higher premium option won't work

the following letter is published in today's forum page of the straits times:

Mar 17, 2011
Higher premium option won't work

THERE are practical difficulties to Mr Tan Kin Lian's suggestion ('Remove uncertain component of means testing in MediShield use'; March 8) which advocates getting policyholders to 'pay a slightly higher premium to be excluded from (being subjected to) this pro-ration formula'.

First, policyholders may not agree to the higher premium. Second, whether the premium will really be only 'slightly higher' will depend on the take-up rate of this proposed variation in MediShield policy.

In fact, as pointed out by Mr Tan, the current system is already designed to provide this variation through private integrated Shield plans. Those who are well-off and will face means testing can purchase these plans to protect against this uncertainty.

Under our current approach, all policyholders of the same age band and gender pay the same premiums and receive the same MediShield payouts for identical hospitalisation treatment. This is achieved through pro-rating. It is the fairest approach.

If there is no pro-rating, the few patients who receive lower subsidies due to their higher income would end up getting higher MediShield payouts. The extra payouts would then be funded by the majority of the subsidised patients who are less well-off.

Julie Sim (Ms)
Deputy Director
Corporate Communications
Ministry of Health

my comments:

the premiums for the basic medishield plan has never been raised for many years since it's inception in July 1990.

but this record has been broken with the price increase effected on december 01, 2008 after enhancements to the medishield plan, primarily increasing the payouts of up to 80% of large Class B2 and Class C bills, up from 60% previously.

the new premiums are most particularly 'felt' for those who are in the older age bands, for example, for ages 84 to 85, the new premium payable is now $1,123.00 from just $705.00 previously.

because of this, Integrated Shield Plan policyholders who are below 81 years old (age next birthday) can continue to use Medisave to pay premiums, up to the withdrawal limit of $800 per insured person, per policy year. but for those 81 years old (age next birthday) and above, the withdrawal limit for premiums will be increased to $1,150 per insured person, per policy year from 1 December 2008.

therefore, i am in agreement with the ministry of health not to go for the option of higher premium.