Imagine that there was a way to achieve universal healthcare, keep and invigorate the private sector and at the same time cut cost by 60%* or more. Would you want it? Such a system already exists and has been around for several decades. In Singapore.
Some Background: Fifty years ago, the U.S. was the richest country on earth, and decided to adopt the welfare state model. Singapore was a poor third world hellhole back then but chose to adopt the kind of free market model that the U.S. was abandoning. Fast forward fifty years, and the U.S. is turning into a banana republic, while Singapore has become one of the richest countries in the world.
To be fair, there is plenty of government intervention in Singapore. It’s not entirely a free market, but the island state still ranks second on Heritage Foundation’s Index of Economic Freedom, a smidge behind top dog Hong Kong, and far ahead of the former land of the free, the United States of America.
How does Singapore achieve so much more health care at a fraction of the cost? There are many different aspects to their winning recipe, but the two key ingredients are the following:
#1: Health Savings Accounts
For some unfathomable reason, everyone in the U.S. is obsessed with paying all healthcare with insurance, which makes it outrageously expensive. Paying for every single healthcare cost through insurance is such a crazy idea that malice or incompetence could have only designed it.
First, it creates a mountain of completely unnecessary bureaucracy. Americans spend more on healthcare administration than Singaporeans spend in total on all healthcare!
Second, when people don’t have to shop around and look at prices because it’s all paid for by the insurance company, the result is higher prices and additional unnecessary expenses.
Health savings accounts fix both these problems. In Singapore, one is required to put a certain amount of earnings into a personal health savings account, which one can spend on healthcare for oneself and family members. As a result, there is no bureaucratic overhead with insurance, and people are frugal with their own money and shop around. The upshot of this results in real healthcare competition.
Singaporeans have health insurance too, but only to cover significant, unpredictable expenses like accidents, death or catastrophic disease. When used in this proper way, insurance is very inexpensive. The typical Singaporean pays less than thirty dollars per month in health insurance.
#2: Different Service Classes
Another key ingredient in the Singaporean system is to divide healthcare into different service classes. In the top service class, you get private air-conditioned room and premium service. You also pay full price. If you choose the lowest service level, you have to stay in a room with other patients, and you may have to wait for a doctor who happens to be available. This is the cheapest option, and the government pays 80% of the bill.
The quality of operations and medical procedures is the same for all classes, but not as comfortable and convenient. In practice, this gives the poor access to universal healthcare, while at the same time providing an incentive structure to pay as much as possible for one’s healthcare.
Other factors
Other factors contribute to the success of Singapore’s healthcare system. Singapore is in general excellent at keeping governmental bureaucracy at a minimum. Regulations are few and efficient. Furthermore, the governmental subsidies for the lower service classes are only available for citizens. This is important since there are many immigrants in Singapore.
In sum, Singapore is able to provide the most affordable health care in the industrialized world. Free marketers may not be entirely happy with this solution since it does involve some government involvement. In most ways, however, the Singaporean system operates with more freedom and liberty for the consumer than the American healthcare system even before Obamacare. If the U.S. manages to replicate Singapore’s success, Americans can save upwards of two trillion dollars every year. This saving alone is enough to balance the budget and to open up the economy for massive tax cuts.
*Measured in PPP-adjusted dollars, Singapore spends almost 60% less than the U.S. per capita. Measured in percentage of GDP, Singaporeans spend about 70% less than Americans.
