Financing health care: Singapore’s innovative approach

Singapore’s health financing system combines universal medical savings accounts with supplementary programs to protect the poor and address potential market failures in health financing. The results have been impressive, with low costs, excellent health outcomes, and full consumer choice of providers and quality of care.

Singapore's financing system combines universal savings accounts with supplementary programs to protect the poor and address potential market failures in health financing. The interplay of individual incentives, targeted subsides, and other cost containers is an important factor in the success. The system differs significantly from national health insurance. Employees are required to contribute 6-8% of their salary to individual savings accounts. These accounts belong to the individual, accumulate over a lifetime, and can be used at the individual's discretion. To address the risk of catastrophic illness Singapore complements these accounts with catastrophic insurance. The government also provides targeted subsides for the poor, the elderly and the unemployed. Both the public and private sector provide health care in Singapore and patients can choose their provider at all levels of care.

A similar model could be applied in other countries, regardless of income levels. Critical and/or politically difficult decisions include whether to make savings accounts mandatory and universal or private and voluntary, whether to fund the savings accounts through payroll contributions or general tax revenue, the size of co-payments, and how to structure and fund targeted subsides. But with political will, these decisions are do-able - thus helping to contain the crisis of escalating costs of health care facing many governments. [author, from discussion summary]

There is also an online discussion on this paper organised by the World Bank's Rapid Response Unit