Some practical ways to rein in rising healthcare costs, premiums

Healthcare costs continue to rise, and Singaporeans are bound to be concerned when they see their hospital bills and medical insurance premiums go up year after year.

Some reasons for this are structural and there’s little we can do about them. We are now merely a year away from super ageing status, as the proportion of the population aged 65 and above is estimated to hit 21 per cent in 2026. By 2030, one in four will be aged 65 and above.

The Singapore Actuarial Society has cautioned that hospital admissions could rise against such a backdrop, with longer stays and more medical attention required, which would mean higher costs and, in turn, higher medical insurance premiums.

But there are other reasons for the rising costs – including over-consumption of healthcare services, some hospitalisations that can be avoided and inefficiencies that can be addressed. It is possible to keep a lid on healthcare costs if we can tackle these issues sensibly.

How we got here

Singapore’s healthcare financing model, which comprises subsidies and the three Ms, has worked well so far.

Medisave is a mandatory national healthcare savings account, MediShield Life is the basic health insurance scheme, and MediFund is an endowment fund that helps needy Singapore citizens who cannot pay their medical bills.

The trio, together with government subsidies, are meant to keep medical bills affordable for everyone.

Geriatrician Carol Tan of The Good Life Medical Centre, who is familiar with healthcare financing, said that governments in developed economies typically spend about 10 per cent to 12 per cent of their gross domestic product (GDP) on healthcare. The US spends about 17 per cent of its GDP, but the results are suboptimal.

In comparison, Singapore spends under 5 per cent of its GDP on healthcare and achieves widely regarded good outcomes, she added.

While the Government plays a dominant role in Singapore’s healthcare landscape, private insurers also chip in to fill the gaps in the system, through not just Integrated Shield Plans (IPs) but also group insurance that is parked under companies’ staff benefits.

But a system that was working smoothly started to go awry after the market’s first as-charged rider was introduced in 2005.

This meant that when a patient sought treatment, their entire co-payment under the IPs was covered. This kick-started a downward spiral. 

First, insurers did not want to be left behind and jumped on the as-charged rider bandwagon. 

Since patients covered by IPs and riders would have to pay very little, if anything at all, they started seeking what they thought were the best and most expensive treatments.

Knowing that the patients were not feeling the pinch and did not know better, some doctors started to maximise their profits – often overtreating patients and charging high fees.

The effects spilled over into the group insurance business. IP insurers, who were making handsome profits, started seeing losses as hospital bills – especially private ones – ballooned.

This led to higher premiums for IPs and riders.

The Ministry of Health (MOH) had to step in by mandating that all IP riders sold from April 2019 would involve a minimum 5 per cent co-payment on the part of the patient. Fee benchmarks were also put in place to give patients a sense of what they could be expected to pay.

But with the population ageing and some poor habits becoming entrenched – patients don’t mind expensive treatment, even if it is not really required, as long as they don’t have to pay much – premiums continued to rise.

Not surprisingly, the claims for private hospitals are much higher than those for public hospitals.

How can we rein in healthcare costs and premiums?

Changing the ground realities

One way to soften demand for private hospital IPs and riders is to increase the co-payment amount.

This can be done by putting prescribed limits for treatments in place.

Patients who insist on getting treated by doctors who charge way above their peers – their average charges breach the prescribed limit – should be asked to pay the difference.

Another way is to reconsider whether IP premiums covering private hospitals can be paid using Medisave. If this is disallowed, demand for expensive treatments will likely dip.

Policyholders covered for private hospitals may then choose to downgrade to Class A wards in public hospitals. Many older policyholders are already doing this as premiums for private hospital coverage spike with age.

But if the idea is to lower costs by diverting patients to public hospitals, then the public healthcare system must, in the first instance, be able to handle a possible influx of patients who downgrade their IP coverage.

To this end, MOH has ramped up the supply of public hospital beds.

Earlier in March, Health Minister Ong Ye Kung told Parliament that with more hospital beds added, bed occupancy has fallen from the typical 100 per cent or more to 85 per cent.

He said this rate would help ensure sufficient capacity in case of a spike in demand.

But adding beds is expensive and land is scarce, so preventive healthcare is the way to go, said Dr Tan, who added that this strategy entails things like routine vaccinations, health screenings and health literacy.

