A Proposal for Improving the System of Financing Health Care in Singapore

Like many other countries, including the United States, Singapore faces the dual problems of rising health care costs and an aging population. To cope with these problems, the Singapore government introduced the Medishield scheme in 1989 that provides low cost catastrophic medical insurance coverage. The scheme suffers from a serious deficiency, however: coverage ceases at age 70. This deficiency is exacerbated by Medishield\u27s premium payment structure which is akin to the premium structure of a one year renewable term policy so no reserves are developed. As a result, coverage beyond age 70 requires exorbitant premiums that are beyond the reach of the average Singaporean. We propose a premium payment structure under which the annual premium payable remains level in real terms throughout the lifetime of the insured. This makes the premium structure similar to one that is a level percentage of salary. The model uses such key variables as the rate of return, the rates of inflation of general costs and of medical costs, and the rate of increase in the morbidity rate