Ranking second in the Bloomberg Health-Care Efficiency Index 2016, Singapore is increasingly acknowledged by analysts and commentators around the world for achieving excellent healthcare outcomes at modest costs.
The issue of healthcare reform has become ever more contentious, as governments look to rein in spending and limit their fiscal responsibility. In the face of anxieties over rising healthcare costs, Singapore's healthcare model has caught their eye, especially its medical savings account scheme, Medisave. Observers see it as a clever mechanism for reducing government's fiscal obligations while building households' capacity to pay for their healthcare needs.
The interest in Medisave coincides with the ongoing healthcare reform debate in the U.S.. Health savings account is a prominent component in all Republican proposals to replace Obamacare. They all offer attractive tax benefits to those who take it up and then use the accumulated funds to purchase health insurance of their choice. They argue that this will expand individual choice while reducing the government's involvement.
However, in their latest research paper, Tools Approach to Public Policy: Healthcare in Singapore, Professor M Ramesh and co-author Dr. Azad S Bali from the Lee Kuan Yew School of Public Policy, National University of Singapore argue that outside observers' focus on Medisave is misplaced and misses the deeper reasons for the success of Singapore's healthcare system.
They point out that Singapore's achievement is not the result of any single programme, but of the targeted and orchestrated manner in which the government deploys a broad range of policy tools. The scope and depth of government's involvement in healthcare is unlikely to appeal to most American policymakers, Democrat or Republican.
The government intervenes comprehensively in the healthcare sector
Back in the mid-1980s, the Singapore government introduced reforms centred on privatisation, deregulation and marketisation that were in vogue at the time. The ensuing increase in healthcare expenditures and political disquiet led the government to reverse course, and develop and refine a comprehensive set of tools to steer the sector. These policy tools can be broadly classified into four categories: organisational, fiscal, regulatory and information.
Organisational tools
An important part of Singapore's health system is the government's ownership of the vast majority of hospitals in the country. This allows the government leverage to direct the hospitals while granting operational autonomy to managers regarding day-to-day activities.
The emphasis on autonomy and competition while remaining in public ownership makes hospitals more customer-centred and financially prudent, and ensure that they remain under the government's direct control.
Fiscal tools
Out of pocket payments form the bulk of total healthcare expenditures in Singapore as free healthcare is non-existent. Every service user is expected to pay all or part of the costs of treatment. Medisave forms only a very small part of total expenditures. However, the government has elaborate measures in place, including subsidies for lower cost wards, to keep costs down and ensure that basic services remain affordable.
Regulatory tools
The government maintains tight regulatory supervision and control over all healthcare providers in Singapore. These regulations work in conjunction with the controls it exercises through ownership of and subsidy to public hospitals.
Information tools
To promote healthy competition among providers competition based on substantive matters rather than frills the government requires hospitals to publish the average estimated bill for major medical procedures on the Ministry of Health's websites. On admission, hospitals are required to provide patients with an estimate of their bill, and among others, the average bill at other hospitals. This allows patients to make informed choices, and providers to remain conscious of cost and quality issues.
Targeting shortcomings with a portfolio of tools
Singapore's health system is not without its challenges. Though Singapore has managed to maintain modest overall spending, it has a rapidly ageing population and most healthcare expenditure continues to be financed out-of-pocket. What is unique about Singapore's approach to healthcare, however, is that it has developed a portfolio of targeted tools to address specific problems that afflict the sector.
The coordinated use of these tools ensures that healthcare providers compete on costs and quality, and that total costs remain relatively low. Singapore will have to calibrate these tools to respond to challenges in the coming years.
Unlike the focus on financial and payment issues that characterises healthcare reforms in most countries, Singapore's approach to healthcare shows a promising pathway to managing the sector effectively. However, governments have to make their own assessment as to whether they have the political will or the administrative capacity to adopt and execute a similar strategy.
*To read more, see the full paper Tools approach to Public Policy: Healthcare in Singapore.