Case for Socializing Healthcare Cost and Universal Healthcare in Singapore – Peter LYE, December 2016

Fate has it that 2 days after penning a healthcare article, Humpty Dumpty me slipped and fell on a rainy afternoon. A fractured finger and two damaged ligaments left me walking with crutches for 10 days and two fingers with limited utility for 8 weeks. The mountain of medical bills caused a free flow of ideals (not ideas) case for socializing healthcare cost and universal healthcare in my abode between my blood brain barrier putting both in sync ripe for physical impacts into the cerebral sphere thereafter into the physical resulting in this write-up.

The city state of Singapore that I share with about 5M more souls as home where ruling party PAP has not only a simple but two third majority since eons and a doctrine of party whip to complete the control. Small can be advantageous coupled with good political control makes her an ideal test bed for novel policies making reversals and titrations more viable with less extensive and tolerable collateral damage. Coincidentally or deliberately, Obama Care and Medishield Life universal healthcare was made law on the same day about a year ago on 1 Nov 2015.

Obama Care took nearly 2 presidential term of gestation in the senate and a somewhat pro-longed and dangerous birthing witnessed by intense congressional lobbying, horse trading and threat of presidential veto. Medishield Life entry was hardly noticeable except for a front page headline in the local press and of course months of public education campaign prior to that.

The passage of Obama Care is clearly over done as what The Economist term as Vetocracy the result of which could be compromised outcome. Medishield Life most probably represents the other extreme lack of feedbacks and robust parliamentary debate. With diverse parties having vested interest in it chief amongst which are healthcare, managed care and insurance providers, employers, employees, labour unions and last and most importantly 90% of the populace from the uninsured, unemployed, under-employed to the sandwich class, it certainly warrants a more robust debate in the case of Medishield Life but not to the extremities of Obama Care.

Two books were instrumental in shaping my ideological during my teens. Free to Choose which was also made into a ten-part TV serial (also broadcasted in Singapore I suspect as propaganda) by far right University of Chicago Professor Milton Friedman. The other centre left leaning Social Democracy The Singapore Way by our past president Devan Nair.

This cocktail unfortunately formed an ultra-right democratic capitalist psyche in me. As I mellowed, although still a deeply rooted democratic capitalist, I began to see the cracks in certain parts of my doctrine that might need to be supplemented (not supplanted) by socialism in some shape and form. Chief amongst which was Healthcare, Education and Welfare (HEW). Friedman commented that in one of the ten-part serial that it was ridiculous that the budget of USA Department of Health, Education and Welfare was larger than the GDP of USSR which covers a bigger patch previously before the dis-integration of USSR. Briefly, education is a great social leveller and welfare because the humanity in us will not allow us to deny the under-class the most basic essential for a humane existence.

Although universal healthcare has not attained universality, the very fact that it occupies agenda of many healthcare interest groups itself is a major milestone and human development index. At this stage, it mirrors the Chinese toy 不倒翁. It is easily swayed by any effort to topple it but will bounce back in no time. In the same breath, efforts to advance its cause is also easily reversed. Perhaps the case for universal healthcare is compelling with little or no alternatives in sight. The basic principles and doctrines needlessly complex and contentious. Given such a canvas that the actual mechanical operatives must operate on, it is easy to understand why universal healthcare whilst not easily defeated and erased off the global agenda is also 747 too heavy for lift off.

In-spite of the situation, universal healthcare has taken some promising shape or form although not in its totality in some countries like USA, Canada and Singapore.

Medishield Life as our flavour of universal healthcare in Singapore is most probably one small step for man but a giant leap for man-kind.

Just after a year into its existence, issues have surfaced. Chief amongst which are hike in premiums for Integrated Shield Plans which are an optional private plans, buffet syndrome of over consumption for Integrated Shield Plans which have no co-payment component and lastly, pay-out to premium ratios for the six participating private insurers are mostly in line with each other, the public Medishield Life is way below norm. Reasons abound for the differential from premium pricing, coverage, co-payment and lastly underwriting in the case of Integrated Shield Plan as MediShield Life being a universal healthcare insurance has no under-writing.

As we get our feet wet as we progress into the less chartered waters of universal healthcare with an aging demography, perhaps, it is too early to pop that champagne.

