Singapore is a city state off the southern tip of the Malay peninsula. It's just 276 square miles in area, with a population of about 5.4 million people. The GDP per capita is over $60,000 a year. Which is HUGE. And its government is a unitary, parliamentary, constitutional republic. It's also got one of the most interesting healthcare systems around. That's the topic of this week's Healthcare Triage.

(Intro)

I'm not an international political expert, but sources I trust do not describe Singapore as a dictatorship. Yeah, it only has one political party, but control has not been held by force. The country remains stable because its government has been unusually responsive to the wishes of its people.

For instance, the Ministry of Health, literally doubled its 5 year budget a couple years ago in response to citizen concerns. Just last year it said it would expand its coverage of the poor, and those with pre-existing conditions. It would reduce out of pocket payments and strengthen control of premium increases.

But I'm getting ahead of myself. Singapore's healthcare system is remarkable. It spends far, far less than we do. It achieves outcomes that would make most experts weep with joy. And it does so with a combination or public and private inputs that I think many wonks on both sides of the political spectrum would swoon over.

Life expectancy at birth is 2 to 3 years longer than in the UK or the US. Its infant mortality rate is among the lowest in the world, about half of the US, and just over half of the UK, Australia, Canada, and France.

General mortality rates are awesome, compared to pretty much all other countries as well. The W.H.O, which ranked the US 37th in the world in quality in 2000, ranks Singapore 6th. France was number 1.

Remember how the US spent about 18% of GDP on healthcare? Remember how France spent about 11.6%? Singapore spends about 4% of GDP on healthcare.  In 2009, Singapore spent about $2,000 per person compared to the United States more than $7,000.

But the public and private portions of healthcare spending are very different in Singapore. About 2/3 of healthcare spending is private, and only about 1/3 is public. That's even more private spending than in the United States.

Singapore is also a mix of private and public healthcare delivery systems. There are private and public hospitals.  And after that there are lots of tiers of healthcare. If you want to get specific there are five classes: A, B1, B2+, B2, and C. A gets you a private room, your own bathroom, air conditioning, and your choice of doctor. C gets you an open ward, with 7 to 8 other patients, a shared bathroom, and whatever doctor is assigned to you. 

If you choose A you pay for everything. If you choose C, the government pays up to 80% of the costs.

What make Singapore unique, and what makes it beloved among many conservative wonks, is its reliance on health savings accounts.

All workers are mandated to put a decent percent of their earnings into savings for the future. In 2012, workers up to age 50 had to put 20% of their wages into these accounts, matched by another 16% of wages from their employer.

Moneys are divided amongst three types of accounts. There's the ordinary account, to be used to buy a home, pay for insurance against death or disability, or to pay for investment or education. There's the special account, for old age and investment in retirement related financial products, and then there's the Medisave account to be used for healthcare expenses and approved healthcare insurance.

The contribution to Medisave is about 7-9.5% of wages, depending upon your age. It earns interest, set by the government. And it has a maximum cap, at around $43,500, at which point you divert your mandatory savings into some other account.

You can use your Medisave account to pay for in-patient care and some out-patient care. There are some gaps in what you are allowed to pay for with it, but those are getting smaller.

If you can't pay for care out of Medisave, you pay for it out of your regular savings.

Singapore's trying to incentivize people to have children. If you have a baby with a congenital condition, there's now a program to give you additional money. There's a Marriage and Parenthood Package, where you get $6000 cash for each of your 1st and 2nd children, and $8000 for your 3rd and 4th children.

The government will also match, dollar for dollar, a fairly large amount that you contribute to a child development account. Every once and a while, the government tops up the Medisave accounts if it thinks costs have gone up faster than expected, or if it wants to expand coverage. 2011, for instance, lower and middle income people, age 45 and above got $200 to $700 each depending on income and home ownership.

The second healthcare program is Medishield. This is a catastrophic illness program. And while it's not mandatory, more than 90% of the population is covered. It's really cheap, from $33 a year for a 29 year old to $372 a year for a 69 year old. 

Medishield kicks in when you've covered the deductibles for the year and after you've paid your co-insurance. Those vary by the class of care you choose. Medishield has an annual benefit limit of $50,000 and a lifetime limit of $200,000.

Medishield is expected to cover about 80 to 90% of a hospitalization in a class B2 or C ward. The rest would come out of Medisave. Or you could buy further coverage if you like. This will allow you to get a higher class of care. Some plans are offered by the government, and you can use your Medisave money to pay for those. Other plans are purely private. Sometimes they're offered by employers as benefits.

The third healthcare program is Medifund, which is Singapore's safety net program. Only citizens are eligible, and it only covers the lowest class of wards, and it's only available after you've depleted your Medisave account and Medishield coverage.

Elderly patients are prioritized. The amount of help you get depends on a patient's and a family's income, conditions, expenses, and social circumstances. Decisions are made about that at a very local level.

There's also Eldershield. Money for Eldershield starts being withdrawn from your wages at age 40, and the system is run by 3 private insurers. You're randomly assigned to one of them, and you'll pay until you're 65. When you need the money to help pay for disability care, you can take up to $400 a month out for a maximum of 72 months for nursing home or home care.

But why is Singapore so cheap? Some think that it's the strong use of health savings accounts and cost sharing. You may remember from our rant Health Insurance Experiment episode, that people who have to use their own money usually spend less than people that don't. But that's not the whole story here. There's lots of government regulation as well.

Through the tiered care system and its public hospitals, the government has a lot of control over in-patient care. It allows a private system to challenge the public one, but the public system plays the dominant role in providing services.

Initially, Singapore let hospitals compete more, believing that the free market would bring down costs. But when the hospitals competed, they did so by buying new technology, offering expensive services, paying more for docs, decreasing services to lower class wards, and focusing more on A-class wards. This lead to increased spending.

In other words, they found that the market fails in healthcare, as it so often does in the United States. So you know what they did? They got the government more involved. They fixed the proportion of each type of ward in hospitals. They kept them from focusing too much on profits and they required approval to buy new, expensive technology.

Singapore heavily regulates the number of physicians, and they have some control over salaries as well. The country uses bulk purchasing power to spend less on drugs. It also has a lot of mandates, as I mentioned before.

The most frustrating part about Singapore is that as an example it's easily misused by those who want to see their own healthcare system change. More conservative types will point to the Medisave accounts and the stress on individual contributions, but ignore the heavy government involvement in regulation. More liberal types will point to the public's ability to hold down costs and achieve quality, but ignore the class system or the system's reliance in individual decision making.

Singapore's very small. And very homogeneous. It's a little easier to run a healthcare system like that. But what makes Singapore really special is that their system seems to open to change. They seem to recognize that everything has a trade-off. They seem willing to try new things. And they seem willing to change when those things don't work. They don't seem stuck. We can all learn a lot from that.