(Delivered in Parliament on 10 July 2018)
Mr Speaker sir, CareShield Life represents an extension and qualitative shift in the old Eldercare scheme, towards life-long care and protection using the principle of universal, mandatory risk pooling to lower costs to everyone. Any one of us may be stricken with disability in old age. There are many of us who have been. Many more will be. We should not leave Singaporeans to bear the ravages of genetic roulette on their own.
Risk pooling is a sensible way to address the increasing incidence of chronic disease and disability that come with an aging population. Risk pooling stands alongside the other policy prong that is needed here, of course, which is prevention in the form of encouragement to living more healthily, health screening and so on.
The Workers’ Party supports the principle of risk pooling. On the whole, the merits of long-term care insurance far outweigh the downsides.
I agree with the other points made by Workers’ Party MPs, in particular the point about gender equality made by Ms Sylvia Lim, Mr Pritam Singh and AP Daniel Goh. I will focus my speech on a few themes – affordability, transparency, efficiency and creating more options for the pay-outs to be spent for maximum effect.
Affordability
Firstly, affordability. Are premiums set at the right level such that the capital adequacy and medical loss ratio for the scheme is in line with similar government schemes elsewhere in the developed world?
No doubt none of us has a crystal ball. But have premium levels been set such that we are not likely to accumulate unexpectedly high levels of reserves relative to pay-outs in future?
One sentence in the Eldershield report read: “1 in 2 healthy Singaporeans aged 65 could become severely disabled in their lifetime, and may need long-term care.” Were premiums set based on the assumption that 1 in 2 healthy Singaporeans aged 65 will become severely disabled in future? This would appear to be a pessimistic assumption given that, for example, in the USA, the comparable figure, based on one source, is 35.4%, based on a definition of disability that would appear to be far wider than the criteria specified for pay-outs under Careshield Life.
Tied to this is another point – have premium rebates been factored into the calculations for premiums and pay-outs? Some long-term care schemes do actually build future premium rebates into the actuarial model that determines premiums and this practice is not necessarily wrong. However how do we guard against the possibility that the calculations have over-reserved for future premium rebates and hence have set premiums too high for the current generation?
Also on affordability, the report states that those who cannot afford to pay premiums even after means-tested subsidies will be given additional help. Some individuals may have a PCHI that disqualifies them from many financial assistance schemes but may also have a very high expenditure profile for reasons out of their control, such as their medical situation. How will such cases be evaluated for additional help?
Transparency
This leads to my second broad point, which is transparency.
What assumptions were made about how many residents (ie citizens and PRs) will become disabled? What was the basis for these assumptions? Data on chronic disease incidence coupled with data on demographic projections?
I would like to ask the government to publish the actuarial model behind the setting of premiums such that Singaporeans can assess these assumptions and can be aware of how these assumptions track against future realities as the years go by.
Milliman Limited and Deloitte Actuaries & Consultants, respected global professional firms, contributed to the report, the latter being the appointed actuary of the Medishield scheme. I do not expect the actuarial model used to be suspect. However, the assumptions and policy decisions behind any model can and should be subjected to reasonable public scrutiny and debate.
Related to this is the question of what if pay-outs fall below assumptions? Premium rebates will no doubt be given. In the executive summary of the report, it is stated: “An independent council should be set up to advise the Government on premium and payout adjustments in accordance with an actuarially sound adjustment framework.”
According to page 88 of the Eldershield Review Committee Report, in the context of the existing ElderShield scheme, the premium rebate is a feature that provides for the 3 insurers that administer ElderShield to return 50% of any accumulated surplus to existing ElderShield policyholders, if the actual claims experience turns out to be better than what was projected. Premium rebates are considered once every 5 years.
For Careshield Life, will premium rebates be discretionary or mandatory? From the report, it would appear that awarding such rebates will be up to the independent council and there is no mandatory rule on awarding premium rebates.
How do we ensure that the independent council does not over-reserve funds from the current generation’s premiums for future generations, and makes the right determination on what is fair inter-generationally? Can transparent rules be adopted to guide them?
Efficiency
Thirdly, on efficiency, the report recommends that the government administer the scheme, unlike Eldershield which is operated by Aviva, Great Eastern and NTUC Income.
There could be efficiencies in having the government operate the scheme, as the profit motive is absent and there are greater potential economies of scale from administering the entire pot of funds centrally. On balance, this approach is sound.
However there are also risks since the returns on existing reserves and the cost of administration are not subjected to competitive market discipline.
How will the government ensure that the funds are managed efficiently and that administrative costs will be minimal? Will there be rigorous benchmarking of administrative costs of private insurers and those of other benchmark-worthy government schemes in developed countries? What strategies will be used to invest the funds accumulated in the reserves to earn a reasonable return while adopting low risk?
The Eldershield report mentions that the CPF Board should be engaged for administration of the scheme. Would the practice of investing reserves through the issuance of bonds to GIC be pursued for Careshield funds as is currently undertaken, in part, for CPF monies?
An eco-system rich in disability-care options
And finally, let me speak on the subject of creating more options for the pay-outs to be spent for maximum effect.
This debate should not only be about the quantum of premiums and pay-outs. It should also be about how we create an eco-system rich with options for those who receive pay-outs to spend them with optimum effectiveness for themselves and society.
Right now the elderly disabled have various options for managing their condition. They can subsist based only on family care or self-care at home. They can hire a foreign domestic worker. They can enter a nursing home. Or they can enrol in an integrated home and day care package.
Of these, perhaps the one set of alternatives within the eco-system that has the most room for further consideration and development is day care, home care as well as integrated home and day care (IHDC).
I know that various IHDC trial schemes and initiatives are underway and that the AIC started IHDC pilots in 2016 but IHDC is as yet not widely prevalent.
Home care, day care and IHDC have the potential to yield strong benefits in terms of: –
§ enabling the elderly to still live with their family in many cases (which is immensely meaningful)
§ allowing family members who play some care-giving role to work during the day, thus enhancing our labour force participation rate
§ limiting the growth in the foreign worker population, if local full-time and part-time employees and volunteers are optimally engaged; and
§ enabling the elderly disabled to remain within the communities to which they have grown attached.
In Hong Kong, most people have an elder-care day care centre within a few kilometres of their home. The Hong Kong Social Welfare Department lists around 80 elder day care centres and units on its website. This contributes to a good universal long term care network as it enables optimum caregiving in situ, as being close to home and familiar neighbourhood social support networks can help quality eldercare
In Singapore, one huge advantage we have is the presence of HDB void decks, which can be used for day care centres that do not incur exorbitant private rental costs.
I would like to ask – what is the current status of our push to develop home care, day care and IHDC as viable and ubiquitous options within the elder-care eco-system in Singapore?
In particular, for day care, take-up may depend on the proximity of day care centres to homes. Is the number and availability of day care places trending in the right direction to make this a viable option? What have been the results thus far in terms of nudging Singaporeans to take up full or part-time employment in this sector as well as to volunteer with the VWOs who provide many of such services?
Conclusion
We need to address the various problems and gaps in the current Careshield proposal, such as the gender imbalance that many members have spoken of and the other points my colleagues and I have touched on. Doing so would make Careshield a meaningful part of this nation’s response to aging and to the imperative to create a fairer and thus better society for all Singaporeans to call home.
Thank you.