Healthcare Affordability in Singapore

7/24/2019 Healthcare Affordability in Singapore

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UIS3902 Independent Study Module:

Healthcare Affordability in Singapore




Abstract

Healthcare costs and affordability have been an important concern in Singapore. A 2012 Mindshare

survey shows that 72 per cent of Singaporeans believe “we cannot afford to get sick these days due to

high medical costs”.

To examine the affordability of healthcare costs, I use aggregate data to analyse the general healthcare

affordability for Singaporean households. My results show that contrary to the belief of unaffordable

high healthcare costs, the general affordability of healthcare expenditure has been improving over the

past decade. While Singaporeans are spending more on overall healthcare services, the costs and

expenditure on essential healthcare services have actually decreased. Using the trend of government

expenditure on healthcare, we can also observe a shifting role of government’s attitude towards

healthcare provision, which could partly account for improving healthcare affordability.

Furthermore, as hospitalisation episodes are usually a good representation of the affordability of a

healthcare system, I examine the affordability of hospitalisation costs. My finding shows that, while

hospitalisation costs are kept within a household monthly income and are generally affordable, the

structure of healthcare policies has marginalised and created inequitable financing outcomes for

different social groups. I also show the upcoming universal healthcare insurance policy (Medishield

Life) helps mitigate some of the issues faced by marginalised groups, albeit with limitations. The step




Introduction

The World Health Organization (WHO) has ranked Singapore sixth out of 191 countries in terms of

overall healthcare performance (WHO, 2000). However, Singapore is positioned 101-102 in terms of

fairness in healthcare financial contribution. This is mainly due to Singaporeans’ high out‐of ‐ pocket

expenditure in healthcare financing. While government spending on healthcare makes up roughly a

third of total system spending, individual expenditure comprises the other two-thirds (Lim, 2013).

High out-of-pocket expenditure could create a huge financial burden on the lower income and thus

suggest an efficient system which might not necessarily be equitable.

The inequitable financing of healthcare could be understood throughthe government’s stance on

healthcare spending and the consequential development of policies. Since the 1980s, the Government

has declared healthcare spending as an “individual responsibility”, establishing Medisave (a

compulsory saving accounts by individuals to be used in times of healthcare needs) and MediShield (a

national wide health insurance program). These programs seek to enable individuals to finance and

hence be “responsible” for personal healthcare. “Individual responsibility” thus entails a certain level

of independent financing or co-payment for healthcare expenditure. While social support conducted

via Medifund (a safety net subsidy program when medical bills exceed the financial capacity of an



are spending more on overall healthcare services, the costs and expenditure on essential healthcare

services have actually decreased. Using the trend of government expenditure on healthcare, we can

also observe a shifting role of government’s attitude towards healthcare provision, which could partly

account for improving healthcare affordability.

Furthermore, as hospitalisation episodes are usually unplanned with unexpected high costs, analyzing

the affordability of hospitalisation cost could thus provide a good reflection on the efficiency of a

healthcare system. The second part of my essay examines the average affordability of hospitalisation

costs. Section 2.1 uses hospitalisation bills data to analyse the average hospital expenditure for an

individual and measures equity for different income groups in the form of an expenditure to income

ratio. While section 2.2 looks into the risks of incurring high hospitalisation costs, section 2.3

examines the importance of Medishield and groups marginalised by the policy.

My finding shows that, while hospitalisation costs are kept within a household monthly income and

are generally affordable, the structure of healthcare policies could marginalise and create inequitable

financing outcomes for different social groups. I also show that the upcoming universal healthcare

insurance policy (Medishield Life) helps mitigate some of the issues faced by marginalised groups,

albeit with limitations. The step taken towards Medishield Life, however, has shown an attitude shift

of healthcare provision by the government, away from “individual responsibility” towards social

inclusion.



An area of concern for individuals like myself would be the average amount spent on healthcare.

Using the data provided by Singstat, we observe that the monthly household expenditure on

healthcare has increased over the past decade, across all income quintiles (Figure 1). While on

average, households spend SGD 262 per month on healthcare, this amounts to SGD 3144 per annum.

