As Singapore ages, it is preparing its citizens for the possibility of long years of disability by rolling out CareShield Life, which Health Minister Gan Kim Yong said was "more than just an insurance scheme... it is a key pillar of our social safety net".
Speaking in Parliament on the proposed disability insurance that will be compulsory for people born after 1979, Mr Gan spelt out the rationale and the philosophy behind it.
He said it needs to strike a balance between keeping premiums affordable and the payouts sufficient. Each cohort will pre-fund its own needs and, once on the scheme, no one would lose coverage on account of financial constraints.
While half the people who are healthy at the age of 65 would be struck with severe disability at some point after that, preparing for this is not "a natural priority" for most people, said Mr Gan.
The problem is, when disability strikes, one does not know how long it would last. He said: "If we save for four years of disability, but remain disabled for 10 years, we would not have saved enough. If we save for 10 years, but we have been disabled for less, we would have over-saved."
By pooling risks, CareShield Life would smooth over such uncertainties and support the long-term needs of each cohort, with a payout of at least $600 a month for life if one is severely disabled.
DEALING WITH UNCERTAINTIES
If we save for four years of disability, but remain disabled for 10 years, we would not have saved enough. If we save for 10 years, but we have been disabled for less, we would have over-saved.
HEALTH MINISTER GAN KIM YONG, who said that by pooling risks, CareShield Life would smooth over such uncertainties and support each cohort's long-term needs.
Some 19 MPs joined the debate, with many questioning why women had to pay higher premiums and whether the scheme could help less severely disabled people. They also asked how the premiums and payouts were calculated.
Workers' Party chief Pritam Singh (Aljunied GRC) spoke of social media spreading misinformation about the scheme. People had suggested that the Government was using it to make money.
Mr Gan assured that premiums will go into a fund that will be "ring-fenced" for CareShield Life needs. It will be audited annually to ensure all monies are accounted for.
He said: "All premiums collected and any returns from investments will remain entirely within the fund and used solely for the benefit of policyholders."
Senior Minister of State for Health Amy Khor explained why women must pay higher premiums. Of those who were healthy at 65, three in five women would become severely disabled, compared with two in five men. "Women are also more likely to remain in disability for a longer time than men," she said. So, women paying higher premiums "accurately reflects the differences in risks".
Dr Khor also announced that the Government will inject $100 million into the insurance scheme to offset the cost of including those with disabilities, who can start collecting payouts immediately.
Senior Minister of State Chee Hong Tat, who was handling CareShield Life before he moved to the Trade and Industry and Education ministries in May, explained why the payouts were meant only for the severely disabled.
Premiums would jump by a third if the payouts were extended to those unable to do two - rather than three - activities of daily living. They would jump by another third if the payouts were to start at $800 a month, instead of $600, in 2020.
He said it was a matter of tradeoffs - being more generous in payouts against the need to keep premiums affordable.
To MPs who asked for greater transparency in how premiums and payouts were calculated, he said it was "very complex", and that he will discuss with experts "how best to share the information".
Wrapping up the debate of more than five hours, Mr Gan said CareShield Life will not be the only source of funding long-term care.
He said: "Personal and family savings, other government subsidies and safety nets and community support also play a role."