Healthcare financing in Singapore: 10 questions for DPM Gan and Health Minister Ong

SINGAPORE – Singapore is known for its good healthcare, which has contributed to its people being among the longest-lived in the world, with an average lifespan exceeding 83 years.

However, with an ageing population pushing up demand for healthcare and costs going up year after year, will Singapore be able to continue offering good healthcare at affordable prices?

Healthcare financing was the topic of discussion when Deputy Prime Minister Gan Kim Yong, who helmed the Ministry of Health for a decade, and Health Minister Ong Ye Kung sat down with The Straits Times for an interview.

Here are the 10 questions that ST posed to them:

1. In many developed countries, the government provides free medical care for its citizens. Why doesn’t Singapore do the same?

Gan Kim Yong (GKY): There’s really no such thing as free healthcare because someone has to pay for the costs of the drugs, the pharmaceuticals, the facilities, the doctors and the nurses, and the healthcare workers. So the question really is: Who pays for it? Ultimately, it’s the taxpayer who has to pay for it. In Singapore’s case, we have a very comprehensive healthcare payment system: what we call S+3Ms – government subsidies plus MediSave, MediFund and MediShield. With S+3Ms, we ensure that healthcare will always be affordable. 

But it is also important to bear in mind that we must always encourage the appropriate use of healthcare, the right-siting of healthcare. This will help to make sure that overall healthcare costs will be moderated. 

Ong Ye Kung (OYK): The problem is that when healthcare is free, and it’s all paid for already by taxes, people have no discipline. The demand just booms. 

So today, to get a simple X-ray at the NHS (Britain’s National Health Service), the wait is nine months to one year. The last I checked, there were seven million people on the waiting list. The NHS is crumbling under the demand.

In the US system, they buy their own insurance, so in that way, they don’t have a long queue. If they are insured, when they are sick, they go to a private hospital where they can get care almost immediately. However, not everyone can afford insurance.

(The healthcare system in) Britain started off as very affordable because it’s free, but not very accessible because the waiting time is long. In the US, you have the opposite – very accessible because once you have insurance, you can access private healthcare. But it’s not very affordable. Not everyone can afford insurance. 

We started off not wanting to experiment with either extreme. We went straight to the middle – S+3Ms – which leads me to the second fundamental tenet of healthcare: How you pay determines how much you pay. 

If you go to either extreme, you end up paying much more than necessary. But with a judicious mix of S+3Ms, we make the system as lean and as efficient as possible.

2. Why is healthcare so expensive, with costs rising faster than inflation every year? Why can’t the Government do more to contain healthcare costs?

GKY: First, I think there’s always this underlying inflation, a big component of which is wage costs. Healthcare is very manpower-intensive – doctors, nurses, other healthcare professionals, a lot of supporting staff as well to take care of patients. 

And therefore, as wages go up, inflation goes up, cost of healthcare will go up. But healthcare costs go up higher and faster than inflation for several other reasons, one of which is ageing. As you know, all of us are growing older, and as we grow older, we consume a lot more healthcare. 

So individually, our healthcare cost also goes up by the year. And collectively, Singapore as a whole, we are an ageing country, and we are becoming a super-aged society. As we age as a country, there will be more older people consuming more healthcare. The healthcare expenditure will go up over time.

There are also investments in new capability, new technology, new treatments. These are very effective, but at the same time, the cost of these new treatments is also higher, and therefore, there’s also this technology-driven healthcare cost that goes up over time. So there are several factors that contribute to higher healthcare costs. 

The Government has been doing quite a lot in managing and moderating this increase in healthcare costs. For example, we continuously work with our healthcare clusters to see how we can trim costs to operate more efficiently, more cost-effectively, more productively. 

In this way, we help to minimise the unnecessary expenditure. It also helps to right-site our patients, to make sure that they are given the appropriate care and not excessive care. This way, we also minimise expenditure on health.

But ultimately, what is most important is to keep Singaporeans healthy, so you spend less and consume less of healthcare services.

