Why must MediShield break even?

"This is how much you are getting off us"

This is how much you can expect from us.

In the end, when all the tears have dried and euphoria has died down, you start to get this niggling feeling that something doesn’t feel quite right. You toss and turn through Sunday night, wondering if the deal you’ve just been sold may not be such a great deal after all. Then, come Monday morning, you begin feeling a little silly to have gotten so excited in the first place. On hindsight now, after much careful thought, you put it down to that creepy smile and repeat assurance to not worry that threw you off-guard.

In the National Day Rally yesterday, PM Lee played housing agent like a seasoned salesman. Complete with a neat PowerPoint presentation and a cooperative audience in a game of Show of Hands, he demonstrated how a 3-room or 4-room HDB flat can be affordable for ordinary Singaporeans. Even more impressive was how he went on to play the insurance salesman. Indeed, if he ever becomes one, he will no doubt be sweeping all Agent of The Month accolades.

For where in the world will you ever find an insurance agent who gets cheered and praised by his customers for telling them that, in order to get higher and more comprehensive coverage on their health plans, they need to pay a higher premium? The best most agents can hope for is a polite no in place of the phone slamming. When Singtel told its customers the higher price they are now paying for the English Premier League will come with a comprehensive 80 other channels, all they got were brickbats and mio Boxes thrown at them from angry football fans.

At the risk of sounding too cynical, the announced changes to MediShield simply boil down to paying more for getting more. Coverage beyond 90, coverage for pre-existing conditions and less out-of-pocket payment are all excellent but will come at a price of higher premiums for MediShield Life and higher contribution rates to MediSave. There is no left-of-centre paradigm shift in this, as some commentators and even DPM Tharman Shanmugaratnam suggest the government is moving toward. Paying more to get more is no different from what you could expect from profit-driven insurance companies, only that the government as its rightful duty will no longer pick and choose customers like these companies do. Conspicuously absent in PM’s speech was any mention of MediFund, the only leg of our 3M system that comes from government coffers.

The underlying issue is Mr Lee’s statement that MediShield “must break even”, which on the surface sounds sensible but in reality doesn’t have to be. Governments must balance budgets, but individual schemes do not have to break even. Already, the government is spending $2 billion a year on the Marriage & Parenthood Package, with no chance of any babies paying them back in future. The $1 billion spent on Gardens By The Bay is unlikely to ever be recouped from tourist receipts, yet we are already looking to build another “Jewel” at Changi Airport. And it is impossible to talk about our budget without mentioning the amount we spend on defence every year ($12.3 bn for FY2013).

This is not to say that these expenditures are not worthy, but to point out that we have to spend on some areas while recouping from others. Much of the benefits from spending is intangible and impossible to quantify, but it is well known that this country spends one of the lowest on healthcare ($5.7 bn for FY2013) compared to other developed nations. On the government’s part, ensuring affordable healthcare keeps the citizenry healthy and productive and increases disposable income, thereby boosting revenue from the usual tax sources such as income tax and GST. Therefore, this higher-premium-for-greater-coverage change to MediShield is not going to placate those urging the government to spend more in healthcare, nor those who think we spend too much on defence. While defence is vital, nobody can explain why, for example, we can’t cut its budget by 20% to $10 billion without compromising security to give the health budget a 40% increase.

In essence, this is not so much about a straight choice between healthcare and spending in any specific other area but more a sense that there is a lot more the government could do without being so quick to sound the caveat. Besides, whether the scheme breaks even or not depends also on how much it is charging, what it defines as subsidised and what is payable by citizens.

To the PM’s credit, there is a promise to help those who can’t pay for the higher premiums, as well as the newly announced Pioneer Generation Package for those in their late 60s and above. Details, however, are lacking at this moment. Who qualifies exactly, and do they have to jump through hoops to qualify? Until we know more, it’s best not to get too excited for now.