Examining the components of healthcare expenditure shows an interesting trend. While inpatient

services (grey) expenditure have largely remained the same over the years, there are increasing

spending on medical products (blue) and outpatient services (orange) by Singaporeans over the years.

These components with increased spending are also responsible for the difference in healthcare

expenditure between the higher and lower income households.

Table 1: Household Expenditure on Healthcare Components

Average Household Monthly

Expenditure ($)

Average Household Monthly

Monthly Expenditure (%)

2002/3 2007/8 2012/3 2002/3 2007/8 2012/3

HEALTH 171.1 218.4 261.5 100.0% 100.0% 100.0%

MEDICAL PRODUCTS,

APPLIANCES AND

EQUIPMENT

42.6 59.8 77.8 24.9% 27.4% 29.8%

Pharmaceutical products 29.9 40.4 64.4 17.5% 18.5% 24.6%

Pill d S 4 1 9 9 15 6 2 4% 4 5% 6 0%



OUTPATIENT SERVICES 75.3 102.3 116.6 44.0% 46.8% 44.6%

Medical Services 50.6 66.2 77.0 29.6% 30.3% 29.4%

General Consultation 25.1 29.6 32.2 14.7% 13.6% 12.3%

Specialist Services 25.6 36.5 44.8 15.0% 16.7% 17.1%

Dental services 10.5 18.8 15.6 6.1% 8.6% 6.0%

Paramedical services 14.2 17.4 24.0 8.3% 8.0% 9.2%

HOSPITAL,

CONVALESCENT AND

REHABILITATION

SERVICES

53.2 56.2 67.0 31.1% 25.7% 25.6%

Hospital services 48.4 51.6 62.5 28.3% 23.6% 23.9%

Inpatient Hospitalisation Fees,

Government/Restructured28.7 30.1 33.4 16.8% 13.8% 12.8%

Inpatient Hospitalisation Fees,

Private 19.8 21.5 29.1 11.6% 9.8% 11.1%

Intermediate and Long-Term

Care Services4.8 4.6 4.5 2.8% 2.1% 1.7%

Affordability of essential healthcare services



Healthcare affordability due to higher income growth

Even though absolute

healthcare expenditure has

risen over the years, most

households are spending a

smaller proportion of monthly

income on healthcare (Figure

2). The greater growth in

household income has

allowed households to

allocate a smaller income

budget towards increasing

healthcare consumption.

However a worrying trend would be the bottom quintile healthcare expenditure. Even though

healthcare expenditure has risen the least for the bottom quintile, and most of the expenditure is spent

on essential services (outpatient and inpatient care), the proportion of income spent on healthcare is

twice or more relative to the upper income households. The only consolation is that proportion of

income expenditure on healthcare for poor households has been relatively stable over the years. i.e.

1.6%

2.6%

3.6%

4.6%

5.6%

6.6%

7.6%

2002/3 2007/8 2012/3

Figure 2: Monthly Household Income

Spent on Healthcare (%)

Total 1st - 20th 21st - 40th

41st - 60th 61st - 80th 81st - 100th



line) across all income level for the past 10 years (Figure 3). The higher growth of healthcare

expenditure, relative to healthcare inflation (cost) suggests that increasing healthcare

expenditure are spent on greater amount of healthcare goods and services. This could be

expected due to an aging population and more extensive healthcare products/ services available in the

market. The stable healthcare costs would also represent greater affordability by households on

essential services.

Another point of observation would be that rising aggregate healthcare expenditure follows the trend

of positive household income changes but is larger in magnitude. This is contrary to the analysis of

previous figures, whereby household income growth has been greater than household healthcare

expenditure growth. The difference is due to inclusion of both government and household expenditure

within the World Bank healthcare expenditure index. This would also represent that government

expenditure on healthcare has been rising faster than household expenditure over the years, such that

overall healthcare expenditure increment is greater than income growth. I will further examine how

increasing government expenditure could lead to better affordability of healthcare services.

