Healthcare financing in Singapore

Michael K. Gusmano

The cost of healthcare may be an important concern for patients and families when they make treatment decisions. Because patient and family decisions about whether to begin and when to end treatment may be influenced by the cost of care, it is important for clinicians to understand the healthcare financing and delivery system in which they practise. Understanding healthcare financing and delivery can help clinicians better understand why patients are making particular decisions and allows them to counsel patients about their options.

The purpose of this background essay is to provide a brief overview of the Singapore healthcare system. It begins with a survey of healthcare spending and infrastructure. Next, it explains how healthcare is financed in Singapore. In addition to direct government subsidies for hospitals and polyclinics, Singapore relies on the ‘3M’ system of programmes – Medisave, Medishield and Medifund – with out-of-pocket payments designed to encourage responsibility and discourage over-consumption. The statistics presented here were current as of March 2017, but it is important to consult the Ministry of Health (MOH) website for the most recent information. This essay is not designed to provide information that can be used to determine the eligibility of a particular patient for public financing in Singapore.

Healthcare spending and infrastructure

In 2014, total healthcare expenditures as a percentage of gross domestic product (GDP) were 4.9% in Singapore and general government spending on healthcare represents 41.7% of total health expenditures (; accessed on April 23, 2017). To address concerns about the affordability of healthcare for people with lower incomes, the Singapore government has steadily increased its investment in healthcare during the past decade. According to government projections that spending on healthcare will reach S$12 billion in 2020, up from S$4 billion in 2011.

About 80% of primary care is delivered in 1,500 private physician clinics and the rest is delivered in a network of 18 public polyclinics (Khoo, et al., 2014). Since 2014, the government has worked to make General Practitioner (GP) clinics more affordable by providing subsidies to these services through the Community Health Assist Scheme (CHAS). To be eligible for CHAS, household monthly income per person (total gross income divided by the number of family members living together) must be S$1,800 and below, and for households with no income the Annual Value of the home must be S$21,000 and below. If GP clinics participate in the CHAS program, low and middle income CHAS card-holder may receive means-tested subsidies for specified common illnesses, chronic conditions, selected dental services, and health screening. As of 2017, 950 GP clinics participate in the CHAS. These clinics are particularly helpful for addressing the primary care needs of Singaporeans beyond the operating hours of polyclinics, but the take-up of CHAS is not complete (Source: MOH; accessed on March 9, 2017).

Despite the recent interest in developing GP systems that are better integrated with the health system (Wong, 2011), polyclinics are an important source of care for lower income people, including foreign workers who do not have access to public or private health insurance.

With regard to hospital care, the public-private balance is flipped; 80% of hospital care is delivered in restructured hospitals and 20% is delivered in private hospitals (; accessed on April 23, 2017). In total, Singapore had 12,459 physicians and 11,794 hospital beds in 2015 (Health Facts Singapore). Limiting the supply of healthcare services is one strategy the government has used to hold down healthcare costs, but as the population ages, the demand for additional physicians and hospital beds may grow (Bai, et al., 2011).

In January 2017, the MOH announced a plan to reorganise the healthcare delivery system from 6 regional health systems into 3 integrated “clusters,” which are designed to integrate hospital and primary care for the purpose of addressing the growing need for healthcare as the population ages. The goal of the reorganization is to promote vertical and horizontal integration of healthcare by expanding the capacity in each region and promoting better coordination between inpatient and ambulatory care. By the end of 2018, the three new clusters will be: the Central region, which includes the National Healthcare Group (NHG) and Alexandra Health System (AHS); the Eastern region, which includes Singapore Health Services (SingHealth) and Eastern Health Alliance (EHA), and the Western region, which includes the National University Health System (NUHS) and Jurong Health Services (JurongHealth). The polyclinics will also be reorganised and aligned with each of the three new clusters (Source: MOH; accessed on March 9, 2017).

