Fairly comparing PAP’s & SDP’s healthcare policies

Back in March 2012, the SDP released The SDP National Healthcare Plan: Caring for all Singaporeans. The 87 page report proposed a philosophical shift compared to PAP’s existing healthcare policies. Among other things, the SDP suggests that the 3M policy be replaced by a single-payer national health insurance scheme run by government.

It is laudable that the SDP has taken the initiative to prepare such a detailed proposal. These actions should be encouraged from all opposition parties, as it is necessary to show voters that the opposition has the policy capabilities to become Singapore’s next government. Consequently, it is sad that the Worker’s Party, our most successful opposition, has yet to provide any detailed plans on its own ideas (such as the idea to nationalise public transport).

The SDP’s report launches a barrage of criticism against PAP’s healthcare policies. On the other hand, the PAP has not formally responded to SDP’s plan over the past 6 months. This may be due to the nature of bureaucracy, which is always slowed by layers of internal clearances. It is also possible that the Ministry of Health prefers not to debate against unelected opposition parties. Nevertheless, the silence is deafening. I think the PAP should at least provide a direct response when a panel of doctors steps forward to say that something isn’t right with our system.

As intelligent voters, we must examine the PAP’s and SDP’s proposals with rigor. After all, all politicians want our votes, and it is possible that they may not use the most honest of arguments. The US media circus that plays out during every presidential election shows that politicians are more than capable of using tactics such as lies of omissions and strawman arguments to discredit their opponents. It is therefore up voters to see past these tricks.

A fair comparison of the PAP’s and SDP’s policies requires an “apples-to-apples” comparison. This post is my attempt to set a fair backdrop when analysing these two proposals. (The actual analysis will likely be in another post.)

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1. Identify the true cost of the proposal to citizens

The SDP cites that annual healthcare spending is about $12b today, of which govt pays $4b and citizens bear the rest. SDP proposes to raise the govt’s share to $10.5b, so that locals only bear $2b. This cost increase is almost entirely funded by measures such as cutting defence spending and imposing a tax on foreigners buying properties. Hence the actual cost borne by locals will be reduced compared to today.

I have two issues with this paragraph:

Firstly, decisions to reduce defence spending or impose new taxes should be taken separately from healthcare decisions. If it makes sense to reduce defence spending, then we should do it regardless of which healthcare policy is adopted. After all, the resulting revenue can be used to boost other social services, which includes PAP’s existing healthcare policies. This means that SDP’s proposal will always be more expensive to government compared to today.

Since we cannot assume that a new healthcare policy is always accompanied by spending cuts, we should assume that by default, govt’s spending increase will result in higher taxes. But if we also assume no new taxes are enacted, the healthcare plan payments cited by SDP should increase four-fold, so as to recognise that the cost directly borne by locals continues to be $8b instead of $2b.

Secondly, we should recognise that the full $12b of healthcare costs is always paid for by the people, one way or the other. The govt’s money mostly comes from taxes, so when the govt pays for healthcare, they are doing so with our money. We are either paying cash/3M or taxes. If we pay less via out-of-pocket money, then we are paying more through taxes.

This means that when we should take a “big-picture view” when comparing the cost of healthcare policy. The impact of taxes borne by locals and businesses cannot be ignored. It is insufficient to simply compare Medisave contributions vs the SDP’s health insurance premiums. Doing so would obscure the bigger picture in order to gain votes, since people are more sensitive to the direct cost that they pay through cash and Medisave. I should also clarify that there is nothing inherently wrong with paying more for healthcare, especially if it produces better results.

2. Focus on results, not on spending. 

The SDP reports that Singapore’s healthcare expenditure is around 3% of GDP, which is close to the average of 5% of GDP in low-income and lower/middle-income countries. High-income countries spend a much higher percentage of about 11% of GDP. The criticism that the PAP is spending too little on healthcare to the detriment of Singaporeans is a repeating theme in the report.

However, it is a truism in life that spending more does not guarantee better results. Cost-effectiveness also plays a part, and the law of diminishing returns exists for a reason. Instead of focusing on increasing spending, we should focus on increasing results. Singaporeans are generally mindful that it doesn’t make sense to over-pay, which is why there was unhappiness over the Brompton bike saga.

