One in every five dollars spent in the United States goes toward health-care expenses. Singaporeans spend less than one in 20. They live longer lives and report more satisfaction with their health care system.
What do they do right that the United States might imitate?
Singapore requires that its citizens pay into a health-care fund. This, in effect, ensures the “health care for all” that fervent backers of Obamacare so desired. But in practice the system resembles Social Security more than Obamacare. It’s less of a welfare payment than a deposit into a savings account. This allows for universal coverage, a non-negotiable tenet of most health-care plans floated by liberals. But it does so in a way that keeps the money out of the hands of the state and in reach of the hands that deposited it, even if for a strictly limited purpose.
The Asian city-state also requires its citizens to pay a portion of their own medical bills. This works as a check against runaway medical inflation of the likes experienced for years in the United States. William Haseltine, who penned a book on Singapore’s system called Affordable Excellence: The Singapore Healthcare Story, notes how this requirement that patients, rather than relying wholly on an insurance company or the government, pay parts of every bill keeps overall costs down. He writes:
There is little doubt that the manner in which medical care is paid for has an impact on costs. Singapore has countered rising healthcare costs to a far greater degree than in all other high-income countries. Perhaps when people have to spend their own money, as the Singapore system requires, they tend to be more economical in the solutions they pursue for their medical problems. In contrast, in countries with third-party reimbursement systems, neither providers nor consumers of healthcare bear the major burden of cost. Since someone else is paying — government programs, insurance companies — there is little incentive to be prudent in decisions about which and how many tests and treatments are appropriate for a given situation.
How might a similar approach work here?
Americans at all income levels must pay a significant percentage of their healthcare — say, 20 percent — to reduce overall spending. Wealthy patients can pay 20 percent from income and savings. Those with less wealth can receive tax credits which, if not used, can accumulate in a health-savings account (HSA) and pass on to their families at the end of life. (Singapore allows individuals to share benefits with sick family members.) Patients paying no income tax can receive direct payments for their HSAs from the federal government.
The amounts in the accounts can be spent only for medical expenses using an HSA debit card, with health providers subject to reports to federal or state regulators. This type of plan, easier to navigate than the labyrinth encountered by American consumers, works so well in Singapore that China now looks to it as a possible model as it establishes safety nets for healthcare and retirement incomes there.
As it stands, the Obamacare exchanges cover fewer than 20 million people compared to the roughly 160 million covered by employer plans, 55 million by Medicare, and 75 million by Medicaid.
When the CBO projects that 20 million will lose insurance, they estimate the impact of reducing the growth of federal funding for largely state-run Medicaid programs. Hospitals, physicians, drug companies, nursing homes, and other healthcare providers remain more interested in Medicare and Medicaid funding than in any program that might curtail the 20 percent of gross-domestic product (GDP) spent by Americans on healthcare. Insurance companies and pharmacy benefit managers consider Medicare and Medicaid as vital to profits as private insurance plans offered by employers.
Patients covered by any of these plans consider hospital stays, physician payments, MRIs, X-rays, CT scans, nursing homes for elders, much else as coming at no cost. Americans from the very wealthy to the very poor have little financial incentive within the current system to reduce healthcare costs by diet, exercise, annual check-ups, and searches for less expensive medical care. Whether through private insurance or a public program, their bills get paid primarily by third parties.
When payment comes out of one’s pocket, or out of an HSA whose unused dollars roll over for future use, consumers tend to act like cost-conscious actors rather than Brewster spending his late, long lost uncle’s millions. This is an idea in the United States. Halfway around the world, it is a reality.
Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.
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