SINGAPORE (THE NEW PAPER) - Overuse of insurance and pricey doctors in private practice could be reasons for the high inflation in the healthcare sector, said experts.
Medical cost inflation here rose 10 per cent last year, 10 times more than the Singapore economy's estimated 2018 inflation rate of 1 per cent, according to Mercer Marsh Benefits 2019 Medical Trends Around the World report.
The headline inflation officially came in at 0.4 per cent.
Singapore was sixth highest of 11 Asian countries surveyed, and its 10 per cent increase was slightly lower than the Asian average of 10.4 per cent.
Medical inflation is expected to rise to 10.1 per cent this year.
The study noted that Singapore's medical inflation is partially driven up by supplier-led factors such as high-cost pharmaceuticals and biologics.
Last November, MP Seah Kian Peng asked in Parliament about the causes of medical inflation and why it has outstripped inflation in other sectors.
The Ministry of Health (MOH) said in written reply: "As a result of increased government subsidies, while growth in our national health expenditure has been high, healthcare inflation, defined as the growth in prices of healthcare goods and services borne by Singaporeans, has been lower."
Explaining the cause of high medical inflation, Professor Eric Finkelstein from the Duke-NUS' Health Services and Systems Research Programme said: "In other sectors, people buy less when the economy is bad. But in healthcare, the demand never goes down and tends to increase with ageing, rising rates of chronic disease, the availability of new treatments and, most importantly, health insurance."
Other experts agreed that Singapore's ageing population, longer lifespan and increasing affluence leading to a willingness to spend on healthcare are major factors pushing up medical inflation.
Health and social policy Adjunct Associate Professor Phua Kai Hong at the Lee Kuan Yew School of Public Policy in the National University of Singapore said the financing structure for healthcare has evolved over the years because of policy changes and the growth of third-party insurers.
He said there used to be a guideline on what doctors could charge, and they had to justify it when charging higher fees.
But the guideline was scrapped 12 years ago "in the interests of the free market economy".
This allowed doctors to charge whatever they like, and the situation got worse with the influx of third-party insurers, which prompted those motivated by profit to raise prices, Prof Phua added.
However, he noted that the Government has since moved to reintroduce pricing benchmarks, and he expects medical inflation to stabilise in future.
In a document on fee benchmarks for common surgical procedures issued last November, MOH said: "The benchmarks serve to guide private sector healthcare providers in charging appropriately, and enable patients and payers to make better informed decisions."
While noting the benchmarks do not constitute a fee cap, MOH said providers who depart from them should explain to patients, caregivers and payers.
Prof Phua stressed that doctors who deviate from the benchmarks should justify it.
He and other experts, including Singapore Management University's Assistant Professor of economics Kim Seonghoon, said the expansion of insurance coverage has pushed up demand for healthcare and driven up inflation.
Prof Phua said: "Insurance is a double-edged sword, as it encourages people to want the latest and most expensive treatments, or even opt for procedures that are not needed."
Nanyang Technological University Assistant Professor of economics Akshar Saxena said that people's attitudes and beliefs that care should be sought in hospitals or with specialists instead of primary care facilities for common ailments are a concern because hospitals are generally more expensive.
Dr Saxena said: "One major concern with varying inflation is that individuals are unable to accurately predict their medical costs in the future."
However, Prof Kim said that while medical inflation is inevitable to some extent, government intervention can help keep it under control.
He said: "For example, an incentive to invest in preventive healthcare can reduce demand for medical care in the long run, which in turn can slow down the rise in inflation."