Health Care in Singapore: What's the Secret?
It’s always worth exploring how health care works in other countries, if for no other reason than that models in other countries give us the chance to see how some of the approaches discussed by American reformers might pan out. What do the experiences of Germany and Netherlands tell us about the possibility of a better mixed public-private system in the United States? How is China’s health care system a cautionary tale of market forces gone wild? The answer to these questions can add to—or detract from—the appeal of certain health care strategies in the U.S.

It’s hard to imagine a country that could provide a more valuable example than Singapore. The Southeast Asian city-state is widely regarded as a health care superstar, especially when compared to the United States. Life expectancy at birth in the U.S. is 78 years; in Singapore, it’s 82 years. The Singaporean infant mortality rate is a mere 2.3 deaths per 1,000 live births, versus 6.4 in the U.S. As some have noted, these trends persist despite the fact that the U.S. has far more caregivers: 2.6 physicians per 1,000 people, compared with 1.4 physicians in Singapore. The United States has 9.4 nurses per 1,000 people; Singapore, just 4.2. Last—but certainly not least—is the issue of spending: the U.S. spends almost 16 percent of its GDP on health care, while Singapore spends a mere 3.7 percent.

For reformers eager to cite examples proving that their health care ideals are a formula for success, Singapore offers a powerful case study. Its population is healthy, its system isn’t overloaded by medical professionals, and health care spending doesn’t gobble up a huge chunk of its economy.

So how does Singapore do it?

A Consumerist Utopia?

At first glance, Singapore’s health care system seems to have all the trappings of consumer-driven medicine, which emphasizes the need to shift medical expenses directly onto patients through higher co-pays and deductibles. Eighty-five percent of Singaporeans have health coverage through Medisave, a national health savings account (HSA) program introduced in 1984. Like the HSAs found in the U.S., Medisave accounts are tax-free, earn interest, and become part of one’s estate after death. Accountholders can take money out of the account only to pay for approved categories of medical treatments like hospitalization, surgery, and radiotherapy.

In addition to Medisave, people can pay extra for optional catastrophic insurance called MediShield. MediShield helps to cover the care associated with prolonged illnesses, which can get very pricey in the context of Singapore’s high-deductible and high co-pay system of insurance.

An element of consumer choice is also evident in Singapore’s hospitalization practices—even though 80 percent of hospital care in the country is delivered by publicly-owned hospitals. In these public hospitals, patients can choose different classes of ward accommodation ranging from 1-bedded room to an open dormitory with 8 or more beds. Patients in the 1-2 bedded rooms pay the full cost for their stay, whereas patients in other ward classes enjoy subsidies from the government ranging from 20 percent of the cost for the 4-bedded rooms to 80 percent of the cost for the open dormitories. The Ministry of Health also has a web-page that lists the costs for a wide set of conditions and procedures to inform patients about likely medical expenses once hospitalized.

Paying for care through savings accounts and imbuing hospitalization and medical services with consumer choice—if we were to stop here, it would seem that Singapore represents a validation that efficient, sustainable health care depends on consumer-driven medicine. Or would it?

First, the sustainability of Medisave has a lot to do with some very distinct features of Singapore’s society. The country is relatively young: only around 8 percent of the population is over 65 years old, versus 13 percent in the U.S. Most European nations are even older.

A younger population that needs less care is more amenable to consumer-driven medicine. It’s the older people who suffer more when forced to pay medical costs out-of-pocket or out-of-savings, because they need more care. So more old people means more people needing care that exceeds their ability to pay, which results either in more government aid or more sick people—both of which drive up health care costs.

Second, Singapore’s economy has been something of a juggernaut. The country’s GDP is growing at a rate of 7-8 percent per year—almost as fast as the Indian economy. By contrast, in the U.S. GDP is growing by only about 2-3 percent annually. When an economy grows this rapidly, it generally means that many people have more money. Thus many can afford higher co-pays and deductibles. Perhaps more importantly, the growth of the Singapore’s economy has actually outpaced increases in health care inflation, something that is definitively not the case in the U.S.

So even if the Medisave model of HSAs was to be carried over into the U.S., its success is far from guaranteed, since its ability to function is part and parcel of Singapore itself. But that’s not the whole story. More important than saying Medisave wouldn’t work in the U.S. is noting that health savings accounts are not the key to Singapore’s high-performance health care. Far from it: Singapore’s health care success isn’t due to consumer-driven medicine, but rather to government intervention.

The Role of Government

Even Medisave isn’t entirely consistent with the vision of American consumer-driven reformers: savings are compulsory. Every citizen gets 40 percent of his or her income deducted by Singapore’s Central Provident fund, which distributes the money for programs like retirement funds and Medisave. When all is said and done, the government deducts between 6.5 and 8.5 percent of workers’ pre-tax income to be re-directed to their Medisave account, with the percentage varying according to age.

