Bryan Caplan  

Singapore's Health Care System: A Free Lunch You Can Sink Your Teeth Into

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In The Undercover Economist, Tim Harford highly praised the health care policies of Singapore. But it wasn't until I read the section on health care in Ghesquiere's Singapore's Success that I realized how amazing the official numbers are. If the following is true, all the comparisons showing that the U.S. greatly outspends Europe without getting better health are beside the point, because Singapore makes Europe look like the U.S.:

The Singapore government spent only 1.3 percent of GDP on healthcare in 2002, whereas the combined public and private expenditure on healthcare amounted to a low 4.3 percent of GDP. By contrast, the United States spent 14.6 percent of its GDP on healthcare that year, up from 7 percent in 1970... Yet, indicators such as infant mortality rates or years of average healthy life expectancy are slightly more favorable in Singapore than in the United States... It is true that such indicators are also related to the overall living environment and not only to healthcare spending. Nonetheless, international experts rank Singapore's healthcare system among the most successful in the world in terms of cost-effectiveness and community health results.
How does Singapore do it? Singapore is no libertarian health care paradise, but it does self-consciously try to maintain good incentives by narrowly tailoring its departures from laissez-faire:
The price mechanism and keen attention to incentives facing individuals are relied upon to discourage excessive consumption and to keep waste and costs in check by requiring co-payment by users.

[...]

The state recovers 20-100 percent of its public healthcare outlay through user fees. A patient in a government hospital who chooses the open ward is subsidized by the government at 80 percent. Better-off patients choose more comfortable wards with lower or no government subsidy, in a self-administered means test.

I've heard a lot of smart people warn that co-payments are penny-wise but pound-foolish, because people cut back on high-benefit preventive care. Unless someone is willing to dispute Singapore's budgetary and health data, it looks like we've got strong counter-evidence to this view: Either Singaporeans don't skimp on preventive care when you raise the price, or preventive care isn't all it's cracked up to be.

More details on how Singapore's system works:

  • There are mandatory health savings accounts: "Individuals pre-save for medical expenses through mandatory deductions from their paychecks and employer contributions... Only approved categories of medical treatment can be paid for by deducting one's Medisave account, for oneself, grandparents, parents, spouse or children: consultations with private practitioners for minor ailments must be paid from out-of-pocket cash..."
  • "The private healthcare system competes with the public healthcare, which helps contain prices in both directions. Private medical insurance is also available."
  • Private healthcare providers are required to publish price lists to encourage comparison shopping.
  • The government pays for "basic healthcare services... subject to tight expenditure control." Bottom line: The government pays 80% of "basic public healthcare services."
  • Government plays a big role with contagious disease, and adds some paternalism on top: "Preventing diseases such as HIV/AIDS, malaria, and tobacco-related illnesses by ensuring good health conditions takes a high priority."
  • The government provides optional low-cost catatrophic health insurance, plus a safety net "subject to stringent means-testing."

Last year, Robin Hanson stuck his neck out and argued that we should cut health spending in half. If Singapore's numbers are right, Robin was being conservative. Singapore has achieved American health outcomes for about a quarter of the share of GDP the U.S. spends. Furthermore, if Canada shows that socialized medicine can save a few percent of GDP without hurting health, Singapore shows that the free lunch offered by greater government control is meager compared to the free lunch offered by old-fashioned individual incentives.


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TRACKBACKS (1 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/786
The author at EclectEcon in a related article titled More on Health Care and Incentives:
the continuing case for required co-payments
writes:
    A few days ago, I wrote that to deal with the excess quantity demanded for health services at low or zero prices, we should,
    ... make it illegal to for companies ...
    [Tracked on January 14, 2008 1:11 PM]
COMMENTS (19 to date)
dearieme writes:

"preventive care isn't all it's cracked up to be": that's my guess, based partly on the sort of dolts and crooks who,in Britain, offer it as a panacea for the ills of the NHS.

Tim Lundeen writes:

I am dubious about studies that compare healthcare costs and outcomes when the populations being compared have different genetic compositions. The assumption here is that genes don't matter, that we are all essentially the same when it comes to longevity and health, that there is no genetic component; this seems like a rash assumption at best.

