Commentary: Starting ElderShield at 30? We can do better than that
ElderShield coverage must benefit the elderly poor and those who suffer from dementia, says an observer from the Lee Kuan Yew School of Public Policy.
SINGAPORE: As Singapore ages, it is opportune to think about how our healthcare system can be strengthened to provide for our long-term care needs.
So, it is timely that the ElderShield Review Committee has made a few recommendations last week.
The principal recommendation is for ElderShield enrolment to start at 30 instead of 40. The Committee has also recommended that the Government be the single administrator instead of private insurers.
The need to enhance ElderShield is clear. An elderly disabled person can require significant support - as much as S$2,200 per month in today’s dollars.
And in 30 years, when you may need nursing care, at 2 per cent inflation, this service may cost S$4,000 a month.
The current ElderShield payouts of S$400 a month for those who joined after September 2007, based on premiums averaging S$200 a year, do not come close to covering this.
I believe the Committee could have been more bold and innovative in their proposals to get more contributions into ElderShield. While ElderShield cannot be expected to cover all costs, it should be much more substantial than it is now.
Moving the premium start age to 30 is not going to help much. What you need is a very significant increase in the coverage. However, asking to double the premium, for example, may be unacceptable to the public.
INCREASE PREMIUMS BUT SUBSIDISE ELDERLY POOR
What can happen is that the Government increases the basic premium slightly, and then offers to co-pay a top-up to the premium. For example, increase the premium to S$250 per year, and top it up with S$250.
Where the aim of enhancing ElderShield is to provide better coverage for the poor elderly, the co-payment can be progressive, for example a 150 per cent top-up for the less well-off and no top-up for the better off.
This top-up need not be expensive. Assuming a S$200 a person average subsidy and 30,000 people in each age cohort, this adds up to S$6 million dollars a year for each age cohort. The top-up significantly increases the coverage and makes the increase in premiums more acceptable to the public.
If fiscal constraints are a challenge, like Medishield Life, transitional subsidies can also be considered in the initial years where ElderShield is made compulsory.
This top-up can be considered well-spent if it reduces pressure on the Government to spend more on its future subsidies for nursing care - currently ranging from 20 per cent to 80 per cent subsidies for Singapore citizens up to a monthly household income per capita of S$2,600.
Essentially, it transfers future expenditure (paid for by future taxpayers) to present expenditure (paid for by the current generation who will benefit from it). In this sense, it is not a gratuitous handout, but a targeted one.
More importantly, it’s in line with a fundamental principle of healthcare financing in Singapore – which is for each generation to bear its own healthcare costs, with Government assistance to insure against the unexpected, ensure healthcare remains affordable and help people save for their old age.
INCLUDE A DEMENTIA RIDER
Yet there is still a significant gap in ElderShield coverage. A recent study has concluded that 1 in 10 Singaporeans over 60 will get dementia in their lifetime. This is on par with the incidence of diabetes.
Dementia is a particularly bad illness – it affects both caregivers and victims seriously, even in the early stages. An insurance rider to ElderShield to include dementia and other cognitive illnesses would seem to be a must but is currently missing.
In comparison, many developed countries routinely include this cover in their long-term care policies. In Singapore, insurance companies also consider severe dementia to be a critical illness under their critical illness coverage since 2003.
A basic S$400 a monthly payout for five years may only require around S$50 per year of premiums. Once again, a co-payment system would help in buy-in from the public.
PRIVATE INSURERS STILL NEEDED
While it will indeed be more convenient for the Government to be an administrator and provide better coverage for society, other touted disadvantages, such as difficulty of claims process, are easily overcome without needing to turn to the Government as an administrator.
Do not throw the baby out with the bathwater. I think we still need the private insurers.
Profit and social causes are not an incompatible mix. We know at present that insurers actively market supplemental ElderShield plans to consumers and serve as a vital educational and marketing function in persuading people to sign up for additional coverage.
Private insurers also provide additional coverage on top of Medishield Life through integrated shield plans that give Singaporeans more hospitalisation options.
So it stands to reason that insurance companies should be given the space to provide similar plans that provide additional long-term disability coverage beyond ElderShield – and be able to administer these schemes.
Insurance companies also have an incentive to have a healthier customer – we see this with insurance companies running their own prevention programmes for their healthcare insurance customers.
More competition in this space may also temper potential profiteering, while encouraging insurance companies to focus on innovation to differentiate their products and facilitate better protection for their customers.
In summary, we need to take a much bigger step to ensure significant coverage of old age disability from Eldershield.
The ElderShield Review Committee’s recommendations are to be applauded but Singaporeans must not be afraid to go further in the ElderShield review to make coverage more inclusive
Tan Jin Meng is pursuing a full-time post graduate degree at the Lee Kuan Yew School of Public Policy and is currently engaged in research on long-term care financing for a local non-government organisation interested in eldercare matters.