June 3rd, 2008 by David E. Williams of the Health business blog
This is a transcript of my recent podcast interview with Dr. Jason Yap.
David Williams: This is David Williams, co founder of MedPharma Partners and author of the Health Business Blog. I’m speaking today with Dr. Jason Yap, director of Healthcare Services at the Singapore Tourism Board.
He is also part of the multi agency Singapore Medicine Initiative whose goal is to promote, develop, and maintain Singapore as an international medical hub.
I first met Jason about a year ago at the World Healthcare Congress and he hosted me on a tour of hospitals in Singapore last summer. We have spoken in the past about medical tourism, but today I’m planning to focus on Singapore’s health care system and potential lessons for the United States.
Jason thanks for joining me today.
Dr. Jason Yap: I’m glad to be here, thanks.
David: Jason, one of the things that you often say is that Singapore’s system is a combination of the US system and the UK system. What do you mean by that and in fact, why is it that way?
Jason: My initial summary of that was because the US system is largely private sector driven, whereas the UK system has got a lot of government initiatives.
There are two components, one is the financing the other one is the provision. And in the US you find that a lot of the financing and the provision is by or through the private sector, whereas the UK is driven largely by government or government agencies.
In Singapore, it is a cross of the two because the provision of health care is largely private because even the public sector hospitals –the hospitals that are created and run by the government– are run as private limited companies.
However, when it comes to financing, the individuals have a large part to play in their choices. The government only funds about 25 percent of health care through government taxation. Even that is given to the private hospitals as a grant.
So, eventually, at the point of decision making, at the point of payment, it is the patient’s choice, through their own money largely.
David: Talk a little bit about the types of facilities that you have in Singapore. I know you have some facilities that are purely private and there are some of these government owned clusters. What’s the difference between those?
Jason: Let me start with the way they are the same. They are all private companies; they are all private hospitals, licensed under the Private Hospitals Act.
Where they are different is that the public sector hospitals are owned by the government through a holding company. They are supervised by the Minister of Health closely. They have a service level agreement with the Minister of Health and the Minister of Health provides them a financial grant with which to subsidize the bills of patients.
Apart from that, they largely operate as private entities. Some are for-profit and some are non-profit but the similarity is that they do try to run as a private and independent functional enterprises.
David: What about at the level of individual providers? Are physicians typically on salary? Do they have some incentives? What does the financial scheme look like for a physician, and does that differ between inpatient and outpatient?
Jason: We don’t have a clear distinction between those who focus on inpatient or outpatient. The general practitioners are obviously mostly outpatient. But for the specialists, they do look after both inpatient and outpatients.
When it comes to the way they are remunerated, there are two systems. In the public sector, the doctors are largely salaried. They do have financial incentives and it can get very complex. They get rewards for the volume that they do, for the amount of teaching that they do, for the amount of research that they do.
In the private sector, again, there are two more models. There are some who are similarly salaried and they are largely compensated based on the amount of work that they do. And there are others who are independent operators. These independent operators have admitting rights to certain hospitals and they are separate from the hospitals.
But that’s beginning to evolve because even the hospitals that traditionally serve independent operators are now starting to recruit and employ physicians as part of the hospital to run specialized services as well.
So, by in large, we’re going to move to an increasing number of doctors receiving salaries, rather than independent operators on their own.
David: Jason, Singapore has what you call a “3M system of Health Care Financing” and then I believe there are some payment sequences within that. Can you describe that a little bit for me?
Jason: Sure, the 3M system would be Medisave, Medishield, and the Medifund. The Medisave are personalized, personal health savings accounts, which are enforced. That is to say every working person has a certain amount of money that has to be put aside for his retirement as well as for medical expenses.
The Medishield is a national level health insurance program that was set up on an “opt out” basis. It is not totally universal as individuals still have the right to opt out. But by in large most do not do that.
Any other insurance that people buy tends to be on top of that. And that has been revised in such a way that the Medishield and its related services form a base of insurance scheme upon which other insurance companies sell supplementary insurance.
Then, the third level is the Medifund, which is a government fund that helps to pay medical bills for people who cannot afford it all.
So, essentially there are three layers. The first layer is personal savings, which is enforced and you can use that for your family as well. So, the family is their first line of financial support. Then there’s insurance that will take care of extra fees.
And then in extreme cases when someone is in extremis and doesn’t have support, he doesn’t have the resources, then, he qualifies to have his bills written off.
When it comes to a payment sequence, for the people in Singapore who are receiving the subsidized care, first of all, their bill is reduced. So, the total amount is smaller than they would pay on their own.
However, it is very clear from the bill, the proportion, what the full bill would have been, and what the government has already subsidized. So, they are already aware through a feedback mechanism of what the subsidy is. Then they have the amount to pay, which is the full amount for the full paying patients (whether public or private) or subsidized amount for those in the public subsidizing areas.
