4 Reasons Why the Cost of Healthcare Is Rising in Singapore

Singapore is known to be an expensive city, especially when compared to its Southeast Asian counterparts. 

But don’t you find it amazing how such a tiny country without many, if any, natural resources is able to achieve enduring success throughout the years?

Part of its success as a nation is due to strong economic growth, and as a result, the cost of living will inevitably rise. It’s perfectly normal. 

Among the many components that make up the general cost of living is healthcare. Healthcare, particularly the cost of it, has been the recent talk of the town. 

Are things getting out of hand? 

Today, we’re going to explore the reasons why the healthcare cost in Singapore is rising at such a fast pace. 

So, read on! 

Overview of the Healthcare Cost in Singapore Now

Inflation, which reflects a rising cost of living, is a normal occurrence in a growing economy. 

But when inflation gets too high, it can be unsustainable in the long run.

One important statistic to know is the healthcare inflation rate, which measures the change in the price of healthcare (consisting of Medicines & Health Products, Outpatient Services, Hospital Services, and Health Insurance) over a period of time. 

External sources reported that our medical inflation rate hovered around 10% per year in 2019 and 2020

And when we look at our national data from 2000 to 2020, the Consumer Price Index (CPI) for Healthcare increased by 57.46% and the average healthcare inflation rate was 2.30%.

average annual healthcare inflation rate singapore

During that same period, the CPI All-Items rose by 34.1% and the average inflation rate was 1.48%. 

These data signify that the rising cost of healthcare outpaces the rising cost of living in Singapore. 

Here are four reasons why medical costs are increasing: 

1) Singapore Has an Ageing Population and Its People Are Living Longer

Singapore has an ageing population, which means there’s an increasing proportion of older people over time. Coupled with having one of the lowest fertility rates in the world, this situation will be more pronounced in the future. 

Death statistics show that the probability of death increases exponentially the older you are.

probability of death within one year by age and sex age 0 to 99

The probability of getting illnesses such as cancer increases with age as well. One in every four to five Singaporeans are expected to get cancer by age 75.

lifetime risk of cancer in singapore

When the population grows and there are more elderly people, the demand for medical needs will increase as more complications, treatments, follow-ups, etc., are needed. 

Not only that, Singaporeans have been enjoying a longer life expectancy now compared to decades ago. Currently, the life expectancies for males and females are 81.4 years and 85.7 years, respectively. 

average life expectancy in singapore chart

And Singapore’s life expectancy is expected to hit 85.4 years in 2040.

current and future life expectancy in singapore

Unfortunately, as a side effect of living longer, more time will be spent in bad health, especially in older ages. According to a study, Singaporeans are spending an average of 10.6 years in ill health now.

All these factors increase the demand for healthcare needs, resulting in higher costs. 

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2) More Are Utilising Healthcare Facilities 

Apart from the growing and ageing population and longer life expectancy, we have come a long way in terms of medical and technological advances, which have increased the utilisation of medical facilities. 

With medical advancements, there will be an increased range of treatments available, which leads to more consumption of healthcare facilities. These medical advancements include:

  • Conditions which were not treatable before can be treated now
  • Older treatments are replaced with more effective but costlier options
  • Early detection and diagnosis are becoming more common, leading to closer monitoring, treatments, and follow-ups

For example, more facilities are available to detect cancer in its earlier stage. This is critical not only because early detection leads to higher survivability, but also because treating cancer in its early stages costs less when compared to later stages.

cancer survival rate (5-year)

In addition, according to Health Minister Gan Kim Yong, medical care has been made more accessible and affordable to all, bringing up the overall consumption of healthcare services.

3) Increase In Manpower and Operating Costs

Senior Minister of State for Health Koh Poh Koon has stated that manpower accounts for 60% of healthcare costs.

Therefore, an increase in manpower costs will have a large impact on the overall healthcare cost. 

