THE impending review of MediShield to include babies born with birth defects will plug a significant - though sadly, not unusual - gap in Singapore's healthcare landscape. It is by design that virtually all private insurance plans in Singapore exclude birth or congenital issues and pre-existing conditions. Insurance, after all, is a form of risk-pooling where premiums are kept relatively low by a process of cherry-picking the best risks. What this means is that the large proportion of insured must be healthy and this enables the insurer to build up a surplus for the later years when health deteriorates, as it inevitably will. Not surprisingly, this selective picking of risks creates gaps in the marketplace. The very old, for instance, are normally excluded by imposing a maximum entry age, which among private plans may be set at 60. Coverage may also stop at 80.
Only a government-supported plan can step into the breach because its typical opt-out feature gives it a critical mass from the outset, and it is not meant to be profit-making. This is seen in the CPF umbrella. CPF Life, for instance, provides a retirement annuity at a time when insurers are reluctant to do so because of very low interest rates, the long tail risk of longevity and the unattractive profit (or, rather, non-profit) profile. In healthcare, MediShield is yet another building block, providing low-cost catastrophic insurance designed for those who suffer chronic illnesses or conditions that need a lengthy hospital stay. Yet, even MediShield has its exclusions, such as pre-existing illnesses, mental illness and, of course congenital defects.
It has been reported that of 40,000 babies born every year, about 860 - or an average of more than two of 100 births daily - suffer a serious birth defect. For some, the problem can require costly, life-long treatment. Ironically, this segment of people most in need of cover may well be deemed to be uninsurable in Singapore. Or, even if they are offered cover, they may be charged a hefty loading and their most problematic conditions are likely to be excluded to boot.
The challenge is finding a way to keep premiums low. In other mature markets, private insurers that offer a neonatal benefit impose a waiting period, for instance, to preclude self-selection. There could also be a cap on the neonatal benefits on an annual and lifetime basis. Health Minister Gan Kim Yong has already warned of a hike in premiums as an enhancement of MediShield is on the cards, including an extension of cover to age 90, raising lifetime and claim limits, and cover for psychiatric in-hospital treatment. Based on early estimates, a 45- year-old may see a premium increase of $7 a month and the increase for a 75-year-old may be $25 a month. The Budget is providing a one-time Medisave top-up, and the government may well do more in the future - particularly for those who have not accumulated enough in their Medisave kitty. To be sure, enhanced cover is a good thing, but the economics of the plan must remain sustainable for the long term.