PM tweaks troublesome policies, underlying problems remain

“Major turning point”, “strategic shift” and “an epochal speech”. These are some of the terms used by the PAP and their supporters in an attempt to make out that after a year of “National Conversation”, the government had listened and was willing to make drastic changes to improve the lives of Singaporeans. Others however were less impressed – myself included – not least because the policy announcements clearly did not live up to the hype, but most importantly because the superficial changes announced did nothing to address the root causes of the problems facing ordinary Singaporeans.

The policy changes announced came under three predictable headings – housing, healthcare and education. The changes to education policy – forty places at every primary school reserved for P1 students with no ties to the school, and quoting PSLE results as grades rather than raw scores – seem particularly inconsequential. To housing and healthcare however PM Lee dedicated the majority of his speech and it was in these areas that the government’s inability to identify or address the real problems facing Singaporeans was most obvious. Two phrases used by the PM in particular caught my attention – to help people “level up” and to “share the risks”. But in neither housing nor healthcare policy do these phrases rings true, in fact the opposite is closer to reality in Singapore, and therein the supposedly “game-changing” qualities of PM Lee’s National Day Rally speech are quite underwhelming.

Housing – Leveling Up?

PM Lee dedicated a large portion of his speech to playing the role of a HDB housing agent, trying to convince listeners that flats are affordable. Being the good salesman that he is, he repeated the phrase that housing is “affordable” or that we can “afford” it no less than nineteen times. Is the provision of affordable housing suddenly a “major turning point” for the PAP? It seems unlikely, since the government has ostensibly been providing such a service for decades. In his role as HDB housing agent, PM Lee dutifully reeled off a list of grants and benefits available to purchasers, but one would have to try hard to distill a “strategic shift” out of what was mostly a PR exercise in reminding Singaporeans of the numerous schemes already in existence. Only after re-reading the transcript of Lee’s speech was I was able to detect one new policy announcement – an increase in the Special Housing Grant (SHG) of $10,000.

Existing, just the present arrangements, you will have $45,000 of grants already, various things. But now because we have changed our SHG, you will get an extra $10,000 of grant
PM Lee, National Day Rally Speech, 18 August 2013

This couldn’t possibly be the game changer, could it? Increasing existing grants of $45,000 to $55,000? It sounds exactly like “more of the same” rather than a strategic shift.

Ironically, if one wanted to find a strategic shift in housing policy, one would only have to look at PM Lee’s NDR speech from 2011. It was on that occasion that Lee announced an increase in the HDB income ceiling from $8,000 to $10,000. While that $2,000 increase is not in itself a large amount, this policy change was actually much more drastic than it seems, simply because the ceiling had not been increased for seventeen years previously. Accounting for inflation, that $8,000 income ceiling was worth over $10,000 seventeen years ago, but the question to consider is whether or not someone earning that much in the 1990s needed help from the government to purchase a home. “Condo” used to be one of the “5 Cs of Singapore”, and it was surely the expectation of the government in those days that anyone earning more than the income ceiling would be able to afford private housing in an ostensibly rich country like Singapore. Furthermore, by chosing to keep the income ceiling fixed for almost two decades, there was likely an implicit expectation that more Singaporeans could “level up” as their wages increased over the $8,000 threshold to move into private housing.

In fact however, housing and other cost of living factors have outstripped wage growth in recent years, so more and more Singaporeans who earned over the old income ceiling found themselves stuck – earning too much to buy a HDB but not enough to “level up” and buy a condo. This is the underlying problem that PM Lee ignores in his NDR speech – he has done nothing to address the fact that Singaporeans’ wages lag inflation. By instead chosing to give out more government grants, he merely kicks an increasingly painful can down the road. Without solving the problem of low wage growth, what can PM Lee possibly have in mind for 2015 or 2020? Increase government grants, again and again? Similarly to the short-sighted policies of the population white paper, this is a thoughtless non-solution to one of the biggest challenges facing Singaporeans.

Healthcare – Sharing the Risks?

It’s well documented that healthcare spending in Singapore is funded disproportionately out of the pockets of citizens rather than through general government spending, and this reflects the fact that the risk of falling sick here is borne mostly by citizens as opposed to being shared with the government. According to WHO figures from 2011, the proportion of healthcare spending met by the government was 31% in Singapore compared with an OECD average of 61.4%. Even more shockingly, the Singapore government appears to use this predominantly patient funded healthcare system as a source of revenue. If you only learn one thing this week, let it be this: between 2001 and 2010, MediShield collected over $2 billion in premiums and paid out less than $1.3 billion in claims, for a net revenue gain of $850 million. That in Singapore, a supposedly rich country with vast financial assets and reserves, the government not only forces the burden of healthcare spending onto residents, but then in fact sees significant net revenue generation from the healthcare system is inexplicable.

In light of this, it is obvious that MediShield can take on greater responsibility, but the policy announcements made were again underwhelming and neglected to address the root cause of Singaporean’s concerns. As noted by others, extending MediShield to become MediShield Life is an improvement, but an obvious and long overdue one at that. Further changes to increase the circumstances in which MediSave funds can be used to pay for outpatient treatments are also welcomed, but cannot be seen as an increase in government risk sharing, rather these changes merely allow one to use ones own accumulated funds for healthcare spending rather than paying out-of-pocket.

