The Pioneer Generation Package (PGP) unveiled in this year’s Budget, together with other existing and enhanced schemes such as the Community Health Assist Scheme or CHAS, Medisave top-ups, etc., are a set of policies that provide a comprehensive solution for many acute and primary healthcare needs of older Singaporeans, subject to the finalisation of the MediShield Life scheme by 2015.

The main interventions of the Pioneer Generation Package come via the well-established S+3M [1] healthcare financing model: “S” for subsidies, and the “3M” referring to Medisave, MediShield (and now its proposed successor MediShield Life) and Medifund.

Financing of intermediate and long-term care

The acute and primary healthcare orientation of the PGP is clear. However, given Singapore’s rapidly ageing population, there is urgent need to consider not just the healthcare requirements of a growing elderly population, but also the spectrum of care all the way through to intermediate and long-term care (ITLC) services. A concurrent effort to enhance Singapore’s long-term care system is necessary to cope with projected changes in old-age dependency, as well as to cope with a changing disease burden, i.e., more chronic long-term diseases, including mental health issues.

The financing system for ILTC services is less well developed than it is for healthcare, in particular lacking an explicit mandatory savings component; there is no Medisave equivalent for ILTC services although ElderShield premiums may be paid out of Medisave. There is also relatively less developed and much less comprehensive long-term care insurance scheme in the form of ElderShield. [2] ElderShield is designed as an affordable severe disability insurance scheme for those aged 40 and above, but it cannot be considered to be universal in coverage (41% of those eligible are not covered) and payouts are a fixed amount with no inflation-protection for a maximum period (Singapore Parliamentary Reports, 2013).

A large portion of the almost 700,000 eligible persons not covered by ElderShield and not entitled to a transitional scheme called Interim Disability Assistance Programme for the Elderly (for those not eligible to join ElderShield when it was introduced in 2002) will be in the Pioneer Generation. Those most in need amongst this group would be entitled to means-tested subsidies offered by the Ministry of Health for a range of ILTC services that include home nursing and residential care, with subsidies targeted at households at the median income level per capita and below (Ministry of Health, 2012).

This however leaves those with monthly household income per capita above $2,200 to pay the unsubsidised rates out-of-pocket, and possibly without the ElderShield payout if they have opted out of ElderShield. A significant number of middle-income households may thus be forced to rely on their own out-of-pocket payments to finance their own and their elderly parents’ long-term care needs.

ElderShield payouts and risks within current actuarial risk-pooling

The maximum duration of ElderShield payouts may also be a general concern.  Whilst health-adjusted life expectancy for both male and female Singaporean residents has improved, the average healthy years of life lost to disability remains about at around six years for both men and women (Ministry of Health, 2014; see Table 1).  A number of the disabled elderly could face the prospect of outliving their ElderShield payouts which last only up to a maximum of six years, with payouts ending at the point in time when they would most require them.

Table 1: Healthy years of life lost to disability for Singaporean Residents

Source: Ministry of Health Singapore (2014)

Note: Healthy years of life lost to disability are calculated by subtracting health-adjusted life expectancy from life expectancy at birth.

Another issue with ElderShield lies with the fixed monthly payouts that are not adjusted for inflation. A steady 3% annual rate of inflation in the cost of providing LTC services compounded over 30 years would erode the purchasing power of $1 today by almost 60%, e.g., a payout of $400 in 2044’s dollars would be equivalent to just $164 in today’s terms.

Unlike the basic MediShield scheme today, ElderShield is an insurance scheme administered by three private insurers: Aviva, Great Eastern and NTUC Income.  Together, they provide the ElderShield coverage and additional supplemental cover with higher premiums to 1.013 million policyholders (Ministry of Health, 2013). This means that a risk pool that is less than one-third the size of the total 3.5 million MediShield policyholders is in turn split amongst the three ElderShield insurers.  Such sub-optimal risk-pooling may mean that premium rates are either set higher to ensure an adequate margin of safety; coverage is inadequate; or that the scheme may be not be sustainable in the long run.

Policy implications and recommendations

Dealing with the fundamental issues of ElderShield as discussed above will require an extensive review of Singapore’s ILTC landscape not just as it stands today, but projecting 15 to 20 years ahead as more of the Pioneer Generation begin to require these services. Is the current subsidy, ElderShield and family support structure capable of financing the bulk of elderly Singaporeans’ LTC needs?

As with the MediShield reforms undertaken in 2005 when the administration of basic MediShield was made the responsibility of the Central Provident Fund (CPF) Board, it may be necessary to consolidate the administration of basic ElderShield within a government agency like the CPF, in order to optimise the ElderShield risk pool and to arrive at an appropriate actuarial baseline for the scheme. The state may then need to step in and underwrite some of the inflation and longevity risks.

Extending coverage to those in the Pioneer Generation who are uninsured by ElderShield would require another likely substantial amount to be set aside, not dissimilar to that allocated in this year’s Budget to cover the MediShield Life subsidies in the PGP. Would there be appetite for this measure to be taken up in next year’s Budget, given the already substantial provisions made in the 2014 Budget? Perhaps it is fitting though that we consider enhancements to our LTC framework in the lead-up to the year of Singapore’s golden jubilee in 2015; and perhaps the MediShield Life committee can be persuaded to extend their mandate to also considering a reform of ElderShield.

Christopher Gee is a Research Fellow with the Demography and Family Cluster at IPS. A more detailed biography can be found here. Dr Yap Mui Teng is a Senior Research Fellow with the Demography and Family Cluster at IPS.  A more detailed biography can be found here.

Photo Credit: Dwellings.sg

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Footnotes

[1] Healthcare subsidies in the PGP include enhanced subsidies on outpatient clinics and cash assistance for the Pioneer Generation with disabilities or their caregivers; Medisave top-ups for the Pioneer Generation from August 2014; MediShield Life subsidies; and left unsaid but likely to act as the safety net of last resort, top-ups for Medifund, although there was no explicit top-up of Medifund as part of the PGP. The Pioneer Generation has been defined as those who are 65 and above in 2014 and have obtained citizenship on or before 31 December 1986.

[2] ElderShield400 offers a monthly payout of $400 for up to 72 months, a claim for which can be made once the insured is classified as severely disabled, i.e., unable to perform at least three out of six activities of daily living (washing, dressing, feeding, toileting, mobility and transferring).

References

Ministry of Health Singapore. (2012, February 20). More Affordable Intermediate And Long-term Care Services To Help Singaporeans Age-in-place. Press Release.

Ministry of Health Singapore. (2013, August 12). Healthcare Financing Statistics.

Ministry of Health Singapore. (2014, January 14). Population and Vital Statistics.

Singapore Parliamentary Reports. (2013, May 13). No.12, Vol. 90, Sitting 18.