Lessons of Singapore: Getting Financing

and Purchasing right

Dr Kambiz Monazzam

Tehran - Jan 2007

Most slides are based on Prof Lim Meng Most slides are based on Prof Lim Meng KinKin

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Singapore: Small but!

Singapura, the Lion City, from the Malay words singa (lion) and pura (city).

Singapore

Iran

Area 660 sq km Population 20064.48 million

Area 660 sq km Population 20064.48 million

Singapore

• late 1300'sp Paremswara settles in Temasik (Singapore). He later moves to Malacca to escape the invading Siamese forces.

• 1400-1500 Golden age of Malacca as a trading entrepôt.• 1511 Portuguese seize Malacca.• 1600 British establish East India Company (EIC).• 1602 Dutch establish United East India Company (VOC).• 1613 Singapore burned by the Portuguese.• 1641 Dutch take control of Malacca.• 1786 Sir Francis Light takes possession of Penang for Britain.• 1795 Malacca transferred from Dutch to British.• 1811 Raffles appointed Lieutenant-Governor of Java.• 1819 Raffles signs treaty with Sultan Hussein of Johore and Temenggong Abdul Rahman of Singapore to allow

British to establish a trading post in Singapore.• 1819-1823 Farquhar in charge of British settlement in Singapore (reporting to Raffles in Bencoolen). Singapore

thrives as a duty-free trading port.• 1823 Raffles oversees transition of Singapore's administration from Farquhar to Crawfurd, then returns to

England (and dies there three years later).• 1824 Dutch formally recognize British rights to Singapore under Treaty of London.• 1826 Penang, Malacca, and Singapore joined to form Straits Settlements.• 1825 Value of Singapore's trade double that of Penang and Malacca combined.• 1832 Singapore becomes administrative headquarters of Straits Settlements.• 1860 Singapore's population exceeds 80,000.

Singapore: Ancient History

Independent Singapore was admitted to the United Nations on 21 September 1965, and became a member of the Common wealth of Nations on 15 October 1965.

• 1 Ancient times • 2 Founding of modern Singapore (1819) • 3 Early growth (1819–1826) • 4 The Straits Settlements (1826–1867) • 5 Crown colony (1867–1942) • 6 The Battle of Singapore and the Japanese Occupation (1942–1945) • 7 Post-war period (1945–1955)

– 7.1 First Legislative Council (1948-1951) – 7.2 Second Legislative Council (1951-1955)

• 8 Self-government (1955–1963) – 8.1 Partial internal self-government (1955–1959) – 8.2 Full internal self-government (1959-1963) – 8.3 Campaign for merger

• 9 Singapore in Malaysia (1963–1965) – 9.1 Merger – 9.2 Racial tension – 9.3 Separation

• 10 Republic of Singapore (1965–present) – 10.1 1965 to 1979 – 10.2 The 1980s and 1990s – 10.3 2000 - present

Singapore: Recent History

Chinese 75%Malays 14%Indians 7.7%Others 1.4%

Chinese 75%Malays 14%Indians 7.7%Others 1.4%

Independent Singapore was admitted to the United Nations on 21 September 1965, and became a member of the Common wealth of Nations on 15 October 1965. On 22 December 1965, it became a republic, with Yusof bin Ishak as the republic's first President.

144 years144 years

GDP per capita (PPP) USD 27,330

Infant Mortality Rate

2.5

Iran: 26

Life Expectancy

Iran: 70

0

2

4

6

8

10

12

14

16

1965 1970 1975 1980 1985 1990 1995 2000

Per

cent

age

Health care expenditure trends: OECD countries & Singapore 1965-2000

U.S.

Germany

Canada

Japan

U.K.

