The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), 3/6/2018
its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the
data included in this paper and accepts no responsibility for any consequences of their use. Terminology
used may not necessarily be consistent with ADB official terms.

Sustainability of Healthcare 
Financing in Singapore

Chia Ngee Choon 
ecscnc@nus.edu.sg
Department of Economics
National University of Singapore

Presented at the Training Workshop “Effectiveness of Universal Health Insurance in 
Asian Countries”, Yogyakarta, Indonesia, 20‐22 March 2018
© Chia Ngee Choon 
1

Outline of Presentation

• Motivation
• Ageing Health Landscape
• Overview of Healthcare Financing in Singapore
• Financing Implications of Medishield LIFE
• Conclusion

Motivation | Ageing Health Landscape | Healthcare Financing in Singapore | Insurance Financing Implications | Conclusion 2

1
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Share of Population aged 65 and over

35
30
25
20
15
10
5
0

Source: United Nations (2009)

1950 1975 2000 2010 2025 2050

© Chia Ngee Choon

Share of Population aged 65 and over

35
30
25
SUPER‐AGED
20
15 AGED

10 AGING

5
0
1950 1975 2000 2010 2025 2050
Laos Cambodia Philippines
Brunei Malaysia Myanmar
Indonesia Vietnam
© Chia Ngee Choon
Thailand
4

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Speed of Aging in Singapore
Proportion of 65 years and over to total population

16
14.4
2017
14

12

10

0
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Source: Singstat

© Chia Ngee Choon 

Speed of Aging

• Singapore became an aging population in 1999 
• Proportion of elderly population in 2017 is 14.4%
• Projected to become super‐aged by 2026
• Singapore takes less than 20 years to transit from ageing to 
aged. 
‐ much shorter time to adapt to changing demographic 
landscape
‐ compared to Japan took nearly 25 years
‐ US expected to become aged in the next few 
years.  would have taken 66 years to transit from 
ageing to aged.  

© Chia Ngee Choon 

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Lee Carter Mortality Forecasting
Demographic Landscape of Singapore, 2013, 2030 and 2050

2030
85 +
2012 80 - 84 2050
85 + 75 - 79 85 +
80 - 84 70 - 74 80 - 84
75 - 79 65 - 69 75 - 79
70 - 74 60 - 64 70 - 74
65 - 69 65 - 69
60 - 64 55 - 59 60 - 64
55 - 59 50 - 54 55 - 59
50 - 54 45 - 49 50 - 54
45 - 49 40 - 44
Age

40 - 44 35 - 39 45 - 49
35 - 39 30 - 34 40 - 44
30 - 34 25 - 29 35 - 39
25 - 29 20 - 24 30 - 34
20 - 24 15 - 19 25 - 29
15 - 19 10 - 14 20 - 24
10 - 14 15 - 19
5-9 5-9 10 - 14
0-4 0-4 5-9
6 4 2 0 2 4 6 6 4 2 0 2 4 6 0-4
% of population Author’s computations 8 6 4 2 0 2 4 6 8
Author’s computations

• By 2050, population pyramid would be fully inverted.
• Aging landscape will impact financing a universal basic pension costs in a 
profound way.
• Quicker transition from ageing to aged population.
• Demographic Forecasting
• Hospitalisation  Probabilities
• Health Stat of Population Motivation | Objective | Overview  | Ageing Health Landscape | Financing Implications | Conclusion 7
• Future Hospital Admission Levels
© Chia Ngee Choon  7
• Health‐Adjusted Life Expectancy

Lee Carter Mortality Forecasting
Population Aged 65 and above in 2013, 2030 and 2050

2013 2030 2050

Oldest old

Middle old

Young old

• Oldest Old is the fastest growing age group.
• By 2030, youngest cohort of the baby boomers become young old. 
• By 2050, they will become the oldest old.

