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    Fixing the US Health Care System: Look To Singapore

    Singapore Health CareImagine going to the doctor with the flu and paying $30 for the visit and $10 for the medicine with no further medical bill.  Now imagine going to the doctor and finding out you have cancer.  You have enough money in the bank to deal with such a medical emergency and whatever you can’t cover, the federal government will pick up.  All citizens of the country in these scenarios have the same deal and the government only spends 4 percent of GDP on health care. Sound impossible?  Welcome to Singapore.

    Touting arguably the best health care system in the world and a per capita income higher than America, Singapore is the answer economists have no doubt been shouting at their televisions during every health care debate the last eight years.  The Singapore health care system presents an ideal blend of left and right ideas on health care and still manages to be more free-market than U.S. health care has been since prior to the "New Deal."  Due to the creation of Medicare in 1965, the federal government has been spending more each year on health care; which has brought us to a current rate of 17 percent of GDP on health care.  As explained by senior fellow at the Manhattan Institute and Forbes writer Avik Roy

    ...if we measure the relative freedom of health-care systems by the dollar amount of government involvement in health spending, the French system is actually meaningfully freer than America’s.

    Yet the French still spend thousands more per person on health care than Singapore.  So how does Singapore do it?  They call it the three Ms - Medishield, Medifund and Medisave.  Medishield is optional catastrophic insurance run by the government.  Should a consumer opt to use Medishield, the cost of services has a cap with the government covering the majority of the ultimate cost.  Singaporeans can alternatively purchase private catastrophic insurance.

    Medifund covers the bottom 10 percent of income earners and is funded by interest the government has accrued from their initial investment in the program.  The program currently has $3 billion in interest.  Eldershield is also available to cover long-term medical care for those with severe disabilities and the elderly.  Between Medishield, Medifund and Eldershield, the left’s goal of universal health coverage is achieved with the added benefit of all being optional and very low cost to the government.  

    The glue that holds it all together can be found in Medisave, which translates to health savings accounts (HSAs) in America.  85 percent of Singaporeans participate in the program, which redirects 20 percent of their income into a Medisave account.  For many Medisave pays for Medishield.  However, Singaporeans maintain complete control of their Medisave accounts and can choose from whichever public and private insurance options best meet their needs.  In giving citizens ultimate control over their health spending, as opposed to the government like in the U.S., Singapore has incorporated the free-market approach that those on the right know creates success.  Roy likens Singapore’s health care system to the way Americans view other types of insurance: 

    We conservatives have long felt that the most market-oriented approach to health insurance is to think of health insurance the same way we think of all other insurance. Which is to say when we get car insurance, we don't use car insurance to pay for our wiper fluid, car wash or gasoline.  We buy car insurance so that if we crash our car or it gets stolen, we can cover that heavy financial risk that we wouldn't otherwise have.  And that's what health insurance should be too. 

    So if you get hit by a bus, you have a stroke, you have a heart attack, you're going to the hospital and you would otherwise have this huge hospital bill, catastrophic health insurance would pay for that.  Say anything above $8,000, $10,000, all that would be covered by insurance.  If you had a plan like that it would cost almost nothing, those kinds of plans are very cheap.  It's when you have plans that cover everything under the sun, including your routine health expenditures, it drives up the cost of insurance.  

    It's like an open bar.  Or when 8 people go out to dinner but you're splitting the check evenly, everyone orders lots of stuff thinking that, "Well I'm splitting the check anyway so what does it matter?" and then it ends up being a bigger bill.  It's like that with health insurance; everyone consumes more because they're not price sensitive, because they're not paying for it directly, everyone's bill goes up.  That's how our health insurance system works.  So if actually you move to a system where there's true catastrophic insurance, where just like with the car insurance or your homeowners insurance, if you really do get some calamitous event happen to you, you're covered.

    As for routine medical expenses, that is where HSAs (Medisave in Singapore) come in.  Says Roy:

    So what a health savings account does is it allows you to save for those expenses in a tax free way, the same way you would for a 401K.  So it's tax free, you can invest it, it can grow over time, any unused money you put in there rolls over to the next year.  So over time, if you stay healthy, you get rewarded.  Because if you're healthy but you keep putting money away in your HSA, over time you have a lot more money.  Where as if you're unhealthy then you spend it all, and so you have a much bigger incentive economically to stay healthy.  Where as in our current system with a lot of health insurance that covers everything, you don't have a lot of incentive to stay healthy because if you are unhealthy it is all covered by insurance.  If you are 400 pounds and you become a diabetic as a result of that, or you have chronic obstructive pulmonary disease because you smoke all the time, your insurance covers all of that; so you end up not having any economic cost.  But if you have an actual economic incentive to stay healthy and not smoke, go to the gym every once in a while, that’s what HSAs help you do.

    So that system is more attractive on a lot of different levels than what we do today.  So conservatives for a long time have wanted to move the U.S. in that direction.  And actually the Bush 2003 law that gave us the Medicare prescription drug benefit also legalized health savings accounts; before that you really couldn't do anything with HSAs.  So now, actually, a lot of people have HSAs.  Millions of Americans have them and it's growing steadily every year.

    For the skeptics, the proof is in Singapore.  Life expectancy at birth in Singapore is longer than in the U.S. and their infant mortality rate is less than half of America’s.   Singaporeans are healthier than Americans because in part, they are in charge of their health care spending.  

    An additional benefit of a healthier population is a completely different experience when one does need to go to the doctor.  With less patients, individuals can spend more time getting personalized attention.  As one Singaporean put it, “I feel like I’m in a Norman Rockwell painting... only the doctor is Asian.”  In fact, Singapore is a top destination for those around the world seeking quality care.

    So what does America need to do to get affordable, quality healthcare?  Well we know Obamacare isn’t the answer.  The CBO is already projecting the cost to double in the first 10 years.  While conservatives have been fighting hard to repeal Obamacare, talk of what should be done otherwise has been scarce.  
    Perhaps the bigger question is can both sides actually work on something bipartisan for the good of the country?  The left wants universal health care and the right wants individuals to be in control of their own health care.  The Singaporean health care system proves that both sides can win.  

    Roy maintains that spending is the most important aspect to him.  “If we can cover everyone, but we’re spending a quarter of what we’re spending,” he considers that a victory.  Whether or not Obamacare is repealed remains to be seen.  However, in either case our health care system was already broken and it’s time to come to the table with actual solutions.

    1 comments
    Jeff Larson
    05/18/2013

    Medisave is nowhere near 20% of income. It depends on age but is never higher than 9%. Contributions can stop when the account balance is high enough. The Government does not just pay your bills if your account gets empty. Most people do not buy the optional catastrophic insurance an instead rely on bailout from family or charity if bad luck strikes. Pobably the fact that most people except the very poor and rather rich are actually uninsured helps keep medical costs competitive.

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