Insure only for medical treatment

This story was first published in The Straits Times on Dec 14, 2013

AS THE Ministry of Health continues with its public engagement on what people want from the new MediShield Life, one thing is already clear: Singaporeans are worried about rising premiums, especially as they age.

The new MediShield Life scheme, announced by Prime Minister Lee Hsien Loong in his National Day Rally speech in August, will cover basic hospital care for everyone for life - based on subsidised rates in public hospitals.

With MediShield expanded to cover people with pre-existing illnesses and no age limits involved, many have asked how much premiums will rise by.

Historically, medical costs rise faster than general inflation - or incomes. To ensure that people are well protected against big hospital bills, premiums will need to be high enough to cover the cost of treatment not just for the current year, but for chronic ailments such as kidney failure and for the rest of a person's life as well. Once the pool of older people swells with lifelong coverage, costs of coverage will go up - as will premiums.

It is not just premiums of the basic MediShield Life that worry people. With two in three Singaporeans having coverage over and above the basic scheme, premium increases of Integrated Shield plans is a concern. Such plans are enhanced policies offered by private insurers on top of the basic MediShield plan. Premiums for these insurance policies have gone up quite sharply in past years.

At a focus group discussion last weekend on the new MediShield Life national insurance plan, at least three participants brought along letters from their insurers telling them they will need to pay 60 per cent to 75 per cent more in annual premiums.

Private insurers argue that premiums need to rise to cover the greater benefits offered to policyholders.

Unfortunately, policyholders have little say in whether they need such added benefits. Once they are on a scheme, they are more or less stuck with them.

Several people at Saturday's discussion on MediShield Life asked if they should drop their Integrated Shield plans for the new MediShield Life.

Unlike motor vehicle insurance, where owners can easily change from one insurer to another - depending on whether they prefer higher coverage or lower premiums - changing medical insurers can mean reduced coverage, whether you want it or not. This happens when someone is deemed to have a medical problem that raises his level of risk.

Looking at it from a different angle, one way of keeping premiums affordable is to keep medical costs from rising too fast.

This will not be easy, as newer procedures and medicines usually cost more. And because they also often produce superior results, people who are insured will demand them. This is especially so for those who have bought "riders". Riders oblige the insurer to pay the entire bill. Patients do not have to make any out-of-pocket payments.

The result is often over-servicing, sometimes known as the "buffet syndrome". Patients take all the treatments and services offered, even though they do not need them, simply because they are free, thus pushing up overall health-care costs.

One way to prevent this is to disallow riders for all Integrated Shield plans. When patients have to pay part of the bill, they tend to be more cautious about spending on tests and procedures that are not really necessary.

Another way to keep bills down - the Japanese are introducing it for their long-term care insurance - is to remove the cost of board and lodging from the insurance coverage. In other words, the insurance firm pays only the medical treatment, not the expensive room the patient chooses to stay in.

In the public sector, a night's stay in a luxury room could cost more than $700. In the private sector, it can top $12,000. This means that it is quite possible that, in some cases, the cost of medical treatment is less than the cost of lodging during the period of care. There is also no incentive for the patient to want to leave early.

So, two patients covered by the same insurance policy, going for the same treatment but choosing differently priced rooms, would claim different amounts from the insurer. The difference in claims can be significant.

Excluding room charges from insurance payouts would certainly help reduce premiums.

To cater to poorer patients, perhaps all policyholders should be allowed to claim the basic board and lodging charged by public hospital C class wards - less than $50 a day. Patients who want better rooms should pay for that on their own.

Non-coverage of board and lodging by medical insurance should not extend to intensive care costs, as this is a need rather than a choice.

Further regulations on what can reasonably be claimed from insurance for various medical problems could also help reduce unnecessary tests that some doctors might encourage patients to take.

Unlike medical insurance outside the Shield scheme, Integrated Shield plans should be subject to more stringent rules. After all, they are perceived to come with the "blessings" of the Government, since Medisave money can be used to pay their premiums. It is also obligatory for these plans to incorporate the basic MediShield.

People who want super-luxurious medical insurance should look for schemes outside of Integrated Shield plans that do not involve the use of Medisave.