In other words, the Singaporean government mandates savings and funds those savings by re-distributing compulsory contributions. This helps to maintain a relatively stable level of savings that you wouldn’t get in a save-only-what-you-want HSA system like the one advocates push for in the U.S.

Yet the real kicker here is that, when it comes to accounting for Singapore’s efficient health care system, Medisave is beside the point. In fact, according to William Hsiao, a Professor of Economics at the Harvard School of Public Health, Medisave has failed to contain health care costs in Singapore: since Medisave was introduced in 1984, the rate health care spending per capita increased from 11 percent to 13 percent a year after the program’s introduction.

By 1993, Singapore’s government was starting to feel the fiscal pinch and began to notice that, even with Medisave, many citizens were unable to afford the care they needed. That year the government formed Medifund, an endowment fund to help poor, indigent patients pay their medical bills. According to Singapore’s Ministry of Health, the Medifund endowment was S$1.6 billion this year and 98 percent of patients who apply for Medifund aid are approved.

1993 also saw a paradigm shift that became the real engine behind Singapore’s health care system: regulation of supply-side medicine. Consumer-driven strategies like HSAs are all about adjusting the demand of care. In theory, when you pay for more of your care directly, the amount of care you desire and consume changes, because people are more frugal with their own money. In contrast, supply-side interventions look to regulate the amount and kind of medical resources that are available.

Singapore’s government introduced a number of these reforms in the 1990s, all of which have gone a long way toward controlling health care costs. One such change has been a restriction on how fast new, unproven technology can be introduced into government hospitals Before this reform, notes Hsiao, “hospitals competed…by offering the latest technology and expensive equipment, which appeared to be demanded by physicians and accepted by the public as an indicator of quality.” Unfortunately, “once the new technology was put to use, it produced a higher cost inflation rate in medical services.” Sound familiar?

The government also put price caps on all services and procedures delivered in public hospitals, which provide 80 percent of hospital care in Singapore. These caps apply not only to procedures like surgery, but also to ward stays. So while patients are in fact able to choose between types of accommodations for a price, those prices are fixed by the government (except in the case of private hospitals, which can charge whatever they want). Further, beginning in 2009, subsidization for hospital stays will no longer be a universal privilege. The government will introduce a means-testing program to make sure that only poorer citizens who need subsidization actually receive it.

Singapore’s government also put hospitals on a budget, setting a predetermined amount to be given to hospitals each year, so that they would not have a blank check to provide an open-ended number of treatments and hospital stays. Similarly, the government set a limit on the number of beds a hospital could have, to make sure that patient volume was managed efficiently.

One of the most noteworthy changes that the government instituted was a set of reforms aimed at streamlining Singapore’s mostly-private physician workforce. In the late 1990s, the Ministry of Health noticed that “countries with more doctors tend to spend more on health care” and took steps to make sure that Singapore was not supporting more physicians than it needed.

According to Michael Barr, an Australian historian who specializes in Singapore, the government instituted controls on the number of medical graduates produced by local universities and reduced the number of overseas medical schools whose degrees were recognized in Singapore from 176 to 28. . It also set a limit on the proportion of the physician workforce that could be specialists at any given time (40 percent).

Over-Treatment Is the Key

All of these supply-side measures are aimed at reducing the risk of over-treatment. Singapore has made it a point to guard against a glut of expensive technology, high-volume care, too-long hospital stays, and an excess of physicians and specialists. These reforms helped Singapore reduce its per capita health care spending from 1997 to 2001 by 13 percent—even as the United States increased its per capita health spending by 24 percent over this same period. Today Singapore spends one-seventh what the U.S. does per capita on health care.

These numbers owe little to HSAs. As the Canadian Medical Association Journal has put it, “Singapore's MSA program itself has contributed less to cost control than the more recently introduced supply-side tactics” Hsiao also notes that “the well-executed Medisave scheme in Singapore could not contain costs, so it is unlikely that such a scheme could do so here.” And Barr eloquently concludes that while HSAs are an institutionally distinctive feature of Singaporean health care, “the practical and spiritual heart of the system lies in control and parsimony.”

In the end, Singapore’s health care experience isn’t an argument for consumer-driven medicine, but for targeted government interventions and smart, timely, regulation of over-treatment. One of the world’s most successful health care systems is built on the principle that personal responsibility is good, but it has practical limits—and the understanding that when it comes to health care, more can easily become too much.

