Cross-subsidisation of MediShield Life Premiums between Private and Public Hospitals

Miss Cheryl Chan Wei Ling asked the Minister for Health (a) how does the Ministry balance the cross-subsidisation of MediShield Life premiums between the private and public hospitals; (b) whether there is a cap imposed on insurers for the administrative cost charged as a percentage of the premiums received; and (c) what are the plans to keep premiums affordable.

MediShield Life is a basic health insurance scheme designed to protect Singaporeans against large Class B2/C hospitalisation bills. As private hospital bills are generally higher, they are pro-rated to the equivalent level of a Class B2/C bill before MediShield Life payouts are computed. This ensures comparable payouts for subsidised and private patients.

The Government has accepted the MediShield Life Council’s recent recommendation to lower the pro-ration factor for private hospital bills from the current 35% to 25%, to more adequately adjust for the differences between private hospital and subsidised bills. Over the past four years, the average bill size for inpatient and day surgeries in private hospitals has increased about 20% faster than in public hospitals. If we take the example of a coronary angiogram, the procedure when done in a private hospital would incur a bill of about $10,000 on average, while the same procedure in a B2 ward would cost about 25% of that, or $2,500 on average, after subsidies.

To keep premiums affordable and sustainable, we must ensure that rising healthcare costs are kept in check. All stakeholders must play their part and exercise responsibility in choosing and delivering appropriate and necessary care, without inadvertently leading to over-consumption, over-servicing and over-charging for healthcare services. The Government has introduced a suite of measures through the years, including a minimum level of co-payment for private insurance riders and fee benchmarks, to keep healthcare costs sustainable. The MediShield Life Council has also noted the rapidly rising costs of cancer therapies and will be reviewing MediShield Life coverage for such treatment so they can be covered in a more sustainable manner.

To ensure that MediShield Life premiums remain affordable even with the upcoming premium adjustments, the Government will provide up to $2.2 billion for premium subsidies and support over the next three years. The net premium increase for all Singapore Citizens will be no more than about 10% in the first year. The annual MediSave top-ups for Pioneer Generation seniors will also be increased from 2021. Premium payment will be deferred till end-December 2021 for those who have insufficient MediSave balances and are unable to pay their premiums in the coming year due to the economic impact of COVID-19. The financially needy can apply for Additional Premium Support for assistance with their premiums. No one will lose their MediShield Life coverage due to an inability to pay their premiums.

There is no cap imposed on insurers for the administrative costs for the private insurance portion of Integrated Shield Plans (IPs). IP premiums are set, reviewed and adjusted by private insurers based on their commercial and actuarial considerations. Insurers have an incentive to keep premiums competitive, to attract and retain policyholders. As IP premiums are higher than MediShield Life premiums, we encourage Singaporeans to carefully consider their ward preferences and long-term affordability of IP premiums when choosing an IP, especially since premiums increase with age.