Sources of healthcare financing

In 1984, Singapore ended the national health service (NHS) it inherited from the British and created a new National Health Plan financed by a combination of government subsidies for hospitals and clinics, a compulsory savings programme, a voluntary health insurance programme, a means-tested social welfare programme, employer financing, and out-of-pocket payments by individual patients. The last is particularly important because Singapore’s health system places emphasis on ‘shared responsibility’ and the need to minimise the problem of ‘moral hazard’ (Lim, 2004; 2005).

Moral hazard, when applied to health care systems, is the claim that health insurance encourages people to consume more healthcare because it insulates them against the price of care (Stone, 2011). Many economists argue that health insurance leads to an inefficient consumption of healthcare because people continue to consume healthcare beyond the point that additional costs equal the additional benefits from this care (Nyman 2004; Pauly 1968). The hope is that ‘if people have to pay hard money every time they use medical care, they will be forced to consider how much they value each item of care – and they will act more responsibly, buying only what they truly need and can afford’ (Stone, 2011). This claim is supported, in part, by the Rand Health Insurance experiment in the 1970s. Researchers found that higher out-of-pocket costs lead to lower healthcare spending (Zweifel and Manning, 2008). Critics, however, point out that that the experiment also found that cost sharing was equally likely to reduce the use of useful, as well as wasteful healthcare spending (Marmor, 2010). Reducing demand for healthcare through the use of higher cost sharing does not necessarily result in greater efficiency if people do not seek healthcare that would result in health benefits that exceed the costs. Greater out-of-pocket spending may also place greater burden on people with lower incomes. Singapore attempts to guard against this problem through its government subsidies for public hospitals and clinics.

Public Subsidies and the Hospital Class System

Public health services are subsidised in Singapore through general taxation. Patients in Class A wards (1 to 2 beds per room) pay the full hospital cost. Patients in Class B1 wards (3 to 4 beds per room) receive a subsidy of 20%); patients in Class B2 wards (5 to 6 beds per room with no air conditioning) receive a subsidy of 50 to 65% subsidy and patients in Class C wards (open dormitories with no air conditioning) receive a subsidy of 65 to 80% (MOH Press Room Source: MOH Accessed 11 March 2017). The subsidised (B1, B2 and C) hospital wards are only available to Singapore citizens and permanent residents. Foreign workers with insurance through their employer may also receive care in B1, B2 and C Class wards, but at private rates, and they are not entitled to Medifund assistance. Recently, the government also reduced the subsidies available to permanent residents so that they are now ‘half of what Singapore citizens receive’ (Nanayakara, 2012). Because the total amount of government subsidy for healthcare is limited, the government believes that citizens should receive a larger share than others in society and that employers of permanent residents should cover a larger share of the healthcare costs for their employees (Nanayakara, 2012).

The government also provides subsidies for commonly-used drugs listed on their ‘Standard Drug List’. Through the Medication Assistance Fund, the government provides additional subsidies for drugs that are not on the Standard Drug List used to treat particular conditions, including cancer and heart failure. Finally, the Primary Care Partnership Scheme helps to subsidise primary care, including the costs of drugs prescribed by GPs.

The ‘3Ms’

In addition to the direct subsidies from the government, there are 3 programmes that help finance medical care for Singapore citizens and permanent residents: Medisave, Medishield Life (which replaced the older Medishield program in 2015) and Medifund. Together they cover about 10% of total healthcare expenditures. Payments from Medisave accounts cover about 8% of healthcare costs; Medishield and Medifund cover another 2% (Bai, et al. 2011; Hanvoravongchai, 2002).

Medisave, enacted in August 1983 and implemented in 1984, is the centrepiece of the Singapore National Health Plan. It is a compulsory, government-administered medical savings account that builds on, and is administered by, the Central Provident Fund (CPF). CPF is a compulsory savings scheme that was established in 1955 (Lim, 2005). The government requires workers to contribute 7% to 9% of their wages to Medisave in order to pay for help and pay for major acute healthcare expenses (hospital care, hospice care, and expensive outpatient treatments, including day surgery, radiotherapy, chemotherapy, renal dialysis, in vitro fertilisation, and hepatitis B vaccination). The contribution percentage increases with age. Employers and employees each make half of the contribution to Medisave accounts. The self-employed are required to make the entire Medisave payment.