Posted by Niko Karvounis on July 30, 2008

Health Care in Singapore: What's the Secret?
It’s always worth exploring how health care works in other countries, if for no other reason than that models in other countries give us the chance to see how some of the approaches discussed by American reformers might pan out. What do the experiences of Germany and Netherlands tell us about the possibility of a better mixed public-private system in the United States? How is China’s health care system a cautionary tale of market forces gone wild? The answer to these questions can add to—or detract from—the appeal of certain health care strategies in the U.S.

It’s hard to imagine a country that could provide a more valuable example than Singapore. The Southeast Asian city-state is widely regarded as a health care superstar, especially when compared to the United States. Life expectancy at birth in the U.S. is 78 years; in Singapore, it’s 82 years. The Singaporean infant mortality rate is a mere 2.3 deaths per 1,000 live births, versus 6.4 in the U.S. As some have noted, these trends persist despite the fact that the U.S. has far more caregivers: 2.6 physicians per 1,000 people, compared with 1.4 physicians in Singapore. The United States has 9.4 nurses per 1,000 people; Singapore, just 4.2. Last—but certainly not least—is the issue of spending: the U.S. spends almost 16 percent of its GDP on health care, while Singapore spends a mere 3.7 percent.

For reformers eager to cite examples proving that their health care ideals are a formula for success, Singapore offers a powerful case study. Its population is healthy, its system isn’t overloaded by medical professionals, and health care spending doesn’t gobble up a huge chunk of its economy.

So how does Singapore do it?

A Consumerist Utopia?

At first glance, Singapore’s health care system seems to have all the trappings of consumer-driven medicine, which emphasizes the need to shift medical expenses directly onto patients through higher co-pays and deductibles. Eighty-five percent of Singaporeans have health coverage through Medisave, a national health savings account (HSA) program introduced in 1984. Like the HSAs found in the U.S., Medisave accounts are tax-free, earn interest, and become part of one’s estate after death. Accountholders can take money out of the account only to pay for approved categories of medical treatments like hospitalization, surgery, and radiotherapy.

In addition to Medisave, people can pay extra for optional catastrophic insurance called MediShield. MediShield helps to cover the care associated with prolonged illnesses, which can get very pricey in the context of Singapore’s high-deductible and high co-pay system of insurance.

An element of consumer choice is also evident in Singapore’s hospitalization practices—even though 80 percent of hospital care in the country is delivered by publicly-owned hospitals. In these public hospitals, patients can choose different classes of ward accommodation ranging from 1-bedded room to an open dormitory with 8 or more beds. Patients in the 1-2 bedded rooms pay the full cost for their stay, whereas patients in other ward classes enjoy subsidies from the government ranging from 20 percent of the cost for the 4-bedded rooms to 80 percent of the cost for the open dormitories. The Ministry of Health also has a web-page that lists the costs for a wide set of conditions and procedures to inform patients about likely medical expenses once hospitalized.

Paying for care through savings accounts and imbuing hospitalization and medical services with consumer choice—if we were to stop here, it would seem that Singapore represents a validation that efficient, sustainable health care depends on consumer-driven medicine. Or would it?

First, the sustainability of Medisave has a lot to do with some very distinct features of Singapore’s society. The country is relatively young: only around 8 percent of the population is over 65 years old, versus 13 percent in the U.S. Most European nations are even older.

A younger population that needs less care is more amenable to consumer-driven medicine. It’s the older people who suffer more when forced to pay medical costs out-of-pocket or out-of-savings, because they need more care. So more old people means more people needing care that exceeds their ability to pay, which results either in more government aid or more sick people—both of which drive up health care costs.

Second, Singapore’s economy has been something of a juggernaut. The country’s GDP is growing at a rate of 7-8 percent per year—almost as fast as the Indian economy. By contrast, in the U.S. GDP is growing by only about 2-3 percent annually. When an economy grows this rapidly, it generally means that many people have more money. Thus many can afford higher co-pays and deductibles. Perhaps more importantly, the growth of the Singapore’s economy has actually outpaced increases in health care inflation, something that is definitively not the case in the U.S.

So even if the Medisave model of HSAs was to be carried over into the U.S., its success is far from guaranteed, since its ability to function is part and parcel of Singapore itself. But that’s not the whole story. More important than saying Medisave wouldn’t work in the U.S. is noting that health savings accounts are not the key to Singapore’s high-performance health care. Far from it: Singapore’s health care success isn’t due to consumer-driven medicine, but rather to government intervention.

The Role of Government

Even Medisave isn’t entirely consistent with the vision of American consumer-driven reformers: savings are compulsory. Every citizen gets 40 percent of his or her income deducted by Singapore’s Central Provident fund, which distributes the money for programs like retirement funds and Medisave. When all is said and done, the government deducts between 6.5 and 8.5 percent of workers’ pre-tax income to be re-directed to their Medisave account, with the percentage varying according to age.