The most telling change announced to healthcare policy however was a commitment to provide “better protection for very large hospital bills”, although in announcing this, PM Lee went to great lengths in asserting that “very very few” people suffer such large bills under the current scheme. One wonders if he himself didn’t see the irony in launching a scheme while at the same time trying to assert that almost no-one would benefit from it – less than 1 in 140 patients if PM Lee’s own MPS are a statistically valid sample. Of course, the details of how this change will be effected were not spelled out, so it is not clear how much increased risk the government will bear, but it is assumed that this will involve an increase to the “claimable limit”. In fact, the very existence of this claimable limit betrays the fact that the entire risk (although not the entire cost) of healthcare funding in Singapore is borne by patients. Once the cost of treatment exceeds this “claimable limit” threshold, the patient is responsible for 100% of the cost. So while the government may assist up to some pre-calculated point, the unbounded upper limit on expensive treatments is in fact borne completely by the patient.

To be truly game-changing the PM’s speech would have needed to address two areas – the profit element and the risk element. Firstly, MediShield should not be a revenue generating operation – as it has been over previous years – but Lee did not appear to address this point.

But because it does more, because the benefits are better, therefore, the MediShield Life’s premiums will have to be higher. It has to be, because it has to break even and I think for most people that will not be a problem.
PM Lee, National Day Rally Speech, 18 August 2013

Of course, there was the expected rejoinder that MediShield premiums would have to go up to reflect the enhanced coverage offered, and PM Lee did make reference to breaking even, but this does not appear to be a statement of budgetary policy so much as an attempt to manage expectations – don’t think you are getting these MediShield enhancements for free. Certainly, PM Lee made no mention of a move away from net revenue generation and no mention of the hundreds of millions in premiums MediShield has accumulated to date, so it would be presumptuous to assume such a significant shift will occur unannounced.

Secondly, on risk, it is hard to avoid the conclusion that residents shoulder an unreasonable share of the cost and risk of falling ill. A more helpful, more significant change would be a commitment to increase the government’s share of healthcare spending much closer to the rich country average (61.4%) when it current languishes at a level almost exactly half that. For a country as wealthy as Singapore, there is no obvious reason (other than political ideology) for healthcare spending to even be less than the average of other rich countries because Singapore is in fact much better off than those other “rich countries”. But unfortunately there is no commitment to make a long-term change in spending policies, no intention to shift the burden from the individual to the state, no hint that revenue will not continue to be generated by MediShield and no clue as to what will happen to the premiums already collected. And most tellingly, while there may be changes to the claimable limit, it appears that MediShield Life will continue to abandon those patients with the highest bills just when they need their insurance coverage the most, so when it comes to “sharing the risks”, the ruling party in fact continues to shirk their responsibilities.

* * * * *

Despite the great fan-fare of a national conversation, and the extraordinary hype of this speech being both a major turning point and a strategic shift, the truth is that nothing much has changed. The government appears to have no policies in the pipeline to solve the underlying problems of low wage growth and the ever-increasing cost of living. While increased grants are likely to be popular today, failing to solve the root cause means the exact same issues will inevitably recur year after year. The government can’t surely see this as a long-term, sustainable plan, but it appears to be all they have. There was also no real indication that the government intends to make an ideological move away from revenue generation. MediShield has accumulated hundreds of millions over the years, but the announced increases in coverage were tempered with a predictable warning that premiums would have to increase in line. “It has to be” said PM Lee. And still, the majority of the risk and cost of falling sick will fall on residents rather than be covered by government policies. Under the PAP, it has to be.


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2 responses to “PM tweaks troublesome policies, underlying problems remain

  1. observer

    Maybe people are not able to see semantically the words used. The keyword here is shift, not rethink or revamp. One inch to the left or right IS a shift. System in all 3 aspects need a revamp, they have brought us thus far and outlived its historical successes. What worked before don’t necessarily work now or for the future. To be rooted in past success without a renewal of the mind sets us up for one catastrophic failure.

    What would happen if we intentionally forged our social solutions in the fires of creative chaos?

    Once upon a time life evolved on a certain planet, bringing forth many different social organizations—packs, pods, flocks, troops, herds, and so on. One species whose members were unusually intelligent developed a unique social organization called a tribe. Tribalism worked well for them for millions of years, but there came a time when they decided to experiment with a new social organization (called civilization) that was hierarchical rather than tribal. Before long, those at the top of the hierarchy were living in great luxury, enjoying perfect leisure and having the best of everything. A larger class of people below them lived very well and had nothing to complain about. But the masses living at the bottom of the hierarchy didn’t like it at all. They worked and lived like pack animals, struggling just to stay alive. “This isn’t working,” the masses said. “The tribal way was better. We should return to that way.” But the ruler of the hierarchy told them, “We’ve put that primitive life behind us forever. We can’t go back to it.” “If we can’t go back,” the masses said, “then let’s go forward—on to something different.” “That can’t be done,” the ruler said, “because nothing different is possible. Nothing can be beyond civilization. Civilization is a final, unsurpassable invention.”

    Old minds think: If it didn’t work last year, let’s do MORE of it this year.
    New minds think: If it didn’t work last year, let’s do something ELSE this year

  2. Nice Kachang

    Just in case anyone reading this article is ignorant about how health care works in other rich countries, read this. In Europe you make social contributions from your pay, just as in Singapore, but in return your health care is FREE at the point of delivery. Whether you need a heart by-pass or a new kidney, it’s free. This applies in every country in the EU.

    On ozzie TV yesterday a 90 year-old woman who had immigrated from the UK to oz in the 1960’s pension was low because when she emigrated from UK her state pension was frozen, although the UK continued to pay it at the 1960’s rate. So the oz government stepped in and made her pension up to the current ozzie rate. The government didn’t need to be asked, they saw someone in need and they stepped in to help.

    That is how the health and pension systems should (and mostly do) work in the rich world. Why does the nation-state exist? To make it’s rulers richer or to take care of the basic needs of it’s citizens?

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