Medical savings accounts: Singapore's non-solution to healthcare costs [original]

Medical savings accounts: Singapore’s non-solution

to healthcare costs

One small part of a complex patchwork of funding

Martin McKee professor of European public health 1, Reinhard Busse professor of healthcare

management 2

1London School of Hygiene and Tropical Medicine, London WC1H 9SH, UK; 2Technische Universität, Berlin, Germany

Not a model worth emulating

Because of the obvious failings of the American health system,

health policy analysts in the United States have traditionally

looked abroad for inspiration.1William Haseltine, president of

ACCESS Health International, is among the latest to do so.

Inspired by a 2010 lecture on the health system in Singapore,

he searched for a book that would provide him with a detailed

explanation of how it worked. Finding that none existed, he set

out to fill the gap. The result is a short, highly readable book

whose title, Affordable Excellence, summarises accurately, if

somewhat uncritically, his judgment on Singapore’s

achievements.2In it, he documents how Singapore has managed

to contain costs while ensuring access to healthcare and

achieving health outcomes that are as good, and in many cases

better, than those in other developed countries.

One reason why Singapore has attracted international interest

is its unique system of healthcare financing, with the concept

of the medical savings account (Medisave) at its core.3Under

this system, all people are responsible for their own healthcare

and that of their family. Money is saved into an account from

which they can draw when necessary. Workers and their

employers (and since 1992 the wealthier self employed) are

mandated to contribute a tax-free proportion of their income,

which reduces with increasing age, into a designated account

that they can use to pay for care when needed. Funds can be

shared among members of the immediate family, and any money

left over at death is inherited by surviving family members.

However, there are restrictions on what the money can be spent

on. Initially only inpatient stays in the most basic level of

Singapore’s hierarchy of hospital wards were covered, but the

system then expanded to include outpatient treatment. More

recently, mental illness and some specified preventive

interventions, such as mammography and certain immunisations,

have been included. However, payments are subject to

deductibles and co-payments.

Not surprisingly, this concept is attractive to those who most

vocally advocate for individual responsibility for health, who

reject the social solidarity that underpins European health

systems and call for a radical shrinking of the state (and by

extension their tax bills).4 5 Yet, as Haseltine notes, the medical

savings account is only one small element of Singapore’s health

system, even if it is the one that has attracted most attention. It

has never accounted for more that 10% of total health

expenditure. As he shows, it only works by being wrapped up

in a complex network of mechanisms that compensate for its

failure to deal with the fundamental challenge in delivering

universal healthcare6—those in most need of healthcare,

typically older and poorer people, are least able to pay for it.

Firstly, Medisave accounts are supplemented by a variety of

government contributions, such as the “grow and share

package,” which makes direct payments into accounts of

younger people on low and middle incomes, and a scheme to

support older lower paid workers.

Secondly, the cost of care is limited by major subsidies to

hospitals—up to 80% of the cost of inpatient treatment—on top

of other payments for capital expenditure. There are also strict

controls on what hospitals can do and what they can charge,

including limits on purchase of advanced technology. This

reflects the lessons learnt from a move to give hospitals more

autonomy in the 1980s, in the misguided belief that competition

would reduce costs.

Martin.McK[email protected]

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BMJ 2013;347:f4797 doi: 10.1136/bmj.f4797 (Published 31 July 2013) Page 1 of 2

Editorials

EDITORIALS

Thirdly, two other funds fill the gaps left by Medisave.

Medishield covers what is termed “catastrophic health

expenditure” but which, in reality, includes all long term

treatment that would soon drain Medisave accounts. Since 2002,

this has been supplemented by the Eldershield scheme, which

provides cover for older people with long term disability.

Finally, for those who have no remaining funds, there is a safety

net, called Medifund, which gives priority to older people whose

Medisave funds have become depleted. This is paid for from

the income of a large endowment fund created by the

government. Even with these measures, there are concerns about

the system’s ability to fund care for an ageing population.7 8

All of these interventions create a system in which, despite a

high level of out of pocket spending—almost two thirds of total

health expenditure—9poor people are relatively well protected.

This is not quite the model of individual responsibility that it is

so often portrayed to be.

Given the many specificities of Singapore, it is not surprising

that the medical savings account has not found success

elsewhere. In the US, such schemes lack the many safeguards

in place in Singapore and thus have limited use. The

Commonwealth Fund argued that “encouraging people to join

such health plans will exacerbate some of the very maladies

that undermine our healthcare system’s ability to perform at its

highest level.”10 An attempt to implement the Medisave model

in another large Asian city, Shanghai, failed.11

Most health systems are shaped by the conditions in place when

they were created, and Singapore’s is no exception. The

Medisave scheme is part of a larger insurance scheme, the

Central Provident Fund, created in 1955, during British rule, to

provide old age benefits. The features of that fund, created for

an entirely different purpose, have been carried forward into

the funding of healthcare. As Haseltine notes, Singapore has

managed to make it work, but only as one small part of an

extremely complicated system involving extensive government

intervention. This is a point that is lost among those politicians

and think tanks engaged in the current campaign to denigrate

the English NHS when they advocate medical savings accounts

as a solution here.12

Competing interests: We have read and understood the BMJ policy on

declaration of interests and declare the following interests: None.

Provenance and peer review: Commissioned; not externally peer

reviewed.

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Cite this as: BMJ 2013;347:f4797