I do not think we are complacent. We know that the pressure on healthcare cost is relentless, and many Members have spoken about this. The increase in healthcare cost is a world-wide phenomenon. Singapore cannot be insulated from the trends and developments around the world. Medical technology continues to advance and we expect new developments in diagnostics, biomedical devices and drug development. In the US, for example, drug prices have risen by as much as 15% a year. Also, as our standard of living improves, Singaporeans will have higher expectations. Demand for healthcare services will correspondingly increase. In particular, we are undergoing a major structural change in our demography. So we are under tremendous pressure on healthcare cost. The challenge for us is how do we keep abreast of this challenge so that to the average Singaporean, healthcare continues to remain affordable. Mr Bernard Chen's comments on health cost is spot-on, 60% of our cost is in manpower, 15% of our cost is in medical supplies, the majority of which is imported and therefore out of our control. So the cost pressure is there. 1.30 pm But so far, we have done reasonably well. We have been able to contain the increase in healthcare cost to within the range of 6% to 8% per year. Looking forward, we cannot keep still. We have to adjust and refine our financing framework so that we can continue to enjoy sensible improvements in our healthcare service, while still keeping it affordable to all Singaporeans. Let me now turn to the whole framework of financing - we call this the 3M framework (Medisave, MediShield and Medifund) - and how the 3M framework has allowed Singaporeans to be able to pay for their medical bills. First, Medisave. I agree with Members that there is a general perception that the use of Medisave is rather restrictive. There are many suggestions to extend Medisave to outpatient treatments. While the original intent of Medisave is to help Singaporeans cope with hospitalisation expenses, we all agree that the trend is towards ambulatory care. Medisave is already allowed for day surgery and over time, we will extend Medisave to more outpatient treatments where appropriate. However, I must say that we must proceed cautiously because an overly liberal use of Medisave would necessitate higher monthly contribution rates. So we need to strike a balance. My Ministry will be making adjustments to the Medisave withdrawal limits so that most Class B2 and C patients would be able to pay their hospitalisation bills through Medisave. We will also increase the Medisave withdrawal limits for certain expensive outpatient treatment, such as chemotherapy and renal dialysis, to help alleviate the financial burden on Singaporeans. Details of these adjustments will be announced soon. But I would just want to dampen expectations. We know we need to make the change, but we will have to move cautiously. Second, MediShield. My Ministry is also looking at relying more on medical insurance to complement medical savings to improve the efficiency of the entire patient finance structure. Mr Yeo Guat Kwang has pointed out the problem of low payouts of MediShield. My Ministry is currently reviewing MediShield with a view towards enhancing its features, in particular the claimable amounts. We are also looking at the deductibles. This is to ensure that MediShield is able to provide adequate protection to the elderly and other Singaporeans who incur high medical bill sizes. Again, we need to strike a balance between enhancing the features of MediShield whilst at the same time keeping MediShield premiums affordable to all Singaporeans, especially the elderly. The third "M" in our 3M structure is Medifund. Dr Wang Kai Yuen asked about the utilisation of Medifund interest income. The average utilisation is about 77%, and this is despite the approval rate for Medifund which is consistently being above 97%. 97% of applications that come to us are routinely approved, and even then we only use 77% of the funds available. So I want to assure Members here that Medifund is more than adequate to meet the needs of the low-income Singaporeans. In fact, it is a very effective safety net. As we all know, Dr Richard Hu announced that the Government will inject a further $100 million into the capital sum of Medifund, bringing it to a total of $800 million. I agree that we should publicise the use of Medifund more deliberately so that people who face financial difficulties will seek recourse to Medifund. Let me assure Members that we have medical social workers in all our hospitals. Whenever they come across cases of patients facing financial problems, they will take up the cases and apply for Medifund on behalf of the patients. I do not think we will find very many people falling through the Medifund safety net. As I have said many times here in this House, if any Member comes across genuine deserving cases that require Medifund assistance, feel free to write to either my Parliamentary Secretary or myself, and we will take up the cases. But from my experience in the last years, the Ministry has shown that the Medifund safety net is a very effective safety net. By and large, the 3M framework has served us well. I think what we need are refinements and adjustments. What is our target? Our target is that all Singaporeans who make regular contributions to their Medisave and who are covered by MediShield would not need to pay out of pocket, if they stay in a B2 or C ward. If their Medisave accounts run out, they can apply to Medifund to help pay for their bills. So that is our target, and by and large we have achieved that. But I must caution that Singaporeans who choose to go for higher ward classes or who wish to go to private hospitals would have to pay out of their pocket. It is therefore important that Singaporeans who require hospitalisation choose their ward class prudently. This is why financial counselling is a mandatory requirement in all hospitals, both in the public and private