Population Ageing Requires Adaptive Responses, Not Just Technical Ones

ETHOS Issue 11, Aug 2012

The Singapore Government’s Budget for 2012 has been widely lauded for its commitment to increase social protection and invest in the country’s capacity to cope with an ageing population. In a Budget remarkable for its emphasis on social spending, the measures in healthcare are arguably the boldest and most important. The Government has projected a doubling of healthcare spending, from the current S$4 billion to about S$8 billion a year, in the next five years. This will enable a 30% increase in the number of beds in acute hospitals and a doubling of the capacity of long-term care services. Equally welcome are the announcements to expand the coverage of MediShield to those aged between 85 and 90, the extension of subsidies for long-term care to a larger segment of the elderly population requiring such services, and top-ups to citizens’ Medisave accounts.

Nevertheless, increased spending and capacity in healthcare do not automatically produce better outcomes in the health and well-being of the population. The ageing of our population, and its implications for our health, social and fiscal systems, constitute an adaptive challenge¹ — our leaders and policymakers in public healthcare will have to consider at least three distinct perspectives beyond increasing public spending in healthcare: how our healthcare system is organised, how incentives and risks are structured, and whether we foster the right norms and values to support successful ageing.

Taking a Systems Approach to the Organisation and Delivery of Care

Significant changes in Singapore’s demographics and disease patterns in the long term may have fundamental implications on how our healthcare delivery system operates in the long run. For instance, around 80% of those currently above age 65 suffer from one or more chronic illnesses; the incidence of chronic illnesses is likely to increase as Singapore ages. Along with this epidemiological transition, healthcare utilisation patterns will shift from acute care to the primary, long-term and social care sectors.

Historically, the Singapore Government has invested in developing a strong acute care sector, but has left primary care and long-term care mostly to private and non-profit providers. The shifts in our disease patterns, largely as a consequence of an ageing population, will necessitate significant changes in the way care is organised and delivered.

Indeed, the current reorganisation of Singapore’s health services clusters — from two large clusters to six geographically-based regional health systems — reflects a shift to a more population- and patient-centred approach in healthcare delivery. The 2012 Budget measures to engage private and non-profit providers also hint at longer-range efforts to harness the resources that reside outside of the public sector.

Increased spending and capacity in healthcare do not automatically produce better outcomes in the health and well-being of the population.

Within each regional health system, the emphasis is very much on providing more patient-centric care through multi-disciplinary teams involving specialists, general practitioners, nurses, care coordinators, social workers and allied health professionals. There are also efforts to integrate care across different parts of the healthcare system. Over time, our healthcare system should evolve from one structured as separate hierarchies — usually with doctors at the apex — to one organised as a fluid network in which the professional taking the lead may change depending on context and the circumstances of the patient. Our healthcare system would become better organised around the needs of the patient and the population, rather than the needs of professionals or healthcare organisations. These changes to the organisation of the healthcare system reflect the Government’s recognition that an older population with a higher incidence of people with co-morbidities² will require a more connected healthcare system.

Such structural changes will involve shifts in organisational cultures, the expectations of healthcare professionals, and the ways in which they work with one another across government. They will require leaders and policymakers in public healthcare to take a systems view of policy reforms: recognising that what is optimal for the system and its intended outcomes may not always be optimal for individual institutions or constituent parts of the system.

Our healthcare system would become better organised around the needs of the patient and the population, rather than the needs of professionals or healthcare organisations.

The magnitude of the inputs into healthcare may matter less than how the resources are allocated and which specific interventions are implemented. From a systems perspective, the right question may not be how much healthcare spending there is, but how healthcare expenditures are allocated over the lifetime of citizens.

