IN AN EFFORT to build a fair and inclusive society, this year’s Budget has increased social protection for the elderly, low-income families and people with disabilities. This is a move in the right direction. Notably, healthcare has received a boost, with annual spending to double to about $8 billion over the next five years. This will see the number of beds in acute hospitals rise by about 30% and the capacity of long-term care services doubled. The government is also raising coverage of Medishield, the national insurance scheme for serious illnesses and prolonged hospitalisation, from age 85 to 90.
However, a broad swathe of Singapore is smarting from aggressive growth policies that have contributed to a growing chasm between the bottom strata of its society and the well-off. At the same time, its population is grappling with the rising cost of ageing. While the government is making a greater effort at redistribution, the moves so far are modest for a country with among the highest official reserves on a per capita basis in the developed world. Here is a closer look at two new enhancements to the social safety net.
Medisave top-ups. Two top-ups were announced to Medisave, the medical savings scheme run by the Central Provident Fund. The first is a one-off top-up for all Singaporeans on Medishield. This ranges from $50 to $400 and is designed to help meet the higher premiums that come with expanding insurance coverage to age 90. The second is part of the new Goods and Services Tax (GST) Voucher scheme. This puts an extra $150 to $450 annually into the Medisave accounts of less well-off Singaporeans aged above 65, depending on the value of their homes and how old they are.
While welcomed, the reality is that these distributions do very little to help ageing Singaporeans meet their rising healthcare costs. Let’s not talk about serious diseases such as cancer. A couple of visits to the doctor for ailments that the elderly are prone to, such as high blood pressure, or an accidental fall, could result in medical and drug bills that would wipe out these Medisave top-ups.
Compared with other developed Asian countries such as South Korea and Taiwan, out-of-pocket expenditure on healthcare by patients in Singapore is much higher. As our society ages, it is the government, rather than the individual, that is better positioned to reap the benefits of risk-pooling in healthcare. Moreover, many Singaporean women may not have enough in their Medisave for old age. On balance, women tend to earn less than men and at retirement, have less than half of the CPF savings that men have, according to a study by AWARE, a gender equality advocacy group, and the Tsao Foundation for Successful Ageing.
GST Vouchers. The government has introduced a permanent scheme to help low-income Singaporeans with the GST. This is an improvement over the temporary offset credits that were given when the GST was hiked from 5% to 7% in 2007. Those GST Credits expired last year. The new GST Vouchers have three components: a cash payout for those whose incomes fall in the bottom 40%, and who live in HDB flats or the bottom 15% of private properties; a Medisave topup (as mentioned above); and a USave rebate to help ease utility bills for those in HDB flats.
The GST Vouchers are a big part of the government’s redistribution efforts. For FY2012, they form almost half of its budgeted outlay for Special Transfers (excluding top-ups to endowment and trust funds). However, many people in the middle-income bracket do not qualify for these vouchers and the GST remains a regressive tax on them.
More than that, the government’s Special Transfers have so far not gone very far in addressing Singapore’s inequality problem. The GINI coefficient, a standard measure of inequality, has climbed steadily over the last decade (see Chart 1). However, even after government benefits and transfers, the adjusted GINI number only went down by about 0.02 points. In Organisation for Economic Co-operation and Development countries, where welfare programmes are much more generous, such transfers lowered the GINI number by a full 0.16 points in the mid-2000s, according to analysis by Citi Investment Research (see Chart 2).
The Singapore government is careful not to overspend. This year, it is working towards a budget surplus of $1.27 billion. However, maintaining a small government means a continued reliance on market forces to allocate resources as well as risks, and sometimes, those risks end up with individuals who are not best equipped to cope with them. Without doubt, individual responsibility should remain a central pillar of Singapore’s socio-economic fabric.
But there is a case for further loosening the purse strings and spending that money optimally, so that as many Singaporeans as possible get the help that they need.
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