HPU
Singapore shuns state-dominated health care
Author: Eustace DavieDate: 22 August 2008

While SA heads determinedly towards a disastrous state-dominated health care system, Singapore heads even more determinedly in the opposite direction.
 
At independence in 1965 the port city-state of Singapore took over a health care system that was fully controlled by government and financed from taxes. Now, forty-three years later, Singapore vies with SA and the US in having relatively larger private health care sectors than other countries. The benefits to the citizens of these three countries are: a greater choice of health care providers; private financing of health care that reduces the burden on taxpayers; providers that have greater freedom to introduce new technologies, and increased efficiencies spurred by competition.
 
Singapore’s government deliberately set out to transform the country’s health care system to achieve these benefits. Financing of the old system from government revenues became a problem when, as happened in other industrialised countries, health care costs rose rapidly during the 1970’s.
 
Government investigations of the medical services revealed poor management, low labour productivity and excessive bureaucratic rules. While the services were technically sound they were not user-friendly. For instance, clinical hours were arranged for the convenience of staff and not patients.
 
As a result of its investigations the government decided to reform the health care system guided by four basic principles:
1.       Consumers were to have a free choice between health care providers.
2.       Self-accountability and self-reliance of patients was to be stressed.
3.       The health care market was to be competitive wherever possible.
4.       The government should be the provider of last resort and offer affordable minimal standards of care to those unable to pay.
 
Reorganisation of the services began in 1984. Greater patient choice incorporated increased payments by patients at the point of service. Efficiency improved with increased competition, which meant that patients received better value for money. Everyone gained access to adequate health care. A new financing system, known as Medisave, which required patients to save and pay directly for health services was introduced in an attempt to control excessive usage.
 
Medisave forms part of a compulsory pension programme and requires every working person, including the self-employed, to deposit a percentage of their income (typically 20% of the employee’s earnings augmented by another 13% from the employer) into the Central Provident Fund. A proportion goes into Medisave personal dedicated savings accounts and individuals can use these medical savings accounts (MSAs) to pay directly for their own or their family’s health services, subject to limits on the amounts that can be utilised. The intention is to fully cover hospital costs of most patients in state-subsidised wards of public hospitals. If patients want more expensive care they pay the additional cost out of their own resources. The accounts can, however, also be used to pay for expensive outpatient care such as chemotherapy, renal dialysis, or antiretroviral drugs.
 
The Singapore government also established the Medishield, Medifund and Eldershield funds. Medishield is a national insurance plan to provide for “catastrophic” events such as paying the costs of serious illness or accident. People can choose private alternatives to Medishield and premiums for the insurance can be paid from Medisave accounts.
 
Medifund is intended to cover the 10 per cent of the population who can’t afford to pay for medical care. The government established it in 1993 with a budgetary allocation of $150 million (R1.15bn) and has since supplemented the amount from budget surpluses. Capital has to remain intact and only interest income may be used to provide medical care for the poor.
 
Eldershield provides private insurance for disability in old age. Insured people who are unable to carry out three or more basic activities are paid a monthly allowance from the fund.


 
A fundamental aspect of the health care system is that patients pay directly towards their own medical expenses, whether from their Medisave accounts or out-of-pocket, a feature that induces responsible usage of health services. While debate rages over MSAs and their influence on health care costs, the fact that Singapore’s health care expenditure is only 3.7 per cent of GDP compared to SA’s 8.5 per cent and the US’s 15.4 per cent indicates that such savings accounts do tend to reduce costs. When patients are fully involved in the decision-making process they are able to exert a downward influence on costs.
 
Although there are 16 private hospitals and 13 public sector hospitals and medical centres, approximately three-quarters of the beds are in public sector facilities. In 2002 the public healthcare facilities were transferred into two separately managed entities, owned by the government but functioning as non-profits: Singapore Health Services (SingHealth) serving the eastern part of the country and National Healthcare Group (NHG) serving the western part. Hospitals and medical centres are run as private companies.
 
The next obvious step in the evolutionary development of the system would appear to be to convert SingHealth and NHG into privately owned public companies competing in a fully private health care market. The increasing number of ‘medical tourists‘ who visit the country specifically to obtain medical care (over 400,000 in 2006) constitute an important step towards making the health care system fully private.
 
SA should recognise the disaster that Singapore avoided by moving away from a single-payer nationalised healthcare system. It has an advantage in that SA would not have to start from scratch as Singapore did to build up a vibrant and effective private health care sector to support its public sector because it already has substantial medical schemes, administrators and insurance companies that could grow along with an expanding private health sector to serve an ever-increasing number of South Africans who are more than capable of building up savings accounts and paying insurance premiums to cover their healthcare costs. All this country needs is a Singapore-type policy environment that is conducive to rapid economic growth and is prepared to promote personal responsibility in health care.
 
Judging by the rhetoric of the candidates in the coming Presidential election, the US is about to descend further into the mire of nationalised healthcare. The UK and Canada have demonstrated that even wealthy countries cannot force single-payer or nationalised healthcare systems to provide timely high-quality care and Americans will rue the day the candidates deliver on their promises. The Singapore principles would provide the US with an infinitely superior option.  
 
Singapore scored 8.8 out of 10 on the economic freedom ratings published in the 2007 Annual Report of the Economic Freedom of the World publication (SA 6.8), and was ranked 2nd (SA 60th) in the world behind Hong Kong. Its stance on health care is symptomatic of the general approach to economic governance adopted by the country’s administration, particularly since 1990. Its policies have resulted in rapid economic growth and a PPP annual per capita GDP of $49,700 (R385,175) compared to SA’s $9,800 (R75,970) and US $45,800 (R354,950). Life expectancy is 82 years (SA 50.7, US 78). Infant mortality is 1.4 per 1,000 population (SA  46.1, US 6.4), doctors 1.4 (SA 0.77, US 2.6), and nurses 4.2 (SA 3.9, US 9.4).
 
The people of Singapore are enjoying greater wealth, longer lives, and better overall medical attention. The people of SA need the same kind of policies that lead to the outcomes achieved by Singapore.
 
Author: Eustace Davie is a director of the Free Market Foundation.  This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

HPU Feature Article / 22 August 2008