Recently, the Medishield Life committee announced the changes to Medishield and many people might be confused by the changes. This post will help you understand the gist of what’s happening.
My discussion on the changes to Medishield will cover four areas:
- Improvements to basic Medishield benefits
- Medishield Life
- Premiums of Medishield Life (to be discussed in another post)
- Impact on Private Integrated Shield Plans (to be discussed in another post)
Medishield Enhancements
1. Remove lifetime claim limit of $300,000
2. Increase policy year claim limit from $70,000 to $100,000
These will affect only the very huge bills and will have no impact for most people.
3. Increase daily claim limits for normal wards from $450 to $700 and for ICU from $900 to $1200.
4. Increase daily claim limits for community hospitals from $250 to $350.
This has low impact for now as daily room rates for B2 and C wards are unlikely to exceed the old limits.
5. Increase claim limits for surgical procedures from $150-$1100 to $200-$2000.
This has some impact as a higher amount of the surgical bill will be covered.
6. Increase claim limits for outpatient cancer chemotherapy ($1200 to $3000) and radiotherapy ($80-$160 to $140 to $500).
This increase is significant and will be very helpful for the subsidized cancer patients.
7. Lower co-insurance rates from the current range of 10%-20% to 3%-10%
This is a big improvement but unfortunately, it will also have a big impact on the premiums.
8. Start premium rebates earlier from the age of 66, instead of 71
A good proposal but will be negated by the increased premiums.
Medishield Life
What is important to understand is the concept of Medishield Life compared to the old Medishield.
The key premise of Medishield Life is to make Medishield compulsory for everyone (Singaporeans and PRs). It will also cover everyone from the time they are born till the time that they die, irregardless of any medical condition that they might have. I will refer to this as universal coverage.
The enhancements to Medishield that have been described above could have been implemented on its own without introducing universal coverage at the same time. However, the government has decided to make both changes together. This has two negative effects:
- Too many changes at one go which makes things difficult for the layman to understand.
- Premiums opacity. You do not know how much of the premiums increase is due to the enhanced benefit or due to the universal coverage.
I have already given my take on the increased benefits in the previous section. From this point on, I will focus solely on the concept of universal coverage.
Personally, I like the idea of Medishield Life. It will ensure that everybody has a basic level of health insurance and that nobody gets excluded.
However, there are several practical challenges involved in implementing Medishield Life. Two of which are affordability and fairness.
If you make a scheme compulsory, how do you ensure that everyone is able to pay for it? What happens if someone does not have sufficient amount in the Medisave account to pay for the premiums? Will the amount be deducted from the next of kin? What happens if he has no NOK?
This is of particular concern for the elderly, who might have no Medisave and NOK. Enforcing debt collection would be a nightmare.
The government has solved most of this problem in a brilliant stroke by introducing the pioneer generation package. As the pioneer generation will be getting a permanent discount on their Medishield premiums as well as Medisave topups, this will help take care of them.
The other thing which the government has done is to increase the Medisave contribution by one percent.
Is it fair (to the rest) to start covering someone unhealthy who has opted out of the Medishield scheme all this while?
Generally, if you buy health insurance, any pre-existing conditions that you have are excluded from coverage. Thus, people have an incentive to apply when they are young, pay premiums when they are healthy so that it can be used when they fall ill later on.
If a plan covers pre-existing conditions, everyone will just wait until they fall ill before they buy health insurance. This is called anti-selection. Such schemes will become bankrupt or will have to charge very high premiums.
For Medishield Life, it will not have an anti-selection problem as every baby will be compulsorily included from birth.
The only tricky part is the initial launch stage of Medishield Life, where you have to suddenly include all the unhealthy people who are currently not on the Medishield scheme. Some of these people might be making a claim immediately after they join Medishield Life. The accumulated insurance premiums might have to take a hit from these claims.
One way of avoiding this problem is to include universal coverage only to the people who are born from today onwards. However, this is not the approach chosen.
Everyone alive in Singapore (both healthy and unhealthy) will be covered under Medishield Life once it is implemented. You might have noticed that the committee has so far declined to reveal the full premium rates of the Medishield Life scheme.
Judging from some of their published illustrations, I estimate that the increase is going to be very significant. The premiums as well as integrated shield plans will be discussed in my next post (This post is getting too long).
