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'Sufficient' reserves will sustain MediShield Life: Gan

Health Minister Gan Kim Yong told Parliament the long-term sustainability of MediShield Life can be ensured by setting aside sufficient reserves. This is to honour current claims and future commitments such as premium rebates for older age groups.

SINGAPORE: A sustainable insurance scheme needs to go beyond current-year claims, Health Minister Gan Kim Yong stressed in his speech wrapping up the debate in Parliament on MediShield Life. He said having adequate reserves will allow MediShield to honour long-term commitments, such as continuing claims for dialysis and cancer treatments, as well as premium rebates for older Singaporeans. 

Mr Gan also said it would not be responsible to exactly balance yearly payouts with MediShield's yearly premiums. "We cannot consider only claims incurred in the current year. This looks only at current cash flow without considering the long-term claim liabilities for example, for conditions which are already receiving payouts, leading to the misconception that MediShield is collecting more premiums than needed." 

Having adequate capital would also protect the insurance scheme against adverse situations, such as an unforeseen rise in claims, or a sharp drop in investment returns. He referred to the Capital Adequacy Ratio (CAR) which compares an insurance fund's financial resources with the capital it is required to hold by the authorities.

The Monetary Authority of Singapore has set the minimum threshold of the CAR at 120 per cent. Below this would result in regulatory intervention. Mr Gan said the MediShield Fund has targetted to maintain the CAR at 200 per cent, and this is in line with industry practice. He pointed out that during 2008 financial crisis, the ratio fell to 148 per cent. Currently, the MediShield Fund's adequacy ratio is at 157 per cent. 

Mr Gan said having adequate capital means peace of mind, knowing MediShield can continue paying out on benefits during adverse scenarios, without having to make sudden adjustments to premiums.

"I am keenly aware of the impact on premiums, but I would rather have sufficient reserves in MediShield Life and provide the necessary premium support and subsidies, than put Singaporeans' healthcare protection at risk." 

Turning to concerns about the capacity in public hospitals if more people turn to subsidised care as a result of MediShield Life, Mr Gan said there will be more beds with the opening of Ng Teng Fong General Hospital later this year. And if there is a shortage of subsidised beds, patients will be moved to higher bed classes if necessary and continue to pay subsidised rates.

Mr Gan also cited the Government's push toward increasing capacity in public hospitals to meet long-term healthcare demands. At the same time, he said it is also about transforming the model of care beyond a reliance on acute hospital care, to one that is closer to the community.

He said ensuring sustainability requires good governance, long-term policy planning and a strong economy with good jobs for Singaporeans.

Mr Gan said, "Only then would we be able to generate the growth and revenue for us to continue enhancing and strengthening our healthcare financing framework, including making MediShield Life a reality".

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