Carl Shulman writes:

The Singapore system is very interesting, but here are some caveats:

1. Remember all those healthy young guest workers (who raise GDP) who will get kicked out of the country if they get sick?
2. The guest workers may drive down the costs of labor-intensive things like nursing care.
3. According to wikipedia the population is younger:

http://en.wikipedia.org/wiki/Demographics_of_Singapore#Life_expectancy_at_birth
"Despite the government's much publicized attempts to raise the fertility rate and warnings regarding an aging population, the elderly (65+) still make up less than half of the percentage in Japan (21.2% vs 8.3%), and the rate is lower than that of the United States. (12%)"

Stephen writes:

I think small nation-states without populations that are necessarily wedded to the land inhabit a weird, more market-friendly space in the typology of governments and markets. Instead of thinking of them as traditional states who have a population that essentially cannot leave, Singapore is in constant competition with its neighbors, and thus must be more more responsible to its populace. In an anarcho-capitalist paradise, it wouldn't be unlikely that you'd have a single corporation that would own an entire city, which is a lot like the situation in Singapore. Though the custodians are not elected by the citizenry and thus the government does not respond to democratic pressures, it does respond to the pressure of citizens coming and going, and always seeks to increase its rents (i.e., tax revenues over expenditures). In this way, it might be better to think of Singapore as a large real estate development with tons of perks and rules rather than as an autonomous state with a permanent, "trapped" population.

Dr. T writes:

Caveats and Observations:

I am skeptical when a nation publicizes healthcare costs, morbidity data, and mortality data that have not been independently verified. I suspect that Singapore has an underground market in alternative medicine providers and herbal products that do not get counted as healthcare costs.

Infant mortality is nearly worthless for comparing healthcare systems, because countries do not agree on a standard. In the US, if a 28-week-gestational age premie survives for a few days and then dies, we count it as an infant death. Other countries put the deaths of premies in the 'stillbirth' category.

U.S. healthcare labor costs are increased by licensure and certification requirements and by unions.

As noted, most preventive care has little value. Even care that has value, such as vaccinations, is overdone. For example, vaccinating newborns (who cannot make antibodies) against hepatitis B (a disease transmitted by contaminated needles or sex) wastes money and causes more disease than it prevents.

U.S. physicians, who directly or indirectly control most non-nursing home healthcare expenditures, have disincentives to keep overall costs low. It will be difficult to lower healthcare costs without radically changing how physicians do business.

John Smith writes:

The co-payment is set at a level where it deters spending which the citizen is aware as being meaningless, and yet at the same time not deter spending which is useful. An example is a visit to the polyclinic, basically a govt operated clinic. You typically spend a few American dollars, less than 10 and usually just 2 or 3, on simple illness like flu or cough. This deters meaningless spending since the amount is still useful, yet few would be seriously deterred by this fairly minimal sum. Thus, about the same goes for preventive care.

Also, the waiting time is rather long, about an hour or so for access to specialist, so the system is fully employed, reducing wastage.

Also, the govt-operated hospitals are fairly independent. Since they have to compete for customers, they must be efficient. If they aren’t, then they will lose customers which will require the govt to bail them out. I presume that the govt will indeed bail them out, seeing as they are govt-linked after all. But it is a near certainty that something unpleasant will happen to the senior management. Thus, they have an incentive not to screw things up.

Another thing is to keep in mind that the male population are required by law to serve in the military. This implies that half of the population is exceptionally fit physically compared to Americans

Alternative medicine isn’t really used much here anymore. I would say they are used rather minimally.

James A. Donald writes:

In the US, we don't have prices, and so don't have a market.

The following is a transcript of conversations I very recently had with some U.S. health care providers, written down during or immediately after each conversation:

Conversation with Stanford Hospital:

Me
My wife needs a colonoscopy: Could you give me a price on it?

Stanford Hospital: (businesslike tone)
Twenty five hundred to thirty five hundred.

Me
You do this all the time. Can't you give me a specific price?

Stanford Hospital: (cooler tone)
Sorry

Me
Is $3500 the all up, all included price to both myself and my insurance?

(Previous research shows that mystery surprise additional charges are usually around a thousand dollars)

Stanford Hospital: (businesslike tone)
It only includes the doctors fee, and does not include any additional services

Me
So after I have this done, any number of people could then charge me any fee they like in addition to the thirty five hundred?

Stanford Hospital: (distinctly chilly tone)
I am afraid so.

O'Connor Hospital

Me
My wife needs a colonoscopy: Could you give me a price on it.

O'Connor Hospital
Do you have a primary physician.

Me
Yes, my primary physician has advised this procedure, but it seems expensive. I am looking for a price.

O'Connor Hospital (indignantly)
We don't give out prices.

Mercy General Hospital

Me
I am looking for a price on a colonoscopy.

Mercy General Hospital hangs up without a word.

Saint Joseph's medical center of Stockton:

I am transferred to financial counselling, who
transferred me to "Estimates" The estimating lady
appreciated my problem and made sympathetic noises.

She then asks me for a CPT code. I then research what CPT codes are, and discover that a colonoscopy can result in any CPT, and any number of CPTs. I discover that no matter what CPT I give, it is unlikely to be correct or sufficient, that additional CPTs can show up any time. A CPT would only be useful if it was possible to know in advance what CPTs would result from a colonoscopy, but the CPTs are only decided after the colonoscopy, usually long after the colonoscopy.

