How High is Healthcare Cost Inflation Today?
Inflation is on everyone’s minds nowadays! On 25 October, the latest figures of inflation in Singapore in September 2022 clocked in at an annual rate of 5.3% for Core Inflation, and 7.5% for Headline Inflation (without Accommodation Costs and Private Transport Costs). Fortunately, Health Care inflation was only 2.8% as reported. However, it has to be said that that 2.8% inflation figure for Health Care seems a little out of place, especially against the experience of rising MediShield Life and Integrated Shield Plan premiums over the past year, and rising costs (not to mention waiting times) to see a doctor and get warded. We need higher healthcare cost inflation now like we need a shot in the arm! So, how high is healthcare cost inflation today?
The last thing we need today!
How much weight does healthcare inflation have on overall inflation in Singapore?
Let’s start by looking at how much healthcare inflation influences the overall level of inflation in Singapore. The chart below puts the weightage of healthcare inflation at 6.55% in headline inflation. If we consider only core inflation, then the weight will be higher, around 9.95%. So, healthcare costs seem to be a pretty significant portion of core inflation, and it also appears to be one of the components keeping core inflation low.
Weight of Consumer Price Index Components
But does this match with reality? Previously we looked at the components of spending, both for working age households and retired households (here), and shown below:
Key components of household spending before and after retirement
Healthcare and health insurance are clearly account for a lot of the spending of elderly households in Singapore, and far higher (a total of 12% for working households and 17% for retired households) than what the weights assigned to this component in the Core Inflation statistic might be. Hence, healthcare cost inflation may be underrepresented in the overall Headline Inflation and Core Inflation figures.
The Core Inflation and Headline Inflation figures may under-represent the impact of healthcare cost inflation, as the proportion of our spending on healthcare, especially for older households, is higher than the weights assume.
But this only makes a significant difference only if healthcare cost inflation is high. The inflation figures released by SingStats in October 2022 show that healthcare costs only went up 2.8% from a year ago. So that doesn’t seem worrying. Or is it?
How high is the inflation of healthcare spending?
Let’s take a closer look at the healthcare cost inflation numbers, beyond the press release. We can see these numbers in the Excel data sheet that Singstats releases (here). Let’s put down the figures for Sep 2020, 2021 and 2022 to compare:
Consumer Price Index (CPI) of Healthcare Costs
|Category||Sep 2020||Sep 2021||Sep 2022||Inflation 20/21||Inflation 21/22|
|Medicines & Vitamins||97.67||99.20||101.34||1.57%||2.15%|
|GP Clinic Fees||75.88||72.22||93.44||-4.82%||29.38%|
The first line in the table above gives the overall CPI for healthcare costs as a whole, and we can see that over the last 2 years, the data indicates that inflation has been moderate, coming in a 1.76% for 2021 and 2.82% for 2022. But once we delve below the surface of these aggregate numbers, a very different picture can be seen.
For example, take a look at the costs of seeing a doctor, perhaps at a polyclinic, or a private GP. In 2022, the fees for such a visit have soared 9.72% for polyclinic visits and an astounding 29.38% for private GP visits! Not many of us may have needed to see a doctor in the past year (except perhaps for Covid-19), but those who have, and who have paid out of their own pockets or Medisave, would have been shocked at the rates of inflation. Which may explain why there is always the complaint that the Headline and Core Inflation figures do not paint an accurate picture of the actual lived experience on the ground, especially of the elderly in Singapore.
Strangely enough, Specialist Outpatient fees and Hospital fees seem to have been relatively benign over the past 2 years. However, the cost pressures here might have been suffered more by the insurers rather the man in the street.
While overall healthcare cost inflation is reported to be moderate, the cost of seeing a doctor at the polyclinic has gone up 9.7% in the past year alone, while the cost of seeing a private GP has gone up an astounding 29.4%!
What about healthcare insurance inflation?
