Financing Long‐Term Services and Supports: Ideas From Singapore

Original Investigation

Financing Long-Term Services and Supports:

Ideas From Singapore

WAN CHEN KANG GRAHAM and MARCEL BILGER

Duke-NUS Medical School, Singapore

Policy Points:

In Singapore, long-term services and supports (LTSS) are financed

through a mix of public and private sources comprising tiered means-

tested public subsidies and government grants to care providers, chari-

table donations, voluntary long-term care insurance, and other private

resources.

Singapore’s high take-up rate of voluntary long-term care insurance

is explained by plans offering partial coverage, medical underwriting,

early automatic enrollment, direct debit of insurance premiums, and

defined cash benefits.

Singapore’s experience in long-term care financing is relevant to the

US debate, as it provides policy ideas that may be transferable to the

American context.

We recommend maximizing the population’s total contribution to vol-

untary long-term care insurance by striking the right balance between

coverage adequacy and take-up rate while targeting subsidies to low-

income individuals.

Context: Financing long-term services and supports (LTSS) for the elderly

is a pressing issue in the United States with reforms of long-term care in-

surance (LTCI) presently being explored. Singapore, with 65% of residents

aged 40 to 83 covered by basic LTCI, including 22% with supplementary

LTCI plans, has the highest voluntary LTCI rate in the world. This arti-

cle contributes to the discourse by presenting the case of LTSS financing in

Singapore.

The Milbank Quarterly, Vol. 95, No. 2, 2017 (pp. 358-407)

 2017 Milbank Memorial Fund. Published by Wiley Periodicals Inc.

This is an open access article under the terms of the Creative Commons Attribution

License, which permits use, distribution and reproduction in any medium, provided the

original work is properly cited.

358

Financing Long-Term Services and Supports: Ideas From Singapore 359

Methods: We first reviewed Singapore’s LTSS policies through a comprehen-

sive search of academic papers, governmental reports, parliamentary debate

transcripts, print media, and official websites of LTSS providers. We then es-

timated the LTSS financing mix, conducted an in-depth analysis of the main

policies, and illustrated the financial protection they procure for the elderly

using realistic hypothetical scenarios.

Findings: The main principles governing Singapore’s LTSS policies are shared

responsibility for long-term care financing, targeted assistance for the poor,

centralized governance and administration, separation from other income and

housing policies, and limited intergenerational cross-subsidizing. We estimate

the financing mix to consist of out-of-pocket spending (40%), government

spending (42%), long-term care insurance (9%), and charitable donations (9%).

Assuming a monthly LTSS bill of US$1,545 to US$2,575, between 11% and

19% of LTSS expense is offset by LTCI for severely disabled individuals with

basic coverage. Overall, 63% of care recipients are eligible for public subsidies

that amount to 20% to 80% of their expenses.

Conclusions: The high take-up of voluntary LTCI in Singapore is explained by

the high prevalence of plans offering partial coverage, medical underwriting,

early automatic enrollment, direct debit of insurance premiums, and defined

cash benefits. We recommend setting the coverage of voluntary long-term care

insurance plans at levels that maximize the population’s total contribution by

striking the right balance between coverage adequacy and take-up rate while

targeting subsidies to low-income individuals.

Keywords: long-term services and support, long-term care financing, long-

term care insurance, aging.

inancing long-term services and supports (LTSS) for

older American adults is a pressing policy issue, whose specific

challenges are well known and described in detail elsewhere.

1-7

In summary, the demand for LTSS is projected to rise dramatically

with the aging of the baby boomers, but the availability of informal

care is expected to decrease owing to smaller family size and females’

greater participation in the labor force. The problem is that most Amer-

icans are financially ill prepared to pay for expensive formal long-term

care. Two-thirds of Americans aged 40 and over have not set aside any

funds for LTSS.

One of the key policy challenges is to encourage more

Americans to obtain financial protection through savings or insurance

ahead of time, instead of depending on Medicaid-funded LTSS after

spending down their assets in old age. Elderly Americans, who make up

360 W.C.K. Graham and M. Bilger

just 10% of Medicaid beneficiaries, already account for roughly 20% of

total Medicaid spending (US$438 billion in FY2013).

It is expected

that the rising number of old-old Americans (85 years and older) will

drive the growth of Medicaid spending on LTSS at an annual rate of 6%

per year between 2012 and 2021.

In contrast, the market for private

long-term care insurance (LTCI) in the United States is languishing,

with the number of insurers selling appreciable numbers of LTCI poli-

cies having shrunk from 102 in 2002 to 11 today.

11,12

More than 4

decades after the launch of LTCI in the United States, only 8.1 million

Americans have coverage.