According to Health Minister Gan Kim Yong, during the period of 2012 to 2017, there were higher manpower costs, mainly due to an expansion of the healthcare workforce, as well as higher salaries to attract and retain healthcare workers. 

Meanwhile, from 2007 to 2017, the healthcare costs in the private sector grew 9% year-on-year, which is almost double the increase in the healthcare costs in the public sector.

To curb such rising costs, the Ministry of Health has published fee benchmarks for common procedures in 2018, and in 2020, it published benchmarks for anaesthetists’ fees and inpatient consultation charges.

Such fee benchmarks can help consumers to make informed decisions by knowing the range of what should be charged. Having said that, even if doctors charge above the benchmark, it doesn’t mean that they are overcharging as other factors can come into play. 

4) Premiums for Health Insurance Are Increasing

All Singapore residents (citizens and permanent residents) are automatically included in the national health insurance, MediShield Life. Furthermore, it’s compulsory and you can’t opt out of it. 

Thus, any changes will affect a lot of people.

Partly as a result of the increasing cost of healthcare, premiums for MediShield Life have gone up since 1 March 2021. The increase in premiums could cost up to 35.4% more for certain age groups. Along with the change in premiums, there will be more comprehensive coverage.

To aid the increase in premiums, the government is offering additional subsidies on top of what were offered previously. 

That’s just the basic healthcare plan. 

To get enhanced coverage on top of MediShield Life, you’re able to upgrade to an Integrated Shield Plan (IP) with insurance companies, allowing you to get enhanced coverage even for private hospitals. Close to 70% of Singapore residents are on these IPs. Therefore, like MediShield Life, a significant number of policyholders will be affected when changes are made to these plans. 

IP policyholders were not spared from the rise in premiums, as insurance companies struggled with rising payouts.

As a consumer, I understand the frustration. I was previously on an IP with private hospital coverage and a “full” rider attached. With the substantial increase in premiums of “full” rider plans, I decided to downgrade to one that offers lower coverage, paying only the deductible. However, with another round of changes effective from 1 April 2021, coverage has been further reduced. On the brighter side, premiums were reduced as well.

The Ministry of Health has also highlighted that phasing out the $0 co-payment (“full” riders) can reduce over-consumption, over-servicing, and over-charging.

Overall, it seems all these changes, although cumbersome, are needed to make the whole system sustainable for everyone. And I wouldn’t be surprised to see more changes in the future.

3 Things You Can Do About Rising Healthcare Costs

The cost of medical care is likely to keep rising with time because of inflation. That can’t be helped. 

And at this point, we should let the various government bodies and insurance and medical associations have their discussions as to what the future of healthcare will look like.

But there are still some things we can do in the meantime. Here are three of them: 

1) Lead a healthy lifestyle 

The best way to reduce consumption of healthcare facilities is to get healthy. 

Being healthy, of course, doesn’t mean that you’re immune to death, illnesses, or accidents. However, it greatly reduces the probability of getting into such situations. 

Some examples of how to have a healthy lifestyle: 

  • Have a balanced and proper diet 
  • Exercise regularly 
  • Cut down on your alcohol intake
  • Don’t smoke

2) Go for regular health screenings

Even though we may try to live healthier, there are still things we can’t control. 

Going for annual health screenings, although they come with some costs, can help you discover conditions when they’re still early or minor. 

Doing so makes the illness easier to treat, have a higher rate of recovery, and reduces costs. 

3) Choose a medical insurance coverage based on your needs 

Insurance companies are moving away from offering “full” riders and towards co-payment options. 

In my opinion, I do think a capped co-payment is fine. That way, the premiums will be more affordable, while we can still substantially eliminate the risk of huge hospital bills. 

Ultimately, it depends on your expected healthcare needs and the premiums you’re willing to pay.

(Learn more about MediShield Life and the Integrated Shield Plan today.)

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Abram Lim

With over 7 years of experience in the financial advisory industry, and previous stints in Citibank and UOB, Abram eagerly shares his knowledge by publishing research-backed articles. Learn more about Abram