Follow The Money Trail

Doctors In The Crosshairs

On 2 May 23, a certain financial advisor by the name of Francis How Chee Kuen wrote to The Straits Time Forum stating, “Many years ago, IPs (Integrated Shield Plans) were more affordable, but doctors have been charging high prices for their services, leading to insurers increasing their premiums. Premiums will continue to rise if doctors overcharge or mark up prices”. The letter was titled, “Holistic approach needed to tackle cancer care costs”

He gave an example of one his clients having to pay $3000 out of $5000 a month when the new Cancer Drug List (CDL) is enforced in February 2024. He ends off the letter by saying “In our battle to contain cancer treatment costs, we can’t just be targeting the insurers and capping coverage. Instead, the whole issue needs to be addressed holistically and from all angles”.

“Holistic” is a very politically-correct word nowadays, but using such a big word doesn’t make one’s argument any more complete and persuasive than making a monkey wear a skirt or a pair of pants and calling it human.

What this Mr How is actually saying is, doctors overcharging and making mark-ups to their services is the root of the problem. He also said in the same letter that pharmaceutical companies should be subject to scrutiny as well. And the system should not be just targeting insurers and insurance coverage in an attempt to contain costs.

Just Being Human

This hobbit’s answer to Mr How is quite simple – Everybody wants to make a good living and put bread on the table. These includes doctors, employees of pharmaceutical companies such as pharma reps and insurance agents (now called financial advisors).

So let’s cut to the chase. Everyone wants to defend or maintain if not increase the money they are making. Because doctors, insurance companies and their financial advisors as well as pharmaceutical companies and their sales representatives are humans and no one wants to suffer a loss of earnings. This is true for a communist society and even truer for a market and capitalist economy like Singapore. It is true whether you are making $4,000 a month or $4,000 a day. Nobody wants to then earn $3,000 a month when he was earning $4,000 a month or $3,000 a day when he is used to earning $4,000 a day. It’s human nature.

Let’s start with the insurance industry itself and their financial advisors. In the four years leading up to the Pandemic (2016-2019), the growth rate in management costs and commissions (paid to insurance agents and financial advisors) was actually faster than payments made to the healthcare providers. This could be easily inferred from a study made by the Singapore Actuarial Society. ( (Table A4 of Medishield Life 2020 Review: SAS Comments). From this data, we can reasonably conclude that insurance companies and financial advisors are not exactly doing this for charity. They also want to make money, and probably as much as legally possible.

Now, let’s turn to the doctors. According to the 2021 SMC Annual Report, there are about 50 medical oncologists in the private sector. These 50 will prescribe the bulk of cancer drugs in the private sector, although there are also many other specialists who prescribe cancer drugs.

So it is probably expedient to focus on these 50 specialists and say they overcharge or have mark-ups and use ineffective cancer drugs. Especially if many of them are big earners. Are all 50 completely blameless? Probably not. But that’s not the point. By the way, no medical oncologist has actually been convicted of overcharging by SMC or in the courts.

Moreover, Mr Frances How used the case of his patient from a restructured hospital, which to this hobbit, makes no sense because as everyone knows, a doctor in a restructured hospital has no input on decisions of drug price. He does the work and the hospital decides on the prices based on costs. Unless he is thinking that even restructured hospitals unreasonably mark-up their services.

Which means that he is either illogical, uninformed or he must think the problem lies elsewhere – i.e. the pharmaceutical companies. Well, pharmaceutical companies are for-profit companies that will expectedly maximise their profit. Why do you want to sell a cancer drug for $3,000 when you can sell it for $5,000? Especially in this case, your customers have paid insurance premiums that will fund most if not all of the $5,000.

So, there is no use in pointing fingers at doctors or pharmaceutical companies. Everybody is behaving as expected. It is more fruitful to, as the saying goes, “follow the money trail” by revisiting why people pay for IPs, especially pertaining to IP cancer care coverage.

