What the United States Can Learn from Singapore’s Health System
by Allie Smith
Abstract
The United States faces a health care crisis with skyrocketing health care costs, growing ranks of uninsured Americans, and relatively poor health outcomes. Suggested possible responses to the crisis range from implementing a socialized national health care system to decreasing government intervention to allow market correction. To solve this crisis, the United States should look to innovative solutions crafted by other nations for providing national health care programs. Singapore possesses a unique program which provides its citizen a level of universal health coverage, yet it still boasts financial efficiency and impressive community health outcomes. The program successfully encourages individuals to assume personal responsibility for both their own health and their health expenditures. Singapore’s program consists of three main components:
- Compulsory individual medical savings accounts funded by employer and employee payroll tax contributions to pay for both current and future health care expenses;
- Catastrophic coverage for serious health conditions available from both the government and private insurers; and
- Need-based government subsidized coverage that fills the gaps between funds available from medical savings accounts and catastrophic coverage.
The individual accounts, coupled with the structure of the catastrophic coverage, provide individual ownership of, and insight into, the real cost of health care. Private payors both individuals and insurers also bear a large portion of the costs of health care. Additionally, Singapore aggressively disseminates information regarding health care costs and outcomes and encourages preventive care. Price pressures stemming from government regulation of health care supply and demand serve to control health care inflation.
While Singapore’s health system has proved a successful system for its citizens, importing the system wholesale to the United States would prove difficult, if not impossible. Societal and cultural influences may make it difficult to replicate. Nevertheless, the United States can still learn a great deal from the Singapore health system. The most important lessons from Singapore center on developing programs that encourage individual responsibility for health care decision making. The lesson is that the best solution to the health care crisis may be a hybrid of a public and private health care system. Second, the United States should provide individuals with the tools to become informed stakeholders in the health care system. Finally, reducing reliance on employer-based coverage for the majority of health care will help United States companies compete globally, prevent coverage loss tied to employment changes, increase insurance options, and encourage consumer choice between plans.
Table of Contents
Introduction
Health Crisis in the United States
Skyrocketing Costs
Poor Health Outcomes
Rising Number of Uninsured
Employment-Based Health Insurance Coverage
Singapore Health System
Structure of the Singapore Health System
Medisave Accounts
Funding of Medisave Accounts
Problems with Medisave Accounts
Medishield & Private Health Insurance Coverage
Problems with Medishield
MediFund
Government Control over Health care Delivery & Pricing
Lessons From Singapore’s Health System
Implementation Difficulties
Public-Private Hybrid Health Care System
Decreased Reliance on Employer-Provided Health Insurance Coverage
Increased Personal Responsibility and Health Care Consumerism
Conclusion
Introduction
Presidential elections and an increasingly dismal picture of health care in the United States have once again brought debates about a national healthcare solution bubbling to the surface. Liberals advocate handing off the entire program to the federal government; conservatives, on the other hand, argue that leaving health care to the whims of the market will eventually solve the problem.[1]
The traditional view of socialized medicine is that it “inevitably leads to poor quality, inefficiency, rising taxes and rationing.”[2] Singapore, however, proves the exception to this rule. Singapore has implemented a national healthcare system that not only provides a measure of universal health coverage for all Singaporeans, but encourages personal responsibility for individual and family health.[3] The system exhibits not only health outcomes that far surpass those recognized in the United States, but health care in Singapore costs substantially less than that in the United States.[4] While the United States spends approximately 16 percent of its gross domestic product (GDP), Singapore only devotes about 3 percent of its GDP to health care.[5] As the United States seeks a solution to the national health care crisis, Singapore’s system may provide guidance in the development of possible solutions.
Part II explores the health care crisis in the United States and its detrimental impact on achieving economic justice in the delivery of health care. Part III analyzes the components of the Singapore health system and discusses the successes and shortcomings of each aspect of the system. Part IV suggests that the United States may benefit from adopting modified versions of certain components of Singapore’s system.
Health Crisis in the United States
Political pundits, as well as average citizens, have recognized that the United States health care system has reached a crisis state.[6] While the individual worries about access to affordable health care, the problems with the health care system are multiple and complex.[7] Nevertheless, four issues represent the heart of the health care crisis. These four issues are rapidly rising costs, poor health outcomes, the growing number of uninsured, and the deteriorating employer-provided health insurance system.