At the same time, we also make sure that healthcare costs are always affordable for our population, particularly for the middle-lower-income group, through our subsidy structures, through our financing schemes. 

OYK: There was a frantic hiring spree during the Covid-19 pandemic. We lost 14 per cent of our foreign manpower, poached by other countries. And of course, they offered higher salaries. So this strong demand for healthcare manpower is driving up healthcare costs.

DPM Gan also mentioned technology. Productivity and innovation usually mean you get a better product at cheaper cost. Healthcare is the only industry I can think of where we get better healthcare at a much higher cost.

It’s to do with the well-being of our loved ones. People don’t stint on such things. Doctors will say “let’s try this drug”, but it costs a lot more and people will try. 

There’s another reason – insurance has an impact. I mentioned earlier, how we pay also determines how much we pay. With insurance, someone else is paying the bill and a new dynamic arises. There is always the tendency for over-servicing and unnecessary treatment. That pushes up cost.

That is a factor that is very hard to tackle, and which worries us a lot. 

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3. The public sector accounts for more than 80 per cent of hospitalised cases. Can’t public hospitals stop the buffet syndrome by not over-treating or over-servicing patients?

OYK: The buffet syndrome is not such a huge factor in the public sector, especially the subsidised sector. We have clinical control and discipline to prevent unnecessary treatment and excessive servicing. 

The buffet syndrome does happen a lot more in the private sector, in particular, if you have a rider. I’m particularly concerned because when you have a rider, you practically pay nothing or very little, and that’s when the buffet syndrome starts.

When we look at our data, someone with an IP (Integrated Shield Plan) rider is 40 per cent more likely to claim than someone without a rider. And when we look at the size of the bill, it is 1.4 times that of someone without a rider. 

So essentially, if you have a rider, chances are, your healthcare cost is two times that of someone without a rider.

More than half of the population has riders. Many people buy riders, I think, for peace of mind. I can understand that. Half the time, they don’t use the riders, they go to a subsidised class.

4. Mr Gan, you stepped in to do something about riders in 2018. You mandated that all new riders had to have a minimum co-payment of 5 per cent, capped at $3,000 a year. But riders are still fuelling healthcare expenditure. Were you too light-handed? Should you have put in more safeguards?

GKY: We considered it very carefully. At that point in time, the rider covered the first dollar, so the (patient’s) healthcare was practically free. It’s paid for by insurance. But again, I stress that healthcare is never free. You eventually pay through the premiums. Premiums will continue to rise and healthcare costs will continue to rise.

So we introduced the non-zero co-payment concept to ensure that there is a minimum co-payment that patients will have to pay. And that helps to moderate the cost increases in healthcare as well as insurance premiums. 

When we introduced this mandatory co-payment scheme, we also wanted to continue to give patients the assurance that healthcare will always be affordable. Therefore, we decided to have a cap of $3,000.

This threshold, or this benchmark, will have to continue to be adjusted from time to time. As healthcare costs go up, it has to increase over time to keep pace with overall healthcare bills.

OYK: I think the problem of riders is a serious one. We’ve taken some measures, required some co-payment. But fundamentally, it is an industry problem. IPs and riders, these are commercial products, and we have reached a stage where there is quite unhealthy competition.

Why has this happened? I think it’s because insurers were fighting for market share. This is not a case of lack of competition. It’s a case of a lot of competition – so much so that to fight for market share, they offer better and better terms: “I cover this, I cover that, cover to the last dollar if I can.”

As a result, when they start getting more patients and improving their market share, they find that it’s not sustainable. As I mentioned, 1.4 times (multiplied by) 1.4, that’s the bill that they are saddled with. 

So what do they do? They therefore raise the premium. And you find IP premiums, rider premiums going up. And it’s not sustainable.

Many people, when they reach their old age, find that their IP premium is so high, it’s not worth maintaining it, so they exit.

5. Mr Ong, you say riders are not sustainable. Today, two in three people with IPs also have riders because they think it’s necessary. Can people safely turn to the private sector for treatment if they only have an IP, but no rider? Also, do you and Mr Gan have riders?

