Medical inflation rising, but prudent consumption, fee benchmarks can help check healthcare costs

MEDICAL costs in Singapore have been rising each year, and consumers are likely to feel the pinch as healthcare players and insurers deal with an increasing need for care and higher volumes of medical claims.

However, observers say that there are several ways to fight the rise in healthcare costs, which could help keep consumers’ overall medical expenses in check.

The average cost of medical care in Singapore is expected to rise by close to 10.7 per cent in 2024, up from a 10.3 per cent increase in 2023, data from advisory and solutions company WTW showed. The company, which polled more than 260 insurers in 66 countries, noted that Singapore’s figures are higher than the 9.9 per cent rise in costs projected for the Asia-Pacific for 2024.

A report by employee-benefits business Mercer Marsh Benefits (MMB), pointing to the same trend, forecast that Singapore’s medical trend rate could hit 12 per cent – higher than its forecast of 11.4 per cent for Asia.

MMB’s medical trend rate weighs factors including medical inflation – defined as an increase in costs for healthcare services and supplies – changes in the treatment mix, usage rates of health services, and regulatory changes in the country.

The rise in medical costs can be attributed to a “convergence of factors”, said Chan Wai Kit, executive director at Life Insurance Association Singapore (LIA). These include global inflationary pressures, an ageing population and the increased availability of cutting-edge – but costly – medical treatments and technologies, he noted. “In addition, potential overprescribing and overuse of tests, treatments and services by some medical practitioners may also drive total costs and claims up,” he told The Business Times.

Richard Cooper, partner and MMB leader in Singapore, noted an observable increase in critical-illness claims post-Covid, likely a result of postponed procedures and reduced preventive steps, such as screening, during the pandemic. Given general inflation levels, it is perhaps “not a surprise” that many markets, including Singapore, are facing double-digit cost increases, he said.

Audrey Tan, Singapore and South-east Asia head of health and benefits at WTW, highlighted the pressure on public healthcare systems having a knock-on effect on private players, as demand for private healthcare has surged, and narrowed the gap in caseload with public hospitals. “All these combinations of factors result in higher operating costs for healthcare providers, which lead to rising healthcare and medical costs per person,” she explained.

Ensuring appropriate charges

The Ministry of Health (MOH) now publishes fee benchmarks for hospital stays and medical procedures done in private hospitals, which observers say go some way to help alleviate costs for consumers. These benchmarks list the price ranges for hospital stays and specific procedures, and are based on historical fee data in the private sector. The latest benchmarks were published last June, with existing benchmarks adjusted up for inflation.

LIA’s Chan noted that insurers who offer Integrated Shield Plans (IP) and their panel doctors closely adhere to these benchmarks for procedures and daily attendance fees, to ensure that charges are appropriate.

The Integrated Shield Plan is a private medical insurance plan that provides users with coverage on top of Medishield Life, a health insurance automatically given to all Singapore citizens and permanent residents.

WTW’s Tan said that the benchmarks serve as a guide for patients, in that they offer a better idea of the cost of a given procedure in a private hospital.

Chan added: “As an industry, insurance providers periodically review benefit levels and premiums to ensure the plans and benefits are sustainable.” He noted that insurers have not increased IP premiums since 2022, under a push to provide additional support for IP policyholders amid the implementation of the Cancer Drug List.

Meanwhile, enhanced home care services for seniors, a subject which came up during the debate on MOH’s budget, will also alleviate the stress on both private and public hospitals. Home care keeps costs affordable for patients amid a pivot towards using more affordable healthcare providers, said Tan.

MMB’s Cooper hopes digital health, encompassing virtual tools such as telehealth, can also ease some pain points plaguing the healthcare system. He said, however, that digital heath is still in “somewhat of a clunky stage” in the healthcare system, as people have yet to figure out what exactly they want to use it for.

MMB’s report notes that digital health can pave the way for wider access and affordability. It can also include the use of artificial intelligence in healthcare, which can improve first-line diagnoses and personalise medicine.

Half the Asia-Pacific insurers surveyed by WTW said that telehealth has been an effective approach to managing costs, according to Tan.

Preventive care, prudent usage

While insurers and healthcare providers work to alleviate costs, observers also noted that organisations that offer their employees’ insurance plans, and the patients themselves, can play a part to keep the bills down.

Cooper noted that insurers often respond to the needs of organisations for cost containment when designing insurance plans, but are generally not the ones making these changes. “Clients need to be guided towards plan design changes that are right for them and aligned to their employee benefit strategies,” he said.

Similarly, LIA’s Chan said that IP insurers work closely with MOH to ensure that claims are appropriate, and to encourage patients and medical practitioners to go only for necessary and effective treatments.

WTW’s Tan pointed out that preventive care and services – which promote healthy living to avoid the onset of chronic diseases – can help to rein in healthcare claims, as insured members are often directed to “inappropriate treatment, bypassing preventive-care steps”. This can then lead to an overuse or misuse of care, with healthcare providers or medical practitioners recommending too many services, she added.

In this vein, employers, consultants and insurers should work together to help employees understand what is available, and when and how to use the coverage in their employees benefits plan.

Employers can also use data to understand health risks and take more targeted actions to prioritise their employees’ well-being, such as targeted communications to address key claim drivers. “Taking a more active approach in preventive measures and integrating well-being into their employee-care initiatives will help mitigate medical inflation as people at work stay healthier,” Tan noted.