Our future health care needs, why all roads are leading to. Singapore

11.8.05 ` Our future health care needs, why all roads are leading to Singapore The results have been impressive, with low costs, excellent health outcomes, and full consumer choice of providers and quality of care Financing Health Care The World Bank Group, May 2003 Stephen Milgate Executive Director Australian Doctors Fund Assoc Prof D M Sheldon Chairman Council of Procedural Specialists Page 1 of 10

EXECUTIVE SUMMARY Although Singapore has half the number of doctors per head of population compared to Australia and with limited if any natural resources other than its hard working people and the vision of its leaders, Singapore has become the world s most efficient providers of high quality first world health care. Singapore is unique among developed countries in achieving excellent health outcomes at a low economic cost. Part of it success may be attributable to its health financing system, which combines individual responsibility with targeted subsidies. 1 In 20 years Singapore has proven what many predicted: namely, that a health care financing system based on individual responsibility for health care costs will outlast and outperform the Socialist system of free health care for all on demand. Singapore Vital Statistics Four million people (Australia 20 million); 5,500 doctors (Australia 55,000); doctor-patient ratio 1:727 (Australia 1:363); 699 square kilometres (Australia 7.7 million square kilometres); 6066 people per square kilometre (Australia 0.4 people per kilometre); 6066 people per square kilometre (Greater Sydney is 1,600 per square kilometre Sydney CBD is 3,548 people per square kilometre); GDP per capita 23K (USA 35K, Australia 26K, New Zealand 20K, Philippines 4K, Indonesia 3K (US dollars 2002); 1 Financing Health Care The World Bank Group, May 2003 Page 2 of 10

Philosophy of Healthcare SINGAPORE HEALTH CARE FINANCING SYSTEM Individuals to assume responsibility for their own health and health costs; Government to correct market failure by targeted subsidies and safety net Co-existence of publicly owned and privately owned health facilities Co-existence of salaried and fee for service medical treatment System Features Developed from Central Provident Fund (CPF established 1955); Medisave (part of CPF) commenced 1984 Predominantly private funding (Financial Year (FY) 2002 private 67%, government 33% of health care financing); Health system co-exists with low tax rate (0% to 22% for individuals and 20% for companies); Patients still must pay co-payments after drawing down on all of their insurances, particularly for over-the-counter prescription pharmaceuticals; Withdrawals from Medisave accounts are capped depending on the procedure; There is a maximum balance you can keep in your Medisave Account; Government regulates supply and pricing of public health care; The lowest health- life expectancy per health dollar in the western world; Low infant mortality, low public hospital waiting times; Every hospital has 24hr A&E; All patients must have a guarantee of payment; X-rays, lab tests and procedures are charged separately; Non-Singaporeans pay a surcharge of 30% of the total hospital bill and double the local fee for Class A and B1 wards. Medisave covers 85% of population; Medifund covers 15% of population Hospital and Healthcare Facilities 2 State owned hospitals run by independent boards: Alexandra, Woodbridge (psychiatric); 5 Government restructured hospitals: Singapore General, Kandang Kerbau, Tan Tock Seng, National University & Changi General; 6 Private hospitals: Mount Elizabeth, Gleneagles, Mount Alvernia, East Shore, Thomson Medical Centre and Raffles Hospital. All private hospitals have 24 hr outpatient facilities. 16 public polyclinics for primary health care with salaried doctors Medical workforce 1,600 general practitioners in private practice, 5,500 medical practitioners in total, 3 schemes for Central Provident Fund (CPF) members, Page 3 of 10

