Last week, it was reported in the Today newspaper that Deputy Prime Minister Tharman Shanmugaratnam had said that, “the Government will be announcing measures “soon” to help the pioneer generation of Singaporeans who were unable to reap the full benefits of Singapore’s economic rise during their working life. Specifically, the authorities will be looking to alleviate the healthcare costs in “all aspects” — including hospitalisation, outpatient and nursing home bills — for this “very special group”.
The Today newspaper had reported that Mr Tharman had also “noted (that) this group of Singaporeans did not manage to accumulate much savings in their Central Provident Fund because their salaries were relatively low.”
Today also reported that, “political watchers expect the National Day Rally on Aug 18 to be a possible platform for the announcements.”
What I found disconcerting was that Mr Tharman had also said that, “the younger generation now has higher pay so we want to do more to help the older Singaporeans, especially with healthcare costs”.
Today also reported that Tanjong Pagar GRC Member of Parliament (MP) Chia Shi-Lu, who sits on the Government Parliamentary Committee (GPC) for Health, had “added that the Ministry of Health is looking into greater differentiation between help with healthcare costs for the pioneer generation vis a vis other Singaporeans.”
Yesterday, Today had also reported that the Government Parliamentary Committee for Health, chaired by Member of Parliament Lam Pin Min and comprising seven other MPs — “released a report with a slew of recommendations aimed at improving healthcare affordability”. One of the key recommendations was to “ensure affordability of MediShield premiums, especially for elderly, possibly by getting the young to pay higher premiums”.
Today also reported that, “citing a Today report last month which surveyed 50 young working adults and found an overwhelming majority were willing to pay higher premiums to reduce the burden on the elderly, the committee also proposed a “reversed premium structure” where an individual pays a lower premium as he gets older. A Singaporean or permanent resident aged between 21 and 30 currently pays an annual premium of S$66. At the other end of the spectrum, a Singaporean or PR aged between 86 and 90 pays S$1,190 a year.”
First off, let me state that I believe that older Singaporeans should not be made to paid such high premiums for their Medishield. It doesn’t make financial sense as they should be expected to retire by then and wouldn’t have enough money to pay for such high premiums.
However, what I am concerned about is this – where is the government’s role in subsidising for older Singaporeans?
Let me bring out some statistics to let you understand the reality of the situation.
Acting Manpower Minister Tan Chuan-Jin had said that “entry-level salaries for Singaporeans had been stagnant over the past five years” (Chart 1).
Also, for Singaporeans who earn lower wages, they would see their wages stagnate or drop over time (look at the lines towards the bottom in Chart 2).
Which is why I am uncomfortable that the very first solution that the government could come out with was to ask younger Singaporeans to cross-subsidise the premiums of older Singaporeans.
For the young in Singapore, they have not seen their wages grow and over their lifetime, they would receive lower and lower wages. Wouldn’t the government’s recommendation of cross-subsidising create further challenges for them?
Should the government not uplift their wages first, or in fact, uplift the wages of low-wage Singaporeans first, before proposing such a solution?
But does that mean that the young shouldn’t subsidise for the old? No, in fact, we should! Because it should be the responsibility of the young to take care of the old. But before that happens, what other considerations need to take place?
What the government needs to consider before asking the young to cross-subsidise the old is to look at (Chart 3):
- First, how much more can the government subsidise for healthcare?
- Second, how should the rich subsidise for healthcare for the poor?
Let me show you some more statistics.
The Singapore government spends the lowest proportion of our GDP on healthcare as compared to the other developed countries, and in fact, as compared to even many developing countries (Chart 4).
The Singapore government also spends the lowest proportion on the total health expenditure, as compared to other developed countries (Chart 5).
Do you think the Singapore government should do more before asking the people to do more?
If you are worried, like how the government had kept saying, that Singapore doesn’t have enough money. Let me show you more statistics.
Do you know that the GIC and the Temasek Holdings, which are CPF are invested into, are ranked the 8th and 10th largest and richest sovereign wealth funds in the world (Chart 6).
