The business of running a health insurance is based on actuarial science. Health insurance is not rocket science. However, embedded in the actuarial projections of health insurance is a lot of data that can be explained by the discipline of behaviorial science.
The recent policy announcement by the Ministry of Health to mandate that new policies underwritten as Integrated Shield Plans (IPs) offerings will no longer have “first-dollar coverage” has engendered much discussion and discomfiture among certain stakeholders, noticeably among policy holders and healthcare providers. The common term for first-dollar coverage is “riders”. Apparently, 1.1M people in Singapore have bought these riders whereby they do not need to make any out-of-pocket payments either as deductibles or co-payments when they make insurance claims. To complicate things, many of these IPs are also “as-charged” policies whereby the insurance companies pay out whatever the healthcare providers have charged. And to add salt into the wound, the SMA Guidelines of Fees had to be withdrawn in 2007 because it was deemed to be anti-competitive.
Expectedly, it was found that claims for these plans rose far faster both in size and frequency than those that did not have riders, suggesting that there is overcharging and over-servicing for these plans, leading to over- and unnecessary consumption of healthcare. Doctors in Singapore have been blamed by some quarters for this phenomenon.
Many countries, such as USA, Australia, Canada etc have had much more experience in health insurance than Singapore. And the experience is consistent and unequivocal – first dollar coverage and as-charged plans always lead to much higher and more frequent claims than those that do not have these characteristics. Human behavior and self-interests dictate that the parties involved (patients, doctors and hospital administrators) will work to create these unfavourable and unsustainable outcomes.
Why were insurance companies allowed to offer IP health insurance products that offer first-dollar coverage and reimbursement at as-charged rates when experience world-wide has shown that such products will lead to runaway healthcare inflation? This is perhaps not the forum to examine this in detail but those who are in positions of power should perhaps quietly and introspectively ponder this.
Singapore, because of the safety nets of a well-funded and equipped public healthcare system and Medisave and Medishield, actually came rather late into the game of private medical insurance. If so, Singapore should and could have easily learnt from others and avoid making the same mistakes. But alas, we did not. For whatever reasons, whether by purposeful policy design or mis-design, or inadvertent regulatory neglect, first dollar coverage riders and as-charged plans made their way into our healthcare financing environment in a big way, leading to the problems we now see.
And if indeed Singapore doctors did contribute to bigger and more frequent claims of IPs that are as-charged and with riders, it was hardly surprising. Singapore doctors are humans after all. Are they expected to behave very differently from their counterparts in other countries in the developed world?
A senior health correspondent argued recently that if all doctors had worked ethically and charged reasonably, the problem would not have arisen in the first place. There are black sheep in every profession, not just the medical profession. Stating the obvious (that there are black sheep) while alluding to an ideal impossibility (that ALL doctors work ethically and charge ethically) is neither helpful nor responsible. It merely polarises the discourse unnecessarily and expediently villainises a certain segment.
We can think of other similarly unhelpful statements like “If all e-scooter riders rode responsibly, there would be no need to register e-scooters” or “If all vehicle drivers drove according to traffic rules all the time, there would be no accidents, no need for the traffic police and no need even to purchase motor insurance”.
These are obvious truths, but unhelpful statements if we are to arrive at practical solutions that is sustainable for all stakeholders. In this vein, former Health Senior Minister of State Chee Hong Tat recently provided a useful framework by his use of the terms over-consumption, over-charging and over-servicing.
Over-charging is a price issue while over-servicing pertains to the volume and scope of services rendered. Over-charging and over-servicing independently or together can lead to over-consumption.
MOH has obviously thought through some of these issues and have started initiatives that are aimed at tackling the problems.
The first and most important of these is the formation of the MOH Fee Benchmarking Advisory Committee. Fee guidelines or benchmarks is a good tool to guard against overcharging and underservicing. If the benchmarks are well constructed, this hobbit believes the vast majority of doctors will charge within the benchmarks. This is because for the vast majority, to justify why one has not charged within the benchmarks is just too much work and carries too much ethical risk.
On the other hand, benchmarks can also be a guard against underservicing. Some third party administrators have fees scales that are so unrealistically low that providers refuse to offer services that are required. Fee scales that fall below that of the official benchmarks will become questionable in that are these companies truly interested in provide adequate care at reasonable prices or are they just interested in slashing costs and making a profit?
As long as doctors charge within the benchmarks, insurance companies that have panels of preferred doctors may and should become unnecessary.
The annual minimum co-payment cap of $3000 that has been mooted that only applies to panel doctors should also be unnecessary as such. The $3000 cap (with no lifting of cap) should apply to all providers as long as these providers undertake to charge within the benchmarks.
Insurance companies may then also offer fee scales that correlate to the lower end of the benchmarks, but these must lead to lower premiums and savings for patients, so that patients know they are getting bargain insurance products versus premium products that enable them to access any healthcare provider as long as the provider charges within the benchmarks.
Over-servicing is a more difficult issue to tackle because subtle over-servicing is often hard to differentiate from professional judgment that errs on the side of caution. Gross over-servicing is easier to detect and can be discovered often through audits and utilisation reviews.
However, it is important to differentiate insurance fraud from over-servicing and not conflate the two. The case of a hernia repair bill that cost >$30,000 which included a tummy tuck, breast augmentation etc., should be investigated for fraud, especially if the patient did not pay and the doctor did not charge for these additional procedures and only billed for the hernia repair.
Optimising insurance product design remains key to keeping over-consumption in check. For example, some products favour inpatient reimbursements over outpatient even though the cost of offering the service is more expensive in the inpatient setting. Such reimbursement asymmetries should be eliminated. This is no different from how public hospitals operated more than twenty years ago – CT scans could only be subsidised in the inpatient setting. As a result, many patients were admitted for CT scans by doctors so that the out-of-pocket expenses of patients could be reduced, even though they only needed outpatient services. Public hospitals have since improved and largely eliminated such funding anomalies. Insurance companies can learn from them in their reimbursement policies and practices.
While some policy missteps and regulatory neglect may have led us to where we are now, necessitating measures to fix health insurance that may not go well with some parties, it may be timely to also revisit some old-fashioned thinking on health care and the role of government. The 1993 Affordable Health Care White Paper issued by the Government then clearly stated “The health care system is an example of market failure” (Page 3, Executive Summary). Unfortunately, some parties may have forgotten or chosen to ignore this ageless adage.
In addition, The Government’s Health Care Philosophy was also spelled out in the Executive Summary of the said White Paper. The Philosophy consisted of 5 points, of which we reproduce here:
- To nurture a healthy nation by promoting good health;
- To promote personal responsibility for one’s health and avoid over reliance on state welfare or medical insurance;
- To provide good and affordable basic medical services to all Singaporeans:
- To rely on competition and market forces to improve service and raise efficiency; and
- To directly intervene directly in the health care sector when necessary, where the market fails to keep costs down
(Last two points in italics for emphasis)
For a while, we had relied on the almost completely free market to manage costs in the private sector. This has obviously not worked and the government’s current moves to have fee benchmarks and to mandate the removal of first-dollar coverage riders from IPs could be perhaps interpreted as adhering to its original philosophy of 1993 – that of “to directly intervene in the health care sector when necessary, where the market fails to keep costs down”.
After 25 years, the 1993 White Paper is an oldie, and certainly in many ways, still a goodie.