Getting the Balance of Risks in Healthcare Right

The allocation of healthcare risks between state and individuals will also have to adapt as our population ages. Singapore’s healthcare financing system is widely regarded to be well-designed and financially sustainable. The 3Ms (Medisave, MediShield and Medifund) and state subvention ensure that the large majority of Singaporeans have affordable access to good healthcare while maintaining patient choice. Seven out of ten patients in our restructured hospitals do not have to pay anything out-of-pocket. The state’s ownership of public hospitals also limits cost pressures, while the emphasis on individual responsibility and co-payment curbs the tendencies for over-consumption. In addition, the provision of a low-cost, near-universal catastrophic insurance scheme (MediShield) provides citizens a certain degree of protection against the risks of catastrophic medical episodes.

However, Singapore’s healthcare financing system will come under increasing stress. First, increasing longevity and a larger proportion of older persons in our population will inevitably raise national expenditure in healthcare. The state will come under increasing pressure to expand its financing of healthcare. Second, medical advances will push healthcare costs up as more conditions become treatable and more effective drugs and treatments become available. Again, there will be greater citizen expectation for the state to provide these new drugs and treatments on a subsidised basis. Third, citizens will expect seamless, integrated care. Adapting to these long-term, structural challenges will require Singapore’s healthcare system to develop efficient financing schemes that provide citizens greater assurance without health spending spiralling to unsustainable levels.

Singapore’s healthcare financing philosophy of shared responsibility — reflected in the combination of tax-financed subvention to public healthcare institutions, individual savings, social and private insurance, and patient co-payment — is basically sound. Because the severity of market failures in healthcare varies significantly across the healthcare system, it makes economic sense to calibrate the extent of government intervention at different points in the healthcare continuum. For instance, in primary care where informational asymmetries are less pronounced, it is easier for consumers to exercise informed choice. Consumers also have relatively more discretion over how much care they consume. In this sector, it is not unreasonable or inefficient for citizens to bear a larger part of the costs and responsibilities. In acute care, on the other hand, bill sizes are much larger, patients have less control over their consumption of such care, and they are far more reliant on the advice of their physicians (i.e. informational asymmetries are more severe). Correspondingly, there should be more state intervention and subvention in this sector. This calibrated, “surgical” approach to healthcare financing is one of the strengths of Singapore’s healthcare system, and helps to contain spending.

The allocation of healthcare risks between state and individuals will also have to adapt as our population ages.

Nonetheless, the state-market balance in healthcare needs to adapt dynamically to changes in the socio-economic environment. The larger increase in healthcare costs relative to median wage growth in recent years may have led to gaps in the ability of low- and middle-income families to afford good healthcare over their lifetimes. The relatively high share of private spending in healthcare is another area of concern. The confluence of these factors may result in inadequate access for a growing minority that has insufficient financial provision for long-term care, but who face higher risks of requiring it. At the same time, an ageing population and the rising incidence of chronic conditions that are best managed at the primary and long-term care sectors may require a different state approach to those sectors. In this regard, it is worth noting that the 2012 Budget extends long-term care subsidies to two-thirds of Singaporean households with elderly members, or about 80% of elderly in Singapore. Furthermore, all patients in community hospitals will now be eligible for government subsidies.

The distribution of risks and rising costs in long-term care also suggest that the state should make more aggressive use of risk-pooling and social insurance. This means, for instance, expanding and strengthening ElderShield. The introduction of universal health insurance (UHI) models in advanced Asian countries like South Korea and Taiwan has seen out-of-pocket shares in healthcare spending fall significantly. While co-payment also features in these systems, out-of-pocket amounts are capped for insured services, and the exposure to the risks of catastrophic spending is significantly reduced. On the other hand, UHI systems are more expensive, and require ever-increasing premiums as the population ages, unless benefits are curtailed or rationed.

Clearly, there are few easy answers as to how Singapore’s healthcare financing system should be adapted and calibrated for an ageing population. While there is certainly a need for more risk-pooling to finance higher health and long-term care costs — something which the Government has acknowledged — the benefits of such risk-pooling have to be balanced with longer-term considerations of affordability, and how changed incentives might alter people’s healthcare consumption decisions. At the same time, changes to incentives in healthcare do not just reflect technocratic or cost-benefit calculations; they are also shaped to a large extent by societal values and the extent to which the Government can forge a social consensus on more risk- and cost-sharing.