Skyrocketing Costs
Almost $2 trillion is spent on health care in the United States annually, or 16% of the United States gross domestic product (GDP).[8] On a per capita basis, the United States spends $6,697 per person annually.[9] In fact, the United States spends more per capita on healthcare than any other country in the world.[10] Reaching $2 trillion in health care spending is the result of decades of growth in health care spending that has exceeded the growth in income.[11] Figure 1 illustrates this growth. In 1970, the United States spent a mere $356 per person on health care, only 7.2 percent of GDP.[12] Health care spending has grown an average of 9.8 percent each year since.[13] This growth rate averaged 2.5 percent higher than the annual growth in income each year.[14] Unfortunately, the rampant growth in health care spending appears poised to continue for the foreseeable future. The United States government predicts that healthcare spending will more than double to reach $4.1 trillion by 2016 or 20 percent of GDP.[15] While discussing health care spending in the aggregate illustrates the trend, most people more readily identify with the direct impact that health care cost increases have on their own lives. Many feel the impact in the form of health insurance premiums because health insurance of some kind represents the dominant means of financing health care expenses.[16] Between 2002 and 2007 alone, health insurance premiums have grown cumulatively by 78%.[17] This growth has outpaced both inflation and growth in worker income.[18] Today, premiums for single health insurance coverage equate to about $4,479 annually; family coverage costs $12,106 annually.[19]
Figure 1[20]
While recognizing the huge cost increases is simple, determining the manifold causes of the health care cost increases poses a more difficult problem. Increased medical technology plays a large role in the costs increase.[21] While better technology promises more efficient care and treatment that could ultimately result in cost savings, these potential cost savings have yet to materialize.[22] Instead, technology often provides costly treatments for heart burn, erectile dysfunction, and other diseases that largely went untreated in the past.[23] As the baby boomer generation gets older, the population of the United States ages bringing with it the concomitant higher health costs generated by older individuals.[24] In addition to being older, the population of the United States has grown more sedentary and heavier, as well. Obesity carries higher risk factors for a variety of costly health conditions such as diabetes.[25] Finally, the structure of the United States health care financing system encourages cost increases.[26] Dependence on employer-provided insurance to provide the bulk of financing isolates consumers from both the true cost of care and the true cost of coverage; the low cost sharing at the point of service may further encourage consumption.[27] Unfortunately, the factors creating the growth in health care spending have not necessarily led to corresponding improvements in health outcomes.
Poor Health Outcomes
Although the United States spends more on healthcare than any other nation in the world, the United States lags behind many other developed nations both in health outcomes. The lag in health outcomes appears in a variety of health statistics. Table 1 compares various health statistics of the United States with those of several other nations. The United States has shorter life spans and higher child mortality rates than most other developed nations.[28] In fact, the probability of dying under the age of 5 in the United exceeds that of many considerably less affluent nations such as Croatia and Cuba.[29] Not only are individuals in the United States prone to die earlier, but individuals in the United States are also more likely to have illnesses that diminish activities and productivity during life.[30] Compared to better performing nations, more adults in the United States—almost 15 percent of the population—experienced limitations on activities due to health conditions.[31] Similar results appear for children; over 5 percent of children miss more than 11 days of school due to health conditions.[32] Although some of these health outcomes may result from other societal influences such as increased obesity in the United States, each of these health statistics suggests that the huge amounts of money spent on health care in United States fail to create a healthier population.[33]
Table 1[34]
Comparison of Health Statistics & National Cost of Health careHeath Factors / Country
United States / Singapore / Japan / Sweden / United Kingdom
Life expectancy at birth (years) / M 75 / F 80 / M 78 / F 82 / M 79 / F 86 / M 79 / F 83 / M 77 / F 81
Healthy life expectancy at birth (years, 2002) / M 67 / F71 / M 69 / F 71 / M 72 / F 78 / M 72 / F 75 / M 69 / F 72
Probability of dying under age of 5 (per 1000 live births) / 8 / 3 / 4 / 4 / 6
Probability of dying between 15 and 60 years (per 1000 population) / M 137 / F81 / M 83 / F48 / M 92 / F 45 / M 78 / F 50 / M 101 / F 62
Total expenditure on health per capita (Intl $, 2004) / 6,096 / 1,118 / 2,293 / 2,828 / 2,560
Total expenditure on health as % of GDP (2004) / 15.4 / 3.7 / 7.8 / 9.1 / 8.1
Rising Number of Uninsured
No figure captures the failures of the health care system more clearly than the soaring number of uninsured individuals in the United States. Due in large part to the skyrocketing costs of health insurance coverage and decreases in employers offering coverage, the ranks of the uninsured continue to grow. Currently, almost 47 million non-elderly people in the United States are uninsured. This figure represents an increase of more than 27% from the 36.5 million uninsured in 1994.[35] The 47 million figure for uninsured individuals may not even fully capture the true extent of the problem. Since these figures are based on Census Bureau data, they only represent the number of uninsured at one moment in time and fail to include those that suffer temporary periods without insurance coverage at other points during the year.[36] Other studies show that at least 89.6 million non-elderly, almost 1 out of 3 people, were uninsured for at least one month in 2006-2007.[37]
The ranks of the uninsured are disproportionately filled with minorities and the poor. Although 64.1 percent of the population under 65 is Caucasian, Caucasians only represent 45.1 percent of the uninsured.[38] In contrast, black individuals comprise 12.6 percent of the population and 15.4 percent of the uninsured; Hispanics comprise 16.3 percent of the population, but a colossal 32.5 percent of the uninsured.[39] Part of this disparity may stem from the fact that minorities are more likely to fall in lower income categories.[40] “The uninsured tend to be members of low-income families.”[41] Almost one-third of the uninsured come from families with annual incomes less than $20,000, yet families in this income bracket represent less than 17 percent of the population.[42] Although most of the uninsured are low income, the majority, 82%, of the uninsured come from families of the working poor where at least one member works. In fact, 71% of the uninsured come from families where at least one member works full time.
