Is Singapore’s “miracle” health care system the answer for America?
When liberals talk about their health care utopia, they have scores of examples to choose from. Some name France’s high-performing multi-payer system (No. 1 on the World Health Organization’s rankings, in case you haven’t heard). Others point to Canada’s single-payer simplicity. The Scandinavian countries all do health care well, and there’s much to recommend Germany’s hybrid approach.
Conservatives really only have one example of a free market health care paradise to point to: Singapore. But oh, what an example it is! In a New York Times column called “Make America Singapore,” Ross Douthat called it “the marvel of the wealthy world.” After the election, Fox News published an op-ed headlined, "Want to ditch ObamaCare? Let's copy Singapore's health care miracle.”
Why are conservatives so taken with Singapore? The American Enterprise Institute’s glowing write-up explains it well:
What’s the reason for Singapore’s success? It’s not government spending. The state, using taxes, funds only about one-fourth of Singapore’s total health costs. Individuals and their employers pay for the rest. In fact, the latest figures show that Singapore’s government spends only $381 (all dollars in this article are U.S.) per capita on health—or one-seventh what the U.S. government spends.
Singapore’s system requires individuals to take responsibility for their own health, and for much of their own spending on medical care.
Here’s what Singapore’s conservative admirers get right: Singapore really is the only truly universal health insurance system in the world based on the idea that patients, not insurers, should bear the costs of routine care.
But Singapore isn’t a free market utopia. Quite the opposite, really. It’s a largely state-run health care system where the government designed the insurance products with a healthy appreciation for free market principles — the kind of policy Milton Friedman might have crafted if he’d been a socialist.
Unlike in America, where the government’s main role is in managing insurance programs,
Singapore’s government controls and pays for much of the medical system itself — hospitals are overwhelmingly public, a large portion of doctors work directly for the state, patients can only use their Medisave accounts to purchase preapproved drugs, and the government subsidizes many medical bills directly.
What Singapore shows is that unusual fusions of conservative and liberal ideas in health care really are possible. Singapore is a place where the government acts to keep costs low and then uses those low costs to make a market-driven insurance system possible. One thing you quickly realize when studying their system is it would be a disaster if you tried to impose it in a country with America’s out-of-control medical prices.
That speaks to the more depressing lesson of Singapore. As soon as you begin seriously comparing where they are, and how their system works, to where the US is, and how our system works, it becomes painfully clear how far America is from having the institutions or preconditions for truly radical health care reform.
How Singapore’s health insurance system works
Books could be written on the structure of Singapore’s health care system, and indeed, they have been. Jeremy Lim’s Myth or Magic: The Singapore Healthcare System is particularly excellent, though William Haseltine’s Affordable Excellence: The Singapore Healthcare Story has the advantage of being free. A deep dive here is rewarding, and my summary will necessarily oversimplify.
But the basic structure of Singapore’s insurance system is built around the “three M’s”: Medisave, Medishield, and Medifund. Let’s take them in turn.
Medisave: When conservatives praise Singapore’s health system, they are typically praising the Medisave system. Medisave is a forced savings plan that consumes between 7 and 9.5 percent of a working Singaporean’s wages — think of it like the Social Security payroll tax, if said tax funded a health savings account. Singaporeans then pay for some routine care out of their Medisave accounts.
Conservatives like Medisave because it is built on a deep appreciation for the idea that routine medical care can be treated like any other good, and patients can be pushed to act like consumers when buying it. Which is all true. Medisave distinguishes Singapore’s system from that of the US or Western Europe, where insurers typically cover most of the cost of routine care.
But again, the way Medisave actually works is the governmen
t forces you to divert 7 to 9.5 percent of your wages into this account, and then it decides what you can do with those savings — one way Singapore keeps drug prices low, for instance, is it only allows Medisave funds to be used for drugs that the government judges cost-effective (more on this later).
So while Medisave may look like a health savings account, it’s a mandatory health savings account funded by a payroll tax and only usable in certain conditions.
Medishield: Not all medical care is routine care. For the big expenses, Singapore runs Medishield, a nationwide catastrophic insurance program. The premiums are set by your age, and the deductibles are reasonably high — roughly $1,400 in US dollars. Enrollment is automatic, though you can opt out if you choose.
Together, Medishield and Medisave form the core of Singapore’s more market-oriented health insurance system — the idea is
you pay routine expenses out of your Medisave account, and if things get bad enough that you hit your deductible, you begin using your Medishield account. This accords with the broader conservative view on health care: Insurance should cover unexpected costs, and for everything else, people should shop around as they do for most other products, and unleash the powers of the market.
But to make that structure work,
Singapore relies on a massive amount of government coercion across the entire system. Fully funding your Medisave account is compulsory, not optional. You’re automatically enrolled in Medishield. The government limits the services both programs can purchase and, as we’ll see, often produces or reprices the services both programs purchase.
Medifund: Some Singaporeans fall through the cracks of Medisave and Medishield. For them, there’s Medifund — Singapore’s payer-of-last-resort.
Medifund’s structure is unusual in two ways. First, it’s based on a $3 billion endowment, with the government only able to spend the previous year’s investment income to pay for the needy’s medical bills; dipping into the endowment itself is forbidden. Second, it’s administered with a lot of discretion at the hospital level — so rather than qualifying for Medifund based on income, the way Americans do for Medicaid, hospital boards administer Medifund to the patients they judge needy enough to qualify. This is less restrictive than it might sound — the government says that more than 99 percent of applications are approved.
The big vulnerability of Medifund is that a bad investment year could wipe out the government’s ability to pay — and do so at the moment it was most needed. It’s a testament to Singapore’s economy, and to the government’s fiscal skill, that they’ve not faced this problem yet.