1.2 How much is our government providing for healthcare expenditure?

70.0%

Components of National Healthcare Expenditure



Affordability through increasing government healthcare expenditure

Our national healthcare system expenditure mainly comprise of a) government expenditure on

healthcare subsidies and infrastructure developments, b) the three Ms (Medisave, Medishield and

Medifund) which are used to assist affordability of healthcare consumption, c) 3rd party healthcare

insurances for claimables beyond Medishield coverage and d) individual out-of-pocket healthcare

expenses.

We can observe that while individual expenses (green line) through out-of-pocket expenditure and privately sourced insurance still make up majority of national healthcare expenditure at 60% in 2011

(Figure 4), individual expenses component has been declining. Over the past decade, government

expenditure (blue line) with the 3M framework has taken on an increasing prominent role towards

healthcare expenditure, growing from 34% of total expenditure in 2002 to 40% in 2011. The anomaly

spike of government expenditure in 2003 is due to spending measures to fight the severe acute

respiratory syndrome (SARS) outbreak in the country.

The increasing proportion of government expenditure could reflect a progressive shift of viewing

healthcare as an individual responsibility towards a socially responsible healthcare system. Even

though we would expect healthcare costs to rise in proportion to income, due to an aging population

needs and increasingly expensive medical treatments/ equipment, the trend is not observed in

i



Government expenditure limited through operating subsidies

When we further investigate the components of government healthcare expenditure, we can observe

that government expenditure has indeed risen with a focus on operating expenses (subsidies) to ensure

general healthcare affordability (Figure 5). While operating expenses (blue line in Figure 5) made up

80% of government expenditure, infrastructural development (orange line) accounts for the remaining

20%. This is also evidenced in Figure 6 as observed from the increasing density of service staff per

1000 population (doctors and nurses), which are part of operating expenses. The low level of

infrastructural development expenditure (Figure 5) is correlated with our decreasing density of

hospital beds per 1000 population (Blue line in Figure 6).

While high operation subsidies provide for affordable healthcare, setting aside a small

component on development expenditure could have long term effects on healthcare costs. Some

of the adverse effects include increasing pressure on existing infrastructure and decreasing quality of

healthcare, given population growth and an aging population. The pressure from population growth on

infrastructure demand has seen increasing hospital bed crunches and complaints in the recent years,

whereby hospital beds are placed along corridors and into make-shift tents (Khalik, 2014). Although

the density of medical personnel has been increased to cope with population demand, infrastructure

constraints could limit the productivity of medical staff. Current plans for infrastructure developments

(Th St it Ti 2014) h h b th t Th t fi ill



2 Affordability of hospitalisation costs

2.1 How much are we spending on hospitalisation bills?

One main concern of healthcare affordability would be an incurring of high expenditure in the event

of a hospitalisation episode. I will examine the individual expenses one might incur across different

ward classes, given a hospitalisation episode, by measuring the average sizes of hospital bill

expenditure. Expenditure is taken as the remaining bill payable after accounting for government

subsidies and medishield claimable (assuming medishield coverage is present).

The hospitalisation bills used for analysis will be taken from a paper by Aggarwal (2010). The data

for hospital bill is extracted from his sample size of 30,192 elderly (64 and over) admitted in

Singapore General Hospital (SGH) from Jan 2007-Dec 2007. My calculation for individual

expenditure uses Aggarwal’s hospital bills data, while taking into account average government

subsidies and the given medishield claimables across different wards.

While there are currently 8 acute care public hospitals, together they provide for 80% of

hospitalisation care (MOH Healthcare Institution Statistics, 2015). Information of hospitalisation/

procedure bills are published by MOH (MOH Hospital Bill Sizes, 2015) to ensure standardized costs

and competitive pricing across hospitals, thus providing the external validity of Aggarwal’s data.

H i t t t i ld l h it li ti t ld b th hi h th



wards B2+, B2 and C are kept within a range of $1,000 to $2,000, while higher class wards

have expenditure which are twice or more higher ($4,000 - $5,000).

2. Due to the high deductibles of Medishield ($2000 for ward B & above; $1500 for ward C),

Medishield claimable generally does not take effect for median bills. However, Medishield

plays an increasingly important role for higher end hospital bills. It covers 50% of

government subsidised hospital bills in the 90th percentile for B2 and C wards, which

progressively increases in proportion by 60% and 75% for 95th and 99th percentile bills,

respectively.