© Chia Ngee Choon  8

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HEALTHCARE FINANCING IN SINGAPORE : 
SUBSIDIES AND 3MS

Singapore: Government Spending on Health

S$ mil % of GDP

6,000 1.6
1.4
5,000
1.2
4,000
1.0
3,000 0.8
0.6
2,000
0.4
1,000
0.2
- -
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

Total Expenditure % of GDP

10

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Background:
Comparison of Government Health Expenditure, 2014

Health Expenditure Per capital health 
(% of GDP) expenditure

Public Private Total PPP $ US $

Singapore 2.05 2.87 4.92 4,047 2,752

Japan 8.55 1.68 10.23 3,727 3,703

United States 8.28 8.86 17.14 9,403 9,403

United Kingdom 7.58 1.54 9.11 3,377 3,935

East Asia & Pacific 4.56 2.32 6.89 893 640

World 5.96 3.93 9.89 1,271 1,059

Source: World Bank (2017)

Motivation  | Objective | Overview  | Ageing Health Landscape | Financing Implications | Conclusion 11

Background 
Health Care Financing : the 3 Ms + Subsidies

Affordable Health Care
Subsidies Up to 80% at public 
healthcare institutions

Prefunded
S+ 3Ms Medisave Mandatory medical savings account
Individual and family responsibility

Medishield Life Hospitalization Insurance

Medifund Social Safety Net

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Background
Medisave: Medical Savings Account
• 1984: Mandatory precautionary savings
• self insurance scheme
• avoid third party payment problems

Employee Age Contribution Total CPF Allocation Rates :

(years) (% of wage) Contribution (% of wage)
Employer Worker (% of wage) OA SA MSA
35 & below 17 20 37 23 6 8
Above 35 to 45 17 20 37 21 7 9
Above 45 to 50 17 20 37 19 8 10
Above 50 to 55 16 19 35 14 10.5 10.5
Above 55 to 60 12 13 25 12 2.5 10.5
Above 60 to 65 8.5 7.5 16 3.5 2 10.5
Above 65 7.5 5 12.5 1 1 10.5

13

1. Medisave: Medical Savings Account

• Guidelines on usage and withdrawals
• used primarily for demands that are relatively inelastic
‐ management of chronic illnesses 
‐ hospitalization 
‐ certain outpatient treatments like chemotherapy and 
radiotherapy treatments
‐ step‐down care eg: community hospitals, hospices
‐ use for paying premiums for approved medical 
insurance e.g. Medishield, Eldershield and private 
medical insurance 

Motivation  | Objective | Overview  | Ageing Health Landscape | Financing Implications | Conclusion 14

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Medisave: Medical Savings Account

• emphasis on individual responsibility and family 
support
• Medisave does not provide for risk pooling across 
individuals, it  provides for risk pooling within the 
family
• children’s Medisave is a major source of healthcare 
financing for the elderly. 

15

2. Medishield: Medical Insurance

• Introduced in 1990 
• Not a universal insurance scheme
• a basic, low‐cost catastrophic medical insurance scheme. 
• An explicit form of medical insurance
• Premiums paid from Medisave

• implicit form:  mean‐tested government subsidies
according to incomes and hospital class wards

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Medishield: Features put in place to minimize disincentives

• To deal with moral hazard 
‐ Depart from the open‐ended, unrestricted medical insurance
‐ Mainly for catastrophic life‐threatening illnesses 

• To curb excessive demand
‐ Claim limits, co‐payments and high deductibles
‐ Determined by the maximum limits for per day of hospitalization, surgical 
procedures, surgical implants and approved specific treatments and 
outpatient treatments.

• To curb supplier‐induced demand
‐ A system of negotiated fee schedule to restrict what providers may charge 
the insurers  per individual and type of illnesses. 

• To avoid adverse selection
‐ An opt‐out system.