Do you also know that Singapore has the highest reserves per capita in the world (Chart 7).
Chart 7: The World Bank Total reserves
So, can the government do more?
Next, I wonder too why the government would be so willing to ask the young to cross-subisidise for the old, when it hasn’t even broached on asking the rich to cross-subsidise for the poor?
The government had always been resistant towards having more progressive taxes.
But looking at Chart 2 again, if you are the government, what would you realistically do first?
In Chart 2, which is the group which keeps seeing growth in their wages?
Sensibly and logically, would you first ask the rich to subsidise for the poor first, or would you ask the young, who if they are in the lower-wage group would see their wages drop, to subside the old first?
So, are there fundamental flaws in the government’s first solution to solve Medishield’s problems be to first make the young pay more for the old?
What I would do is to first increase the government’s subsidy for older Singaporeans, and also for poorer Singaporeans, then implement more a more progressive premium structure, where the rich pay more, before finally asking the young to pay more higher premiums for the poor.
I will be very worried if at the rally this Sunday, all Prime Minister Lee Hsien Loong would suggest would be to ask the young to pay higher premiums for Medishield.
What I want to hear is that the government would either top up the premiums of older and poorer Singaporeans, or to increase the payout for older and poorer Singaporeans.
Let me show you some more statistics to give you a clearer picture.
Our CPF Ordinary Account now pays an interest of 2.5% whereas the Special and Medisave Accounts pay interest rates of 4%.
Do you know that the GIC and the Temasek Holdings, which our CPF is invested in, is earning 6.5% (Chart 8) and 16% (Chart 9) respectively?
Chart 8: GIC Medium-Term Investment Results
So, can more interests be returned to at least the older and poorer Singaporeans?
What do you think?
Another thing that got me worried was what Associate Professor Sean Flynn had said. Today had called him “a visiting American economics professor, who is a strong advocate of the Singapore healthcare system” and that he is currently “writing a book called The Singapore Solution as part of his efforts to push for a reform of the US healthcare system”.
Assoc Flynn had said that, “a way to “get rid” of any bed shortages for a particular class of ward would be to raise the prices of these beds. “But this is difficult for politicians to do and if they had to vote on it every year, politicians don’t like to raise the price of anything … So a simple way to solve this problem is to just have everything indexed to inflation, so the prices of things would just go up automatically every year with the inflation rate … that relieves the polticians of having to make that decision every year.”
Assoc Prof Phua Kai Hong, of the Lee Kuan Yew School of Public Policy had also suggested to adjust the “Medisave amount” according to the rate of inflation.
But in the first place, the wages of the workers in Singapore have actually not kept pace with inflation. You can see in Chart 10 that inflation has actually risen faster than wage change.
Chart 10: The Straits Times
If the government wants to pursue such a policy of pegging the prices of beds or our Medisave Minimum Sums to inflation, then the government would also need to implement an explicit policy of pegging wages to inflation. Otherwise, if the prices of beds and healthcare prices keeps increasing while the peoples’ wages have not been rising in tandem, as it has not, then how can the people continue to afford the ever-increasing prices of healthcare?
So, at the rally this Sunday, if PM Lee doesn’t say that the government will do more to spend more to subsidise the healthcare of Singaporeans, then this PAP-led government has truly become irrelevant. Also, if the government would even think of pegging prices of beds to inflation, then the government has truly not been in touch with the peoples’ needs.
And as I’ve written before, “Health Minister Gan Kim Yong had announced that, the government will increase its “share of national spending … from the current one-third to about 40 percent and possibly even further, depending on various factors such as demographics, and our ability to manage healthcare costs and target our subsidies.”
As I’ve also mentioned, 40% is simply not something to shout about, not when it’s still considerably lower than the 48% that the United States spends on and the 58% that South Korea spends on, especially not when these two countries have lower GDP per capita than Singapore.
For a fair comparison on a country which has a similar GDP per capita, Norway spends 84% of the total expenditure on healthcare. So, if the Singapore government increases their expenditure to 40% or 45%, will you even consider this to be a significant move for Singaporeans?