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Winding road ahead for universal coverage 

First published in The Straits Times on 8 March 2013
When the World Health Organisation launched its World Health Report in 2010, it called for a global movement towards universal coverage and brought attention to this financing model for healthcare.

In light of rising healthcare costs worldwide – thanks to ageing populations and new technologies among other factors – universal coverage emerges as an appealing notion.

Essentially, a commitment to universal coverage means that all citizens in a country can afford and have access to basic healthcare services, and illness should not lead to financial ruin.

In its most ideal form, citizens enjoy full and comprehensive healthcare coverage, meaning there is minimal out-of-pocket expenditure for any form of basic healthcare. Such universal coverage is mostly achieved by national insurance or government support.

Japan, Taiwan and various Scandinavian countries are just some of the places which have seemingly implemented universal healthcare coverage with success. However, given that they, too, feel the burden of a growing ageing population and are continually incorporating market mechanisms to make universal coverage more viable, many countries including Singapore have been debating over the merits and pitfalls of universal healthcare coverage. Is such a model really sustainable?

Cracks emerging in universal coverage systems

Currently, many much-lauded universal coverage healthcare systems are increasingly showing signs of strain.

In theory, universal coverage should not lead to bankruptcy for insurers or the system because the lower-risk, lower-cost and previously uninsured individuals joining the pool will spread risk and balance out those who incur greater cost.

However, in reality, coverage expansion will inevitably exert greater pressures on insurers and payers because some consumers may choose not to join the pool. In the extreme case, insurers may be required to insure all patients, without excluding pre-existing conditions. The insurer may also be relatively helpless when it comes to escalating healthcare costs.

The fact that some hospitals and doctors may order expensive, even unnecessary treatments knowing full well that these will be covered by insurance or some other third party payer, exacerbates the situation.

To deal with these problems, some insurers have capped reimbursements to providers. This, however, could lead to severe underfunding. Taiwan is a classic example. Their National Health Insurance (NHI) has been so efficient in its control of reimbursements that doctors and providers are now labouring under low salaries, high volumes, outdated technology and worn-out infrastructure.

It is thus clear that as noble as it appears to be, expanding coverage will not be an easy task for any country. It will cost money, at least in the short term, and taxes either for the individual or companies are likely to rise. Payers, insurers and governments will impose pressures on providers to lower costs, and hospitals and doctors could be stretched with more patients and less funding.

What will it take for universal coverage to be sustainable?

For universal coverage to be sustainable, payment reforms and radical changes to the healthcare delivery and business model must occur.

It may seem simple enough to just mandate through regulation for insurers to cover everyone regardless of pre-existing conditions, to agree to no lifetime or annual limits, and so on. However, with such high risks and without any commercial case remaining, insurers may decide to discontinue or exit the market.

Payment reforms will allow some control over rising costs. Rather than having insurers fork out payments for all sorts of sometimes unnecessary treatments, bundled payments can be introduced. These include paying for quality and outcomes instead of paying for each service or procedure; paying for a standard package involving various basic treatments for a specific ailment instead of paying for each separately; and co-opting the patient as a partner in care through incentives such as lowered premiums for those who change their health behaviours.

For such payment reforms to work, a more integrated healthcare delivery system must be developed. The traditional fragmented style of delivery must give way to a new business model which requires different players in the system coming together in new ways to deliver coordinated and appropriate care. Insurers can then pay for the whole care process, as opposed to separate treatments.

Universal health coverage and the Singapore model

The Singapore healthcare financing model does possess several attractive features.

For one, individual out-of-pocket expenditures are relatively affordable. This is possible because overall healthcare costs have been kept in check through aggressive demand and supply controls. The government also provides subsidies for services in public hospitals and polyclinics, and every resident has a mandatory medical savings plan – MediSave - that starts from his first day of work. The savings is used to pay for a widespread basic insurance coverage, MediShield.

While MediShield is not comprehensive, it covers large hospitalisation bills and catastrophic illnesses. MediFund, which is the final M in our 3M health system, functions as a safety net for those who have exhausted other means. These are policies hardwired into our system for decades, and are easily taken for granted.

However, Singapore is not immune to the global trends of ageing populations, increasing chronic diseases and costly new technologies. These forces have raised some hard questions: are our insurance payout terms and rates sufficient for the best available care? Is our system of co-payment and high deductibles – where patients must bear some portion of the treatment costs before insurance kicks in - exposing individuals to risks of financial ruin?

In considering the expansion of coverage, Singapore will do well to observe the current health reform underway in the United States of America(US).

In 2010, US President Barack Obama signed into law the Patient Protection and Affordable Care Act (PPACA), more widely known as Obamacare. Its main focus: to regulate the health insurance industry and expand coverage to reach all Americans, and to help those who cannot afford current premiums.

With its historical baggage of high spending and low coverage, universal coverage in the US is almost impossible to achieve if payment reforms and radical changes to the healthcare delivery and business model do not happen. It remains to be seen whether US will succeed in implementing their version of universal coverage.

Concurrent with payment reforms, the US is already attempting to integrate healthcare through its Accountable Care Organisations (ACOs). Each ACO involves different healthcare players – hospitals, long-term care providers, GPs, insurers and even drug companies – coming together to take responsibility of the healthcare for a specific defined population.

Like the US, Singapore is in the beginning stages of integrating care services within Regional Health Systems (RHS). Each RHS will be responsible for improving the overall health of the population within a specified geographic region. Within each region, the RHS seeks to provide continuity in health services delivered seamlessly through partnerships among healthcare providers. When fully functional, the RHS can work with our payers (whether the Government, employers or public and private insurers) to perhaps negotiate a reimbursement rate based on true value and outcomes delivered. The RHS could ultimately spur innovation to find the most cost effective way to provide care to a patient across the full spectrum: from prevention to acute hospitalisation to chronic disease management to long-term care.

Drastic insurance and payment reform as is happening in the US may not be as necessary or urgent here, but our Ministry of Health’s ongoing review of the 3Ms and boundaries of coverage this year is timely. While there is no one-size-fits-all solution, it will be meaningful for Singapore to study the developments in the US carefully to learn lessons for our own system.


This article is contributed by Dr Loke Wai Chiong, Director, Global Healthcare Practice, KPMG in Singapore. The views expressed are his own.