In other words, the Singaporean government mandates savings and funds those savings by re-distributing compulsory contributions. This helps to maintain a relatively stable level of savings that you wouldn’t get in a save-only-what-you-want HSA system like the one advocates push for in the U.S.

Yet the real kicker here is that, when it comes to accounting for Singapore’s efficient health care system, Medisave is beside the point. In fact, according to William Hsiao, a Professor of Economics at the Harvard School of Public Health, Medisave has failed to contain health care costs in Singapore: since Medisave was introduced in 1984, the rate health care spending per capita increased from 11 percent to 13 percent a year after the program’s introduction.

By 1993, Singapore’s government was starting to feel the fiscal pinch and began to notice that, even with Medisave, many citizens were unable to afford the care they needed. That year the government formed Medifund, an endowment fund to help poor, indigent patients pay their medical bills. According to Singapore’s Ministry of Health, the Medifund endowment was S$1.6 billion this year and 98 percent of patients who apply for Medifund aid are approved.

1993 also saw a paradigm shift that became the real engine behind Singapore’s health care system: regulation of supply-side medicine. Consumer-driven strategies like HSAs are all about adjusting the demand of care. In theory, when you pay for more of your care directly, the amount of care you desire and consume changes, because people are more frugal with their own money. In contrast, supply-side interventions look to regulate the amount and kind of medical resources that are available.

Singapore’s government introduced a number of these reforms in the 1990s, all of which have gone a long way toward controlling health care costs. One such change has been a restriction on how fast new, unproven technology can be introduced into government hospitals Before this reform, notes Hsiao, “hospitals competed…by offering the latest technology and expensive equipment, which appeared to be demanded by physicians and accepted by the public as an indicator of quality.” Unfortunately, “once the new technology was put to use, it produced a higher cost inflation rate in medical services.” Sound familiar?

The government also put price caps on all services and procedures delivered in public hospitals, which provide 80 percent of hospital care in Singapore. These caps apply not only to procedures like surgery, but also to ward stays. So while patients are in fact able to choose between types of accommodations for a price, those prices are fixed by the government (except in the case of private hospitals, which can charge whatever they want). Further, beginning in 2009, subsidization for hospital stays will no longer be a universal privilege. The government will introduce a means-testing program to make sure that only poorer citizens who need subsidization actually receive it.

Singapore’s government also put hospitals on a budget, setting a predetermined amount to be given to hospitals each year, so that they would not have a blank check to provide an open-ended number of treatments and hospital stays. Similarly, the government set a limit on the number of beds a hospital could have, to make sure that patient volume was managed efficiently.

One of the most noteworthy changes that the government instituted was a set of reforms aimed at streamlining Singapore’s mostly-private physician workforce. In the late 1990s, the Ministry of Health noticed that “countries with more doctors tend to spend more on health care” and took steps to make sure that Singapore was not supporting more physicians than it needed.

According to Michael Barr, an Australian historian who specializes in Singapore, the government instituted controls on the number of medical graduates produced by local universities and reduced the number of overseas medical schools whose degrees were recognized in Singapore from 176 to 28. . It also set a limit on the proportion of the physician workforce that could be specialists at any given time (40 percent).

Over-Treatment Is the Key

All of these supply-side measures are aimed at reducing the risk of over-treatment. Singapore has made it a point to guard against a glut of expensive technology, high-volume care, too-long hospital stays, and an excess of physicians and specialists. These reforms helped Singapore reduce its per capita health care spending from 1997 to 2001 by 13 percent—even as the United States increased its per capita health spending by 24 percent over this same period. Today Singapore spends one-seventh what the U.S. does per capita on health care.

These numbers owe little to HSAs. As the Canadian Medical Association Journal has put it, “Singapore's MSA program itself has contributed less to cost control than the more recently introduced supply-side tactics” Hsiao also notes that “the well-executed Medisave scheme in Singapore could not contain costs, so it is unlikely that such a scheme could do so here.” And Barr eloquently concludes that while HSAs are an institutionally distinctive feature of Singaporean health care, “the practical and spiritual heart of the system lies in control and parsimony.”

In the end, Singapore’s health care experience isn’t an argument for consumer-driven medicine, but for targeted government interventions and smart, timely, regulation of over-treatment. One of the world’s most successful health care systems is built on the principle that personal responsibility is good, but it has practical limits—and the understanding that when it comes to health care, more can easily become too much.

Posted by Niko Karvounis on July 30, 2008