A further takeaway from the SingStats figures on healthcare costs CPI is the rise in healthcare insurance premiums. While insurance premium inflation has been benign for 2022 so far, in 2021, we saw premiums rise by 6.28%. This has reflected the rise in MediShield Life premiums, of between 3% for the very young, to as much as 10% for the old. So while the premium inflation figure of 6.28% for last year may look mild, it disguises the fact that the sharpest increases have fallen on the oldest and poorest members of society.
But that is not all, or the end of it! Recall that back in 2020, the Ministry of Health announced the increase in MediShield Life premiums by between 11% (for the very young) to 35% for the elderly. So the 6.28% insurance premium increase in 2021 has been only the first leg of this increase. Come next year, in 2023, we will see another sharp increase of between 10% to 20% to bring it up to the announced levels. Once again, the highest increases will fall on the elderly and least well off members of society. And while subsidies will be given, these subsidies only help alleviate the dollar amount or level of the premiums, but do not do anything about the rate of the increase of the premiums. That is, everybody, without exception, will be hit with the increases in MediShield Life premiums.
Revised MediShield Life Premiums announced in 2020
And even with the looming 10% to 20% increase in MediShield Life premiums next year, coming after a 3% to 10% increase in 2021, Singaporeans will still have another shock in store this year. The inflation data for Sep 2022 may have come in a little too early, but Integrated Plans, of which some two-thirds of Singaporeans hold, will see a 5% to 20% increase in premiums in 2022 (see here and here). Hang on, didn’t the Life Insurance Association announce that insurers will be freezing their Integrated Plan premiums between 2 Sep 2022 and 31 Aug 2024?
Unfortunately, this is where reading the fine print comes in handy. The Life Insurance Association’s statement goes “Insurers will not change premiums for IPs until Aug 31, 2024, but this does not apply to premium increases for IPs announced before Friday, or riders“. So the premium increases announced in Aug 2022 will still go ahead, come hell or high water! And who knows, maybe in Sep 2024, we’ll see another round of premium hikes for Integrated Plans again!
MediShield Life premiums have gone up between 3% to 10% in 2021, and will go up by another 10% to 20% in 2023. In between that, Integrated Plan premiums will rise between 5% to 20% in 2022 despite record profits for the insurers in the past 2 years!
Conclusions: There is no respite from rising healthcare costs
As Mark Twain says:
There are lies, damn lies, and statistics.
Inflation statistics may be one category of statistics which fit this to a tee. While our inflation numbers may show that prices are still rising at a manageable rate, our lived experiences tell us differently. And nowhere is this more true than in healthcare cost inflation, because the rise in healthcare costs is the mildest for the young, whose numbers are large, and for whom spending on healthcare is small. On the other hand, healthcare costs are rising fastest for the elderly, who are less well off, and for whom spending on healthcare takes up a large portion of their meagre budgets.
So while our inflation statistic tell us that healthcare costs have only risen 2.8% in the last 12 months, deeper dive into the numbers and data show us that:
- The Core Inflation and Headline Inflation figures may under-represent the impact of healthcare cost inflation, as the proportion of our spending on healthcare, especially for older households, is higher than the weights assume.
- While overall healthcare cost inflation is reported to be moderate, the cost of seeing a doctor at the polyclinic has gone up 9.7% in the past year alone, while the cost of seeing a private GP has gone up an astounding 29.4%!
- MediShield Life premiums have gone up between 3% to 10% in 2021, and will go up by another 10% to 20% in 2023. In between that, Integrated Plan premiums will rise between 5% to 20% in 2022 despite record profits for the insurers in the past 2 years!
So now it is the time to tighten our belts! Since healthcare cost inflation is purely domestic, and to a large extent supply-side driven, there is little that our economic policies, which focus on imported inflation and demand-side driven inflation, can do about it. It will be costly ride to keep ourselves healthy in the next couple of years!
You may also find our other posts on healthcare costs of interest:
- The Hidden Cost Of Retirement: Healthcare
- Greedy doctors, overpaid agents, or kiasu patients? What is wrong with Integrated Plans?
- Greedy doctors, overpaid agents, or kiasu patients? A few clarifications
- Integrated Plan Insurers are Profitable Again! How did they do it, and what it means for Policyholders