John Smith writes:

it is a matter of values. the amercians highly value the principle of equality in healthcare. since currently it is impossible to achieve this, they must settle for the next closest thing, the appearance of equality of healthcare, as best as can be achieved. i would say that there is not necessarily something wrong with that. perhaps the emtional and mental joy that the amercian citizens obtain from this is so great that it outweights the deadweight loss. thus, we should not be too critical of the amercians.

8 writes:

Eastern medicine is far more preventative to begin with. I don't know how you separate the healthcare system from the culture.

Dan Weber writes:

I thought I heard someone assert that the best predictor of life expectancy is obesity. What's Singapore's rate?

John Smith writes:

singapore is extremely westernised. primarily the older generations who practice traditional medicine.

singapore's obesity rate is minimal. not sure what exactly. due to the fact that males must serve in military

8 writes:

John,

Pehaps you meant this with your answer, but when I referred to Eastern medicine being preventative I didn't mean traditional medicine as much as excercising, stretching, eating right, etc. When I was sick in China the doctor dispensed medicine as an afterthought and the entire conversation revolved around diet and exercise.

Lord writes:

Wow! A libertarian proposing government run healthcare. What is the world coming to?

anon writes:

OK... I'm Singaporean. To the Americans who insist/insinuate that Singaporeans practise qigong, take herbal remedies all the time, go for acupuncture for backaches, colds, hernias, cancer, I would like to let you know that this is not the case. The healthcare system here is Western medicine. Private practitioners in the neighbourhood would dispense cough syrup if you have a cough, antibiotics if you have a throat infection... Traditional medicine is still stigmatised by the mainstream healthcare system, although recently there have been funds going into research.

Lord writes:

I, for one, would be happy with such a solution; one with a role for public and private alike, the best of both worlds rather than the worst of both like we have now.

Charles writes:

I am not sure that everyone actively seeks treatment in Singapore: the cost are prohibitive.
The country itself is 30 year old, the Baby Boom population that is responsible for the healthcare cost in Western countries does not exist here.

The medisave and medishield amount to nothing when you have a cancer.
Using individual saving (medisave) for medical expenses is ridiculous: putting the risk in common is what must be done (insurance, medicaid).

In Singapore when a retiree gets cancer, the children (and grand-children) put their house on mortgage to pay the treatment; indeed it does not cost much to the state.

John Smith writes:

true. it is impossible that everyone seeks treatment for every illness. but we do not want them to in any case. such an approach would be excessively costly. i think people would generally agree with an approach where you simply create an environment in which if people should so choose to do so, they have the ability to access suitable care. and that has been done. people do not need to mortgage their house. all they need to do is purchase insurance which the govt has arranged. if they refused to buy insurance on a gamble, then it is a decision we should respect.

Prisc Lim writes:

I am Singaporean, and am living in the US now, I have seen first hand on both the healthcare systems in the countries (my grandmother has multiple illnesses and visits the hospital 3 times a month, and my roommate in the US is disabled).

People who say that the healthcare in the US is not atrocious really need to start opening their eyes.

For examply both my grandmother and my roommate have to go through the exact same ailment (Hip replacement surgery). My family paid SGD6000(USD4000) up front for the surgery and a week and a half stay in the hospital, and was reimbursed 60% of that amount by the insurance company. On contrary, my roommate, who owns a painting company paid USD90,000 for the surgery and a 5-day stay in the hospital. He had to declare himself a bankrupt, get on disabled and medicare. But now, SSI and medicare is trying to make him pay XX amount back for what they call "OVERPAYMENT", when they know that he is not able to cough up that money.

There is something really wrong with the health system in the United States. In contrast, Singapore -- which may not be a perfect world, viewed as an equally capitalist country -- at least understands what it means to pay if you have the means to pay.

My grandmother has used both privatised medicine and public healthcare, and the price difference is astonishing, but... this is a choice that our family has made, mainly because we have health insurance, and most of our family members are blood donors (yes, blood donors are given a huge discount on healthcare), and also TTS hospital is one of the most reputable hospital in Singapore.

So for someone who is experiencing both worlds now. I would say I thank the higher beings that I a Singaporean.

Jwee writes:

I too am Singaporean and I think the big hole in the comparison is in the narrowness in the indicators for standard of healthcare. Just one example would be the inferior healthcare provided to the disabled, the number of which the the government openly admits it isn't even aware of. Care for the elderly is probably another.

As a disabled person myself, I know for a fact that a lot of needed care just isn't available to many families with disabled members who just go without it, to the detriment of the disabled. These deficiencies aren't present in many states in the US.

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