17

Medishield Coverage

Aggregate
Members Resident
Approved
Year Covered Population Coverage
Claims
('000) ('000)
($m)
2005 91.5 1,955 3,467.8 56.4%
2006 115.6 2,764 3,525.9 78.4%
2007 140.8 2,871 3,583.1 80.1%
2008 163.9 3,076 3,642.7 84.4%
2009 219.5 3,299 3,733.9 88.3%
2010 258.5 3,390 3,771.7 89.9%
2011 291.4 3,497 3,789.3 92.3%
2012 327.1 3,543 3,818.2 92.8%
Nov 2015 Medishield LIFE                                                                  100% 

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Medishield LIFE (November 2015)

• to provide better protection against large hospital bills
• for all Singaporeans for life.
• to keep MediShield Life premiums affordable, the Government provide 
subsidies:
1. Premium subsidies of up to 50% for the lower‐ and middle‐income;
2. Special premium subsidies of up to 60% and Medisave top‐ups of up to 
$800 for the Pioneer Generation;
3. Transitional subsidies for all Singaporeans, to help ease the shift to 
MediShield Life over four years;
4. Additional premium support for needy Singaporeans

19

Medishield: Medical Insurance Premium, 2014  (before Medishield Life)

$1,200

$1,000

$800

$600

$400

$200

$-
15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90

Premiums paid by individuals from Medisave or out-of-pocket.

20

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Annual Medishield Life premium, before and after subsidy, 2019

SGD

1600

1400

1200

1000

800

600

400

200

0
1
4
7
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
55
58
61
64
67
70
73
76
79
82
85
88
91
94
97
100
Before subsidy Lower Lower‐Middle Upper‐Middle

Source: Author’s calculation from MOH data
© Chia Ngee Choon 

21

Medishield Coverage

Year Maximum Coverage Age

1990 65

1992 70

1996 75

2001 80

2006 85

2013 90

Medishield Life 2015, no age cap 
© Chia Ngee Choon 

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Medishield: Coverage and Aggregate Claims

99% 99%
800 92% 93% 93% 93% 100%
88% 90%
Dollar  million
84% 90%
700 80%
78%
80%
600
70%
500 56% 60%

400 50%

40%
300
30%
200
20%
100 10%

0 0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Aggregate Claims Coverage

© Chia Ngee Choon 

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Viability of Medishield Life

 2,000 90%

 1,800 80%
 1,600 70%
 1,400
60%
 1,200
50%
 1,000
40%
 800
30%
 600
20%
 400
 200 10%

 ‐ 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016
Insurance Premium Collection ($m) Aggregate Approved Claims ($m)
Loss Ratio = Claims/ Premiums

© Chia Ngee Choon 

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Prefunding Ageing Population 

• The Medifund Silver Fund was launched in 2007, in 
response to an ageing population
‐ initial capital sum of $500 million
‐ targeted assistance to the needy, means‐tested  
• Medifund is a social safety net to help needy Singaporeans 
who are unable to pay their medical expenses.  
‐ set up in 1993 with a start‐up capital of $200 million
‐ FY2012, the capital sum was $3 billion.  

• Eldercare fund was set up in 2000, to finance operating 
subsidies to nursing homes run by VWOs.  Capital sum at $3 
billions in FY2011
© Chia Ngee Choon

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Financing Healthcare: Pioneer Generation Package

• S$8 billion fund set up to finance the package
• Historically unprecedented in capital seed size for any 
Singapore endowment or trust fund scheme
• 16 times larger than the S$500 million Medifund Silver Fund 
launched in 2007 in response to an ageing population. 

© Chia Ngee Choon 

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Pioneer Generation Package

Outpatient Care
• receive additional subsidies on top of existing subsidised services and 
medica on at polyclinics & Specialist Outpa ent Clinics. 
• enjoy subsidies at par cipa ng GP and dental clinics under CHAS. 
Medisave Top‐ups
• receive Medisave top‐ups in their Medisave Accounts annually for life. 
MediS h
  ield Life
• Support for all Pioneers’ MediShield Life Premiums with special 
premium subsidies and Medisave top‐ups.
• pay less premiums for MediShield Life than Medishield. 
Disability Assistance 
• Cash of $1,200 a year for those with moderate to severe functional 
disabili es under the Pioneer Genera on Disability Assistance Scheme.  