These people will therefore start paying based on whether their employers provide benefits or they have insurance coverage. And after the insurance and employer benefits, then, they will have to pay out of their Medisave account or out-of-pocket. Then the last, of course, if they really can’t pay out of any of these schemes then the Medifund will kick in through a qualification mechanism.
So after these steps –you can count six steps in total– most people are able to afford health care. The important principle here is that no one gets health care for free. The people who get their bills written off through Medifund, those are a relatively small number and there is a qualification mechanism which makes it not so easy to obtain.
They have a right to choose the kinds of levels of care they want in terms of the amenities, the kinds of wards they have, so they make choices about the kinds of services they want. Then when the bill comes there are a whole series of payments. So there is a lot of feedback to the patient about what his bill is going to be.
In fact there is actually a formal financial counseling mechanism, so every patient that has been admitted to a hospital there will have someone to sit down with them and say, especially in the public sector, if you go to this one, it is a single bed; this is what your bill is going to be like. Go to this one, this is what your bill is going to be like. You make proper choices because you have to look at financial capabilities first before you choose what kind of services you want.
David: That is an excellent explanation, and of course it is fairly complicated. Let me see if I can relate it a little bit to the US system and you can tell me where I’ve got it right and where I’ve got it wrong.
The Medisave account sounds like a kind of Health Savings Account but also has the added benefit that it’s something that can be shared among the family so it is not just something that is on an individual basis. Is the Medisave account something that could go beyond the immediate family, would it be to extended family as well, or is it just the immediate family?
Jason: It is usually to the direct family member, so you can use it for your children, for your wife, for your parents, for your siblings.
David: So that might be similar to an HSA from that standpoint. And is there a distinction between the Medisave account and what we might have here like an IRA account? Or is it money that is fungible between the medical account and what might be a retirement or other savings vehicle?
Jason: Well the Medisave account grew out of our retirement savings. So at one stage when it first started, something like 20 percent of your salary is set aside for retirement. And with the employer providing some amount as well. And out of the total amount, six percent in value of your salary goes to this Medisave account up to a certain maximum amount whereupon it is capped.
So it is related to the retirement account. Once you hit a certain cap (the cap has varied through the years) it is increased. When you hit the cap then whatever money that would have gone into this account goes into a retirement account instead and the retirement account will grow.
When you make use of the Medisave account itself and your amount drops below the cap it starts filling up again. So essentially it is a fairly dynamic system that makes sure that people have some money set aside for medical expenses all the time.
David: Explain again the difference between how the Medisave and Medishield interact with one another.
Jason: Essentially the Medishield is a simple insurance program. It is usually for more catastrophic kinds of diseases and you can pay for the premium out of the Medisave account. In terms of actual payment streams, the Medishield kicks in before the Medisave, because usually the Medishield will cover whatever is the remainder, then the Medisave is equivalent to out of pocket expenses.
David: And the Medifund might be something similar to Medicaid, for people who lack the needed resources.
Do providers receive different payments depending on what the source is? Because in the US you have a different payment depending on whether it is self pay, from an insurance company, or from Medicaid and Medicare, and in particular the Medicaid funding might be quite low so the provider might not want to see a Medicaid patient compared to a patient that has private insurance. Is there a similar dynamic in Singapore, or does it differ?
Jason: I think the US system is a lot more sophisticated and a lot more complex than the Singapore system. In Singapore by and large the payment is on what the bill was. That is, we do not actually control what the payments are based on line items. So the question for example for Medishield, is the disease included in the scheme? If it is, whatever the bill is it will be paid.
It is not based on how many X rays, how many MRIs and so on. At one stage the government grant to the public sector hospitals was based on the DRG systems and there were unit levels by DRGs but right now it has gone to a block grant and even that may not go by individual disease patterns.
David: Would you describe the system as consumer directed? Or is that not the right way to think about it?
Jason: I think a consumer directed system has got multiple dimensions. We are increasingly becoming more consumer directed in terms of patient choice, patient choice of hospitals, of doctors, of disease therapies and so on, as our population gets more sophisticated. In terms of the financials, it is very much consumer directed in the sense that there is always feedback about how much it is going to cost.
Even patients in the most subsidized class of ward in the hospital have to pay something. The hospital stay for the knee replacement for the most subsidized case is about 1000 US dollars, which is very cheap, but they still have to pay the 1000 dollars because nothing is free. And because nothing is free people think about whether they want or do not want to make the expenditure.
David: Singapore has a GDP per capita that is roughly similar to the US or other advanced countries. So I want to focus a question about the share of spending on health care.