OYK: MediShield Life will kick in first. If you go to the private sector with no subsidy, and you have an IP, that’s very good because it protects you in the private hospital. And then there is the residual. The residual is paid by your rider plus your MediSave. And if you don’t have enough MediSave, you pay cash, but the rider is still covering the residual. 

I’ll give you an example. I know somebody whose mother went to hospital. She told me: “Luckily, my mother bought a rider.” I said, “Hang on, tell me which hospital.” Tan Tock Seng Hospital. I asked which class ward. Class A, no subsidy. So let’s break down the bill of over $300,000 – very long stay plus intensive care plus high dependency. 

So I say, “break down what is the financial support” – $80,000 from MediShield Life. IP claim is about $200,000. So roughly $280,000. IP rider paid $29,000. Out of more than $300,000, the rider paid only about $30,000.

I asked, “What is the premium your mother is paying?” MediShield Life premium, $2,000 to $3,000. IP premium, $2,000 to $3,000. Rider, once you are in your mid to late 70s, close to $10,000.

So you pay $10,000 in your old age for a rider, and you claim $29,000, which is about three years’ worth of premiums.

Many seniors are beginning to realise that it’s not worth it. So I think riders are not sustainable. I think they are pricing themselves out. And more and more people will realise that.

Insurers also realise this – that over time, riders are not sustainable. They are causing their own demise. So I believe the insurers are also thinking about how to come up with better alternatives to riders. It requires maybe a bit more discipline, some co-payment but priced lower. This is something the industry must think about.

GKY: It’s a risk pooling concept. If your bills are higher, you’re more likely to claim. All this will add to the need for higher premiums, because the payout is from the premiums collected.

You just have to bear in mind that as you get older, you’re likely to claim more. Your premiums will also go up. You just have to make your calculation: whether it’s worth your while, whether you can afford it. You make a decision on whether you want to continue with the rider at that point in time.

I think what Mr Ong is saying is that riders have to be restructured. They have to be re-thought through, rather than a fit-for-all rider that covers everything. 

There is also a need for guidelines on how riders can operate. There will still be some need to cover beyond just IP. The key question is: How can that rider concept be sustainable in the long term, and continue to be affordable, and not end up with the buffet syndrome at the end of the day?

OYK: In the end, we all want choices. So riders make sense. We do have riders. As I said, most of us want choices, we all want peace of mind. But when the rider is not designed properly, and I don’t think it is now, it creates an unsustainable vicious circle.

GKY: You must also bear in mind that at a young age, riders are quite affordable. If you really want to cover yourself for the unforeseen circumstances – which rarely happens, but it may happen – especially when you’re young, riders offer lower-cost protection.

But as you grow older, when your claims really kick in, the premiums will go up. You have to understand how riders operate and make your own informed decision.

6: Public hospitals continue to face very high demand for beds, with patients sometimes waiting two to three days to get a bed. With the ageing population, this could get worse. Are people right to worry that while subsidised healthcare remains affordable, there may be problems accessing good healthcare?

OYK: Yes, I’m worried, too. There’s no doubt that with the ageing population, more people are falling sick; chronic illness and patient load will go up. And we had a rude shock, a double whammy, after Covid-19.

First whammy, it pushed back all our infrastructure development projects by a couple of years – two years, three years. That was so painful. 

Second, emerging from Covid-19, many countries noticed the same thing, which is, the patient profile has changed, and patient sickness has changed.

We’re seeing a lot more older patients coming in, not because of very severe diseases, but actually because of infections. Because they are old, and there are underlying illnesses after Covid-19, they are more frail. One infection is all it takes for them to be in the ICU (intensive care unit).

That’s really the kind of patients that we’re seeing at the emergency department, which is also why the average length of stay went up from 6.1 days to seven days. It sounds like (an increase of just) one day, but that’s a 15 per cent increase in patient load. We are swimming against the tide, almost drowning.