hospitals. This is a requirement before they are allowed to use Medisave for their patients. I agree with Mrs Lim Hwee Hua when she spoke about the importance of financial counselling which would enable patients to have a better estimate of the expected hospitalisation charges so that they can choose the type of ward class according to their means. I think Dr Tan Cheng Bock also made several very timely and wise remarks about the role that doctors play in helping to keep health cost down. I think it is worth reiteration, and these remarks would have to be more widely transmitted to the professional community. Let me at this juncture try and respond to some of the other points raised by Dr Tan Cheng Bock. We have some rules in the way the subsidies are given. If a patient opts for a B1 or A class ward, he or she can ask for a downgrade, and most times this would be acceded. The only exception is if you go to a private hospital and then later you want to transfer to a public hospital, we will insist that you transfer to a B1, that means, a non-subsidised ward. But if you are within the public hospital system, if you ask for a downgrade, this would be considered with one condition - we will ask that you go for means testing. So if you enter the health system and at the point of entry you choose B2 or C, no questions are asked, we would let you have the subsidies. But if you opt to be non-subsidised and later on you ask to be subsidised, then we insist that you go for a means test so that we know that the subsidy is correctly targeted at the low income families. So that is the only rule. If you cannot afford to pay the fees, you can ask the medical social workers in the hospitals and they will undertake to review your case. And the hospitals have some means to waive the fees, if the case is genuine, or to seek Medifund assistance. Dr Tan also asked that we prescribe shorter duration for drugs rather than giving out one to two months' supply. I think we would have to depend on the doctors to exercise the judgement. In some cases, it is more sensible to give one to two months' supply so as to make it more convenient, and the patients do not have to come back so often. At other times, it may be sensible, as he suggests, to just give one or two weeks' supply. Sir, on this whole issue of Government subsidies, again, let me stress that the Government basically assures all Singaporeans that they will have access to affordable basic healthcare. The same package of basic medical service is available to all classes of wards. The key differences are that in the unsubsidised wards, you enjoy the ambience of fewer patients to a room and you can name your own consultants. But other than that, between a B2 and a A ward, the Government will extend the same basic level of service. Several Members also remarked about the high level of subventions to the hospitals. As you well know, the highest share of medical expenses occurs in our hospitals and therefore this results in a higher proportion of subvention. Government subvention to the restructured polyclinics and hospitals has therefore increased significantly every year. In FY1999, it was $580 million. In FY2000, it was revised to $700 million and this year, we will increase it to just about $1 billion. While the Government is prepared to increase the subventions, we must make sure that we target the subventions appropriately. I agree with both Mr Low Thia Khiang and Mrs Lim Hwee Hua that subsidies should be directed at those who are most deserving. The most direct way to channel the subsidies to the lower-income group, which may eventually be necessary, would be through some form of means testing. However, as pointed out in the 1993 White Paper on Affordable Healthcare, means testing is an administratively clumsy procedure which the public will take some time to get used to. The current rules allow you to enjoy subsidies if you go through the polyclinic system and then you go to the public hospitals. We keep these rules. But if you enter the hospital through the private GP, at the point of entry into the hospital, whether or not you are in the A&E ward, you can choose the ward that you want to go to, whether it is B2 or C. If you choose B2 or C, then obviously you will enjoy the 65% subsidy and 80% subsidy accordingly. The choice is available at the point when you are admitted. If you are referred to the Specialists' Outpatient Clinic by the private sector GP, then as a starting point, we will treat you as a private patient. If you are referred to the Specialists' Outpatient Clinic by the polyclinic, we will treat you as a subsidised patient. But if you cannot afford to pay the fees in the Specialists' Outpatient Clinic, you can ask to be reclassified and we will require you to be means tested. So it is a win-win situation for Singaporeans. Anybody who wants to enjoy subsidised healthcare can go to a polyclinic and then go to the SOC, and no questions are asked, we would not require you to be means tested, and you can enjoy subsidised fees. But if you enter the public healthcare system through the private GP and you think that you deserve subsidised healthcare because you are from a low-income family, then you ask to be means tested. And if you do qualify, then you will enjoy the subsidy. So that is a fair system. It may not be completely effective, because as Mr Low Thia Khiang suggested, you will allow rich people to enjoy subsidies by going through the polyclinic system. So I hope Mr Low Thia Khiang will continue to plug the line and when the population is ready to accept means testing, we will use means testing in a wider way. Dr Michael Lim raised some concerns about casemix. I do not want to go through the details because this is a very specific issue. All I want to say is that we would take his comments and review them. I want to assure the House that casemix is intended to be a more effective and efficient way to allocate resources. It is not intended to cause doctors to discharge patients earlier. The casemix provides for outlier cases, as Dr Michael Lim raised, that means people who need to stay longer than what is provided for in casemix subvention. We allow the outliers to continue to stay in the hospitals if the doctors deem it necessary and we will then subsidise those outlier patients on a per day basis. So there is no change in the way we continue to subvent these patients. 