Shaping Norms and Values for an Ageing Population

An ageing population will demand a corresponding shift in social norms and values. Much of the emphasis so far has been on what the Government has to do to deal with ageing. However, the state cannot mandate or incentivise a change in norms and values; the technocratic options are relatively limited.

That we need a culture and a set of norms that would support successful ageing was recently made more salient by the reactions of some Singaporeans to the proposed development of eldercare facilities in their estates. There is some evidence to suggest that these are not isolated responses but constitute a wider pattern.³

Perhaps the most contentious subject for healthcare leaders to engage the public on is death. Not only do people generally avoid thinking about bad outcomes, but they may also hold unrealistic expectations of what medicine can do for people with terminal illnesses. This also needs to be addressed if we are to ensure that population ageing does not impose significantly higher healthcare costs without commensurate health or quality of life benefits. Addressing end-of-life issues would require leaders — not just in healthcare but also in society at large — to engage in difficult conversations with citizens: for instance, to sometimes make the case for letting things take their natural course and helping people to die gently if that is what they want. This may involve options such as providing adequate pain relief and coordinating treatment across specialists, allowing patients to be cared for at home where possible, rather than using technology to keep them alive when there is no hope of improvement.

Fostering new norms for an ageing society is arguably the hardest adaptive challenge facing Singapore. It cannot be addressed simply by government spending more or doing more. Similarly, changes to the healthcare financing regime are only viable if they command the support of broad swathes of society. More than ever, leaders in healthcare will have to engage in an ongoing dialogue with Singaporeans on the trade-offs that an ageing population brings, on the difficult shifts that the government is trying to make in our healthcare systems, on the changing roles of the state, community and individuals, and on the limits of medicine. Not only will such a dialogue help to shape citizens’ expectations of what the state should do as our population ages, but it will also foster a stronger sense of citizenship and ownership of the challenges of an ageing society.

ABOUT THE AUTHOR

Donald Low is currently Vice President of the Economics Society of Singapore and a consultant on economic and social policies. He has served in various capacities in the Singapore Government. Donald helped to establish the Centre for Public Economics at the Civil Service College in 2009, and served as its founding director for the first two years. He was formerly Director of Fiscal Policy at the Ministry of Finance, as well as Director of the Strategic Policy Office in the Public Service Division. He is also the editor of the book Behavioural Economics and Policy Design: Examples from Singapore (reviewed in Policymaking for Real People). The views expressed in the article are his own.

Melinda Elias is a researcher at the Healthcare Leadership College at MOH Holdings Pte Ltd. The views expressed in the article are her own.

NOTES

1. Harvard’s Ronald Heifetz makes a useful distinction between two kinds of challenges. Technical challenges can be clearly defined and addressed with known solutions and current structures or ones developed by technical experts. Adaptive challenges, on the other hand, require significant and sometimes painful shifts in people’s habits, roles, status, identities, values and ways of thinking. Adaptive challenges invariably involve conflicts, which have to be carefully managed in order to sustain positive change. Heifetz, R. A., Linksy, M. and Grashow, A., The Practice of Adaptive Leadership: Tools and Tactics for Changing Your Organization and the World (Harvard Business Press, 2009).

2. Co-morbidity is either the presence of one or more disorders (or diseases) in addition to a primary disease or disorder, or the effect of such additional disorders or diseases.

3. In recent months, news reports have highlighted a number of Singaporeans voicing their concerns over elderly care facilities being built in their vicinities: for example, some residents of Woodlands, over the proposed construction of an elder daycare centre; some residents of Toh Yi estate in Bukit Timah, over plans to build an eldercare facility; and some residents in Bishan, over plans to build a nursing home.

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