AGING AND HEALTHCARE FINANCING IN SINGAPORE

Abstract

Singapore is aging rapidly. Changing demographic and disease patterns will impact upon the healthcare financing system. National Health Expenditure (NHE) is projected to escalate due to aging and growth of medical technology. Thus, a shift towards greater cost sharing occurs in government health services with varying levels of supply-side subsidies. Cost containment is also undertaken by the government to curb excess demand. Meanwhile, the existing tax base would have to support growing needs of an aging society. The Singapore 3-M model attempts to alleviate the increasing tax burden on the productive population, and to avoid subjecting social expenditure to the vagaries of economic cycles. Instead of depending on unreliable intergenerational transfers, present generations of wage earners are mandated to save for their health needs in old age in their medical savings (Medisave) accounts to promote individual responsibility in financing healthcare. An optional catastrophic low-cost health insurance scheme (Medishield) supplements medical savings. For the poor and needy, public subsidy is provided via a medical endowment fund (Medifund) which comprises of budget surpluses accumulated over high economic growth, further relieving the reliance on taxation for healthcare financing. Hence, this paper attempts to critically appraise the present health financing system in Singapore. In particular, my discussion strives to probe into the issue of adequacy of Medisave balances for the baby boomers for their old age medical needs because it is noted that these people are currently drawing from their Medisave for their aged parents and dependent children. Furthermore, as the baby boomers have higher educational attainment than the present aged, they are more likely to engage in preventive health measures and life expectancy is expected to lengthen. A host of policy issues and implications is highlighted. Extension of Medisave to community-based services and chronic illnesses, the establishment of a national endowment fund and the promotion of insurance culture are among recommendations to alleviate the inadequacies of the present health financing system for the baby boomers in old age. With medical technology growth, the challenge of conflicting goals of cost control and of the medical hub vision faced by the government is also depicted. Concerns over the under-supply of informal care are sounded. While a higher female labor force participation rate means greater financial independence for the female in paying for healthcare, it can also affect the level of informal care of their aged parents adversely. With more females assuming dual roles of worker and caretaker, perhaps more part-time and flexible work packages can be introduced to ease their burden. In addition the Japanese and Hong Kong healthcare financing systems are also discussed. Both countries, like Singapore, are also facing the challenge of rapid aging. The Japanese social health insurance system and Hong Kong's tax-financed system are noted to be heavily dependent on intergenerational transfers and might suffer from the repercussions of subjecting public expenditure to economic cycles and lower social financing from a shrinking labor force in the long run. Hence, Singapore has learnt from such lessons and has invoked the fully funded medical savings scheme to relieve dependence on intergenerational transfers.