3. The cost of a medical catastrophe could rack up to more than $40,000 in bills (99th

percentile). This translates to 12 times magnitude difference between the median-99th

percentile gross bills. However government subsidies and Medishield could mitigate the

financial risk by reducing the gap of final expenditure to ~2.7 times, if an individual chooses a

B2 or C ward. 99th percentile gross expenditure is reduced from $41,478 to $3,197 and

$47,685 to $2,669 for B2 and C ward respectively.

These observations show that government subsidies are providing the main bulk of hospital

expenses for lower class wards while Medishield insurance are important for higher end bills.

The two schemes help mitigate catastrophic hospital bills by reducing bills to an affordable

Th d t il d b kd f h it li ti bill i h i T bl 2 f th di



My results show that individual’s final expenditure for

median hospitalisation bills makes up half or less of household

total monthly income, across all income quintiles. The detailed

breakdown of final hospitalisation expenditure across income

group is shown in Table 3 of the appendix. The lowest percentile

h hi h t dit t i ti (51%) hi h

Income Group

Household

Monthly

Income

(SGD)

All Households 10,244

L t 20% 2 447

0.00

0.20

0.40

0.60

0.80

1.00

Lowest

20%

2nd

quintile

3rd

quintile

4th

quintile

Highest

quintile

Lowest

20%

2nd

quintile

3rd

quintile

4th

quintile

Highest

quintile

Median Hospital Bill 90th Percentile Hospital Bill

Figure 9: Final Expenditure to Household MonthlyIncome Ratio

B2 Ward C Ward



usage within limited space, since class B2 and C service 6-10 beds per ward while the higher class

wards only have 1-4 beds. However the relatively small difference in subsidies between the higher

and lower income group using the same subsidized wards, means a higher financial risk is still

borne by the poor. This is problematic as the low-income group are usually the households with the

least savings too. The unplanned expenditure on hospitalisation bills could thus take away a

significant proportion of savings accumulated or even put households in debt. A possible mitigation

would be to increase subsidies towards lower income household and/ or to reduce the medishield co-

payment rates by lower income household, in proportion to the income differences between household

income quintiles.

0.230.17

0.47

0.320.33

0.22

0.52

0.34

2 d i il 3 d i il 2 d i il 3 d i il

Figure 9a: B2 Ward Expenditure to

Household Income Ratio Change

2 Working Adults 1 Working Adult

0.150.12

0.34

0.240.26

0.17

0.41

0.27

2 d i il 3 d i il 2 d i il 3 d i il

Figure 9b: C Ward Expenditure to

Household Income Ratio Change

2 Working Adults 1 Working Adult



Suppose we are part of the 9.1% that gets admitted into a hospital. Out of a list of 81 common surgical

procedures (MOH Hospital Bills, 2015), 13 of them lead to 90th percentile expenditure for a class B2

ward (Table 5). Given medishield coverage and maximum government subsidy, the final expenditure

for these procedures would amount to ≥$2000 (Medishield, however, does not cover maternity and

fertility expenses condition 7 in red). While five out of the top ten hospitalisation causes could lead to

these expensive procedures, these 5 causes make up approximately 16.6% of all hospitalisation cases

(MOH Top 10 Conditions, 2014).

Table 5: Final Expenditure ≥ 90th Percentile (B2 Ward)

1 Condition: Heart angioplasty (Coronary angioplasty)

2 Condition: Heart attack with angioplasty (PTCA)

3 Condition: Heart surgery (Coronary artery bypass graft) without angiography

4 Condition: Hip replacement surgery

5 Condition: Knee replacement surgery

6 Condition: Stroke with serious complications

7 Condition: Delivery (Caesarean section)

8 Condition: Heart angiography (Coronary angiography) - same day

9 Condition: Hysterectomy (surgical removal of the womb) for non-malignant (benign) conditions

10 Condition: Lung cancer with complications



2. The elderly who are covered only till the age of 92, while facing increasing premiums as they

age. Medishield premium jumps from S$775 for 76-78 years and S$865 for 79-80 years to

S$1,123 for 81-83 years and S$1,153 for 84-85 years. The increasing premium has result in

greater drop out of Medishield coverage by elderly due to affordability issues (MOH Age

Range, 2013), as shown in Figure 11.

