Recently in Singapore, there has been more chatter about rising medical costs.
In particular, conversations surrounding the national health insurance, MediShield Life, and its supplement, the Integrated Shield Plan, along with the fees charged by public/private doctors, are heating up.
Many changes have been made to curb the rising costs in healthcare, but at the moment, they seem to be inadequate.
We should expect more changes to come, but today, we’re simply looking at the average and the past medical inflation rates in Singapore.
So, read on!
In a Nutshell
- From 2000 to 2020, the cost of healthcare has increased 57.46%
- The healthcare inflation rate in 2020 was -1.54%.
- The average healthcare inflation rate is 2.30% over a period 20 years (from 2000 to 2020).
What Does Healthcare Inflation Mean?
Inflation happens when the prices of goods and services rise over time, usually measured yearly. On the other hand, a negative inflation (or deflation) can also happen when such prices fall.
Generally, in a good economy, inflation happens as businesses and consumers spend and consume more. Higher demand (with supply being constant) pushes prices higher.
There are many categories of goods and services which make up the “general” inflation, and healthcare is one of them.
By just looking at the healthcare category, we’re able to gain insight on how the cost of healthcare changes over time.
What Do Other Sources Say About Our Medical Inflation?
To measure inflation, we have to regularly monitor the prices of goods and services.
As it’s almost impossible to track every single item, a “basket” of goods and services commonly consumed by households is tracked instead.
However, discrepancies arise when different “baskets,” or sources, are used.
With that, let’s take a look at what different sources say.
According to Aon, the forecasted medical trend rate (similar to the medical inflation rate) was 10% in 2020, and is projected to be 7% in 2021.
In another report conducted by Mercer, the expected medical inflation rate decreased from 10% in 2019 to 9.5% in 2020.
At an inflation rate of 10%, medical costs will be unsustainable in the future, especially when such a high rate continues. To illustrate: if a hospital bill costs $10,000 now, it’ll cost $20,000 seven years later based on a rate of 10.41% compounded annually.
However, these statistics are from external sources of data, so we should also look at what our own data say.
The Healthcare Inflation Rate by Year (Singapore)
How much have the medical costs in Singapore risen?
One of the most reliable ways to measure inflation is by using the Consumer Price Index (CPI). This measure compiles national data from the Singapore Department of Statistics, and its objective is to measure the average change in prices of commonly consumed goods and services.
Healthcare is one of the 10 main categories that are tracked.
Here’s the CPI-Healthcare for the past 20 years:
From 2000 to 2020, the CPI-Healthcare has increased by 57.46% (from 62.534 to 98.463). Hypothetically, this means that if an item in the healthcare category costs $10,000 in 2000, it’ll cost $15,746 in 2020.
And here are the healthcare inflation rates by year:
|Healthcare Inflation Rate (%)||1.05||2.89||2.96||1.89||5.56||0.51||0.89||4.05||5.45||1.81||1.81||2.37||4.36||3.79||2.77||-0.09||1.08||2.49||2.04||1.11||-1.54|
From the data, you can see a positive inflation happening every year except in 2015 and 2020, reflecting that the average prices are almost always increasing.
In 2020, there was a negative inflation of 1.54% in the healthcare category.
But this is just the main category of Healthcare. It can be broken down into subcategories:
- Medicines & Health Products
- Medicines & Vitamins
- Medical Products
- Outpatient Services
- Fees At Polyclinics
- Fees At General Practitioners (GP) Clinics
- Fees At Specialist Outpatient Clinics
- Dental Services
- Paramedical Services
- Hospital Services
- Health Insurance
Let’s look at the data on the most interesting subcategories: Outpatient Services, Hospital Services, and Health Insurance.
|Outpatient Services Inflation Rate (%)||–||4.32||4.68||2.25||9.53||0.66||0.71||3.84||5.46||2.75||2.46||2.42||5.15||3.27||2.15||-3.88||2.81||2.46||1.81||1.55||-3.51|
|Hospital Services Inflation Rate (%)||–||2.00||0.40||1.54||0.95||0.82||0.72||5.54||6.89||2.02||1.98||2.99||6.80||4.53||5.36||3.11||0.32||4.41||3.78||2.14||1.49|
|Health Insurance Inflation Rate (%)||–||0.00||0.00||-0.36||0.30||1.46||0.38||0.56||0.04||6.81||2.50||-0.05||0.52||1.62||0.44||0.06||0.01|
Overall, the national data differ from external data, and the most likely reason is because different sources are used.
The Average Medical Inflation Rate in Singapore
In addition to knowing the yearly medical inflation rates, getting the average rate over a period of time will also help paint a clearer picture.
To get the average inflation rate, you can’t just take the sum of the yearly inflation rates (e.g., from 2000 to 2020) and divide it by the number of years.
The correct way to find the compound annual rate is by using this formula:
PV (1+r)^n = FV
PV = the CPI-Healthcare of the 1st period
FV = the CPI-Healthcare of the 2nd period
n = the number of years
r = the annual compound rate
(You can use a financial calculator for this.)
And we’ll get the answer: 2.30%.
In short, over the past 20 years from 2000 to 2020, the average healthcare inflation rate in Singapore is 2.30%.
Healthcare Inflation vs Headline (General) Inflation in Singapore
How does the cost of healthcare compare to the overall cost of living in Singapore?
To answer this question, let’s just look at the CPI All-Items for simplicity’s sake. There are, however, other measures, such as MAS Core Inflation.
From 2000 to 2020, the CPI All-Items increased 34.1%, while the CPI-Healthcare rose by 57.46%.
During that same period, the average headline inflation rate was 1.48%, while the average healthcare inflation rate was 2.30%.
So, what do these figures mean? The rising cost of healthcare outpaces the rising cost of living in Singapore.
What Can You Do About the Rising Costs?
Inflation, whether it’s general or healthcare, is driven by external factors. There are also specific reasons for the rise in healthcare costs, but it’s all out of your control.
However, you can better deal with it.
All Singaporeans – citizens and permanent residents – are covered by the national health insurance scheme, MediShield Life, which is meant to provide basic hospitalisation needs. We’re also given the option to enhance this coverage with an Integrated Shield Plan (IP).
Now, the premiums of these IPs (with “full” riders) have increased substantially and have gone through major changes. From the looks of it, more changes might be implemented in the near future as ongoing discussions between insurance and medical associations and government bodies continue.
In my view, getting “the best of the best” health insurance plans may not have broken the bank previously, but we may have to move away from those plans in the future simply because they’re either too expensive or they’re not available anymore.
We might need to look towards a solution that provides “value” instead, where co-payments are involved. That way, premiums remain affordable, and you’re still able to be covered substantially. Even when accidents happen, your savings will not take a huge hit.
And we should also remember the most underrated solution of all: implementing healthy living habits. That will certainly help you keep clear of hospitals.