We Should Be Anti-social

Since the introduction of the CDL, the IP providers have come up with riders for coverage of cancer drugs that the CDL either does not cover or where the CDL-based reimbursement caps are perceived to be insufficient to cover the actual cost of treatment. These riders are to be paid for in cash. There is a concern in some circles that if too many people buy these riders, the issue of expensive cancer drugs gets “socialised” to a huge segment of society, thereby undermining the efforts of introducing the CDL and claims caps etc to control costs.

In an article published in The Straits Times on 24 April 23, it was reported that the Minister for Health said “now that riders provide higher cancer coverage, their premiums will need to be priced higher. If this results in fewer people buying riders, “I think we have addressed the problem”. But if riders continue to be in high demand, notwithstanding high premiums, that would be a problem and MOH and the MAS are prepared to step in.”

This reporting by Ms Salma Khalik is a relief to this hobbit because it shows that MAS, the body empowered by law to directly regulate insurance companies (not MOH) is now finally prepared to step in on matters that are medical-related. This hobbit does not remember MAS stepping in to regulate IP providers in any meaningful way other than for non-medical issues and have appeared to be content to let MOH to do the heavy lifting in this area. Perhaps they have finally crossed over to a higher plane of enlightenment, which is good.

However, this hobbit thinks many people will buy these riders, which means the problem is likely to persist. We will look at this issue from both the demand and supply sides.

Demand Side

First, on the demand side, there will be a healthy interest in buying these riders:- The whole purpose of buying IP is to finance a person’s medical expenses in the private patient classes (A1 or B1 class) of a restructured hospital or in a private sector hospital when he gets a catastrophic disease. Cancer is an example of a catastrophic medical event and more than a quarter of Singaporeans will die from it and more than 40% will get it in their lifetime, i.e. getting a cancer is NOT a remote and rare event.

So it usually makes little sense if I have an IP but it is perceived that the IP is insufficient to fund private oncology care (Restructured B1 or A1 or private hospital patient). If I have an IP now I would be inclined to buy the rider, just for peace of mind and the high probability that I will need and use the rider, unless I find the rider really quite unaffordable.

There are also secondary factors that contribute to uncertainty and hence create more demand for riders (and for peace of mind):

  • The current messaging is not good for IPs that are sold without a rider. The new limit of paying only for the most expensive cancer drug (should more than one be used at the same time) gives the impression that a IP policyholder sans cancer rider has to pay out of pocket for the remaining drugs, should the policyholder need more than one drug, even though the reimbursement limit is actually quite generous.
  • The monthly limit for CDL claims can be seen to be archaic when chemotherapy cycles are now commonly 6 weeks along, leading to unutilised claim limits in some months and bursting the limits in other months, in which case the policyholder may have to top-up the difference in these other months.

Supply Side

On the supply side, there are two structural problems with the current IP environment that leads to the situation where the IP sector is unable to effectively complement Medishield Life (MSL). As this hobbit will show you, it can even undermine the policy intent of MSL. By design, the IP policy sits on top of MSL so the two are entwined like Siamese twins. If one of the twins are unwell, the other feels it too.

Problem #1: MSL Is For Life While IP Is An Annual Plan

Being an annual plan means the IP sector is in permanent dissonance with MSL. This dissonance is not just structural, but strategic, financial and behavioural as well. While MSL looks at the lifetime needs of its policyholders, IP executives and financial advisors are incentivised to think mainly short-term.

The executives who run IP providers are rewarded mainly for the IP’s financial performance on a year-by-year-basis. Financial advisors’ commissions are also heavily front-loaded and diminish very significantly after a policy is sold after say, about 2 to 3 years.

Problem #2: Too Many IP Providers

According to the financial advice website Singsaver, there are close to 3 million IP policyholders. This is about right if you consider the oft-quoted claim that close to 70% of Singapore residents (i.e. citizens and PRs) have bought IPs. Most insurance experts will tell you that 3M is a rather small pool to be shared among seven providers. It is quite unlikely that market penetration will rise much beyond 70% because the poorest 30% will probably find IP premiums very unaffordable.

