Anticipating Longevity: Sustainable Financing Models In Singapore

Published on 23rd July 2019

Population ageing is a significant demographic phenomenon shaping societies all over the world. Globally, we expect to have more than two billion residents aged 60 and above by 2050, more than double the number in 20171.

For Singapore, our life expectancy has risen, from 83.2 years in 2010 to 84.8 years in 2017, and we now have the highest life expectancy in the world. Health-Adjusted Life Expectancy increased from 72.9 years to 74.2 years over the same period. This brings opportunities for greater labour force participation at older ages, and is important for a country like Singapore where birth rates are relatively low.

However, longer life expectancies also bring us face to face with the disease burden and frailty that comes with old age. From 2010 to 2017, the prevalence rates of diabetes, hypertension and hyperlipidaemia among Singapore residents aged 18 to 69 increased by 4%, 14%, and 33% respectively. This is partly due to an older population, but also due to unhealthy lifestyles and habits.

Furthermore, we estimate that 1 in 2 Singaporeans who are healthy at age 65 could become severely disabled at some point in their lifetime and will require long-term care.2 What all this means is that while we are living longer, we may also be spending more years in poor health and with lower quality of life.

How do we ensure that we help our seniors maintain their desired quality of life even in old age, and can afford the healthcare that they need, while ensuring financial sustainability in the healthcare system in the face of longevity? We look at three things:

  • First, promoting health, not just healthcare
  • Second, strengthening the integration of health and social services
  • Third, ensuring affordability of healthcare and financial sustainability in the long-term

Let me elaborate on each of these in turn.

Preparing For Longevity

Promoting Health, not just Healthcare

Our first priority is to help Singaporeans to take care of their health. Findings from the 2017 Singapore Burden of Disease report showed that more than 80% of our total disease burden is caused by non-communicable diseases. The leading risk factors are dietary risks, tobacco, high blood sugar and pressure, as well as obesity. To promote population health, we take lessons from around the world, and creatively employ a range of financing and non-financing levers.

We have a comprehensive health promotion strategy, led by the Health Promotion Board, our national agency to drive healthy living. For example, HPB works with food and beverage outlets to use healthier ingredients. We also recently announced our ban on Partially Hydrogenated Oils by 2021, which is a key source of artificial trans-fat in our diets.

Not only do we want to prevent diseases, we want to detect them early. To encourage more Singaporeans to go for health screenings and follow-ups, we provide significant subsidies for selected chronic diseases and cancers under our national screening programme, “Screen For Life”. Between 2013 to 2017, screening rates for Singaporeans aged 40 and above for diabetes, hypertension, and hyperlipidaemia have increased to about 75% – 80%3.

We also recently introduced Project Silver Screen, a nationwide screening programme for seniors aged 60 and above. This programme is to detect age-related decline in vision, hearing and oral health early, so that timely intervention can be rendered, before other health issues surface.

By supporting Singaporeans to actively manage their health and well-being, we achieve two objectives: a better quality of life for our seniors in their silver years, and a reduction in the strain on our healthcare system.

Strengthening the Integration of Health and Social Services

As we age, it is inevitable that we need more health and social care across a range of care settings, from primary care, to hospitalisation care, to long-term care. Singaporeans, as with most of us, would prefer to live independently in our communities as we age, rather than be institutionalised. Thus, our aim is to support Singaporeans to age within the community.

In this regard, we have made significant efforts to strengthen primary care by facilitating closer collaborations between general practitioners in the public and private sector, as well as with healthcare institutions. Primary care is the foundation of our healthcare system and enables Singaporeans to receive good quality, comprehensive and continued care near their homes.

We also have systems which allow our seniors to benefit from better care coordination. Our Community Networks for Seniors programme anchors a strong community care system for seniors. It brings together various government agencies, NGOs and volunteers, to promote active ageing, extend befriending services to seniors living alone, and sew up health and social support for our seniors with needs.

Finally, we have expanded our aged care services by increasing the supply and capabilities of day care and home care since 2015, to encourage ageing in place.

Ensuring Affordability of Healthcare and Financial Sustainability in the Long-Term

But our biggest challenge remains that of providing assurance to our citizens that they can afford to pay for their healthcare needs as they age, while still ensuring the sustainability of our healthcare financing system for generations to come.

Let me share our financing philosophy. Our philosophy is one of shared responsibility, where the individual, society, and Government work together to support the costs of healthcare.  However, the outcome must be that no Singaporean is denied access to appropriate care because they cannot pay. We provide support through multiple, and often overlapping layers, each one playing an important but different role.  We refer to this as the “S + 3M” approach.

Government assistance

First, the Government provides heavy subsidies of up to 80% for Singaporeans across all healthcare settings, including hospitals, outpatient care, residential long-term care, and home and community care services. This is the “S” in the “S + 3M” approach. These subsidies are means-tested, with more subsidies directed towards the lower-income, where needs are the greatest.

We have also recently reviewed our primary care financing structure and will soon make subsidies for chronic care available to all Singaporeans for private primary care, in addition to today’s subsidies for public primary care. This is a major policy shift for us, as Singapore has never had universal subsidies for private primary care, but we believe this is critical to manage the rising burden of chronic diseases and better anchor chronic care in the community.  These subsidies will be available to all Singaporeans on a tiered basis based on household income.

