April 18, 2009
Pay now, reap the benefits in old age
Higher health insurance premiums when young can lower cost for seniors
By Salma Khalik
THE majority of Singaporeans are now covered by a basic medical insurance scheme.
Even newborns are getting insured with MediShield, the national scheme, within the first few days of their lives.
The Government has also made it easier for the parents of uninsured children to sign them up when they register for primary school. This will be extended later to children in higher level educational institutes.
The number of housewives still not covered has come down over the years, their husbands having been persuaded to get them on board.
The only real gap left is the one yawning over the elderly, and now is a good time to fix this.
The basic MediShield scheme now stops coverage for people over the age of 85.
There is a valid reason for this: MediShield is based on each age group paying for itself.
Younger people pay less in premiums since fewer of them need medical coverage; older people pay more since more of them will end up in hospital.
As people age, the call on medical insurance goes up. Premiums thus have to be accordingly higher.
However, the proportion of people over 80 who are likely to claim from insurance is so large, and the amount they are likely to need is so high that, in order to pay for it all, premiums for this age group would likely be beyond the means of most.
This is especially so because most of them would have stopped working for a couple of decades.
In fact, in order to keep premiums for the 80- to 85-year-olds affordable, the deductible - the initial amount patients have to pay before insurance kicks in - is now double that for younger people.
Since the deductible for older patients was raised last December, an 80-year- old patient who used to have to pay the first $1,000 to stay in a C-class ward now has to pay the first $2,000.
The deductible in a B2-class ward has also doubled - from $1,500 to $3,000.
Higher deductibles mean lower insurance coverage and higher Medisave or out-of-pocket payments.
In spite of that, premiums for this group still had to be raised to over $1,000 a year.
There is little that can be done to change things for the current group of elderly people.
But there is still time to prepare younger people for their twilight years.
Literature shows that the bulk of medical expenses comes in the last years of life. Ironically, that is when most people no longer have a regular income.
Some can depend on their children to help pay their hospital bills, but a growing group of childless elderly people will have to look after themselves.
One way is to have people pay premiums in advance, for when they hit their 80s.
If they were to start paying, say, $100 to $200 a year from the time they start work in their 20s, the amount - with interest - by the time they are in their 80s would be considerable.
It should more than cover even the high premiums they might need to pay from the age of 80 for the rest of their lives, even after working in inflation.
Furthermore, while life expectancy for Singaporeans now tops 80 years, the harsh reality is that some will die young.
If all young adults were to join in this 'forward premiums' scheme, they would add to the money invested - even if they may not live long enough to draw on it.
This will increase the pool of money for the survivors.
So those who die before 80 can look at their premiums as a form of charity, to help those who do make it past that age.
This is, after all, what insurance is about - pooling resources just in case of future need.
With this amount to count on, people can enjoy medical coverage even in their last years, when their need for hospital care goes up.
The actual premiums to be paid will have to be worked out by actuaries and would depend on the age of the person at the time these payments start.
Given the nature of things in Singapore, to make it work will require, at the very least, Government endorsement.
Better yet, the Health Ministry should take the lead, the way it did with MediShield and ElderShield, the disability insurance.
The take-up for such a scheme will be higher if payment can come from Medisave. As younger adults are still working, the sum taken out will be constantly replenished, and so will not deplete their account.
It will also be in line with the raison d'etre for Medisave, which is to pay for acute illness.
Such a scheme will relieve some of the demand on Medifund, which can be kept for those in greater need.
The current economic situation may make it look like this is not a good time to start such a scheme, but it is times like this that bring home the message about the critical need to prepare safety nets.
Furthermore, it takes time to set up a national scheme, so it would be ideal to have it ready to roll by the time the economy turns around.