Dear Dr Jeremy Lim,
I refer to your 14 Jun 2013 Straits Times article  in which you cited Professor William Haseltine’s new book and Ms Gillian Tett’s subsequent commentary as examples of how Singapore healthcare is being held up as a model for low spending and impressive population health metrics. Sadly, there is a fundamental flaw in Professor Haseltine’s study, a flaw which Ms Tett didn’t detect but which completely changes the rosy picture that he painted.
Professor Haseltine failed to consider old age dependency when he compared Singapore’s healthcare costs to those of Western nations. All else being equal, a more aged population will have higher healthcare costs and since Western nations have more aged populations than Singapore, they naturally will have higher healthcare costs all else being the same. As Singapore’s population ages thirty years down the road, our healthcare costs will go up too even if our healthcare system remains unchanged. So if we were to compare Singapore today versus Singapore 30 years down the road, do we say that Singapore’s cost efficiency has deteriorated over the years or do we say that Singapore’s cost efficiency hasn’t changed but the population has aged and hence incurs higher healthcare costs? Controlling for old age dependency is important without which, there can be no proper or meaningful comparison of healthcare costs across nations.
Old age dependency ratios can be obtained from World Bank. When these are regressed against World Health Organisation’s healthcare costs, a significant relationship is obtained with a p-value of 8.4 × 10-23. The regression relationship is thus a credible predictor of how healthcare costs should vary with old age dependency. Against this predictor, Singapore fares poorly, overspending by 83% compared to old age predicted healthcare spending.
|Country||2011 old age dependency ratio||2011 per capita health expenditure||2011 old age dependency predicted per capita health expenditure||2011 % healthcare overspending compared to predicted value|
The other issue with Professor Haseltine’s study is his comparison of healthcare costs as a percentage of GDP instead of healthcare costs itself. It is not a particularly meaningful comparison as the following example illustrates.
Both Mr Jones and Ah Huat are of similar age, health and fitness. Mr Jones earns $10,000 a month and spends $200 a month on healthcare. Mr Jones’ healthcare expenditure as a percentage of his salary is therefore 2%. Ah Huat earns $1,000 a month and spends $50 a month on healthcare. Ah Huat’s healthcare expenditure as a percentage of his salary is thus 5%. Therefore, according to the statistics, Ah Huat’s 5% expenditure is higher than Mr Jones’ 2% expenditure even though Ah Huat spends only $50 a month compared to Mr Jones who spends $200 a month.
The notion that Singapore has much better population health metrics than Western nations is also questionable. The following table  shows that very little separates Singapore from Western nations in terms of population health metrics.
|Country||2011 Life Expectancy (both sexes)||2011 infant survival rate (probability of surviving between birth and age 1 per 1000 live births for both sexes)||2011 adult survival rate (probability of surviving between 15 and 60 years per 1000 population, both sexes)||Average|
It is these false comparisons have led to Singapore’s health system being wrongly held up as a model for international attention which it rightfully doesn’t deserve. And if as you assert, the controlling hand of our healthcare market is that of our government, then you may have to contend with the reality that the controlling hand has potentially led to 83% overspending in healthcare.
 Straits Times, Myth of the invisible hand in health care, 14 Jun 2013, Jeremy Lim
SINGAPORE’S health-care system has come under the spotlight again.
A new book ambitiously titled Affordable Excellence: The Singapore Health Care Story by American academic William Haseltine has attracted a flurry of interest including a commentary by Financial Times’ assistant editor Gillian Tett reprinted in The Sunday Times under the headline “Thank you, Singapore”.
Singapore’s system has been held up as a model to emulate for its low spending and impressive population health metrics.
The magic of the ‘market’?
DR HASELTINE argues that “managed capitalism” is the secret sauce. Former health minister Khaw Boon Wan has previously exhorted policymakers to “de-politicise” health care and work to make the market work in health care like any other economic activity, by reducing the market failure in health care, for example, by making sure patients get good information about hospital bill sizes.
This means competition, transparency and consumers who are well-informed and incentivised to keep costs down.
Ms Tett writes: “Patients are always forced to co-pay for treatment, alongside insurance groups, to create incentives to scrutinise their bill.” She goes on to speculate that if Americans could compare prices as they do in Singapore, and co-payments were more strongly used, the spiralling costs of American health care could be curtailed.
It seems affordable excellence can be brought about by consumers, competition and co-payments.
The limits of markets
HOWEVER, markets have a dark side. While international accolades pour in, 72 per cent of Singaporeans believe “we cannot afford to get sick these days due to high medical costs”, according to a Mindshare survey reported in the Business Times last October (Mindshare survey 2012).