Challenges for Singapore Rising healthcare costs due to advances in medical technology and knowledge; Rising expectations and demands from patients; Rapidly ageing population; How it works from the patient s (your) perspective As a wage earner you pay 20% of your monthly wage into a Central Provident Fund (CPF) (Note: your income tax is between 0-22%) Your employer (boss) pays the equivalent of 13% of your monthly wage into the CPF (employer s contribution) The CPF is administered by the Central Provident Fund Board which handles all CPF accounts. The CPF account holder receives a bi-annual statement with their CPF balance on it. To access the money, the CPF account holder has to write to the CPF Board For housing and education loans the bank can apply to the CPF Board on behalf of the borrower to access the money. Depending on your age, 6, 7 or 8% of your monthly wages is quarantined for health costs in a sub-account entitled Medisave (<=35yrs 6%, 35-44 yrs 7%, >O45 yrs 8%) There is a maximum amount you can contribute to Medisave per week. (U35yrs AU$59, 35-44 yrs AU$68.50 per week, O45 yrs AU$78.00) From your Medisave account you purchase a catastrophic insurance cover known as Medishield which reimburses some health costs If you don t want to buy Medishield you can buy a private alternative, such as income shield, but not both You can buy other private health insurance on top of your Medisave and Medishield or you can accept a private health insurance product purchased by your employer. Your Medisave policy covers your dependents including your grandparents. Once your medical savings account exceeds a balance AU$23,600, the surplus is transferred to your CPF Ordinary Account which you can then use for your housing and education costs. When you reach 55 yrs, you have 3 options: o Withdraw any funds above the minimum sum (AU$66,200 in your CPF and AU$4,000 in Medisave). The minimum sum is transferred to your retirement savings account o Partially withdraw from your CPF o Postpone your withdrawal and continue to accumulate your CPF at the given interest rate With your minimum CPF sum now in your retirement account, you can o Buy a life annuity from a participating insurance company and receive a monthly income o Deposit it with a participating bank as a fixed interest deposit and the bank will pay a monthly income until the balance is exhausted o Leave it with a CPF board invested at the given rate (currently 4%) and draw off a monthly income until the balance is exhausted. With your Medisave minimum sum you leave it in your Medisave account. If the balance drops below the minimum amount (Medisave minimum sum or MMS), you do not have to top it up. If it exceeds the MMS you can withdraw the excess amount. Contributions to CPF are tax deductible Page 4 of 10

Medisave is a percentage of wages Medisave accounts accrue interest (currently 4%) which is adjustable On the death of the CPF account holder, the CPF account can be transferred to a beneficiary. Where there is no beneficiary the CPF account will be allocated as follows: 50% to a spouse and 50% to all issue divided equally. For those who are unmarried and/or who have no offspring then the account becomes the property of the closest relative after kinship has been established. What happens if you have no income or your health costs exceed your insurance? When you enter hospital, into a B2 or C ward or go to an outpatient clinic or a voluntary residential step down facility, you are put in contact with a medical social worker who will assess your circumstances The social workers are able to pay your hospital and medical bills from a safety net account known as Medifund. They can pay all your bills, or a percentage of your bills depending on your circumstances. Almost every application for Medifund is approved. How does the cost of health insurance in Singapore compare with Australia? Family of 4 (including parents with major income earner 35yrs old), with a total taxable income of AU$60,000 Australian family Amount Singaporean family Amount Medicare levy (1.5% of TY) $ 900.00 Medisave a/c $3,562.00 Private health insurance $2,409.00 Medishield (nil included (MBF top cover) in above) Total health costs p.a. $3,309.00 $3,562.00 How can Singaporeans afford health care in a user pay system? Taxable income AU $ Singapore $ equivalent Page 5 of 10 Income tax Singaporeans pay ( AU $) Income tax Australians pay ( AU $) $20K $25,706 $394.08 $2,380 $50K $64,266 $3,588.58 $11,172 $80K $102,826 $7,069.90 $23,312 $110K $141,386 $12,853.90 $37,412 $200K $257,065 $42,540.35 $79,712 Conclusion: Singapore looks to its citizens to take responsibility for their health care costs. It supports them in their obligations with tax payer funded targeted subsidies and a safety net administered by social workers. In comparison Australians have been taught to look to Government (taxpayers) to finance the greater part of their health care needs. By promoting a greater degree of self-reliance Singaporeans enjoy the benefits of lower taxation, personal ownership of their health care dollar and choice of doctor and hospital accommodation to suit their particular circumstances.

