21 August 2013

MediShield Life — Painting Roses Without Thorns

Prime Minister Lee Hsien Loong announced changes to MediShield, which will be renamed MediShield Life, at the National Day Rally:

▪ Coverage will be for life, instead of up to 90 years now.

▪ Coverage will be universal and will include those who have dropped out and those with pre-existing illnesses.

▪ Coverage will be higher for large hospital bills.

▪ Coverage will be compulsory.

All these are nice. But, as PM Lee warned, "It may cost you a bit more, but it can be done."

Isn't it rather premature to announce the proposed changes without having already looked into the most important aspect — cost?

Better Coverage and Affordability
Ask anyone whether he wants better coverage e.g., lifetime coverage or higher coverage for large hospital bills, and he will almost certainly say yes.

Until you tell him what the additional cost will be, assuming he has to bear it all himself without subsidy (and the Government will not subsidise MediShield Life premiums unless the person really cannot afford them).

No one knows what the additional cost will be, but Minister for Health Gan Kim Yong tried to reassure us that the MediShield Life premiums will continue to be affordable for us.

The State will subsidise the premiums for those who cannot afford them.
 
Affordability must be referenced to the people who just miss qualifying for subsidies or who do not qualify for full subsidies (assuming subsidies are tiered). It is these people for whom affordability matters most, not people with significantly higher personal or household income.
 
My guess is that the Government will justify the affordability of the MediShield Life premiums — whatever the final amounts are — by telling us that the premiums are only a small fraction of the huge bill that we will face in the event of a major hospitalisation episode without MediShield Life. That's insurance salesmanship, not affordability.

Because MediShield Life will be compulsory, we have no choice but to pay whatever premiums we are required to pay irrespective of whether we consider the premiums to be affordable.
 
Wider Coverage But Who Pays?
About 300,000 citizens, or 8 per cent of the population, do not have Medishield insurance.

Some of them cannot afford to pay the premiums.

Others are excluded because of pre-existing illnesses.

Is it fair for people who have been paying MediShield premiums for years — since MediShield was introduced in 1990, in many cases — to pay the same MediShield Life premiums as the people who will be brought under MediShield Life and either have pre-existing illnesses or game the system by not disclosing their pre-existing illnesses? We are not talking about small numbers, and these people do have pre-existing illnesses. Inclusiveness should not be blind to the difference in risks and potential insurance claims between insuring someone who does not have a pre-existing illness but who may be afflicted by an illness subsequently (that's the purpose of insurance) and insuring someone who already has a pre-existing illness. Inclusiveness has limits.

Perhaps, MediShield Life may have to impose a loading on people with pre-existing illnesses.

Loading for pre-existing illnesses is not unfair, just as loading for age — premiums do increase across age bands — is neither unfair nor even questioned.

Integrated Shield Plans I
The Integrated Shield Plans provide better coverage than MediShield, for a price.

For example, among the Integrated Shield Plans for class B1 wards in government restructured hospitals as at 31 July 2013, only Prudential's PruShield Plan B does not provide lifetime coverage.

Will the premiums for the Integrated Shield Plans increase when MediShield Life, which is supposed to be better than MediShield, is introduced? (MediShield is subsumed under the Integrated Shield Plans.) Unfortunately, we won't be able to tell, but people fear the worst.

Integrated Shield Plans II
Since the Integrated Shield Plans provide better coverage than MediShield, albeit for a price, there is nothing to stop those citizens who want better coverage such as those broadly envisaged in Medishield Life to upgrade from MediShield to the most basic Integrated Shield Plans, and leave MediShield as it is for those who don't want, or cannot afford (but whom the Government does not think fit to subsidise), to pay for the better coverage.

Or does this alternative leave the Government carrying a bigger financial burden?

Compulsory MediShield Life
Making MediShield Life compulsory disadvantages at least two groups of citizens.

First, some of the approximately 200,000 citizens living overseas who can't claim against MediShield Life.

Second, the individuals who are covered under their (or, as dependants, under their spouses' or parents') corporate hospitalisation plans. To the extent that they can claim under such corporate insurance, these people will not claim against MediShield Life, and the premiums they pay MediShield Life is money down the drain. Such premiums, however, represent risk-free income for MediShield Life or cross-subsidise other people who claim against MediShield Life, or a combination of both.

Perhaps, before MediShield Life is made compulsory, hospitalisation insurance should be made portable, starting with the public service.


This article was updated on 22 August 2013 at 15:20 pm by inserting the section on Integrated Shield Plans II and renaming the preceding section Integrated Shield Plans I.

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