Peter Lye aka lkypeter
lkypeter@gmail.com Safe Harbor. Please note that information contained in these pages are of a personal nature and does not necessarily reflect that of any companies, organizations or individuals. In addition, some of these opinions are of a forward looking nature. Lastly the facts and opinions contained in these pages might not have been verified for correctness, so please use with caution. Happy Reading. Peter Lye (c) Peter Lye 2014

Airline Pricing and Singapore Public Healthcare Pricing andSubsidyRationing

28^th September 2016 Peter LYE

In “Secrets and agents”, the Economist narrated how airlines are leveraging the theory of information asymmetry grand fathered by George Akerlof who finally won a Nobel Prize in economics in 2001 after agonizing for nearly four decades after he wrote “The Market for Lemons” which was rejected by three leading journals. He might more easily be identified as the husband of Janet Yellen chairman, Federal Reserve Board although he is definitely a man in his own right. Some wonder the major topic of their pillow talk when these two bed fellows dissertated on lemons and unemployment?

Air-conditioning has been effectively used as a primary pricing differentiator as Mr. Lee Kuan Yew himself admittedly responded that air conditioning was the greatest invention of this century in a 2001 RTHK interview. In temperate climates and beyond, air-conditioning is a must as winter chill can kill. In the tropics, air-conditioning can be a difficult luxury to forgo especially for sick patients with Singapore being nick named an air-conditioned city. Why deprive our sick when it is all and sundry at most public locations including public offices when the incremental cost can be marginal in buildings that are already equipped to be centrally air-conditioned?

Before posthumous arrows gets directed at him, recognition must be accorded to his practical wisdom in leveraging on airline pricing model that rest partly on Akerlof Information Asymmetry although doubts abound that the two are or can be placed in the same room as no references were made to these academic and commercial exploits in his governmental policy.

Public healthcare pricing and subsidy rationing pre 1970s was primarily a non-issue because the middle class was not a sizable addressable market and public healthcare was the backbone of the healthcare system and private healthcare the preserve of the local rich and the well-heeled medical tourist from neighbouring countries. Even at public healthcare, the A class wards were lightly used and C class wards were the norm. The major differentiator between the classes were creature comforts like air-conditioning, private rooms instead of open wards, quality of food not in terms of nutrition but taste and presentation as most hospital meals are dietician directed.

With an ageing population over the horizon, rapid development of medical technology and cost as well as the populace expectation on healthcare, the government most probably predicted that the existing healthcare infrastructure would have to undergo rapid modernization and expansion and the framework to fund it is also not tenable and demanded a fundamental structural change.

The Central Provident Fund (CPF) as the national retirement fund liberalised the use of its fund for healthcare needs through the creation of a separate Medisave Account in 1984 as one of the baby steps. The tables were turned quickly with a sudden frenzied feeding demand for A and B class wards and an emptying out of C class wards. Such was the situation with the waiting list for A and B class wards that resulted in an unprecedented non-medical transfer of patients between wards. Many felt that CPF funds are so tightly locked up and why not use it when you can initially.

Between 1984 and now, healthcare financing has been a regular topic of public discourse and subsequent legislative changes to re-calibrate with the changing spectrum of demography in terms of age profile as well as citizens, permanent residents and foreign talents as the latter two begin to expand more rapidly. Of these measures, three defining progressive landmarks are worthy of mention.

First, the introduction of nation-wide voluntary opt-out basic medical insurance name MediShield in 1990, means testing of healthcare subsidy to lower B2 and C class wards to ration subsidy to the more economically needy and lastly, the almost seamless and unnatural quiet implementation of compulsory universal basic health insurance on 1^st November 2015.

The 1990 voluntary opt out MediShield most probably had limited subscription and success that demanded the last measure in 1st November 2015. This rebirth has many laudable features such as being universal, it is available to all regardless of their medical state as well as a government cum private insurer initiative to address the issue of duplicity of insurance coverage for those with existing insurance coverage with private insurer to a dove-tailed and more cost efficient Integrated MediShield Life Plan. Such knows no other precedent in other countries to learn from and demanded threading on untested waters and it is a deserving of accolades.

A similar initiative in USA known commonly as Obama Care which has been debated to death in public forums as well as the senate and congress, supported and jeopardized by many camps and worthy of a congress vs the president by majority and veto respectively. Perhaps the ability to side-line to a later phase most of the duplicity for employer provided healthcare insurance is the reason for the success as a large quantum of healthcare is employer provided in USA.

As for the means testing to ration health care subsidy to the more economically needy, it could have been a knee jerk reaction to ministerial observation from some quarters that some seemingly wealthy patients are having their expensive heart procedures done at C class ward to save cost. Means testing is a robust sociological tool for government subsidy rationing but wonder whether it is worthwhile as it is not common enough to sight a billionaire like Ingvar Kamprad of Ikea who proudly proclaims that he travels on commercial airline economy class. We certainly do not see airlines reacting to it. On the reverse, such mean testing can land the sandwich class into medically induced bankruptcy or close to it.

Why SMB Need Key Man Insurance

20 July 2016^© Peter Lye

After 3 decades, Key Man Insurance is still too 747 heavy for lift off in big way.

