National Day Special 2015 | A toast to an improbable nation: 1984

The impeccable logic of Medisave

Mr Koh Chee Peng, 47, used $30 from his Medisave account to pay for a heart check-up at Khoo Teck Puat Hospital. Ms Fazliana Jamaludin, 30, uses about $200 from her Medisave account each year to pay for immunisation. Madam Yeo Pui Hiong, 64, used $78
Mr Khaw Boon Wan - seen here on July 30 speaking to Mr Othman Ahmad, 62, a senior postal officer who was warded at Khoo Teck Puat Hospital - said he was lucky to be at the right place, at the right time, as he became heavily involved in helping then Health Minister Goh Chok Tong turn the idea for Medisave into a workable scheme.ST PHOTO: ONG WEE JIN
Mr Koh Chee Peng, 47, used $30 from his Medisave account to pay for a heart check-up at Khoo Teck Puat Hospital. Ms Fazliana Jamaludin, 30, uses about $200 from her Medisave account each year to pay for immunisation. Madam Yeo Pui Hiong, 64, used $78
Madam Yeo Pui Hiong, 64, used $78.90 from her Medisave account for ultrasound scans at Khoo Teck Puat Hospital. ST PHOTO: ONG WEE JIN
Mr Koh Chee Peng, 47, used $30 from his Medisave account to pay for a heart check-up at Khoo Teck Puat Hospital. Ms Fazliana Jamaludin, 30, uses about $200 from her Medisave account each year to pay for immunisation. Madam Yeo Pui Hiong, 64, used $78
Mr Koh Chee Peng, 47, used $30 from his Medisave account to pay for a heart check-up at Khoo Teck Puat Hospital. ST PHOTO: ONG WEE JIN
Mr Koh Chee Peng, 47, used $30 from his Medisave account to pay for a heart check-up at Khoo Teck Puat Hospital. Ms Fazliana Jamaludin, 30, uses about $200 from her Medisave account each year to pay for immunisation. Madam Yeo Pui Hiong, 64, used $78
Ms Fazliana Jamaludin, 30, uses about $200 from her Medisave account each year to pay for immunisation. ST PHOTO: ONG WEE JIN

Just as people save for a rainy day, they should also save for their medical expenses

Around for over three decades, it is now easy to take it for granted: Medisave. Yet this healthcare scheme gives Singaporeans a huge advantage over the rest of the world, says a minister involved in its creation, Mr Khaw Boon Wan.

"(Singaporeans) do not need to worry that they will be priced out of essential healthcare. It gives great comfort and peace of mind," he said.

Before Medisave was introduced on April 1, 1984, Singaporeans who were not covered by their employers had to pay in cash for their hospital care.

The brainchild of then Premier Lee Kuan Yew, Medisave is a compulsory individual healthcare savings scheme for all workers, initially meant to help them pay for up to 11 hospital stays. It went on to become a cornerstone of Singapore's three medical "Ms" - with basic insurance MediShield, and Medifund, which helps the needy pay healthcare bills.

Mr Lee had run the idea by Singapore's economic genius, Dr Goh Keng Swee, in 1981. Mr Khaw, then an assistant director of finance at the Ministry of Health, recalled: "I saw an exchange of letters between them in which Dr Goh did some back-of-the-envelope calculations to show the viability of such a scheme."

The scheme has changed considerably since its birth. It no longer covers only hospital bills, but can be used in outpatient care and for some preventive care, such as vaccines.

The scheme was not without its detractors, who asked: Why can't the Government simply pay for everyone's healthcare needs, as is done in most developed countries?

Indeed, the year Medisave was introduced, Mr Lee addressed this in his National Day Rally speech, saying that giving free medical treatment to all would be disastrous as there would be no sense of personal responsibility. In Europe and America, such schemes had led to enormous wastage in medical treatment.

Mr Khaw, who went on to serve as Health Minister from 2004 to 2011, recalled that back in 1981 when the scheme was mooted, Singapore was "breaking new ground and starting something quite unique in the world".

So the Government decided not to rush it and, over three years, explained the rationale at townhall meetings, focus-group discussions, talk shows and in ministerial speeches.

  • MEDISAVE MILESTONES

    • April 1 1984: Medisave is launched with money hived off from Central Provident Fund savings. Use limited to inpatient hospital bills.

    • 1987: Medisave use extended to birth of third child. Previously, it was only for the first two, in line with the family-planning policy of stopping at two.

    • 1990: Its use is extended to paying premiums for MediShield, the new national medical insurance scheme.

    • 1996: Up to $20 a day and $1,500 a year can be taken from Medisave to pay for day rehabilitation.

    • 2006: Medisave daily limits are raised from $300 to $400, to help cover a greater share of private hospital bills.

    • 2006: Up to $300 a year from Medisave allowed for use to treat chronic ailments, starting with diabetes.

    Today, up to $400 can be used each year for 19 chronic ailments, including some mental illnesses.

    • 2009: Use extended to childhood pneumococcal vaccinations, which cost about $500. Number of babies vaccinated triples in the first year Medisave use is allowed. Today, Medisave can be used to pay for 10 types of vaccination.

    • 2011: Medisave use extended to screening for two cancers - breast and colorectal.

    • 2015: People aged 65 years and older can use an addi-tional $200 from Medisave for outpatient treatment

"We were in no hurry as this was a scheme for the future," he said.

The actual work of designing a scheme that ensured people were able to pay for subsidised healthcare needs, yet was accepted by all, fell to then Health Minister Goh Chok Tong and his team, shortly after Mr Goh took on the health portfolio in 1981.

Mr Khaw said: "I was lucky to be at the right place, at the right time. I became heavily involved in helping Mr Goh turn this idea into a workable scheme."

The logic behind the idea was impeccable: "Just as we save for a rainy day, for a big-ticket expenditure item like a house, a car, or a holiday, we should also save for our medical expenses."

The challenges included deciding how much people should be made to save for health.

The young rarely think of this need. By the time they are old and sick, it is too late to start saving for it. Furthermore, Mr Khaw said, people's health needs vary, as do their income. What is considered high savings for some might be too low to be meaningful for others.

Mr Khaw said getting Medisave accepted spawned something else uniquely Singaporean - the dialogue between the Government and the governed, a forerunner of the recent "Our Singapore Conversation".

A feature of Medisave is its seamlessness. Every worker has a Medisave account, with no need to stump up cash. "It was conveniently carved out of an existing Central Provident Fund as a separate Medisave Account," explained Mr Khaw, adding: "It was seen as a liberalisation of the usage of the CPF account and hence was welcomed."

The scheme has changed considerably since its birth. It no longer covers only hospital bills, but can be used in outpatient care and for some preventive care, such as vaccines. When MediShield was launched in 1990, the Government freed up the use of Medisave to pay for its premiums. As a result, more than nine in 10 people have health insurance.

Today, more than 200 Medisave withdrawals are made every hour. Last year, more than $850 million from Medisave was used to cover people's healthcare needs.

A version of this article appeared in the print edition of The Sunday Times on August 09, 2015, with the headline 'The impeccable logic of Medisave'. Print Edition | Subscribe