Singapore

Year

Health expenditure as % of GDP

IMR

/1,0

00Cost-effectiveness Comparisons: Health Expenditures and Infant Mortality

Taiwan

Hong Kong

Singapore Japan

Australia

Germany USUK

Health spending as Per capita

% of GDP spending

1. France 9.8% $2,3692. Italy 9.3% $1,8553. San Marino 7.5% $2,2574. Andorra 7.5% $1,3685. Malta 6.3% $5516. Singapore 3.1% $8767. Spain 8.0% $1,0718. Oman 3.9% $3709. Austria 9.0% $2,27710.Japan 7.1% $2,37337. U.S.A. 13.7% $4,18793. Iran 4.4% $108

Efficiency: WHO Rankings 2000

Singapore Inpatient Care System

Hospitals 24

Hospital Beds 10500

Public Hospital beds 80% 200-2500 Bed H

Private Hospital beds 20% 60-500 Bed H

Public Hospital Tiered Pricing

Bed Occupancy Rate 80%

Average Length of Stay 5 day

Singapore Inpatient Care System

• Large Important Centers:– Singapore General Hospital (SGH) – National University Hospital (NUH)

• National Health plan : 19831. First Financing

2. Then Hospital Reform

Outpatients: 80% go to Private 20% go to Public

Inpatients: 20 % go to Private

80% go to Public

Public – Private Mix

Public vs. private health expenditure

Taiwan 66% 34%

Hong Kong 54 46

Thailand 51 49

China 49 51

Malaysia 48 52

Korea 41 59

Japan 32 68

Indonesia 25 75

Iran 43 57

Singapore 21 79

Public Private

Key Health Care Reforms

1983 National Health Plan 1984 Medisave 1985 Hospital Restructuring 1990 Medishield 1993 Medifund

1993 White Paper-Affordable Health Care 2000 Clustering / Eldercare fund

2002 Eldershield

Reasons Behind Reform

• Demand for Hospital Care is going up

• Anticipated Tax revenue expected to go down in relative terms

Reform Goals

• To secure healthy population through active prevention & promotion of healthy lifestyle

• To improve health system cost – efficiency

• To meet rapidly aging population growing demand for health care

Reform Threats

• Complete Dependence to GOV Taxes

• Moral Hazard

• Hospital Induced Demand

• Low People Responsibility

• Punishing of people who stay healthy

Singaporean Values & Famous Proverbs

• Self Reliance

• Strong Family Ties

• “Save for rainy day”

• “Charity begins at home”

Social Context

0%

20%

40%

60%

80%

100%

1965 1970 1975 1980 1985 1990 1995 2000

Year

Pe

rce

nta

ge

Government Expenditure Private Expenditure

Public vs. Private financing Singapore 1965-2000

Financing reform: 3M system

Singapore’s Health Care Financing Philosophy:

Avoid either extremes

Free Market(open–endedhealth insurance)

Free Healthcare(egalitarian welfarism)

“Singapore believes that welfarism is not viable as it breeds dependency on the

government. It has adopted a policy of co-payment to encourage people to assume

personal responsibility for their own welfare, though the government does

provide subsidies in vital areas like housing, health and education.”

• Personal responsibility• State as payer of last resort

Philosophy:

Government:subsidy

People: co-payment

+

Formula:

Financing Options

• Self pay (include user fees)• General tax revenue financing • Insurance:

– Social insurance: Compulsory; Public or private management

– Private: Voluntary• Community Financing• Individual Savings Account

Reforms in health care financing

- 3 “M”s

Compulsory for working individuals

Contributions to personal accounts.

Contributions matched by employer

Tax exempt

Earns interest

Medisave

• Employer & Employee paid 20% of Wages to Central Provident Fund

• X % of employee’s wage go to Employee’s Medisave Account.

Medisave

Age % to Medisave

X <34 %6

35 - 44 %7

45> Retirement or reaching to a ceiling 20,000 S$

%8

• Employer & Employee paid 20% of Wages to Central Provident Fund

• X % of employee’s wage go to Employee’s Medisave Account.

Medisave

Age % to Medisave

X <34 %6

35 - 44 %7

45> Retirement or reaching to a ceiling 20,000 S$

%8

Payment :Full Charges of low class wardsPartial charges of high class wardsHave maximum daily limits

In 2001, 262,000 Singaporeans (or 85 per cent of the total number hospitalized that year) used Medisave to pay their hospital bills.

