A FRIEND who was recently warded at a private hospital praised the dinner menu – nothing less than wagyu beef and lobster. But at the halfway mark of a stay expected to be a week long, the preliminary estimate of the bill exceeded S$30,000, which suggested that the daily room charge, excluding surgery, approached a staggering S$10,000.
It’s tempting to view private hospital charges in isolation, where costs bear scant relation to public hospitals’ charges. And that is so, to a certain extent. But medical cost inflation lifts all boats, even the public sector’s.
In health insurance, policyholders of private hospital Integrated Shield Plans (IPs) have suffered the brunt of premium rises – until now. That is set to change.
The recommendations of the MediShield Life Council in its 2024 report wield far-reaching impact for both subsidised and private care. That’s because MediShield Life is an essential plank in Singapore’s healthcare financing framework. As a nationally administered scheme, it offers all residents a basic level of cover. Nearly three million opt to enhance this with an IP offered by private insurers. In a typical hospital bill, MediShield Life covers the first layer of eligible claims before IP cover kicks in.
In its report, the council recommended enhanced benefits and higher premiums for MediShield Life, and took pains to explain why. An ageing demographic, medical inflation, and advances in treatments and therapies have raised costs significantly. The changes will take effect progressively from April 2025.
Medical cost inflation in Singapore is estimated at between 10.67 and 13 per cent annually. By design, MediShield Life is sized to cover larger bills incurred in ward classes B2 and C. It was meant to fully cover nine out of 10 bills, but escalating costs have diluted this to fewer than eight in 10 bills.
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Four design features help to keep the scheme affordable and sustainable. First are the claim limits, which spell out the maximum amount for eligible claims. Second, a deductible applies; this is the amount a patient has to pay first before MediShield Life kicks in. The third is co-insurance, or the patient’s share of the claimable amount.
The fourth feature is the proration factor, which prorates or “normalises” bills incurred in higher-class wards – classes A and B1 as well as private hospitals – to the equivalent of B2 and C wards in public hospitals. This ensures that payouts are comparable across the board, whether patients opt for subsidised or private care.
The recommended reductions in the proration factors are substantial and will have an impact on IPs almost across the board in terms of ward classes. For surgical fees in private hospitals, for example, the proration factor will drop from 25 to 10 per cent. For Class A plans, it drops from 35 to 25 per cent.
A lower proration factor raises the burden on IPs, which have to foot a bigger share of the bill. This is not currently priced into premiums.
It’s unclear whether this is the first time proration factors are reduced for restructured hospital plans. Until now, such adjustments focused mostly on private hospital IPs, where policyholders have already suffered several rounds of premium hikes.
Now, those who hold restructured hospital IPs will also have to brace themselves.
To be sure, everyone with an IP has to take a hard look at the affordability of premiums today and in future years, when he or she may no longer earn an income. In considering a downgrade, policyholders will likely need to compromise on their preferences and expectations of care. They’ll also need to keep healthy and guard against overconsumption of healthcare, which hurts all in the risk pool.
