Uncle Leong on The ‘hard truth’ of Medishield financing: Rhetoric vs Statistics

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An honorable member of the Coffee Shop Has Just Posted the Following:

I refer to the article “Premiums for MediShield Life to be kept affordable” (Straits Times, Aug 20).

Medishield premiums will increase

It states that “The impact of higher MediShield premiums will be studied carefully to ensure that every Singaporean can afford them, said Health Minister Gan Kim Yong yesterday.”

Dr Ang Yong Guan’s poster on Reserves and Medishield

After I read the above, I read Dr Ang Yong Guan’s facebook poster (which he posted on my timeline) “How much reserves do we really have? Knowing allows us to see how much can be set aside for Medishield”.

Comparing with other countries’ national insurance schemes?

It got me thinking – instead of debating about how to tweak and change Medishield – why not try to think out of the box and look at how we finance Medishield from the perspective of a comparative analysis with other countries? (Note: I am a layman with little knowledge, education, training or experience in healthcare – so, I may be talking nonsense!)

$26.1b CPF contributions a year?

According to the Department of Statistics’ Monthly Digest of Statistics July 2013, the amount of CPF contributions in 2012 was $26.1 billion and the total amount due to members was $230.2 billion.

How much were to Medisave?

Since as much as 9 per cent of CPF contributions go to the Medisave account, how much of the $26.1 billion in 2012 and the total due amount of $230.2 billion were to Medisave?

I estimate the Medisave contributions a year to be more than $7 billion.

Why is this statistic so important in the analysis of Medishield financing?

Because in most countries, their citizens would pay an annual national insurance premium for their healthcare.

Singaporeans pay in total more than $12b a year?

If we include the cash out-of-pocket expenses that Singaporeans pay for healthcare in a year, in a sense, the total that we all pay for healthcare (like the national insurance premiums in other countries) may be more than $12 billion ($7 billion Medisave contributions and $5 billion cash out-of-pocket – I don’t know what the numbers are and I’m just throwing out some numbers for illustrative purposes).

One of the lowest public healthcare spending in the world?

In this regard, the public to private share of total healthcare financing is about one-third to two-thirds. Singapore’s healthcare public spending as a percentage of GDP at about 1.6 per cent in the last reported fiscal year, is one of the lowest in the world.

We pay the highest “national insurance”in the world?

So, on a per capita and percentage basis, are Singaporeans paying the highest “national insurance premiums” in the world?

When they say our total healthcare spending is only 4 per cent of GDP, it may arguably not be a very accurate or appropriate portrayal of our “Uniquely Singapore” healthcare financing model, particularly from the perspective and context of the citizens’ cashflows, because Medisave contributions are not included. That if I may say – is the “hard truth”of our healthcare system.

Medishield’s accumulated surplus?

What is the accumulated surplus of Medishield premiums collected less claims? – Is it still about $850 million as last reported in Parliament? Does this amount include the interest on the surplus all these years? If not, where has the interest gone to or accounted for?

If the annual interest is included, will Medishield still be in operating deficit annually. In this regard, since the Medishield operating deficit statistics were for periods before the increase in Medishield premiums and deductibles from 1 March this year, is the current annual operating deficit still expected to be in deficit in the future?

When Medishield-Plus was transferred to a private insurer many years ago, was the then Medishield-Plus surplus transferred to the private insurer? If not, what happened to it? Was it transferred to the basic Medishield fund?

Medifund surpluses?

Since about $86 million of Medifund surpluses have been transferred to the protected Reserves, why were these surpluses not transferred to Medishield? If these were transferred to Medishield, how much would it add to the accumulated Medishield surplus now, including the annual interest over the years?

Medisave funds’ excess returns?

Since our Medisave accounts pay an interest of 4 per cent – the CPF funds are transferred to the Government in exchange for non-marketable Government bonds to the CPF Board which pay the same interest as the CPF accounts’ rates – Temasek had annualised returns of 16 per cent for ther last 39 years and GIC had about 6 per cent in US$ terms for the last 20 years or so – if the excess interest earned all these years and in the future which if one traces the paper trail were derived from our CPF funds – how much more funds would there be in the Medishield scheme now and in the future?

After reading the above, and if we get all the answers and statistics – do you still think that Medishield premiums need to be raised?

Blind leading the blind?

Without the answers and statistics, we may be akin to a group of blind people trying to figure the best way to go!



Leong Sze Hian

Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, Wharton Fellow, SEACeM Fellow and an author of 4 books. He is frequently quoted in the media. He has also been invited to speak more than 100 times in 25 countries on 5 continents. He has served as Honorary Consul of Jamaica, Chairman of the Institute of Administrative Management, and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional qualifications. He blogs at http://www.leongszehian.com.


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