1.45 pm I want to assure Members that casemix will not result in doctors coming under pressure to discharge their patients prematurely. Casemix is still in its initial phase. We need to build up confidence and I am sure people would have more confidence in the system as we implement it. As we get the costing data sorted out, people will feel that the costing is more reflective of the real cost, and the system is more equitable. So we are not rushing the system. We are making sure that the system is well implemented, the cost data is well researched. So far, of course, we have seen that our local cost data, when we compare it with the Australian cost data, is very close. So there is no reason to believe that we are costing our system wrongly. We also have an ongoing process where we review the costing methodology with the hospitals. We will look at the subvention rates every year to take into account the changing pattern of resource utilisation. So I just want to assure Members here that, before casemix is fully enforced, we have the safeguards in place and we will make sure that it will be implemented properly. Mrs Lim Hwee Hua raised some very fundamental questions about the role and philosophy of our restructured hospitals. Let me just say that we cannot just deal with the increasing healthcare costs by simply increasing the Government subventions every year. If we have to, I am confident the Minister for Finance would provide the additional budget, as he has done this year with his 30% increase. But, at the same time, for all of us in the healthcare sector, we have to continue to be more efficient, more productive and more responsive to the patient's needs. One key strategy in containing healthcare costs and yet providing quality healthcare has been the restructuring of the private healthcare delivery system. Since the late 1980s, we have been restructuring our public hospitals one at a time, starting with the Singapore General Hospital. By October last year, we have successfully completed the restructuring exercise, with the restructuring of Alexandra Hospital, Woodbridge Hospital and the polyclinics. I am aware that some Singaporeans are concerned that restructuring of public sector hospitals and polyclinics could lead to higher charges because they are private companies out to make a profit. I would like to reaffirm that making profits has never been the main objective of our restructuring exercise. We restructure so that we can be more efficient, more productive and more responsive. In this way, we bring the costs down and offer a better service to Singaporeans. I want to make our position on this explicit. SingHealth and NHG would therefore be repositioned as not-for-profit entities. As not-for-profit entities, their main objective is not to maximise profits, neither are they under pressure to pay dividends to their shareholders. To underscore this "not-for-profit status", the Minister for Finance has agreed to exempt the two clusters from paying corporate tax. Instead, the tax savings and any surpluses generated as a result of their efficiency gains will be ploughed back for medical research, training and patient care. While the concept of not-for-profit is relatively new in Singapore, it is well established in the US. In the US, some of the very well-known medical centres, such as the Mayo Clinic Foundation in Minnesota and Johns Hopkins Medicine in Maryland are operated as not-for-profit organisations. By modelling themselves as not-for-profit organisations, our restructured hospitals will have a different organisational culture from the private hospitals. Our restructured hospitals will continue to preserve their sense of public service. Let me clarify that not-for-profit does not mean that our restructured hospitals do not have to worry about costs. The not-for-profit organisation must still exercise financial prudence, cost their services accurately, control their costs and improve productivity. So what is the difference, you may ask? For the private patients in Class A wards, they will continue to pay for the full costs for the healthcare services they receive. The difference is that the profit is not taxed and the profit is not meant for disbursement to the shareholders. For subsidised patients, they will continue to enjoy a high quality of medical care that is heavily subsidised by the Government. The difference is that the hospitals will be more efficient and more service-oriented than if it is run as a Government department. For the staff, they will continue to be part of a dynamic medical institution with high standards and a strong reputation. The difference is that any surplus they make will be channelled back for medical research, training and patient care, ultimately, for the benefit of the patients they serve. This would therefore differentiate our restructured hospitals from the other private hospitals and Singaporeans will continue to enjoy a good affordable healthcare. Sir, in summary, I would say that the 3M structure has given Singaporeans a good affordable healthcare. We need to continue to make improvements primarily to extend the Medisave withdrawal limits so that Singaporeans do not have to pay out-of-pocket expenses. We need to extend MediShield and medical insurance so that the risk is better pooled among the population. And we need to implement casemix sensibly so that we can achieve better allocation of our resources. And by repositioning our two clusters as not-for-profit organisations, we want to reaffirm the importance of public service in the organisational structure of our restructured hospitals.