But we are catching up with our infrastructural works. Thankfully, Woodlands Health Campus opened in 2024.

Two of our most crowded hospitals are Changi General Hospital and Khoo Teck Puat Hospital (KTPH). Once Woodlands Health opened, KTPH’s patient load and occupancy rate have become much more sane. Now its (bed occupancy rate) is in the 80 per cent, as is Woodlands Health’s.

We do have to expand the capacity. It is not just about building hospitals, which we are doing. It’s also about nursing homes, about community care, and now we have this new class of facility called transitional care facilities, home care, Mobile Inpatient Care at Home (Mic@Home).

All these act together to right-site patients and expand the capacity in a way that can keep up with the rising demand.

In 2024, we opened another 2,700 beds or so. About 700 to 800 are acute beds, mainly at Woodlands Health. The rest are at community hospitals, Mic@Home and nursing homes. In 2025, we are probably going for about 1,700 beds. Then in 2026, about 1,300 beds.

As we move towards the end of the decade, we are going to see the completion of Eastern General Hospital, Tengah Hospital, expansion of existing hospitals, and completion of the redevelopment of Alexandra Hospital. So quite a number of big hospitals are going to open towards the end of the decade, hopefully to meet the demand of a rising patient load. 

We can make it affordable to the patient, but there’s no doubt that with an older population, healthcare expenditure, whether by the Government or nationally, is going to go up.

Part of that is to sustain the operation of new hospitals. Equipment you can buy. Manpower, you need to recruit, you need to integrate, and you need them to be able to operate competently. 

Fortunately for healthcare, we do have our fair share of local talent. Many of our young people do want to join healthcare, whether it’s as doctors, nurses, pharmacists or allied health professionals. 

With that strong core, we are also in a position to attract foreign nurses who are prepared to work here. I do think Singapore is a very attractive place, especially for those living in the region.

They know coming here, people appreciate their services, people respect the profession, giving them very good training. And for many of them, after some years of working, with the training that Singapore provides, they can work anywhere they want. They know that.

We’d rather be in that position where we are a magnet that is able to attract people from all over the world to work as healthcare professionals here. And even if they move on after Singapore, that’s fine. We have gladly trained them, and they would have gladly contributed to our system.

7: If people give up their IPs as they grow older and premiums become too expensive, can the public sector cope with the influx?

OYK: If more people decide to come to public healthcare, which is not a bad thing, I think our capacity will have to cater for that. Overall, that’s why we need to expand the capacity as patient load will go up.

The reason why we want to offer a choice is that if you really can’t wait, and you have an IP, you can go to the private sector.

The nature of public healthcare is that if it’s subsidised, there would be a queue. If there is no queue, something is wrong. When there is a subsidy and people know it, demand always exceeds supply.

What is important for us is to be able to triage to differentiate what is immediate and urgent, and what is elective and can wait. Even with cancers – there are cancers and cancers.

Seniors are dropping out of riders which are a lot more expensive, not so much IPs. In your 80s, riders cost more than $10,000 a year. That is a fact of life, that money always helps.

But in Singapore, we hope that regardless of your income, you can come to a public hospital, and you will get good, accessible, affordable care. And if you somehow still can’t afford it, there is MediFund, the last of all safety nets.

All healthcare systems juggle between three objectives: the quality of your healthcare, affordability, accessibility. 

Britain decided to make it really affordable, free. But then it became not accessible. The queue is too long. If there is a subsidy, there is a queue. When it is free, the queue gets longer.

The US decided to have fewer subsidies – take care of yourselves. So it’s accessible, but it’s not affordable.

What we try to do is balance the three objectives, so the burden is not huge on the country and on the person. And yet, you can have very good-quality healthcare.

All this would be so much easier to balance if the population is healthier.

8. Younger people are asking if they will be paying for the healthcare costs of older people. Are they going to be subsidising this cost as it comes out of the taxpayers’ money?

OYK:  Healthcare expenditure will go up. Healthcare expenditure is already going up.