© Chia Ngee Choon 

27

Pioneer Generation Package:
Our estimations indicated the package is adequate in covering healthcare subsidies for the current 
elderly cohort

ESTIMATED PIONEER GENERATION FUND SUBSIDIES (NOMINAL) ESTIMATED PIONEER GENERATION PACKAGE (PRESENT VALUE)

Age 80+  Age 65‐79 
Age 80+ Group Age 65‐79 Group (2014) (2014) Total
$400 m Subsidy per 
$2,400  $1,000 
$350 m person
Aggregate Subsidies

$300 m NPV, r=2.75% ($ billion)

$250 m 2.5% inflation 1.58 5.56 7.14
$200 m 4.0% inflation 1.71 6.49 8.20
$150 m 5.0% inflation 1.80 7.24 9.04
$100 m
Author’s computations
$50 m
$0 m
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
2047
2049

Allocated Package
Year
$8 billion fund + $1 billion return = $9 
Author’s computations
Fund gets drawn down  billion
completely at 2050

Assume:
• Cover full premiums for older pioneers and half of the premiums for younger pioneers
• More than a 40% margin over pre‐MediShield Life premium structure
• to account for the subsidies of outpatient costs

• Pioneer Demography © Chia Ngee Choon 
• Subsidy allocation
Motivation | Objective | Overview  | Ageing Health Landscape | Financing Implications | Conclusion 28
28

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Role of Integrated Shield Plans (IPs)

• IPs supplements Medishield Life by offering 
policyholders higher coverage for stays in higher 
wards either in public and private hospitals. 
• Premiums for IPs may be wholly or partly paid using 
Medisave monies. 
• Also have deductibles and co‐insurance features 
• Insurers offer IP riders that cover the deductible an 
co‐insurance portion of IPs
‐ paid by using cash instead of Medisave

© Chia Ngee Choon 

29

Coverage: Medishield Life, IPs and IP Riders

Source: Health Insurance Task Force (HITF) Singapore, October 2016

© Chia Ngee Choon 

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Cost of Private Insurance: Weighted average 
expense and claims ratios for IP Insurer

Source: Health Insurance Task Force (HITF) Singapore, October 2016

Costs = Claims Incidence Rate X Average Claims Cost 
IP Claim Incidence Rate at 9% ‐ trend of higher hospital 
admission rate across the population as a whole.
© Chia Ngee Choon 

31

Average incidence rates of all Ips with and without 
IP riders

Source: Health Insurance Task Force (HITF) Singapore, October 2016

• Higher incidence with IP Riders
• Higher propensity to utilize private hospital services 
• Over‐ consumption: Out of pocket costs no longer a concern
© Chia Ngee Choon 

32

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Average Bill Sizes Incurred by bill types
and Hospital Wards

Source: Health Insurance Task Force (HITF) Singapore, October 2016

• Average bill sizes incurred at private hospitals inflating 
at a more rapid rate than public hospitals

© Chia Ngee Choon 

33

Variation in healthcare utilization and costs

• Large variation in healthcare utilization across 
different hospitals is observed in Singapore. 
• According to the Life Insurance Association report 
(LIA, 2015), average total bill sizes for private 
hospitals are about three times as high as those of 
public hospitals, and this gap is still growing. 
• Cost in private hospitals two times more than public 
hospitals for inpatient treatments;
• 2.5 to 3 times more for outpatient treatments
• 4 times more for day surgeries
 over‐charging?

© Chia Ngee Choon 

34

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Further research

• understand the drivers of the rising medical 
expenditures in Singapore 
‐ supply side vs demand side
• study behavioral mechanisms of consumers 
and providers for healthcare
‐ physicians’ overcharging (monetary vs 
non‐monetary incentives)
‐ patients’ over‐consuming
• healthcare market efficiency
© Chia Ngee Choon 

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18