Medical Savings Accounts: The Singapore Experience

Policy Reports | Health

No. 203
Monday, April 01, 1996
by Thomas A. Massaro, M.D., Ph.D. and Yu-Ning Wong

Executive Summary

In 1984 Singapore adopted a system of Medisave accounts, individually owned accounts used to pay for many of the health care expenditures that in the United States would normally be covered by health insurance. The fact that people are spending their own money rather than that of a third-party insurer has helped to curtail Singapore's health care costs, which are about 3.1 percent of gross domestic product. Even with these low expenditures, the income of Singapore doctors is about the same in relation to average wages as physician income in the United States, and patients have easy access to such technology as CAT scans, organ transplants and bypass surgery.

Singapore also compares favorably to other "Asian tigers" in terms of spending and overall health indicators. For example, Singapore had an infant mortality rate of five per 1,000 live births in 1992, equal to that of Japan and lower than that of Hong Kong, which was six.

To achieve this record, the government has implemented three programs that help people pay for medical expenses: Medisave, Medishield and Medifund.

The Medisave Program. Created in 1984, Medisave is a compulsory national health care savings program designed to help citizens meet their individual responsibilities and to supplement funds drawn from their own savings. Medisave contributions range between 6 and 8 percent according to the worker's age, and can be used to pay for a variety of specified inpatient and outpatient medical services, both before and after retirement.

The Medishield Program. Since Medisave accounts alone may be insufficient to cover a serious or prolonged illness, Medishield was established in 1990 as a catastrophic insurance program to pay extraordinary hospital expenses for those under 70 years of age.

The Medifund Program. Since the combination of out-of-pocket, Medisave and Medishield payments may not cover all low-income workers' medical expenses, Medifund was established in April 1993 to provide assistance.

Public institutions dominate Singapore's hospital sector: 13 of the 23 hospitals and 8,640 of the 10,469 beds are in facilities controlled by the Ministry of Health. A key component of the government'spolicy is a tiered structure of subsidies based on the setting in which care is delivered and the amenities provided with it. In the public hospitals, there are five classes of wards that receive varying degrees of subsidy, while private hospitals are unsubsidized.

In principle, individuals are free to choose among the five levels. Medical social workers provide financial counseling to everyone at the time of admission into the public hospitals. They advise patients that it is their responsibility to choose a ward class they can afford and to cover their expenses through a combination of subsidy, Medisave, Medishield and personal funds. If necessary, patients can draw on their spouse's, children's or parents' Medisave accounts.

Quality of service is an important issue for Singapore's hospitals. Hospital personnel are responsible for improving service, and senior management makes decisions based on the satisfaction of patients and other customers. For example, patients waiting less than 15 minutes at admission increased from 40 to 71 percent between 1991 and 1992.

Singapore has one of the most sophisticated health care delivery systems in Asia, serving citizens and foreign nationals alike in both private and public hospitals. In terms of efficiency of delivery, Singapore is comparable to U.S. managed health networks and point-of-service plans.

  • The hospital admission rate for residents is approximately 1.10 per year per 1,000 population, about the same as aggressively administered HMOs in the U.S.
  • The ratio of caregivers to support personnel is 5:1 at Singapore General Hospital - it is 2:1 in benchmark American hospitals - reflecting the increased efficiency that comes from lighter bureaucratic and regulatory loads that Singapore places on the delivery system.
  • The average length of stay at Singapore General Hospital is 5.4 days, also comparable to the best American managed care and far less than that in other developed countries.

The Singapore programs provide incentives to reduce consumption and offer protection against extraordinary events and free-rider abuses. The system is efficient and effective, the health status of the people is improving and the national investment in health care is surprisingly low, while hospitals are profitable and physician incomes are relatively high.

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