When I first joined politics in 2015 and became minister for education, education was the second-largest ministry by budget. The top was defence. Health was a distant third at $9 billion. Education was about $12 billion.

Today, it’s reversed, with government health expenditure – $18 billion in financial year 2024-2025 – surpassing MOE (Ministry of Education) by quite a margin, but still behind defence. From $9 billion 10 years ago to $18 billion today.

By 2030, I think we are looking at closer to $30 billion. So those costs, that whole healthcare expenditure, is going up. A large part of government expenditure is subsidising healthcare costs.

But it is also important for us to supplement that with other social safety nets, mainly your own savings, your MediSave and insurance.

The big difference between the insurance scheme and the subsidy scheme is a subsidy can be cross-generational, which is the question that you just raised, and which can cause problems in many countries and jurisdictions.

But with insurance, you are paying for yourself. Each generation paying for itself through premiums, which goes back to our earlier discussion about insurance being designed responsibly in a disciplined way, so that even while you pay for yourself, it is done in a sustainable way. 

There’s no doubt that expenditure is going to go up. We still expect our GDP (gross domestic product) to grow. And so long as the Singapore economy grows, tax receipts will go up. And a big part of it, a significant part of it in future, will be for healthcare.

9: The Government has always promised Singaporeans that it will provide basic healthcare for everyone. The question is, with higher demand, will the definition of basic healthcare be scaled back? In other words, will people in future not get the treatments and medication that are currently available?

OYK: For many years, the definition of basic healthcare has been changing. And it’s always been enhancing, because of technology advances and medical science. People’s expectations get higher. Diseases become more complicated when you get older, so the definition for basic healthcare will continue to be enhanced.

I don’t foresee the quality of healthcare coming down, given the trajectory of expectations as well as advancements.

I would say, it’s a big inflection point, though people may not realise it yet. In the recent review of MediShield Life, we included cell, tissue and gene therapy products (CTGTP).

This is a big change in medical therapy. Scientists and doctors can now customise drugs and treatments to treat previously untreatable diseases, including cancer.

They take blood from you, they cultivate it, they put “weapons” into the cells and reproduce them. After a certain amount of time, they inject it back into the patient, and these cells will target the cancer cells. One-time treatment.

It is nascent, but it is evolving very fast, and it is extremely expensive.

In the past, drug cost was mostly in R&D (research and development). Production was actually low cost. CTGTP is the reverse. R&D cost may not be very much, but because it’s customised to every patient, production cost is very high. 

But we decided that this is the way to go. At some point, that becomes people’s expectation: A cure is available for my serious sickness. I expect to be supported.

So we have to start embracing this. We have strengthened our health technology assessment to make sure we bring in and approve only those that are cost-effective. And when they are brought in, we now will subsidise them, we will allow MediShield Life coverage.

In time to come, the pipeline will increase. So what is deemed as basic will continue to be enhanced. It’s just like housing, like transport – we expect life to be better. We deserve life to be better.

Cost ought to come down over time, with better techniques, better supply chain. I visited the labs in China, they are able to produce it (CTGTP) at a lower cost. We ought to have a good gatekeeping system. There are all kinds of drugs.

10: Can the Government do something about the very high cost of treatment in the private sector?

OYK: If we go the way of Canada (that does not allow private healthcare), which is extreme, we are taking away choice. Yes, it (private healthcare) may cost three times more, but there are patients who choose that, for whatever reason.

Maybe they trust the doctor, or maybe they prefer the service, or maybe they really have the means and don’t mind paying two to three times more. I would want to respect the choices of patients.

In a more variegated healthcare system, it serves patients better. But we must make sure, as we go towards such a variegated system – not just at the more expensive end, but also on the more cost-effective end – that if you do not require hospital care, you can go to an Active Ageing Centre near your home. There is a health post where you can do your health screening, your physiotherapy. They can all be done there.

So if we right-site that spectrum of choices, that makes our system much more effective, cost-wise and clinically-wise.

This article was originally published on The Straits Times. Its inclusion on this website is solely for education purposes.