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http://www.straitstimes.com/singapore/measures-in-place-to-avoid-overuse-of-health-care

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Generous health-care subsidies for the pioneer generation and other groups of Singaporeans announced in last Friday's Budget may lead to the buffet syndrome, where people consume more than they actually need because something is free.

But the Government is well aware of this and has put in place safeguards such as co-payments to prevent the health-care sector from being overloaded, Senior Minister of State for Health Amy Khor and Senior Minister of State for Finance Josephine Teo said at a Reach post-Budget public forum yesterday.

Many among the 120 participants raised questions about the Budget's centrepiece, an $8 billion package of health-care measures to honour the efforts of Singapore's pioneer generation.

Some 450,000 Singaporeans will enjoy Medisave top-ups for life, subsidies for the new MediShield Life insurance scheme and subsidies for outpatient treatment.

Addressing a group that included working adults, students and retirees at the National Library, Mrs Teo took pains to warn about the pitfalls of over-consumption of health care, such as a strain on hospitals.

To avoid this scenario, the Government has subsidised outpatient treatment as well as hospitalisation and insurance premiums, said Dr Khor, who is also chairman of Reach, the Government's feedback arm.

Through the Community Health Assist Scheme (Chas), which subsidises care at private general practitioners and dental clinics, Singaporeans will be encouraged to turn to their family physicians or polyclinics first, instead of going straight to hospitals, she added.

Another way of tackling over-consumption is through requiring co-payment, said Dr Khor. This way, individuals will be encouraged to take personal responsibility in their choices.

Participants also raised the question of whether taxes would rise to fund social spending.

Mrs Teo, who also holds the transport portfolio, said the Government will have to think of ways to increase revenue to balance responsible spending.

Over the last few days, Reach had received more than 400 pieces of feedback about this year's Budget. More than half focused on initiatives such as the Pioneer Generation Package, health-care affordability and further help for older Singaporeans, said Dr Khor.
yuenc@sph.com.sg

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Measures in place to avoid overuse of health care

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Generous health-care subsidies for the pioneer generation and other groups of Singaporeans announced in last Friday's Budget may lead to the buffet syndrome, where people consume more than they actually need because something is free.

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There is an overproduction of the healthcare service, since Singaporeans tend to overuse the health care when there is subsidies provided by the government even when they don't necessarily need it.

The private cost incurred on the government would be the opportunity cost of giving subsidies to citizens for healthcare. The opportunity cost may be education programmes for students. The private benefit that the citizens consuming the health care get is that they prevent themselves from getting ill and gain some protection from illnesses when they get health check ups,consultations and other services from the doctors. Health care produces a large sum of chemical wastes,thus the marginal external cost occurs as increasing number of chemical waste being dumped,which may pollute the environment.

The full opportunity cost of production to society is greater than private cost.Thus, there is a divergence between the marginal social cost(MSC) and the marginal private cost(MPC)curve.

When MPB=MPC,the market equilibrium output level is determined by the government and Singaporeans taking into account their own cost and benefit,driven by their self-interest.Hence, the industry achieves market equilibrium where MPB=MPC.

Meanwhile at the social optimum output level,where MSB=MSC,the benefit society gains from the last unit of healthcare is exactly equal to the opportunity cost of producing it.

The market equilibrium output level is more than the socially optimum output level.Hence, there is overproduction or overconsumption of healthcare.For each additional unit from Qs to Qm,the marginal costs to society are greater than the marginal benefit. Thus,each of these additional units produced and consumed results in a net welfare loss to society. By summing the excess of the marginal social cost over the marginal social benefit for all these additional units of QsQm,we get the total deadweight loss to society which is area A. Therefore there was a need to introduce the measure as to reduce the deadweight loss.

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The copayment ensures that Singaporeans pay a fixed amount of money for their healthcare while the rest is paid by the government through subsidies. This ensures that not all of their medical bills are subsidized,reducing the overuse of health care. Thus,the measure is effective in reducing the total deadweight loss to society and bringing the market equilibrium output level closer to the social optimum output level. The total deadweight loss can't be cleared as the government does not have sufficient information to know how much copayment Singaporeans should pay to totally remove the deadweight loss.

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http://www.enterpriseinnovation.net/article/singhealth-medtronic-set-center-excellence-diabetes-care-singapore-590166625

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Enterprise Innovation | Asia's Premier Business and Technology Publication

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SingHealth, Medtronic set up Center of Excellence for diabetes care in Singapore

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SingHealth has signed an agreement with Irish medical technology and services company Medtronic plc, which recently opened its Asia-Pacific regional headquarters in Singapore, to develop a Centre of Excellence in the treatment of diabetes across Southeast Asia.

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There is underproduction of the aid provided to diabetic patients in Singapore. As shown in "the rising prevalence of diabetes in the region is  driving up healthcare costs, but there is tremendous opportunity to improve treatments across the diabetes care continuum through innovation and collaboration". This means that the demand for aid by diabetic patients is rising and more can be done to help them.

The private cost incurred on the government is the cost of raw materials for producing better medical technology equipments. The private benefit to diabetic patients is that that their health gets restored. External benefits is that the healthy patients companies' will earn more profit as their workers are more productive when they are healthy.These companies are those that do not compensate for any part of their workers' medical bills.

As there are positive externalities,the total benefit to society is greater than the private benefit.Thus, there is a divergence between the marginal private benefit(MPB) and marginal social benefit(MSB) curves.

To derive the MSB curve, we add marginal external benefit(MEB) to the MPB curve. Hence, MSB curve is above the MPB curve. The vertical distance between MSB and MPB is the MEB for each and every unit of output.

Assuming firms operate in a perfect market, the industry achieves market equilibrium where MPB=MPC. This free market output level is determined by individuals who take into account their own private benefits and costs, ignoring all third-party effects.

In contrast, the socially optimum output level is attained where MSB=MSC. This output level is taken into account social benefits and social costs. At this output level, the society's welfare is maximised as the benefit society gains from the last unit of the aid given to diabetic patients is exactly equal to that of the next best alternative good forgone.

The market equilibrium output is less than the socially optimum output level. Hence, there is underproduction or the underconsumption of the aid given for diabetic patients. By summing the excess of marginal social benefit over marginal social cost for the additional units QfQs,we get the total deadweight loss(DWL) to society as shown in the diagram.

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Effectiveness of measure(collaboration to improve diabetes care)

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Effectiveness of measure(collaboration to improve diabetes care)

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The measure is effective as it reduces the total deadweight loss by improving the aid provided to diabetic patients, reducing the divergence between the MPB and MSB curves. The measure however will not cause all of the additional units QfQs to be produced and consumed as it is difficult for government to gauge how much improvement in medical technology should be made for the total deadweight loss to be cleared completely.