It might be a sterling example of lost in translation. Though the label is semantically correct, the impression created seems to suggest some grandiose plan not meant for commoner.

This is far from reality as it was created mainly with the smaller business in mind instead MNCs and larger corporates.

Insurance is intangible in itself. Compound this complexity that Key Man Insurance hardly exists as ready to sell product but as a wrapper for a bespoke basket of insurance products, it is easy to understand why only the brave will attempt to venture.

Unlike liability class of insurance which provides a like for like recourse like repair, replacement or hold legally harmless, Key Man Insurance normally provides a pre-agreed compensation in cash. Some quarters voice that this money does not buy everything necessary to recompensate a key man insurance, it sure can buy many things.

Key Man are essentially owners, business partners or employees for which their continued ability to contribute to the business if curtailed by illness, accidents or death can result in major business impact. The value contribution can be special skills, relationships with customers or source of finance.

The risk coverage can range from basic death due to accident only, to term for death due to whatever cause or even critical illness. Critical illness can affect work ability and this is an important consideration though it is relatively more costly risk to cover. Many have asked about risk of jumping ship to competitor or leaving for whatever reason and the answer is normally no as there is a certain level of control over the outcome rather than a random event. This infringes one of the basic principle of insurance that the outcome is not controllable or largely not controllable.

Table:Key Man Issue Impact on SMB vs MNCs

	SMB	MNCs or Large Corporate
Funding	Owner. Bank Facilities (OD/Trade) with Personal Guarantees by shareholders.	Corporate Capital Market. Bank Facilities with Corporate Guarantees.
Skills Duplication	Rarely or limited	Widespread
Process Documentation	Limited even for those with ISO 900X	Robust
Economy of Scale	Limited	Larger
Ownership/Management	More Integrated	Segregated
Too Big to Fail	None	In Some Case
Quick Access to Sudden Cash / Resource	Limited	Extensive in Most Case Especially in MNCs.

It is clearly evident from the table above why SMB should be looking at Key Man Insurance rather than MNCs as they have sufficient buffer in most case.

Key Man Insurance Cash Pay-out is normally arranged in one of the following fashions when an insured event which is normally a Key Man like issue arises.

Firstly, for business that are funded by owner and Bank Facilities with Personal Guarantors, the Pay-out is useful in case the of loans or trade facilities by banks. A wise sage once opined that wise Bankers only try to loan you money when you least need it.

In the case of a sudden skill shortfall due to key person meeting the insured event, the cash pay-out is useful to secure additional resource to re-compensate part of the resource or to keep the business a float due to sudden drop in business.

As ownership and management is more often than not integrated in SMB, a buy-out agreement using the insurance cash pay-out as a base load can ensure a more congenial management of the company without the sudden intrusion of a new management member to replace the key man. This can be structured along the lines of a Texas Shoot Out Clause to ensure fairer value of transaction for both buyer and seller.

Most SMB owners have poured in blood and sweat to take their business to where it is and it would be a waste to see it die with them. In addition, it is also part of being a responsible to your business partners and employees.

Imagine chef/owner Peter of your favourite neighbourhood burger diner paralysed by a sudden stroke and passed away. What will happen to his business, partners, employees and most of all his family members. Little imagination is needed to picture the catastrophe.

The special marinate that makes the burger unique was formulated by Peter and though many staff and partners have seen it done daily, the exact recipe was never documented. Customers started to complain that the burger tasted different.

The business started by Peter as a small street corner food cart many years ago. When it tasted success, Peter roped in 2 additional business partners who were in the restaurant business to provide restaurant expertise to expand it into a full service diner. The additional capital needed to acquire shop space, kitchen and dining area were provided by the 2 new partners and bank over draft and trade facilities secured by joint personal guarantee by Peter and his partners.

The Bank not only stop all credit facilities but recalled all loans. The business almost grind to a halt as most working capital is via Bank facilities. Bankers are logical business that take such actions because firstly, they now have 2 instead of 3 personal guarantors. Secondly, business risk has also increased with poorer business outlook.

The final straw came when the Bank lodged a charge on Peter’s estate on account of the personal guarantee locking all the emergency funds the immediate family needs.

If the same were to happen to a branch manager of MacDonald, business would continue almost normally save for a minor discontinuity during the initial period it takes to transfer and localise another branch manager. Bankers, suppliers and customers would hardly blink about it.

This is why Key Man Insurance is for SMB.

Case for Socializing Healthcare Cost and Universal Healthcare in Singapore – Peter LYE, December 2016

Airline Pricing and Singapore Public Healthcare Pricing andSubsidyRationing

28th September 2016 Peter LYE

Why SMB Need Key Man Insurance

28^th September 2016 Peter LYE