On average, each patient withdrew about S$1,500.

Status of Medisave:

Catastrophic insurance, covers expenditure for major illness such as:

Long HOS stayCancer Chemotherapy

MediShield

Can Medisave cover catastrophic health Expenditures?! Why

MediShield:Claim limit /YearClaim limit /Person

"deductible"

coinsurance: 20%

MediShield

Premiums automatically deducted from Medisave / orIf people wants to pay separately

%0.5 ?

MediShield

In 2001, MediShield covered 2.02 million

CPF members and their dependants.

MediShield paid out 91,000 claims

amounting to S$64 million.

Present status of Medishield:

Endowment fund

interest distributed to public hospitals, to pay hospital bills of

needy.

Hospital Medifund Committees appointed by Government

Medifund

Status of Medifund

In 2001, 156,800 applications (or 99 per cent of all

applications) for Medifund assistance

amounting to S$26.9 million were approved.

MEDISAVE:

compulsory savings plan

MEDISHIELD:

catastrophic insurance plan

MEDIFUND:

a health endowment fund

Markets\PrivateSector

Broader Public Sector

Core Public Sector

B A C P

Hospital reform

B - Budgetary UnitsA - Autonomous UnitsC - Corporatized UnitsP - Privatized Units

C

• Raise efficiency & service standards

• Improve productivity

• Cost control

• Give Management flexibility

Hospital Reform Goals

Hospital reform

• Select 11 HOS for pilot (6+5)

• Started with one new HOS

• Corporatized pilot Hospitals

• Use commercial accounting

• Increase Price for Quality • Make HCS ( Health Corporation of Singapore )

& Pilot HOS is under it, (HOLDING of HOSPITALS)

Hospital reformElements Delegation of each element

Decision Rights Labor, Remuneration, Deployment of labor & other resources

Residual Claimant Full to their budget + GOV subsidies decreasing over time

Market Exposure subsidies decreasing, Less budget allocation, more revenues from “sales” (15% to 55%)

Accountability accountability to board of directors

Social Functions Internal Cross Subsidization, GOV Subsidies for poor

Hospital reform problemson Implementation

Problems SolutionsGeneral Resistance Implement over time

Staff Resistance 3 Options: join 80%, 1 Y Delay, Stay as Civil Servants

Doctors go to private Increase their earnings 5-6 times greater average wage

Extra Demand for not C/E services

-

Graded ward subsidyCross Subsidization

Class Subsidy Difference

A 0% 1-2 bedded, air-conditioned, attached bathroom, TV, Phone, choice of doctor

B1 20% 4- bedded, air-conditioned, attached bathroom, TV, Phone, choice of doctor

B2+ 50% 5-bedded, air-conditioned, attached bathroom

B2 65% 6-bedded, no air-condition

C 80% >6 beds, open ward

Admissions- Public & Private Hospitals

0

20

40

60

80

100

120

1980 1985 1992 1995 1996

Year

Perc

enta

ge

Private

A

B1

B2

C

Hospital Reform Results

Admissions Go UP Cost recovery 40-60%

Administrative costs increase 5-10%

Revenue increases more than costs

Administrative Staff 1/6 of Cure staff

Waiting time decrease

Length of stay decrease but increase in C wards

Medifund

Medishield

Medisave

Example 1:

Example 2:

Elderly as % of Population (1997)

United States 13United Kingdom 16Japan 16Hong Kong 10 Taiwan 8Korea 7Singapore 7Iran 5.2

But 3Ms is not enough…

Demographic transition: % population > 65years

Eldercare Fund (2000)

• $200m Initial capital injection; further capital injections from budget surpluses. Interest income to fund operating subsidies to voluntary nursing homes for elderly & other step-down care services.

• Goal: $2.5billion capital by 2010Now: $900 m.

ElderShield (2001)

• National severe disability insurance covering long-term care (home care or nursing home).

