SINGAPORE (Jan 14): Seow Ban Yam, an 82-year-old suffering from cataracts, made headlines last month when the public health insurance scheme MediShield Life paid only $4.50 of his subsidised bill of $4,477, because of claim limits set for his eye operations. The surgical procedures took place at the Singapore National Eye Centre last year. Seow’s case created a furore and, not long after, SNEC said it would review its charges from March 1.

Still, the whole saga raises questions about the affordability of healthcare in Singapore, especially as medical expenditures are already projected to increase amid rising cases of chronic illnesses and an ageing population. Would healthcare costs rise uncontrollably? Can government subsidies and insurance keep up? Or, why is healthcare becoming so much more expensive in the first place, and how can it be brought down?

Healthcare bills, especially in the private sector, have been going up sharply. Between 2007 and 2017, average inpatient bills in the private sector rose 9% a year. In public restructured hospitals, where healthcare costs are regulated, bills at an “A” Class ward, which is comparable to a ward in a private hospital, went up 4.9% annually over the same period. Overall, healthcare inflation and hospitalisation inflation rose 2.6% and 3.8% respectively, higher than the broader inflation rate of 2.3%, during the period.

Last month, the government introduced benchmarks on professional fees in private practice. The benchmark fees cover 222 common surgical procedures, which comprised 85% of surgeries done in private hospitals in 2017. Doctors charging above the benchmarks have to explain their case if asked. In addition, to prevent overconsumption, it introduced a mandatory co-payment scheme, where patients have to pay at least 5% of the bill out of pocket, for new Integrated Shield Plan riders that will kick off this year.

There are also programmes that further subsidise healthcare bills for lower-income groups and the elderly: the Community Health Assist Scheme and MediShield Life. The latter is the state-run, compulsory insurance scheme launched in 2015 to provide payouts for subsidised treatments. MediShield is projected to have paid more than 65% of the bills on average for public patients last year. The Ministry of Health also said it would review MediShield Life’s limits imposed on claims, and premiums to be paid, by 2020, to better match healthcare cost inflation and actual claims.

Inflated bills

The various schemes offered by the government are aimed at mitigating how much of a medical bill that patients, particularly poorer ones, need to pay. But the bills themselves are getting bigger.

There may not be one single reason for rising healthcare costs. Surgeon’s fees make up about one-third of hospital bills in the private sector. Industry players have pointed to an ageing population, with the need for more medical attention, and increasing land and labour costs as contributing factors. Yet others have blamed medical insurance plans that include “riders”, which cover the co-payment and deductible portions of the bill. These plans mean consumers pay nothing at the end of treatment, and some industry players have said this allows for overconsumption, or overcharging.

The Singapore Medical Association’s removal of its fee guidelines, which were in place between 1987 and 2007, is also likely to have played a part in the ballooning of medical costs. The guidelines, which allow members of the public to see the recommended range of fees for consultations and common procedures, were removed in 2007 as the competition watchdog saw it as “harmful to competition”.

Last month, Wong Chiang Yin, president of SMA from 2006 to 2009, argued in an essay in The Straits Times that the fee guidelines were not uncompetitive, and in fact probably helped curb the rise in doctors’ fees in the private sector. Wong posited that, conversely, without fee guidelines, professionals may have felt free to charge as the market could bear, which led to fee increases.

Further, local private healthcare providers are grouped under publicly listed companies, which in turn have an obligation to shareholders to deliver earnings and dividend growth, even as operating costs rise. Also, a good proportion of private healthcare facilities are owned by such groups. Raffles Medical Group owns and operates Raffles Hospital and recently opened a new tower that houses specialist centres. IHH Healthcare operates Mount Elizabeth Orchard and Mount Elizabeth Novena; the latter was built on land acquired at a record $1.25 billion.

“The costs [of salaries, medical equipment, drugs and other areas] have gone up over the years. [Listed healthcare providers] have to raise prices to keep up, or their share prices will drop,” says one industry insider.

Only triage

So, will fee benchmarks bring costs down? It is one step in the right direction, as healthcare is a public good, says Phua Kai Hong, a health economist, at the Lee Kuan Yew School of Public Policy. Phua was part of the committee that set the new benchmark fees for private medical professionals.

“The SMA guidelines [were not broken]. But we [wanted to] free up the market, and that was the start of medical tourism,” says Phua. “We felt we were controlling prices too much and [wanted to] let the market find its own levels. The right thing to do at that time was for the government to come in to replace the profession fee guidelines. But we left that alone for almost 12 years.

“Now, [the healthcare system] is imbalanced because there is a lack of control on the supply side. We realise that in some ways [the damage has been done] and we have to rein it all in. The government has to take control of the prices and control the quality.”

There also needs to be a review of what public health schemes can be used for. “To me, insurance can be used for the private sector and private beds. But don’t use your [MediShield Life] — that is a public scheme to finance everything under the sun. It doesn’t work,” Phua says.

Medical professionals whom The Edge Singapore spoke to are calling for more intervention. For one, there is no rule that prevents doctors from charging above the fee benchmarks. Some suggest that doctors who overcharge be named publicly. Others argue that there should be benchmarks for hospital facility fees and other consumables that make up two-thirds of hospital bills.

Ultimately, the burden from rising healthcare costs falls on the public sector. National healthcare expenditure rose to $10.5 billion in 2017 from $4 billion in 2011, and is expected to exceed $13 billion by 2020, more than expenditure for education and about 3% of GDP. It is therefore in the interest of the government to keep costs in check.

Eric Finkelstein, professor of the health services and systems research programme at Duke NUS Medical School, says: “If one looks at healthcare inflation across countries, it does not systematically vary such that one type of system [such as a nationalised healthcare system] has lower inflation than other types, at least not to my knowledge. In other words, no [one] system seems to systematically reduce costs relative to others, aside from the obvious outlier of the US. The government can do some things to bend the cost curve, but it is fighting an uphill battle. I think we can lower costs only if we truly improve public health, but that is a very tough row to hoe.”

This story appears in The Edge Singapore (Issue 864, week of Jan 14) which is on sale now. Subscribe here