To sustain seven IP providers, each IP provider will have to look for new customers to sign up. These new customers can come from either other IPs’ customer base or those that have not signed up with any IP, especially young adults entering the workforce and earning a decent salary. In any case, because of the relatively small pool of addressable IP customers, there is intense competition for new customers among all IP providers so that the IP providers can maintain or grow their market share.

One of the most important determinants of selecting an IP is of course, price. IP providers have to compete on price. But an interesting facet of the IP industry is that price competition is only critical when a person decides to buy an IP and when he renews his IP while he is still young with no pre-existing diseases. Once an IP policyholder has pre-existing diseases he is basically stuck with the same IP provider if he wants to continue having IP coverage for these diseases. He then effectively has only two choices – stay on and pay the increased premiums with the same IP provider or drop out of the market completely.

In other words, once pre-existing diseases kick in, IP is a very sticky business. Which is why despite some IP providers periodically “cry father, cry mother” about how tough and unsustainable the IP market is, no provider has exited the scene yet. Customer stickiness is a good thing when you are a business owner or operator.

And So….

In summary, this culminates in a situation whereby IP providers compete aggressively for customers up front by slashing prices but do not similarly compete so intensely on “after-sales” service and care quality later. That is why they do not have to respect MOH fee benchmarks in its entirety and also seek not to have more doctors empanelled. When you’re stuck to your IP provider because of pre-existing diseases, you’re stuck real good.

We say that healthcare is ultimately determined by the Golden Triangle of Affordability, Accessibility and Quality.

But in reality, the business model of IP is probably based on maximal affordability up-front and denial or limitation of accessibility later with minimal if any respect for quality, so that profits can be maximised.

This can be largely attributed to the two features described above:

  • IP policies is an annual plan while MSL is for life, resulting in multi-faceted dissonance between the two and
  • There are too many IP providers fighting for a small pie up front which paradoxically becomes a sticky business post-sales.

So it is likely that cancer riders will be popular because there are factors on both the demand and supply side that lead to such a fertile milieu for the sale and purchase of these riders.

But what if the revenue from these riders cannot adequately pay for the cancer services incurred later on? As usual, IP providers can raise premiums to a limited extent before policyholders drop out, or restrict accessibility by empanelling as few specialists as possible.

They also have a third trick up their sleeves – which is to blame service providers such as doctors and hospitals for being expensive as well as chastise pharmaceutical companies for excessive mark-ups. And then the cycle may repeat itself – there may be some task force or committee formed that will try to control costs by introducing measures that mainly target healthcare providers while IP providers pay lip service to the recommendations that would have been  put up, which is essentially what happened with the HITC’s work (Health Insurance Task Force) a few years ago.

If you think about it carefully, the interests of IP providers and their financial advisors are almost diametrically opposite to that of the government. The government is always about long-term sustainability while the IP sector is short-term. The government doesn’t want too many buying such riders lest the problem gets socialised. The IP sector on the other hand wants more and more people to buy riders, thereby indirectly socialising the issue. This applies to cancer care and can be applied to the whole IP industry as a whole. The money trail starts with the how the IP sector is structured while at the same time there are too many IP providers for a relatively small market. And these lead to other consequences when other stakeholders also want a piece of the pie. The trouble is everyone wants the biggest slice of the biggest pie. And somehow the insurance industry has been the most adept at this game so far, by blaming others and positioning itself as mostly blameless.

But the truth is, everyone is human and human nature prevails. Unless you’re a hobbit.

Previous posts on the subject of IP:

5 thoughts on “Follow The Money Trail

  1. Thank you for another well written article.
    Not sure if you have written about this but nowadays IPs also have something called Claims Adjusted Pricing (CAP). Basically this is similar to car insurance where one’s insurance premium is increased the following year if there are claims above $2000. Are people be treated similar to vehicles?


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