SINGAPOREAN MEDICAL FEES IN AUSTRALIAN DOLLARS GP Public GP Private Item Fee Item Fee Consultation (adults) $6.30 Short consultation $14.00 - $20.40 Consultations (Children $3.10 Long consultation $19.60 - $43.00 under 18) Consultation over 64 $3.10 Extended consultation $15.70 - $19.60 (per 15 minutes) Non-emergency house $78.30 - $117.50 call Emergency house call $117.50 - $156.50 Public Hospital Outpatients (excluding medication and tests) Private Specialist Clinics Subsequent visits lower. Medication treatment, laboratory tests and procedures not included Item Fee 1 st visit Fee 2 nd visit Item Fee Senior consultant $50.90 - $78.30 $23.50 - $54.80 Short consultation $35.20 - $66.60 Consultant $39.20 - $62.60 $19.60 - $43.10 Long consultation $54.80 - $101.80 Senior Registrar $32.10 - $47.00 $18.00 - $31.30 Extended 31.30 - $39.20 consultation (per 15 minutes) Non-emergency $117.50 - $156.60 house call Emergency house call $156.60 - $235.00 Hospital charges per day Ward type Public Hospitals Private Hospitals A1 single bed $161.30 - $352.40 $227.00 + A2 two bedded $152.70 - $168.40 $156.60 + B1 four bedded $105.70 - $133.10 $62.60+ B2 five bedded $47.00 - $82.20 B2 6 12 bedded $22.00 - $39.20 C open ward $12.60 - $19.60 AUSTRALIAN/SINGAPOREAN COMPARISON OF FAMILY MEDICATION COSTS (AUS Dollars) Singapore Australian Item Fee Item Fee $1.10 Non-concession card holders (per item) Weekly supply adults (weekly supply per item) School children and senior citizens (weekly supply - per item) Page 6 of 10 $28.60 maximum payment any PBS item up to total of $874.00 p.a., then go to concessional card holder rates $0.60 Concession card holders $4.60 per item up to 52 scripts p.a., then free

Singapore Income Tax Rate as at 2005 year of assessment Taxable income SGD $ Taxable income AU $ % Rate of income tax AUS$ paid in income tax @ Singapore rates On the first 20,000 15,854 0 0 On the next 10,000 7,927 4 318 On the first 30,000 23,781 318 On the next 10,000 7,927 6 476 On the first 40,000 31,708 793 On the next 40,000 31,708 9 2854 On the first 80,000 63,416 3646 On the next 80,000 63,416 15 9512 On the first 160,000 126,831 13159 On the next 160,000 126,831 19 24098 On the first 320,000 253,662 37257 On income above 320,000 (AU $253,662) 22 Taxable income is the remainder of earned income plus bonuses plus interest less CPF contribution and any other allowable deductions i.e. CPF contribution is tax free Medisave required minimum sum to be topped before CPF withdraw in 2003 dollars Year commencing 1 January Amount SGD $ Amount AU $ (rounded) 2004 SGD$2500 $1,960 2005 5,100 $4,000 2006 7,500 $5,900 2007 10,000 $7,840 2008 12,500 $9,800 2009 15,000 $11,760 2010 17,500 $13,720 2011 20,000 $15,700 2012 22.500 $17,640 2013 25,000 $19,600 CPF required minimum sum at age 55 Year commencing 1 July Amount SGD $ Amount AU $ (rounded) 2004 84,500 $66,300 2005 88,000 $69,000 2006 92,000 $72,200 2007 96,000 $75,300 2008 100,000 $78,400 2009 104,000 $81,600 2010 108,000 $84,700 2011 112,000 $87,800 2012 116,000 $91,000 2013 120,000 $94,100 Page 7 of 10

Council of Procedural Specialists Briefing Paper on the Singapore Health Care System 1. Singapore is unique among developed countries in achieving excellent health outcomes at a low economic cost. Part of it success may be attributable to its health financing system, which combines individual responsibility with targeted subsidies. Financing Health Care The World Bank Group, May 2003 2. Most Western countries have relied on government taxation revenue (directly or indirectly) to pay for a substantial proportion of health care costs. According to Access Economics, Australian Federal Government outlays on health care are growing at an average of 8.1% p.a. (other expenditure 5.7%). At this rate health will account for half the Federal Budget outlays by 2050 (R Kilham, Health and the 2005-06 Federal Budget, A Report by Access Economics) 3. In the US a substantial proportion of health care financing is paid for by employers who claim it as a tax deduction. As a result many large US corporations are now struggling to finance their health care liabilities incurred on behalf of their employees. GM last week reported a $1.1 billion first-quarter loss -- the largest quarterly loss for the company in more than ten years -- and cited the cost of health insurance for 1.1 million employees, retirees and their dependants as a large factor (Kaiser Daily Health Policy Report, 4/20) ; GM has supported proposals that would have the federal government assume catastrophic health care cost to help reduce the $5.6 billion that the company spends on health care annually; White House spokesperson Trent Duffy said that President Bush favours proposals to make the United States "the best place in the world to do business," such as increased use of health savings accounts that could help reduce health care costs for companies such as GM and Ford (Wall Street Journal, 4/27). 4. Household savings have declined in Western Countries although Australia is in a stronger position than the US because of government surpluses. Nevertheless low domestic savings makes an economy vulnerable to future shocks Australia is not well prepared for such a shock John Quiggan, Fin Review 18 November 2004. Furthermore according to the Commonwealth Treasury Intergenerational Report 2002-2003, For the government, however, the high levels of debt among some baby boomers heading for retirement is a concern and there is an urgent need to increase household saving as we face the fiscal challenges associated with populating ageing 5. Singapore addressed the problem of escalating health care costs in 1984 by adding a medical savings account to its compulsory savings programme called the Central Provident Fund. 6. By contributing 6-8% of their pre tax salary to a Medisave, Singaporeans are encouraged to take personal responsibility for their own health care costs with targeted subsidies for those who do not have the means to pay (Medifund). 7. In Singapore public and private hospitals levy charges on all users as does government run polyclinics. The private health sector also is free to set its own fees and public and private sectors co-exist offering patients considerable choice of doctor and hospital accommodation.. Page 8 of 10