Last week Dr Phua Kai Hong, a respected local health economist, disagreed in this newspaper that “high co-payments and individual responsibility” were the solutions for Singapore. He also raised the spectre of Singapore veering towards a “more uncaring and socially unacceptable system”, the “market economy” over-extending to become a “market society”.
A health-care market may be efficient but is it equitable?
It is unclear whether competition and co-payments per se have even been effective in overall cost containment. Eminent health economist William Hsiao of Harvard University has pointed out repeatedly in articles that despite the introduction of Medisave in 1983, the subsequent dramatic increase in patients’ co-payments and the creation of “markets” through corporatisation of government hospitals, Singapore’s total health-care spending continued to increase in absolute numbers.
Professor Hsiao emphasises that the real lesson learnt from Singapore is that “price competition is secondary”.
Providers compete with each other by recruiting brand-name physicians onto their panels and by having the most sophisticated expensive technology, both of which drive up costs. He added that “market power on the supply side is much greater than the demand side”, leading to providers being able to induce demand and push up prices.
More recently, well-publicised cases of egregious charging have further dampened the belief in the power of the market to rein in prices. It seems supply-side measures are equally if not more important.
THE real secret, in my view, to Singapore’s successful cost containment is not “markets” per se but “strong government”.
There is no “invisible hand” in Singapore’s health-care market; the controlling hand is that of the government.
The health-care market works not through consumer influence but through adroit exploitation of the Government’s simultaneous roles as regulator, largest provider and largest single buyer of health- care services.
Unlike, say, in eateries or retail where the Government sets and enforces the rules and then sits back to let “creative destruction” work its effects, in health care the Government is more interventionist.
For example, the Government influences prices through subsidies, Medisave and MediShield, influences practices through the government-owned hospitals and regulates tightly the number of hospitals and health-care professionals nationally.
The Government to a large extent controls the public narrative: By deciding what to subsidise, what not to subsidise and how much to subsidise, the Ministry of Health keeps a firm grip on what treatments become mainstream, and shapes the price points.
It is not the market but the multiple roles the Government plays in health care that has enabled success. Former head of the Civil Service Lim Siong Guan once said: “What is absolutely key to understanding Singapore’s success in applying market systems to public problems is the centrality of the state in assessing, controlling and regulating the market. The hallmark of Singapore’s use of the market has been strong government control and oversight.”
This interventionist stance is not surreptitious; the Government unashamedly acknowledges this, declaring in the 1993 White Paper on Affordable Health Care that it must “intervene to prevent health-care costs from consuming a disproportionate share of the nation’s or a family’s resources”.
Two-tiered health care
ONE reality Singapore readily accepts as a consequence of the market is a two-tiered health-care system. Singapore has by design engineered two health-care worlds. The first is a market world where the sky’s the limit for those with wealth; the second is one which provides, as the Health Ministry describes, “quality and affordable basic medical services for all”.
This is not repugnant and, if politicians are truthful, there is no other way. No country in the world has managed to provide everything to all citizens and none ever will. Rather than pretend to be an egalitarian utopia, Singapore has accepted that in health care, as with almost everything else, the rich will enjoy more and better services. The Government thus intervenes to create the second world for the heartlander or average Singaporean. The official dogma is that the two worlds differ mainly in the frills or amenities but it is increasingly clear this is tenuous at best.
Singapore prides itself on attracting the best and brightest to its shores; the best and brightest demand and can afford world- class health care for everything from cancer to corns and the gulf between the two worlds ever widens. Questions on “how far apart can these worlds be?” and the related “is basic care affordable and good enough?” lie behind the current national angst.
Singapore’s health system rightly deserves the international attention it receives, for there is much the country can offer the rest of the world in terms of experiences and insights, both positive and negative.
We have much to learn ourselves from a careful and un-blinkered examination of our history, our philosophy and our aspirations. In the ongoing fundamental review of Singapore’s health system, we must pay heed to both adulatory and critical perspectives.
• 2011 Life Expectancy, Infant mortality and Adult mortality are from World Health Organisation
• For life expectancy, comparison is based on percentage of highest life expectancy which is 83 years for San Marino, Switzerland and Japan
• Infant survival rate is used instead of infant mortality to convert the score to one where the higher it is the better it is. Infant survival rate is 1000 – infant mortality rate. Comparison is based on percentage of highest infant survival rate which is close to 100% for almost all First World nations.
• Adult survival rate is used instead of adult mortality to convert the score to one where the higher it is the better it is. Adult survival rate is 1000 – adult mortality rate. Comparison is based on percentage of highest adult survival rate which is 95% for San Marino, Switzerland and Iceland.