Medical inflation to rise 9.3% in 2020

Singapore’s demand for health care services continues to outstrip supply.

The cost of employer-sponsored health care benefits in Singapore is expected to rise by 9.3% by 2020 and outpace the Asia Pacific region’s average of 7.1%, according to a survey of medical insurers by Willis Towers Watson.

Medical inflation is projected to rise far ahead of the core inflation figure projected at 1.9% by the Monetary Authority of Singapore (MAS). “The demand for health care services continues to outstrip supply, and there is an indication that inefficient administrative procedures exist, which aggravate costs further,” Willis Towers Watson said.

The Singapore government has reviewed the level of subsidies granted to lower- and middle-income groups, but Willis Towers Watson argued that more education and critical health care cost management is necessary, especially on preventive health care and individual habits.

“Some chronic diseases and medical conditions are being seen in younger people. These require early intervention, which pushes up medical expenses. Medical advances also increase cost, especially when Singapore is often where such newer solutions are introduced,” it said.

In the Asia Pacific, over one-third (35%) of the insurers expect that medical cost will continue to rise in the next three years.

When asked for the most significant cost-driving factors based on employee and provider behaviour, almost nine in 10 respondents (86%) cited the overuse of care by medical practitioners recommending too many services as the leading driver.

At the same time 67% saw insured members overusing care which placed this as the second condition that pushed up costs. When asked about external factors (out of the control of both employees and providers), the high cost of new medical technology (71%), followed by providers’ profit motives (52%) once again emerged as the top two leading drivers of medical costs. Both figures represent an increase from last year (60% and 37% respectively).

Willis Towers Watson also found that cancer (86%) and cardiovascular diseases (48%) will remain the top two conditions by cost and are expected to remain so in the near future. In addition, 60% of insurers are seeing an increase in incidences of gastrointestinal disorders.

Mental health conditions are expected to become some of the most significant cost factors over the next five years. Two-thirds (66%) of insurers expect that behavioural and mental health conditions will become one of the most costly medical conditions and form the bulk of medical expenses other than hospital and inpatient care in the next five years.

Whilst many insurers in Asia Pacific expect mental health disorders to become more prevalent in the next three years, about 50% are currently excluding them from standard medical insurance policy.