Singapore’s health care system, dating back to 1955, works wonderfully well. Clearly this small city state differs in many ways from the US, but there are many useful principles and practices we could take from its successful forced savings plan.
Health care is again moving to center stage in this election year. A year ago the Trump Administration released a respectable report (“Reforming America’s Healthcare System Through Choice and Competition”) but neither Democrats nor Republicans have shown much interest in it since no major legislation can pass both House and Senate. Accordingly the Trump Administration has been confined to making changes in insurance and tax regulations, and proposing price controls to reduce pharmaceutical costs (which the 2018 plan rejected.)
On the Democratic side, Sen. Bernie Sanders has championed “Medicare for All”, which on close inspection translates to “Medicare for Nobody”; Sen. Elizabeth Warren has floundered trying to clarify her version of universal coverage; Pete Buttigeig is promoting a government insurance company as a “public option”; former VP Joe Biden promises to expand and improve Obamacare; and Michael Bloomberg is running ads telling us that he worked wonders in health care as Mayor of New York.
One key Sanders talking point is “the U.S. is the only country in the developed world without government-run universal health care coverage.” There is certainly something to be learned from examining health care policies in such countries as the Netherlands, France, Switzerland, Japan, and Sweden, plus the problem-plagued Canadian and British models. But by far the most interesting and successful model is Singapore.
In 1955, ten years before this city-state became independent, its British colonial masters instituted the Central Provident Fund. Every Singaporean is required to pay 20% of wages, matched by the employer, into the Fund. This is the equivalent of the U.S payroll taxes for Social Security and Medicare (15.3%), plus the cost of the employer’s medical plan, plus a large contribution into the employee’s HSA, HRA, FSA, or 401(k).
Unlike the U.S. payroll taxes that become government property, the employee can use the funds he or she contributed into the CPF to buy retirement income annuities, family Health Savings Accounts (Medisave), catastrophic health insurance premiums (Medishield), home purchase down payments, and certain educational benefits. The government also pays for a safety net program called Medifund.
As William Haseltine (Brookings Institution, 2013) has noted, “the government has always made clear that a welfare system or an entitlement mentality has no place in Singapore. The need for ‘individual responsibility’ and ‘self-reliance’ on the part of the citizenry in all personal matters, including health care, has always been an integral factor in the country’s achievements”. Individuals self-pay 65% of Singapore’s health costs, and the government spends only 4% of its GDP on health care, compared to 8% in the U.S.
As for quality, Singapore has outstanding modern doctors and medical facilities and is a very competitive medical tourism destination for foreigners. Its government puts heavy emphasis on health education and wellness. Its providers offer transparent pricing, and compete on the basis of price and quality. About 80% of primary care is provided by private sector doctors and clinics. One can buy private insurance like Medigap.
The CPF is a forced savings plan. One’s CPF account can’t be used to buy that new pickup truck or take a vacation. But it’s designed to assure that every Singaporean provides for a modest retirement income stream, the means to access an adequate level of health care, and a down payment on a home.
In an Australian interview, Dr. Phua Kai Hong, a scholar at National University of Singapore, listed as crucial components “the creation of incentives for responsible behavior and the efficient delivery of services; the discouragement of overconsumption through cost sharing; the regulation of hospital beds, doctors, and the use of high cost medical technology; the promotion of personal responsibility; targeted government subsidies; and the injection of competition through a mix of public and private-sector providers.”
Critics have long marshalled many objections to considering a Singapore model for the U.S.. Singapore is entirely urban (5.3 million people, on half the acreage of Lamoille County). Many Americans want somebody else to pay for all the health care they want. Americans won’t like forced savings any more than they like taxes. Americans increasingly lack the supportive family and social structure evident in Singapore. Singaporeans accept paternalistic controls because they trust their government far more than Americans ever will.
These are all valid points, but there are certainly steps the U.S. could take in Singapore’s direction. One is the expansion of first-party medical payments through Health Savings Accounts, coupled with catastrophic insurance. Another is spurring informed consumer choice, provider competition, and price transparency (all advocated in the 2018 Trump report).
Above all, improving affordable health care depends on reinvigorating the principles of personal and family responsibility. The U.S. has a lot of ground to make up.
— John McClaughry is vice president of the Ethan Allen Institute
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