22 September, 2015

A Short Explanation about MediShield Life

MediShield Life is as close to universal healthcare that Singapore has ever had.  It is the basic health insurance administered by the CPF Board.  It is a replacement for MediShield, the low cost basic medical insurance introduced in 1990.

MediShield and MediShield Life coverage is for subsidised treatment in Class B2 and C wards of public hospitals.  It is the bare basic coverage.  Staying in a B1 or A class ward, or in a private hospital, you are still covered by MediShield but because the bills are higher since there is minimal government subsidy.  If people can afford it, it is advisable for them to get an integrated plan.

Features
MediShield Life began replacing MediShield coverage from November 2015.  The new premiums are in force from the next premium anniversary.  It has the following features, distinct from MediShield.

It covers all Singaporeans and Permanent Residents.  The current MediShield does not.  This coverage is automatic.  There is no need to apply for it.

It is specific for B2 / C class wards.  There is another plan to be introduced in 2017 for B1 wards.

It covers pre-existing conditions.  The current MediShield does not.  This coverage for pre-existing conditions is provided even if you have been previously been rejected for that exact same condition.  This coverage does not extend to the private insurance portion of an integrated plan.

Covering pre-existing conditions for all Singaporeans and Permanent Residents is expensive.  Those with pre-existing conditions pay 30% extra for their premiums for the next decade.  The government stressed that this does not reflect the actual cost of coverage.  Additionally, insurance companies have pledged not to raise their premiums for one year.    As to what constitutes a pre-existing condition serious enough to warrant this extra 30% loading, MoH will release that at a later date.

Younger people will pay a slightly higher premium to compensate for a lower premium in their old age.

The coverage is for the entire natural life.  The current MediShield terminates at age 92 next birthday.

All of the MediShield Life premiums are now payable by Medisave.  Previously, there were claim limits ranging from $800 to $1,400.

The policy year claim limit has been raised to $100,000.  Previously, it stood at $70,000 per policy year.

The lifetime claim limits have been removed.  Previously, the maximum lifetime claim limit was $300,000.

The daily claim limits for normal wards and Intensive Care Units have been raised by up to 55%.

There is an increase in the claim limits for surgical procedures by between 25% and 93%.

There is an increase the daily claim limit for Community Hospitals by 40% from $250 to $350.

There is an increase in the claim limits for outpatient chemotherapy and radiotherapy treatments.  This covers more of the cost of subsidised cancer treatment.

The co-insurance rates have been lowered from the current 10 to 20%, to 3 to 10%.  This means MediShield Life can be used to cover a larger proportion of the medical bill.

Premium rebates are supposed to begin from age 66 next birthday, instead of the previous age 71.

Subsidies
There are four types of premium subsidies.  This is needed because in some cases, the premiums go up substantially. 

The first type is the Pioneer Generation Subsidies.  Their subsidies are between 40-60% regardless of their household per capita income or the Annual Value of their home.  After the subsidies and top-ups, Pioneers pay lower premiums for MediShield Life than they would have paid under MediShield.  Pioneers will receive $200 to $800 a year in Medisave top-ups for the rest of their life.  This will be used to pay for their MediShield Life premiums.

The second type is the Transitional Subsidies.  This is for all Singapore Citizens whose net premiums, after Pioneer Generation Subsidies or Premium Subsidies, increase after the introduction of MediShield Life, regardless of their household income or the Annual Value of their home.  It is only available for the first 4 years of MediShield Life.

In the first year, the Government pays 90% of the net increase in MediShield Life premiums, less other premium subsidies, above MediShield premiums.  This means that we pay 10% of the net increase in premium for the first year.  The subsidy decreases to 70%, 40% and 20% of the net premium increase in the second, third and fourth years of MediShield Life respectively.

The third type is Premium Subsidies for lower- to middle-income families.  They must have a household monthly income of $2,600 and below per person, and living in residences with an Annual Value of $21,000 and below.  Simply getting enough people such as your parents to stay with you will do this.  Those eligible can receive subsidies of up to 50% of their premiums.  Permanent Residents receive half the subsidy rate applicable to citizens.  This is a permanent feature of the Scheme.

The final type is the Additional Premium Support for families who require assistance with their premiums even after the above subsidies and Medisave use.

Analysis
It is estimated that covering pre-existing illnesses will cost just over $1 billion in the next five years.  Insurance companies will see the claim history for a year before deciding how much to raise the premium of the integrated portion of their respective Shield Plans.  The 30% loading over the next 10 years is definitely not enough to cover the cost.  As such, the government has to raise that funds elsewhere.  That would likely be found in an increase in the GST.

Based on data on deductible, withdrawal and co-insurance breakdown, the pay out of the plan as a percentage of the hospital bill is about 44%.  In contrast, the average increase in premium is close to 90%.  This is double the percentage pay out.  This is very high for a national health insurance.

The current system is also running at a surplus since it is the practice of the administration.  The national health insurance should not be seen as another profit centre.  What it means is that even though the features are attractive, and MediShield Life has merit, it is actually still expensive and not as cost effective as it should be.  Also, once the one year moratorium on the raising of premiums for the private health portion of the integrated plan is over, the premiums are likely to rise substantially.  What we will see is that cost-wise, the cost of health insurance will still rise faster than the lower to middle income can likely afford. 


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