The SDP-PAP healthcare debate would therefore be more productive if the report focuses more on the results and sustainability of healthcare policy, rather than harping on spending as a percentage of GDP. Nevertheless, it can be difficult to predict what the theoretical results of SDP’s proposal would be if applied in Singapore, so we may need to observe the effect of similar single-payer models on the healthcare costs of other countries. Healthcare philosophy matters, since the effect of PAP’s philosophy for individual healthcare responsibility should be compared with the healthcare philosophies of other nations.

SDP’s report also extensively discusses measures to improve healthcare services. These should not be ignored, but they should also be analysed separately from how we pay for healthcare. As quoted by Singapore M.D. “How you run a healthcare system can in fact have nothing to do with how you pay for it – you can have a system where individuals pay for their own healthcare but where providers are guided by evidence, and you can have a system where patients do not pay out of their own pockets but where treatment is not guided by evidence.”

3. Use a like-for-like comparison for Medisave.

When criticising govt’s healthcare expenditure, the SDP report does not consider Medisave to be part of govt’s healthcare expenditure, since Medisave is a forced savings account that is paid for and drawn down by the individual.

I believe that’s the wrong way to see things.

Medisave is a “strange animal” because it doesn’t fall neatly into the definitions of either govt taxes or out-of-pocket expenses. At times, it behaves like an out-of-pocket expense because (i) it can only be drawn down by the individual and (ii) if you do not fully consume your Medisave, your next-of-kin can inherit it. Yet at other times it behaves like a tax, because the individual “permanently loses” his money to the state as if it is an expense, then gets it back in the form of healthcare services from govt.

Although Medisave is “strange”, it is not difficult to imagine Medisave as a tax on  7 – 9.5% of your income which is then returned to you by govt in the form of “vouchers for healthcare services”. Under this light, Medisave can be treated as govt’s healthcare expenditure. This would temper the SDP’s criticism that too much cost is borne by out-of-pocket expenses under the existing PAP policy.

In fact, Medisave is probably better than a normal tax from the taxpayer’s perspective. All taxpayers pay taxes in exchange for services from the govt. In the case of Medisave, the taxpayer and his family gets “first bite of the cherry” from the taxes that he has paid. But if we had general taxes instead of Medisave, then we don’t get the same “first bite” for ourselves (or our immediate family).

4. Beware of throwing the baby out with the bathwater

This is a common problem when criticising the govt’s policies. PAP is not the perfect govt, and PAP’s policies are consequently not perfect. The online response to failures in the PAP’s policies is typically to replace the entire policy with an alternative idea. However, this ignores the possibility that a particular policy may have the right concept but is tuned improperly, thus resulting in imperfect results.

An analogy would be like taking medication for a fever. Even the right medication may be ineffective if the dosage is too small. Switching medication may not improve things (or may even make things worse).

This means that when we compare the PAP and SDP’s proposals, we should consider if the broad healthcare philosophies and concepts ensure the correct broad outcomes and behaviors first, before we dive into the specifics. There may be good points in both policies that could be cherry-picked and merged into a better solution. Broadly speaking, SDP’s National Health Investment Fund is really a souped-up version of Medishield and Medifund combined. Would we be able to achieve the same (or better) outcome if we tweaked the 3M policy to take on the implementation concepts in SDP’s proposal?

Conclusion

Healthcare is an important policy that will affect all Singaporeans. As intelligent voters, it is necessary to analyse the proposals from politicians in a fair manner. I hope this post has been useful in illuminating some of the trickier issues in today’s healthcare debate.

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About sgthinker

I'm a 40-year old Singaporean male, and this blog pens down my thoughts and feelings about Singapore's political happenings, government policies and society trends. I hope this blog will provide a moderate voice in the growing online debate about the state of Singapore's society. Some of the posts here won't be solely written by me, since there will be times when other writers are more eloquent at expressing their views, in which case I'll share their insights (along with my comments). The content on this blog is owned by me.If you wish to share or reproduce the content, please attribute it to this blog.
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One Response to Fairly comparing PAP’s & SDP’s healthcare policies

  1. Pingback: Leong Sze Hian: Talking cock or intellectually dishonest? | sgthinker.wordpress.com

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