In 1984, Richard Rahn and I wrote an editorial in the Wall Street Journal in which we proposed a savings account for health care. We called it a Medical IRA. That same year, Singapore instituted a related idea: a system of compulsory Medisave accounts. Through the years, my colleagues and I at the National Center for Policy Analysis have kept track of the Singapore experience, including publishing a general study of Singapore’s social welfare system in 1995 and a study of its health care system in 1996.
It’s taken about almost three decades, but all of a sudden Singapore has come to the attention of a lot of other policy wonks, including a book by Brookings, a whole slew of posts by Austin Frakt and Aaron Carroll, a good overview by Tyler Cowen, and lots of links in all of this to other studies and comments.
Before commenting on the commenters, let me jump to the bottom line, which was completely missed by Austin and Aaron, as well as some others: No, Singapore does not have a free market for health care. What it does have is an alternative to the European/American welfare state, in which private saving and private insurance do what employers and governments do in other countries. The Singapore philosophy is:
If the United States adopted a similar approach to public policy, there would be no deficit problem in this country.
How the system works. In Singapore, people are required to save for health care, retirement income, and other needs. They can use their forced saving to purchase a home, pay education expenses, and purchase life insurance and disability insurance. For individuals up to age 50, the required saving rate is 36% of income (nominally divided: 20% from the employee and 16% from the employer). Of this amount, 7 percentage points is for health care and is deposited in a separate Medisave account. Individuals are also automatically enrolled in catastrophic health insurance with a deductible of about US $1,172, although they can opt out. When a Medisave account balance reaches about US $34,100 (an amount equal to a little less than half of the median family income) any excess funds are rolled over into another account and may be used for non-health care purposes.
Some hits and misses by the commenters:
[Cross-posted at John Goodman's Health Policy Blog]