Insurance

Second, we have insurance. With smaller family units, collective responsibility through risk pooling across society is an effective way to ensure affordability and financial sustainability in the long-term.

In 2015, we increased the role of risk-pooling through a universal medical insurance scheme, called MediShield Life. This is the first M in our “S + 3M” approach. MediShield Life serves to protect all Singaporeans, including those with pre-existing illnesses, against large hospitalisation bills and expensive outpatient treatments like chemotherapy and dialysis, from cradle to grave.

Next year, we will be introducing a new universal long-term care insurance scheme called CareShield Life that will cover all future cohorts of Singaporeans from age 30, including those who are already severely disabled, for life. The scheme provides monthly cash payouts for as long as one is severely disabled and is unable to perform three basic activities of daily living.

One unique design feature of CareShield Life is that compared to many other national long-term care insurance schemes, is its pre-funded nature – each generation pays premiums during their working years for a fixed term that will be used to cover their own long-term care needs when they become severely disabled. In this way, we avoid inter-generational transfers and ensure the long-term sustainability of the scheme.

However, these schemes are not truly universal if some Singaporeans are excluded from cover due to financial difficulties in paying their premiums. Thus, we provide premium subsidies targeted at the lower to middle income, and make additional premium support available for those who are unable to pay their premiums even after the premium subsidies. This ensures that no Singaporean loses their insurance coverage due to the inability to afford their premiums.

Personal and family savings

Third, there is personal and family savings. Individual co-payment is an important cornerstone of our system to guard against over-consumption of healthcare services, which can lead to rising, unsustainable healthcare costs. Hence, in Singapore some amount of co-payment is designed in the system across all care settings. Co-payment encourages Singaporeans to choose appropriate and necessary care, and to take ownership of their own health.

We help Singaporeans to afford co-payment for their healthcare expenses through a national mandatory medical savings scheme, called MediSave, which enables Singaporeans to regularly put aside part of their income during their working years.  This is the second M in our “S + 3M” approach. An individual’s MediSave savings can be used to pay for healthcare expenses for hospitalisation, selected outpatient treatments and long-term care services, and insurance premiums for our national healthcare insurance schemes, for both the individual and his family.

Further, all Singaporeans are required to contribute a portion of their income from work into a fund called the Central Provident Fund (CPF), which enables them to join an annuity scheme called CPF Life that will allow them to draw an annuity in their senior years to meet their retirement needs, which they can choose to start from age 65, for life.

Many of our seniors today had also benefited from Singapore’s robust economic growth over the last few decades. The home ownership rate among Singaporeans is 91%, and many have housing assets that have appreciated significantly. Seniors can therefore also monetise their housing equity to meet their healthcare and retirement needs. For those who wish to move to a smaller apartment, we currently give a cash bonus of up to USD$14,000 if part of the sales proceeds is used to top up their retirement savings in CPF Life for higher payouts.4  For others who wish to remain in the same apartment, we will buy back part of the remaining lease.5

Government safety net

Finally, our Government provides a final safety net through discretionary Government funds to help those who have care needs, but are unable to afford it despite all other available support measures. This is called Medifund, which is the third M in our “S + 3M approach”. This ensures and assures Singaporeans that no one will be denied care because of the inability to pay for their care.

Conclusion

Our strategies to help our citizens prepare for longevity are a constant work-in-progress. They are reviewed and changed to adapt to evolving needs of Singaporeans, demographics, and societal challenges.  In recent years, we have also introduced packages for current seniors to honour them for their contributions to nation-building, and provide greater assurance that they will be able to afford their healthcare expenses over their lifetimes. These are what we call the Pioneer Generation and Merdeka Generation Packages which provide additional support to our elderly, in the form of more subsidies for healthcare and insurance premiums as well as top-ups to their national medical savings account. The Government has set aside funds upfront that will be enough to pay for the full projected cost of both packages, including a buffer for inflation, throughout the lifetimes of these two cohorts. This avoids burdening future generations and ensures long-term fiscal sustainability.

We still have a lot to learn from how other countries are helping citizens prepare for their long-term care needs. I look forward to sharing ideas over the next two days with other distinguished participants in this Forum. Thank you.

By Dr Amy Khor,

Senior Minister of State for Health, Singapore

References

1 Source: Organisation for Economic Co-operation and Development (OECD).

2 Computed by actuaries engaged by MOH. The projection draws information from a wide range of cross-sectional and longitudinal sources, including ElderShield claims experience, as well as actuarial pricing data from insurance schemes in the United States, Taiwan and South Korea.

The United States has a similar statistic – in 2016, the United States Department of Health and Human Services estimated that 52% of Americans turning age 65 in 2016 would develop a disability serious enough to require long-term care before dying. Source: U.S. Department of Health & Human Services Office of the Assistant Secretary for Planning and Evaluation (ASPE) Office of Disability, Aging and Long-Term Care Policy. 2016. “Long-term care services and supports for older Americans: Risks and financing research brief”. ASPE Issue Brief Feb 2016.

3 From 2013 to 2017, screening rates have improved as follows:

Diabetes: 69.3 to 76.4%, Hypertension: 77.6 to 82.6%, Hyperlipidaemia: 72.2 to 76.8%

4 This is the Silver Housing Bonus scheme.

5 This is the Lease Buyback scheme.


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