3. The low income group and individuals with no income such as housewives, who are unable to

afford the Medishield premiums. Currently those earning ≤$500 bypass the CPF system

altogether and have neither mandatory medisave nor medishield (MOH more lower income,

2002).

0%

20%

40%

60%

80%

100%

0-20 21-30 31-40 41-50 51-60 61-70 70-80 >80 Total

Figure 11: 2013 Medishield

Coverage by Age (%)

93%



The various subsidies (Medishield Life Premium and Subsidy, 2015) given are as such

1. A transitional period subsidy for the next 3 years for individuals to cope with the increased

premiums.

2. Greater subsidies for the lower income households.

3. Pioneer generation scheme (those aged 65 and above in 2014) (MOH Pioneer Generation

Package, 2015).

The pioneer generation scheme allows elderly to receive a premium subsidy of between 40-60%

regardless of household per capita and an additional $200-800 top up in medisave annually which

could be used to pay for the medishield life premiums. The subsidy will reduce premium rates from

$815-1530 to $489-615 (according to age), prior to medisave top-ups. This is considerable lower than

the current premiums paid for Medishield ($540-1190). However a considerable limitation is an

arbitrary isolation of pioneer generation for subsidies. Therefore, a non-pioneer generation elderly

who turns 65 in year 2016 will not be able to acquire the pioneer generation subsidy. He/ she will

have to pay 5-20% more in premium rates (according to income group), as compared to the pioneer

generation elderly.

Another limitation would be the increased premiums faced by lower income households. While the

current annual medishield premium per low income household (assuming a family of 2 parents and 1

child) is (105 + 105 + 50 = 260), it will rise more than twice (233 +233 +98 =564) in 2019, even after



aged and ill, while being subsidized by the next generation in future. However, there is always a fine

line between equity and efficiency, whereby increasing subsidies and social initiatives might one day

bring us upon the slippery slope of overconsumption and excessive burden on healthcare

infrastructure, which initial policies had set out to avoid at all costs. The delicate balance will be an

issue the government will continue to grapple in years to come, especially with an aging population’s

increasing social needs.

Conclusion

Factors such as income growth and governmental support have given rise to improving healthcare

affordability across households over the past decade. Even though WHO ranking has shown

Singapore’s healthcare system to be relatively inequitable, consistent low healthcare cost over the

years has allowed improving affordability, even for the lower income.

However, there are still presence of marginalised groups who face high financial risks for unplannedhealthcare expenditure. They are the lower income households and sole breadwinner households,

which face relatively higher costs in terms of hospitalisation expenditure to income ratio. Policy

changes have to be made to target these vulnerable groups so as to minimize their financial risks.

Furthermore the improved universal healthcare insurance Medishield Life, which forms an important

safety net towards high unplanned healthcare expenditure, has an increased premium. Social groups

h h l i d i ld l ld b i li d b h hi h i if



References

Aggarwal, H. (2010). Essays in Modeling Health Care Expenditures With A Focus On Singapore

(Doctoral dissertation).

Cpf.gov.sg,. (2015). General information on Medishield Scheme Retrieved 2 November 2015, from

https://www.cpf.gov.sg/assets/members/documents/generalinformationonmedishieldscheme.pdf

Khalik, Salma. (2014). Hospitals facing severe bed crunch take unusual steps. Retrieved 2 November

2015, from http://www.straitstimes.com/singapore/hospitals-facing-severe-bed-crunch-take-unusual-

steps

Khalik, Salma. (2015). Parliament: MediShield Life Scheme Bill gives wide-ranging powers to

administrator . Retrieved 2 November 2015, fromhttp://www.straitstimes.com/singapore/health/parliament-medishield-life-scheme-bill-gives-wide-

ranging-powers-to-administrator

Lim, Jeremy (2013). Commentary: Revisiting co-payments. Retrieved 2 November 2015, from

http://www.todayonline.com/commentary/revisiting-co-payments



Moh.gov.sg. (2013). Age range of MediShield policyholders | Ministry of Health. Retrieved 2