Singapore citizens and permanent residents are expected to use Medisave to pay for their own healthcare expenses and those of immediate family members (Hanvoravongchai 2002). There are limits on the amount of money that can be withdrawn from Medisave accounts to pay for particular medical services. These limits can be found on the (Source: MOH; accessed on March 9, 2017). Limits on withdrawals for particular services are designed to require patients to pay for a portion of their medical care out of pocket or with private insurance.

Medishield was a voluntary catastrophic health insurance adopted in 1990. Singapore citizens and permanent residents were automatically enrolled in Medishield unless they choose to ‘opt-out’ of the programme. On November 1, 2015, Medishield Life replaced Medishield as a programme to subsidise high cost hospitalizations. The new programme, which is compulsory, is administered by the CPF Board, which helps to pay for large hospital bills and selected costly outpatient treatments, such as dialysis and chemotherapy for cancer for all Singapore citizens and permanent residents. MediShield Life subsidies are set based on the cost of Class B2 or C wards in public hospitals. If patients choose to stay in Class A or B1 wards, the MediShield Life payout will cover a small portion of the bill and patients are responsible for the remainder, which may be paid for from Medisave accounts and/or cash. The majority of Singaporeans also have Integrated Shield Plans (IPs). IPs are supplementary insurance plans that help to cover large hospital bills and some costly outpatient treatments at the Class B1 level in Singapore’s public hospitals. CPF are permitted to use Medisave savings, subject to limits, to purchase IPs for themselves and family members, including parents and grandparents (; accessed on April 23, 2017).

Individuals or their family members may use funds from Medisave to cover Medishield Life premiums. There are subsidies for lower income individuals and ‘pioneer’ generation Singaporeans, which are defined as living Singaporeans who: 1) were aged 16 and above in 1965 (born on or before 31 Dec 1949; and 2) those who obtained citizenship on or before 31 Dec 1986. Individuals with ‘serious pre-existing conditions’, which include cancer, blood disorders, degenerative diseases, heart or other circulatory system disease, HIV/ AIDS, renal diseases, and chronic renal disease, are required to pay additional 30% premiums for 10 years to reflect their higher risk (Source: MOH; accessed on March 9, 2017).

The third M, Medifund, was adopted in 1993. Medifund is a means-tested social welfare programme. Medifund is a payer of last resort to provide healthcare for the poorest Singapore citizens only. The government created it as an endowment fund, and it distributes the interests to the public hospitals. It can only be used to pay for Class B2 or C wards ‘at approved public hospitals, and for care at outpatient clinics’ (Hanvoravongchai, 2002: 8). In 2013, the government adopted a new Medifund Junior scheme. The new fund is designed to subsidise healthcare for low income children under the age of 18. It will be financed, initially, with $10 million during the first five years of the programme.

Singapore citizens needing Medifund must apply for it. Their cases are then reviewed by Hospital Medifund Committees. The exact eligibility criteria vary by institution, but Medifund is limited to patients who have medical bills that exceed their Medisave accounts and Medishield insurance coverage. Furthermore, Medifund committees may also take into account the availability of Medisave funds and other savings from the patient’s immediate family members.

Finally, ElderShield is another supplemental insurance fund created in 2002 to help provide coverage for long-term care services (Lim, 2004; Pwee, 2009). All citizens and permanent residents between the ages of 40 and 69 are automatically enrolled in Eldershield unless they opt out of the system. This fund provides up to S$400 per month for up to 72 months. These payments care be used to cover nursing home and home care expenses. Eldershield premiums may be paid for with money from Medisave.


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Gusmano, Michael K., 'Healthcare financing in Singapore' in Chin, Jacqueline, Nancy Berlinger, Michael C. Dunn, Michael K. Gusmano (eds.), A Singapore Bioethics Casebook, 2 vols (Singapore: National University of Singapore, 2017),