In the United States, both major political parties look towards the Lion City on the southernmost point of the Malay Peninsula when it comes to healthcare policy, but for two outrageously different reasons. It’s understandable why one may look towards the Singaporean healthcare model for guidance; the island city-state was ranked sixth in health systems in the world by the World Health Organization (WHO) in 2014 (1) and was ranked number two in the world in terms of healthcare efficiency by Bloomberg in 2015, only surpassed by Hong Kong (2).

Singapore is among the highest in life expectancy, lowest in infant mortality, and lowest in maternal mortality; furthermore, they achieve these outcomes while only spending 4.9% of their total GDP on healthcare (3) — just under four times less than what the United States does.

Singaporeans and permanent residents pay an incredibly low amount of income taxes compared to the western world. They have a progressive tax system that starts out at a mere 2% while making its way up to 20% for the top earning bracket of S$320,000 (approximately 224,491 USD). In 2017, the marginal rates will be increased slightly, however, with the top earning bracket of S$320,000 being taxed 22% (4).

In addition to paying taxes, working Singaporeans, up to the age of 50, are mandated to divert 20% of their income into what is called the Central Provident Fund (CPF). Moreover, employers are also mandated to match by adding an additional 15.5% of the employee's income into the CPF (5). Within the CPF, there are three different branches which the savings are being funneled into.

There’s the ordinary account which is used to buy a home, to pay for investments and education, and to pay for insurance against death or disability. Then there’s the special account, which is used to save for old age and to invest in retirement-related financial products. Lastly, there’s the Medisave account, which is the first of the 3 Ms which serves as the pillars of Singapore’s healthcare system.

Around 7-9.5% of the contributions into the CPF is funneled into the Medisave account where it earns a guaranteed minimum interest rate of 4% which is set by the government (6). Once the Medisave account has reached its cap of S$49,800, contributions into the CPF gets diverted into the ordinary account.

The Medisave account is then used to pay out all health-related care — inpatient and outpatient care; this is one of the reasons as to why healthcare expenditures in Singapore remain so low. Once an individual has to spend their own money to cover the medical expenses, they tend to spend less than if they were covered through a single-payer system. This emphasis on self-reliance is why the Singaporean healthcare model is so often applauded by more conservative types of the west.

The second of the 3M is Medishield; Medishield is a catastrophic illness insurance program which kicks in after one has used up all the deductions from Medisave. Despite not being mandatory, over 92% of Singaporeans (7) are covered by the Medishield plan as it is dirt cheap and offers tremendous value — a 29-year-old would only pay $33 per year and a 69-year-old would pay $372 per year. With Medishield, one can pay out $50,000 per year, but with a cap of $200,000. In 2015, Medishield Life was introduced as a replacement to the previous Medishield program. It remains largely the same, but simply with expanded coverage (8).

The third and final of the 3M is Medifund; this is Singapore’s healthcare safety net program. Only Singaporean citizens are available for this program. This only kicks in once both Medisave and Medishield accounts are depleted. Care received through this program varies highly on income, social circumstances, and the like. Most decisions regarding coverage through Medifund is made at a very local level. Furthermore, it only covers the lowest level of care in a low-level ward.

The different ward tiers is also another system that makes the Singaporean healthcare system unique. You may choose any type of ward, ranging from A to C — an A ward gives you a hotel-like room with you own bed, bathroom, flat-screen tv, and the like; you also get to choose your own physician. The government doesn’t cover any of your expenses in an A ward, however. In an C ward, you share a room with 7-8 other patients and a doctor is assigned to you. 80% of one's stay is covered by the government, which makes the C ward more attractive for bottom earners.

Republicans often look towards the Singaporean healthcare model to justify privatization of healthcare in the United States; after all, approximately two-thirds of the country’s expenditures on healthcare are private with public expenditures on healthcare amounting to a mere 1.5% (9). There’s a heavy emphasis placed on self-reliance and private hospitals, along with the ward tier system, which makes a strong case for privatization. However, what they tend to forget is the heavy government involvement.

Like it so often does in the U.S., the private market failed when it came to healthcare in Singapore. Singapore used to let hospitals compete, which would, in theory drive, the cost down. What happened, however, is that there was increased investments in technology, hospitals offered more expensive services, increased pay for doctors heavily, and focused primarily on A wards while almost completely neglecting lower level wards. Competition in the healthcare market didn’t drive down costs; in fact, it lead to an increase in spending.

More liberal individuals highlight this fact when it comes to the Singaporean healthcare model, and then point towards the heavy regulation and immense government involvement to justify a centralized healthcare system. But this is still not telling the whole story either. Yes, the government plays a large role in imposing regulations, limit spending on technology, balancing the ward system — but, the system still revolves around the private sector.

The disregard for political lines in this system is what truly makes this system function so well. The Singaporean healthcare model shows that private and public sectors can co-exist while achieving astonishing outcomes. The pragmatism and rationality behind this system makes me, and any economist, weep for joy. Healthcare is a sector where we cannot afford to play politics — with human lives on the line, efficiency is imperative.

Sebastian Rothstein

Editor-in-Chief

Write to the author at:

Rothstein@sbeconomic.com

1. "World Health Organization's Ranking of the World's Health Systems." Thepatientfactor.com. The Patient Factor, n.d. Web. 12 Dec. 2016.

2. Du, Lisa, and Wei Lu. "U.S. Health-Care System Ranks as One of the Least-Efficient." Bloomberg.com. Bloomberg, 28 Sept. 2016. Web. 12 Dec. 2016.

3. "Singapore." World Health Organization. World Health Organization, n.d. Web. 12 Dec. 2016.

4. "Income Tax Rates." Iras.gov.sg. Inland Revenue Authority of Singapore, n.d. Web. 12 Dec. 2016.

5. "About The Central Provident Fund." OECD.org. Organisation for Economic Co-operation and Development, n.d. Web. 12 Dec. 2016.

6. "What Is the Central Provident Fund (CPF)." Mom.gov.sg. Ministry of Manpower Singapore, n.d. Web. 12 Dec. 2016.

7. "MediShield Coverage of Population." Moh.gov.sg. Ministry of Health, 17 Feb. 2012. Web. 12 Dec. 2016.

8. "MediShield Life Benefits." Moh.gov.sg. Ministry of Health, n.d. Web. 12 Dec. 2016.

9. Haseltine, William A. "Affordable Excellence - The Singapore Healthcare Story." Brookings.edu. Brookings Institution, n.d. Web. 12 Dec. 2016.