Irish Healthcare – time to adopt the Singaporean model?

There are many parallels between Ireland and Singapore, both small countries with populations of the order of 4.5 million, both open export focused economies, both competing for foreign direct investment. One area where Singapore is streets ahead of Ireland is in health care. With Ireland experiencing a fiscal crisis that threatens the economic sovereignty of the state, is it time to consider a different model for health care that could drastically reduce the cost of health care provision (€15.5bn this year in Ireland compared with a 2008 average of $381 per person or $1.5bn in Singapore) to the state while improving the standard of care. It is not only the cost to the state that is lower in Singapore, but also the total cost of health care provision. Health care in Singapore costs Singaporeans only 3.7% of GDP compared with 7.5% of GDP in Ireland (this underestimates the amount the Irish pay relative to their income as GDP overstates Irish income by 10-20%).

What do the Singaporeans get for they’re much reduced spend? Well, life expectancy at birth in Ireland is 78.07 years; in Singapore, it’s 82 years; In the UK it is 78.85. The Singaporean infant mortality rate is a mere 2.3 deaths in Ireland it is 5.14, in the UK it is 4.93.The Singaporean model works by mixing public and private health care in an optimally efficient manner. The current Irish system also mixes public and private health care, but does so in a much less efficient manner. Singaporean citizens, like Irish citizens, but unlike British citizens are responsible for selecting and paying for their own health care. This means that the market and not a bureaucracy determines the provisioning of health care services and ensures that citizens have an incentive to become informed, and unwasteful, consumers fostering competition among service providers to drive costs lower and service levels higher. The Singaporean model is based on a system of 3Ms – Medisave, Medisheild, and Medifund.

Unlike Ireland, however the market distorting insurance companies are not involved in paying day to day medical expenses. The state ensures citizens have enough cash to pay for health care via a mandatory health savings scheme (Medisave), funds are automatically deducted from citizens pay each month, supplemented by employer contributions and accumulated in personal health care accounts. These accounts remain the citizens property but are boxed off for meeting healthcare costs while the citizen is alive. The state provides for cover for serious (and expensive) health problems via a public health insurance scheme (Medisheild), but citizens are free to choose private alternatives if they wish. Medifund is a government run fund for meeting the costs of those Singaporeans who are unable to contribute to Medisave and Medisheild.

While a market based system may gall those used to the public health care provision provided by the NHS, it does seem to produce positive changes over time by allowing innovation by entreprenuers and competition on price and service levels. For example, in the last five years in Ireland a small startup company has enjoyed enormous success with their VHI branded Swift Care clinics. The clinics which promise to see every patient in under one hour specialise in dealing with non-life threatening accidents and emergencies. Not only do these clinics reduce inconvenience for their customers they also help to take the pressure of busy public A&E wards which deal with the real emergencies (car crashes, heart attacks etc). Another innovation helping to create an informed citizenry and reduce doctor and hospital visits is VHI’s Nurse Line service. Complementary to VHI policy holders Nurse Line is a 24 hour service providing remote diagnosis and first level medical advice.

It’s important to note that the Singaporean approach leverages the market as a means-to-an-end, that is quality affordable health care for all, rather than an ideological (free market) end in itself. To ensure that service providers do not price gouge or take advantage of vulnerable patients a health care regulator regulates service levels and costs.

Perhaps the biggest advantage of public health service is that the same quality health care is provided to all. However without a market pricing mechanism to allocate the finite resources (or funds) available to the service decisions on what health care services are available must be taken by a committee. For example in the UK, Tim Harford pointed out in his book “Undercover Economist” that treatments for some ailments that cause blindness aren’t provided under the NHS until they are well advanced and will only be performed to save one eye! The Singaporean model appears to solve this dilemma, patients can choose which treatments they spend their money on – and the government ensures that all patients have enough money to purchase services (and that no patient can duck out of the system by avoding making contributions to their own health care fund)

Is there a downside to such a system? Drastically reduced cost to the government (up to 90% cheaper) and quality market based health care solutions available to all. It certainly sounds better than the inefficient public / private mix we have in Ireland today, and givien the scale of our fiscal imbalances it is imperative we find innovative ways not only to reduce costs but to actually improve services available while doing so.

No bio, some books worth reading – The Rational Optimist: How Prosperity Evolves – Matt Ridley .

Crisis Economics: A Crash Course in the Future of Finance -Nouriel Roubini, Stephen Mihm