The number of the uninsured is huge; however, the impact on society is even more staggering. “[D]iminished health and shorter life spans of the uninsured” cost the United States up to $135 billion annually.[43] The uninsured receive less medical care, both preventative care and treatment for health conditions, than insured individuals.[44] As a result, they experience worse health outcomes and have a 25 percent higher mortality rate than individuals with health insurance.[45] Additionally, the care that the uninsured receive places a strain on the United States health care system.[46] The uninsured often seek inappropriate levels of care. Unable to pay for physician’s visits in private clinics, the uninsured seek more costly care in public hospital emergency rooms that cannot refuse care.[47] Much of the care that the uninsured receive goes unpaid.[48] Medical debt, often linked to a lack of health insurance is the second leading cause of bankruptcy.[49] These unpaid medical bills place financial stresses on the health care providers.[50] In turn, many of these costs are passed on to insured consumers.[51] This additional cost to insured consumers equates to about $922 annually for family coverage and $341 for individual coverage.[52]
Employment-Based Health Insurance Coverage
Employment-based health insurance coverage forms the backbone of the United States health care financing system. Figure 2 illustrates the dominance of employment-based coverage over other source of health insurance coverage. Employment-based coverage comprises 64.1% of health insurance coverage. As indicated by the growing number of uninsured, employment-based coverage has decreased in recent years.[53] Businesses unable to afford the increasing cost of health insurance premiums have either discontinued coverage or increased cost sharing of premiums to the point that some workers can no longer afford to participate.[54]
Figure 2[55]
Although employment-based health insurance offers some positive aspects, the system’s flaws outweigh its benefits. One of the strongest benefits of health insurance paid in part by employers is that it provides a voluntary funding source, rather than being paid directly from tax revenues. Additionally, linking health insurance to employment encourages individuals to work.[56] Nevertheless, employment-based coverage suffers from many problems. Some of these flaws are readily apparent. For example, if medical insurance is linked to employment, losing a job or switching jobs often results in a coverage loss.[57] Additionally, providing coverage saddles employers with huge costs.[58] For many employers, employee benefits are the largest cost item after wages.[59] For example, Starbucks spends more on health care annually then it spends on the raw materials for brewing its coffee.[60] These huge costs threaten the global competitiveness of corporations that continue to offer health insurance.[61]
Other flaws in the employer-provided health coverage system are less obvious. The largest flaw in the system is that it actually encourages the growth of health care costs and creates an inefficient market. Employer-provided coverage not only effectively limits the coverage choices of the health care consumer to the plans offered by the employer, but also shields the health care consumer from both the cost of coverage and the actual cost of care.[62] Tax breaks provided for purchasing employer-provided coverage make it less palatable for employees to select coverage from a source other than their employer.[63] Employers shield employees from the true cost of health coverage by fully or partially subsidizing the coverage.[64] Since employees recognize only a fraction of coverage increases caused by their consumption, employees have no incentive to change their behavior.[65] Although out-of-pocket spending accounts for approximately 20 percent of all health expenditures, point-of-service cost-sharing still provides little visibility into the true cost of care or a means for consumers to make effective choices.[66] Finally, the prevailing fee-for-service payment systems encourage health care providers to perform as many services as possible without regard to the marginal benefits provided.[67] These flaws in the United States system and its deterioration leading to increasing numbers of uninsured individuals should encourage the United States to look for solutions to the health care crisis in the successful systems of other countries such as Singapore.
Singapore Health System
Singapore, in contrast to the United States, spends a mere 3.7 percent of it GDP on health care, yet boasts both impressive health outcome indicators and some degree of universal health coverage. Table 1 illustrates the comparisons between cost of care and health outcomes for Singapore and United States among others. In Singapore, people live longer than those in the United States. Men and women in Singapore not only enjoy longer lives, but they can also expect more of their life to be healthy. These health outcomes are also demonstrated by a reduced infant mortality rate. Only 3 children out of every 1,000 live births die before the age of 5. Per capita, Singapore’s total health expenditures equate to only $1,118 annually. While a variety of factors influence these health outcomes, Singapore’s health system and culture of personal responsibility for health care deserve a large part of the credit for achieving such impressive results.