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ammo for liberals

No, I don’t mean some juicy rumor about a McCain/Bush romantic romp through Saudi Arabia paid for by stolen welfare funds. This post aims at providing the left with some rational material to work off for criticizing the right and their insistence on market-driven everything. I’ve come across a blog post that provides some (surprising) insights into health care, which I don’t think the people to the right of me would necessarily accept, but I find very interesting and worthy of discussion.

I stumbled across the treatise on health care, via Bryan Caplan over at EconLog, who offered his comments on this supremely interesting recent article on health care in Singapore. Caplan characterizes the Singaporean system as “not laissez-faire, but it is state intervention with the hands of a surgeon.”

Caplan then quotes from the piece:

What’s the reason for Singapore’s success? It’s not government spending. The state, using taxes, funds only about one-fourth of Singapore’s total health costs. Individuals and their employers pay for the rest. In fact, the latest figures show that Singapore’s government spends only $381 (all dollars in this article are U.S.) per capita on health—or one-seventh what the U.S. government spends.

Singapore’s system requires individuals to take responsibility for their own health, and for much of their own spending on medical care. As the Health Ministry puts it, “Patients are expected to co-pay part of their medical expenses and to pay more when they demand a higher level of service. At the same time, government subsidies help to keep basic healthcare affordable.”

The reason the system works so well is that it puts decisions in the hands of patients and doctors rather than of government bureaucrats and insurers. The state’s role is to provide a safety net for the few people unable to save enough to pay their way, to subsidize public hospitals, and to fund preventative health campaigns.

In Singapore’s system, the primary role of government is to require people to save in order to meet medical expenses they don’t expect. While the Singaporean government does regulate prices and services, its hand is nowhere near as heavy as that of governments with extensive nationalized healthcare, such as the United Kingdom or Germany.”

Unlike the United States, Singapore features four related, but distinct entities to provide health care. By dividing the health care responsibilities to distinct bodies, Singapore avoids the problem that plagues the American health care market — trying to accomplish fundamentally different tasks within the same entities: (a) provide everyday care, b) provide insurance for catastrophic unplanned care, c) subsidize care of those who can’t afford it, d) subsidized the disabled elderly.

In the US, we try to do it all within the same program, and we do it poorly. Singapore specializes, and is unsurprisingly much better at each task.

1) Medisave: “covers about 85 percent of all Singaporeans, is a component of a mandatory pension program… accounts can be used to pay directly for hospital expenses incurred by an individual or his immediate family.”

2) Medishield: “a national insurance plan that covers the higher cost of especially serious illness or accident, which in Singapore’s system is described as “catastrophic.” Singaporeans can choose Medishield or several private alternatives, some offered by firms listed on the Singaporean stock exchange. Premiums for the insurance plans, including Medishield, can be paid using Medisave accounts. “

3) Medifund: “for the roughly 10 percent of Singaporeans who don’t have the means to pay for their medical needs, despite the government’s subsidy of hospital and outpatient costs. The fund was set up in 1993 with $150 million, with the budget surplus providing additional contributions since then. Only interest income, not capital, may be disbursed.” (A self-perpetuating financial assistance program, WHAAAAAAAA?!?!?!?)

4) Eldershield: “private insurance for disability as a result of old age. It pays a monthly cash allowance to those unable to perform three or more basic activities of daily living.”

It’s important to note that patients aren’t isolated from price in this system, unlike in the US and Europe:

“Nearly all Singaporeans contribute directly toward each treatment, including prescription drugs, through patient co-payments of 20 percent for amounts above deductible levels. The money to meet deductibles and co-payments can come out of a person’s Medisave account.”

A Singaporean health policy professor cites these principles as the source of Singaporean success:

The creation of incentives for responsible behavior and the efficient delivery of services; the discouragement of overconsumption through cost-sharing; the regulation of hospital beds, doctors, and the use of high-cost medical technology; the promotion of personal responsibility; targeted government subsidies; and the injection of competition through a mix of public- and private-sector providers.”

Does Singapore have all the answers? Definitely not. Check out the article yourself to see Singapore deal with the same issues we are struggling with in the US.

I certainly would prefer a more market-based approach, but if you are more market-averse, Singapore is a much stronger example than France, Cuba, or anything else you’ll find in SiCKO. Advocates of the single-payer system should be a bit more discerning in the examples they seek to emulate. I think even most single-payer advocates would admit that the single-payer strategy depends absolutely on intelligent design to work (at all), and simply pointing to the most politically-convenient or recognizable is not a recipe for reform, but simply more of the same.

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Filed under: Health

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