The landscape of healthcare in the United States will definitely see some changes next year - for the better or worse. The US healthcare system has been criticised by some and comparisons are drawn with a model, closer to home: Singapore.

Singapore has been praised as having the world's greatest healthcare system - it is the only country in the world that is in the top five bracket for infant mortality, life expectancy, and maternal mortality. It is also the world's healthiest country when Business Week compared countries on 21 different healthcare metrics.

In comparison, the US ranks 41st in life expectancy, 55th in infant mortality, and 49th in maternal mortality, and spends nearly 18% of GDP on healthcare. Other developed nations show better results while spending between 9% to 12% of GDP.

Spending less for more

Singapore however, spends only 4.7% GDP, less than half of what Canada, Japan and the United Kingdom are spending, but achieves the best results. Sean Masaki Flynn who teaches economics and finance at Scripps College in Claremont, California explains why.

According to Flynn, Singapore empowers consumers by providing health security and fosters competition by providing consumers with price-comparison data and provider-performance data. It provides universal access and coverage for pre-existing conditions, much like what Obamacare is trying to do.

Singapore then ensures everyone, regardless of economic background, has funds to pay for access to the same doctors and the same facilities. It ensures contributions into health savings accounts and provides an optional high-deductable health insurance plan that Singaporeans can afford - including premiums, deductibles and co-pays.

Acknowledging moral hazard of health insurance

The country acknowledges the moral hazard of health insurance - the difference between a citizen forking out their own cash, versus insurance, says Dr. Thomas Davis, an emergency medicine physician at Vanderbilt University Medical Center in Nashville, Tennessee, who previously worked in Singapore.

Insurance financially protects individuals from low probability and high consequence events, such as the variable types of cancer. It is an important financial tool in many industries including healthcare, but the moral hazard is the reason no one buys health insurance that includes a great amount of inpatient coverage.

Inpatient coverage is essential for recovery, but if an increase in inpatient coverage occurs, many would take advantage of it, and premiums would consequently rise. Many US reformers have promised that increasing health insurance coverage would decrease emergency department visits.

However, data from a randomised study on the effects of health insurance shows that expanded health insurance coverage, resulted in a 40% increase in emergency department visits over a two-year period.

Singapore minimised the effects of this moral hazard by reducing the role of health insurance. Instead of compulsory health insurance plans, it has established mandatory health savings accounts - Medisave. It is also tax free, interest bearing and inheritable.

When patients are admitted, they know they are not spending the health insurance company's money, but rather their own hard-earned money. Either way, it is the patient's money, but the psychology of spending, is completely different.

For those who cannot afford the most basic healthcare expenses, the Singapore government created Medifund. In the US, money is borrowed from future generations to pay for current welfare programs. In Singapore, the government contributes surpluses into Medifund. The interest is then distributed to hospitals to spend on these patients.

Empowered consumers and fostering competition

The government also provides price-comparison and provide-performance information, fostering competition in the healthcare market. It is the world's most competitive healthcare market whereby providers have to deliver on both price and quality in order to survive.

It proves effective. Major surgeries cost 62% to 92% less in Singapore compared to the US and on average, Singapore spends 72% less per person on healthcare compared to the US and between 46% to 57% less than Canada, Japan, France and the United Kingdom.

If the US achieves the same level of spending, it would save 12.2% of their GDP - USD2.1 trillion - that can balance the federal budget, allow Medicare and Medicaid to have a long-run actuarial balance, and still have USD1 trillion to be distributed into other priorities such as infrastructure, education and national defense, according to Flynn.

There is also evidence that Singapore's healthcare model can be translated to the US. The State of Indiana has adopted a Singapore-style health insurance that is proven to be effective for both middle-class government employees as well as poverty-struck Medicaid recipients.

The difference between the US and Singapore healthcare system is that Singapore's exhibits a bottom-up model rather than top-down and the local control creates flexibility and strength in addition to slashing red tape and administrative costs.

Policymakers view the bottom-up perspective as important when looking for solutions. The decentralisation will allow the US healthcare system to cope with the size and diversity of the population of the US, far better than the current central planning and rigid rules.

That can only be done by trusting people to make wise decisions for themselves and their families and putting them in charge of the money. MIMS

Read more:
A look at healthcare systems across Asia
Singapore healthcare subsidies: Lots more room to improve, as compared to Asian Tiger counterparts
Singaporean citizens getting back less from national health care insurance compared to Asian Tiger countries and Japan