8. Singaporeans also buy health insurance (Medishield) from pre-tax earnings. This insurance supplements their Medisave accounts. Those who are unable to pay due to genuine circumstances of hardship are assessed by social workers and have their medical expenses paid by the taxpayer through from Medifund. 9. The Singaporean system is financed predominantly by private sources (67%) government (33%). (Watson Wyatt, Health Care Market Review). In addition to Medisave and Medishield Singaporeans are also expected to pay for some of their own health care costs out of their own pockets in the form of co-payments for larger medical bills. 10. Singaporeans are among the lowest taxed income earners in the Western world. Tax rates are from 2%-28% for individuals and 26% for companies.(watson Wyatt, Health Care Market Review) 11. Although Singapore has approximately half the number of doctors per head of population compared to Australia (doctor patient ratio of 1:727 compared to Australia s 1:363), its waiting times are considered to be far superior to any other Western country. Up to date data is hard to find. However in 1996 the Singapore Ministry of Health claimed waiting times of 8 days for elective surgery. 12. Health cost comparisons using the World Health Organisation measure of expected number of years to be lived without reduced function due to illness and disability show that Singapore had an annual health care expenditure less than half of many developed countries even though its citizens enjoy comparable healthy life expectancy.(watson Wyatt, Health Care Market Review) 13. Singaporeans are only slightly less wealthy as individuals when compared to Australians GDP per Australian 2002 (25993 USD) Singapore 2002 (23023 USD). 14. AUSTRALIAN/SINGAPOREAN COMPARISON OF FAMILY HEALTHCARE COSTS $AUD Family of 4 (including parents with major income earner 35yrs old), with a total taxable income of AUD$60,000 Australian family Amount Singaporean family Amount Medicare levy (1.5% of TY) $ 900.00 Medisave a/c $3,562.00 Private health insurance (MBF top cover) $2,409.00 Medishield (nil included in above) Total health costs p.a. $3,309.00 $3,562.00 Page 9 of 10

SINGAPOREAN MEDICAL FEES IN AUD (rounded to nearest 10 cents) Public Item Consultation (adults) Consultations (Children under 18) Consultation over 64 Fee $6.30 $3.10 $3.10 Private Private Item Fee Short consultation $14.00 - $20.40 Long consultation $19.60 - $43.00 Extended consultation $15.70 - $19.60 (per 15 minutes) Non-emergency house $78.30 - call $117.50 Emergency house call $117.50 - $156.50 Public Hospital Outpatients Specialist Clinics (excluding medication and tests) visits lower. Medication treatment, laboratory tests and procedures not I ncluded Private Subsequent Item Fee 1 st visit Senior $50.90 - consultant $78.30 Consultant $39.20 - $62.60 Senior $32.10 - Registrar $47.00 Fee 2 nd visit $23.50 - $54.80 $19.60 - $43.10 $18.00 - $31.30 Item Fee Short consultation $35.20 - $66.60 Long consultation $54.80 - $101.80 Extended consultation $31.30 - (per 15 minutes) $39.20 Non-emergency house $117.50 - call $156.60 Emergency house call $156.60 - $235.00 Hospital charges per day Ward type Public Hospitals Private Hospitals A1 single bed $161.30 - $352.40 $227.00 + A2 two bedded $152.70 - $168.40 $156.60 + B1 four bedded $105.70 - $133.10 $62.60+ B2 five bedded $47.00 - $82.20 B2 6 12 bedded $22.00 - $39.20 C open ward $12.60 - $19.60 Source: Singapore Medical Association (SMA Guidelines) Page 10 of 10