In the US the share of GDP spent on health care is something like 16 percent and it has been increasing, and there are projections that it will get to 20 percent before too long. In Singapore, it’s under four percent. Can you tell me why there would be such a dramatic difference in the level of spending as a percent of GDP?
Jason: I think, perhaps, the first point is that it may not be all that fair to compare Singapore with the U.S.A., because Singapore’s got four and a half million people where the U.S. are three hundred million in your very large space. Singapore is essentially a city state, so the control mechanisms are very different. And I think that we are lucky in a way, because the U.S health financing system is about seventy years old.
Singapore as a country is only about forty years old. So we haven’t had time to build in some of the difficulties that have arisen in the U.S.A.
Why is there a difference? I would say one major reason is what I’ve mentioned earlier, that patients, at the point of care, usually have to consider the financial consequences of their choices. So we actually take pains to avoid what we call the “buffet syndromeâ€ — that if you know that there is a fixed price for something, you consume as much of it as you can.
But because the cost of what you consume increases as you consume more, at each point of the care process, patients are very aware and they have to make choices. And thus, we avoid the invitation to consume more just because there is no additional cost to taking more.
David: What’s the nature of the doctor patient relationship in Singapore? Do people just say ,”I’ll take fewer services”, not just because theyâ€™re paying for them, but also is there some sort of implicit or explicit social contract between doctor and patient? Or how do a physician and patient actually interact?
Jason: I think that that hasn’t really changed. In Singapore, we have the Singapore Medical Council, which safeguards the integrity of the medical profession. We have very established processes to make sure that the professionalism and integrity is protected.
Every specialist, for example, in Singapore, before they are accredited as a specialist, must go to a medical ethics and professionalism course, and so on. The doctor patient relationship is no different from what it should be in any other country.
We do have stresses in terms of when the commercial aspects come in and it is always a debate in the country: “How does business interact with medicine?” And of course there will be areas in where we are not comfortable or we try to curtail certain practices. Having said that, the doctors still act generally as gatekeepers to health care, and they are still very much aware and protective of the principle that patients come first.
David: When I see your list of the issues that Singapore is facing in health care, a couple of them are similar to the U.S. issues: cost and quality, and there’s another one, “balance”, that you mentioned. So, could you talk about what cost and quality issues you mean, and then, what do you mean when you say “balance”?
Jason: Cost and quality, as medical technology advances, equipment gets more and more expensive, doctors get trained in more and more specialized areas, which basically means to see fewer and fewer patients, which also means that, therefore, economies of scale becomes an issue. So, to continue to provide the highest level of care that we can, and because our doctors are trained in U.S.A., U.K., in the best centers around the world, and we want to continue providing the level of care.
You find, for example, that for things like pediatric bone marrow transplants, and for a lot of procedures, our survival rates, our quality indicators, are as good, if not better, than the U.S.A. and many other international centers. So, to continue to provide this level of sophistication, we have to make sure that we keep all parts of the system in place.
One reason why we welcome international patients is because we are too small to sustain the kind of subspecialties that we have without foreign patients. For example, we’ve got three liver transplant teams in the country and the majority of our liver transplants are actually from overseas patients. If we only looked after our own people, we would not be able to have enough cases for even one team.
David: Jason, you talk about managing the marketplace, but not the market. Can you tell me what that means, and also how that relates to pricing and price transparency?
Jason: Well, what I’m saying is not so much the policy as just the practice within Singapore: that we focus more on making sure that the market mechanism works, rather than trying to determine what the market is.
For example, the Singapore government gives a grant to the public sector hospitals with which to subsidize care for the poorer people. That is given as a lump sum. The hospitals set their own prices, the hospitals do their own services, and the patients will provide feedback one way or another, to customer service, to their choice of hospitals, and through other feedback mechanisms.
So because of that, hospitals respond to the patients’ feedback, and the patients are able to respond to the hospital’s services. If the patients decide to go to another hospital, the hospitals will start to lower their prices, for example.
The Ministry of Health also adds on a mechanism where, on the website, the average bill sizes of the past six months to twelve months are published on the Internet for patients to see. Because patients are able to see the prices, they can make their choices on what their likely bills are going to be. But, more importantly, the hospitals know that the patients can see that.
So the hospitals will revise and change what they do. So when it first came out, some hospitals had bill sizes that were larger than the average, and now you find that the numbers roughly equalize.
So, we don’t tell the hospitals how much to charge, we don’t tell the patients what should be the amount they ought to pay, we leave it to the market to basically decide. But we make sure that the marketplace is as fair as possible and as much information as possible is available to the patient, and that helps the marketplace actually work.
David: I’ve been speaking today with Dr. Jason Yap, Director of Healthcare Services at the Singapore Tourism Board. Jason, thanks very much for your time today.
Jason: Thank you very much.