“Better health and financial health literacy to correct the information asymmetry would also be fundamental to changing patients’ behaviour,” the geriatrician said.

Dr Tan added: “There is a need for responsible curated information, whether it is enabled by artificial intelligence (AI), to help people access the facts because depending on healthcare professionals is not enough.”

What an insurer can do

IP insurers are constantly looking for ways to sieve out doctors and hospitals that like to maximise profits.

In this area, Great Eastern Life might have found an achievable and pragmatic wayout.

In October 2024, the insurer launched its own Medical Care Concierge, where its in-house officers help match patients to doctors, based on their IPs.

These 10 officers, who are experienced in handling patients or are medically trained, are employed by the insurer and receive a fixed salary.

They first determine what benefits apply based on the policy the patient has, then they recommend specialists who are on Great Eastern’s panel.

Patients can also choose to seek treatment from specialists who might not be on Great Eastern’s panel.

In such an instance, the co-payment amount will logically be higher and some benefits may be moderated if the specialist is not on the panel.

The cost estimates and differences will be made known to the patient.

Those who opt for panel doctors will receive pre-authorised certificates and their claims will be guaranteed by the insurer.

Already, the scheme has worked for Great Eastern, whose concierge team has processed more than 1,100 policyholders so far.

Besides preferred doctors, insurers also have their preferred hospitals.

The preferred hospitals approach functions on the basis of the insurers’ bargaining power, which has grown as medical tourism here dries up.

Some insurers secure bill discounts for patients by agreeing to send these patients to preferred hospitals.

Others agree to package fees for procedures and measure treatment outcomes.

Associate Professor Wee Hwee Lin of NUS Saw Swee Hock School of Public Health wrote in October 2024 that private insurers might want to shift from a fee-for-service model to one where doctors are rewarded based on patient outcomes.

This ought to apply to hospitals too.

This is because the care provided, data gathering and facilitation are done by hospitals.

What else can be done

A study by NUS Saw Swee Hock School of Public Health that looked at the public and private hospital claims of five of seven IP insurers – AIA Singapore, Great Eastern Life, Income Insurance, Prudential Singapore and Singlife – between 2016 and 2020, found that the “other fees” category in hospital bills has been growing fast.

This component typically includes implants, drugs, lab tests, ward procedure charges, costs of prescriptions and daily treatments.

The study found that the other five components of hospital bills – surgeon fees, anaesthetist fees, consumables costs, room and board charges, as well as occupational therapy facility fees – remained relatively stable.

One medical veteran noted that bills generated by hospitals are for inpatient stays, and doctors’ charges may not be part of this. He suggested that comparisons be made between hospitals based on the table of surgical procedures, which allows claims from Medisave and MediShield Life. He also suggested that outpatient bills be itemised.

Dr Tan suggested random audits of such itemised bills.

The dicey bit here is that insurers do not want a slow claims return rate.

For claims that are filed electronically, insurers can ask for itemised bills, but these take a long time to get, which then affects the duration an insurer takes to process a claim.

It is why insurers do not make such requests for most bills unless they are exceptionally large.

But having access to more data will give insurers a better assessment of what specifically is driving costs up.

There is also a strong case for better insurance products.

Dr Tan said about 30 per cent of hospital admissions are avoidable.

“Not that patients are denied care but there are cases where the care needed can be managed as outpatient at a lower cost. (Care given during) most admissions after the initial few days can be provided out of hospital. However, insurance pays only for hospitalisation costs, so patients go to hospitals for inpatient care,” she said.

Many insurance products still do not fund out-of-hospital care post-discharge so patients ask to stay in hospital longer, noted Dr Tan, who added that insurers ought to come up with innovative products that pay for outpatient care.

She said these products could have capped limits and have guidelines outside the usual Community Health Assist Scheme illnesses like coughs and colds.

Insurers have to step up and design innovative and thoughtful products that can help patients with affordability.

Ultimately, there needs to be a balance between patients, doctors and insurers for the ecosystem to be sustainable.

Source: The Straits Times, "Some practical ways to rein in rising healthcare costs, premiums", by Claire Huang, 21 May 2025. © Singapore Press Holdings Limited.

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