• Low annual premium from Medisave.

• Cash payout $300 per month up to 60 months.

Summary of financing philosophy:

individual responsibility +

risk pooling+

government subsidies

Framework for financing healthcare

Medisave:

MediShield:

Medifund:

+ ElderCare Fund

+ ElderShield

“No one will be denied needed health care because of lack of funds”

- Prime Minister Goh, 1993

Hybrid Healthcare Financing Framework

Employerbenefits

(36%)

Medisave(8%)

MediShield(1.7%)

Cash(29%)

Individual Financing

Medi Fund

(0.3%)

GovernmentSubvention

(25%)

Total Healthcare Expenditure

No matter who pays at point of care,whether it is

Government Employers, Insurance, Medisave, Out of pocket

ultimately, citizens themselvesbear the burden

• Autonomy - free from civil service constraints.• Integration – seamless healthcare• Accountability – cost and quality indicators • Competition - clusters

Singapore’s health care delivery reforms:

Management Responsibility Management

Responsibility MOHMOH HCSHCS

HospitalsHospitalsHospitalsHospitals

Hospital Restructuring

1985 National University Hospital Pte Ltd1988 National Skin Centre Pte Ltd1989 Singapore General Hospital Pte Ltd1990 Kandang Kerbau Hospital Pte Ltd1990 Toa Payoh Hospital Pte Ltd1990 Singapore National Eye Centre Pte Ltd1992 Tan Tock Seng Hospital Pte Ltd1993 Ang Mo Kio Community Hospital Pte Ltd1997 National Dental Centre Pte Ltd1998 National Heart Centre Pte Ltd1998 National Cancer Centre Pte Ltd1999 National Neuroscience Institute Pte Ltd2000 Institute of Mental Health2000 Alexandra Hospital

Western Cluster

Tertiary Hospital

Regional Hospitals

Polyclinics

Eastern Cluster

Tertiary Hospital

Regional Hospitals

Polyclinics

2000: “Clustering”

Alexandra Hospital

National University Hospital

Tan Tock Seng Hospital Woodbridge Hospital / Institute of Mental Health

NHG Polyclinics

National Skin Centre National Neuroscience Institute

(9 polyclinics) NHG Polyclinics

NHG Polyclinics

NHG Polyclinics

NHG Polyclinics

NHG Polyclinics

NHG Polyclinics

NHG Polyclinics

NHG Polyclinics

•Seamlessness

•Synergy

National Healthcare Group

Demand-side(Patient)

Cost-sharingCost-sharing MediShieldMediShieldMedifundMedifund

MedisaveMedisave

Supply-side(Provider)

Case-mixCase-mix Case-mixCase-mix

ProblemProblem

SolutionSolution

Rationale behind Singapore’s Health Care Reforms

CompetitionCompetition

QualityUtilizationQualityUtilization

Moral Hazard

Goals of health care system

• Quality • Access• Cost

Health care expenditure as % of GDP

United States 14

United Kingdom 6

Iran 4.4

Singapore 3

Spending enough?

Singapore

Iran

UK

USA

Public or private?

Public Private

Public

Private

Provision

Fin

anci

ng

TraditionalMarket

New paradigm: Partnership?

Society’s values

Self-payPrivate

Private Insurance

Mixed Community Financing

Social InsurancePublic

Government Revenue

Self-payPrivate

Private Insurance

Mixed Community Financing

Social InsurancePublic

Government Revenue

Private

Public

Self Reliance

Solidarity

Risk Pooling

}

{

{

Who? What? Why?

Affordability

AccessQuality

Why Singapore Is Successful?In the hospital organizational reform

1. High Capacity of its Public Administration

2. Political system that are conductive for Structural Reform

Lessons of Singapore

1. Innovative Financing

2. Organizational reform

3. Cross Subsidies in delivery

4. Risk Transfer to people

Lessons of Singapore

1. High Social Capital

2. Disciplinary People

3. Imitate the best but adapt

Lessons of Singapore

THE END

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