November 2015, from

https://www.moh.gov.sg/content/moh_web/home/pressRoom/Parliamentary_QA/2013/age-range-of-

medishield-policyholders-.html

Moh.gov.sg. (2014). Top 10 Conditions of Hospitalisation | Ministry of Health. Retrieved 2

November 2015, from

https://www.moh.gov.sg/content/moh_web/home/statistics/Health_Facts_Singapore/Top_10_Conditio

ns_of_Hospitalisation.html

Moh.gov.sg. (2015). Healthcare Institution Statistics | Ministry of Health. Retrieved 2 November

2015, from

https://www.moh.gov.sg/content/moh_web/home/statistics/healthcare_institutionstatistics.html

Moh.gov.sg. (2015). Government Health Expenditure and Healthcare Financing | Ministry of Health.

Retrieved 2 November 2015, from https://www.moh.gov.sg/content/moh

Moh.gov.sg. (2015). Hospital Bill Sizes | Ministry of Health. Retrieved 2 November 2015, from

h // h / / h b/h / d fi i / i l ill i h l



Appendix:

Table 2: Breakdown of Hospital Bills

Gross Inpatient Expenditure Remaining Expenses

Wards Mean(S$)

Median(S$) 90th 95th 99th

Mean(S$)

Median(S$) 90th 95th 99th

A 9852 5002 22130 27803 59005 8509 4960 16897 20913 41664

B1 8956 4953 19941 25357 46271 6689 4241 12780 15388 26476

B2+ 6872 5097 14021 19722 34213 2735 2141 3789 4494 6764

B2 6829 3583 16131 22085 41479 2010 1170 2473 2624 3197

C 7419 4039 16965 23478 47685 1548 999 1930 2126 2669

Medishield Claimable Govt Subsidy %

WardsMean

(S$)

Median

(S$) 90th 95th 99th

Mean

(S$)

Median

(S$) 90th 95th 99th Overall

A 1112 0 4850 6697 16239 230 41 382 193 1102 0.30

B1 1095 0 4806 6452 13452 1171 712 2355 3517 6343 13.60

B2+ 0 0 1046 2247 6112 4137 2956 9186 12980 21336 53.60

B2 40 0 2260 3615 8769 4779 2413 11397 15847 29513 64.30

C 192 0 1935 3132 8017 5680 3040 13100 18220 37000 72.40



Table 3: Income Group Remaining Expenses to Household Monthly Income Ratio

Income Group

Remaining Expenses after Government Subsidy and Medishield

B2 Ward C Ward

Mean

(S$) Median (S$) 90th 95th 99th Mean (S$) Median (S$) 90th 95th 99th

Lowest 20% 2078 1254 2565 2773 3452 1484 808 1859 2070 2554

2nd quintile 2078 1254 2565 2773 3452 1484 808 1859 2070 2554

3rd quintile 2133 1397 2629 2861 3618 1556 969 1961 2163 2744

4th quintile 2262 1792 2807 3104 4074 1719 1414 2194 2422 3269

Highest quintile 2262 1792 2807 3104 4074 1719 1414 2194 2422 3269

Income Group

Expenditure to Income Ratio

B2 Ward C Ward

Mean

(S$) Median (S$) 90th 95th 99th Mean (S$) Median (S$) 90th 95th 99th

Lowest 20% 0.85 0.51 1.05 1.13 1.41 0.61 0.33 0.76 0.85 1.04

2nd quintile 0.38 0.23 0.47 0.51 0.64 0.27 0.15 0.34 0.38 0.47

3rd quintile 0.26 0.17 0.32 0.35 0.44 0.19 0.12 0.24 0.26 0.33

4th quintile 0.19 0.15 0.24 0.26 0.34 0.14 0.12 0.18 0.20 0.27

Highest quintile 0.10 0.08 0.12 0.13 0.18 0.07 0.06 0.09 0.10 0.14

Healthcare Affordability in Singapore

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