Besides France and the United States, Singapore is one of the few

countries that employ a combination of tax revenue and voluntary long-

term care insurance for long-term care financing.

1,5,14

Singapore stands

out because at 65% (among individuals aged 40 to 83),

it has the

highest voluntary LTCI rates in the world. In comparison, enrollment

rates for people aged 40 years and older are 5% and 15% for the United

States and France, respectively.

Even though the United States and Singapore differ i n size, culture,

and political system, the two countries do share key common character-

istics. While Singapore is often called a nanny state, its social policies

are founded on the principle of individual responsibility or self-reliance,

one of the United States’ core values. Both countries also favor regulated

market solutions and consumer choice. As such, Singapore’s experience

in long-term care financing is relevant to the US debate, as it provides

policy ideas that may be transferable to the American context.

The issue of how best to help elderly citizens pay for LTSS has preoccu-

pied Singaporean policymakers since the early 1980s, as Singapore is one

of the fastest-aging countries in the world.

17,18

By 2050, 38% of the pop-

ulation is expected to be over 60 years old, and there will be 2 working-

age adults to every retiree.

Against the backdrop of persistently low

rates of national fertility,

the steadily rising level of females’ partici-

pation in the labor force,

and increasing longevity—life expectancy at

age 65 is 18.9 and 22.1 years for males and females, respectively

—

Singapore’s demand for formal LTSS is expected to rise sharply.

Following the repeal of the Community Living Assistance Services

and Supports (CLASS) Act,

the US Senate Commission on Long-Term

Care was convened to identify alternative long-term care financing so-

lutions. It concluded that there are two potential options—generating

more private LTCI options or implementing social insurance—though

Financing Long-Term Services and Supports: Ideas From Singapore 361

without coming to a consensus on the best way forward.

In early 2016,

the Bipartisan Policy Commission (BPC) put out a report advocating

lower-cost private LTCI products with time-limited benefits that peo-

ple can purchase using retirement savings, without penalty. The BPC

also recommended encouraging employers to provide LTCI through the

workplace on an opt-out basis.

In efforts to further inform the debate

on LTSS financing in the United States, we offer here a comprehensive

description of Singapore’s long-term care financing policies, discuss po-

tential adaptations to fit the US context, and propose new ideas that

leverage the strengths of both systems.

Background

Overview of Long-Term Services and Supports in

Singapore

Singapore is a city-state located in Southeast Asia. In an area slightly

smaller than that of New York City, Singapore has a population of

5.5 million people. The resident population (3.9 million) comprises

ethnic Chinese (74.3%), Malays (13.4%), Indians (9.1%), and others

(3.2%).

22,25

Singapore’s economy is strong. In 2015, it ranked fourth in

gross domestic product (GDP) per capita internationally,

and its gov-

ernment finances are sound, with a long history of budget surpluses.

Singapore spends about 4.2% of its gross domestic product on health

care.

Health care financing is characterized by a multipayer system

that relies on individual health savings accounts (Medisave), mandatory

health insurance (MediShield Life), and general revenues used to reduce

the price of health care, especially for low-income residents. Singaporeans

who cannot afford the out-of-pocket component of health care can apply

for further public assistance (Medifund). This financing system based

on the 3Ms (Medisave, MediShield Life, and Medifund) is described in

detail elsewhere.

28-30

Eighty percent of inpatient care is delivered by government-

owned hospitals, and 20% of primary care is provided through its

polyclinics.

31,32

With the help of medical social workers, LTSS needs

usually are identified at the discharge planning stage of hospitalization

episodes. The range of LTSS available in Singapore is comparable to

that in the United States. These include home-based social and medical

care, community-based day activity centers for disabled elderly people

362 W.C.K. Graham and M. Bilger

with and without dementia, center-based integrated care for nursing

home–eligible elderly still living in their community, chronic sick hos-

pitals, and nursing homes. Hiring foreign domestic workers (FDWs)

to care for elderly relatives is a popular alternative.

Women from

neighboring countries are employed by Singaporean households as

live-in domestic helpers. In 2011, 12% of all retiree households em-

ployed FDWs.

In addition to performing household chores, trained

FDWs can assist the elderly in their activities of daily living (ADLs—

showering/bathing, dressing, feeding, toileting, transferring from chair

to bed or vice versa, and walking or moving on a level surface) and simple

maintenance exercises.

The quality of LTSS in Singapore is monitored by the Ministry of

Health, which recently drew up official quality standards in consultation

with the public.

36,37

These guidelines focus on ensuring clients’ safety,

preserving clients’ dignity, and providing meaningful client-centered

care by a trained staff. Amenities, however, are not regulated. Most

nursing homes in Singapore have open wards with 6 or 8 beds in each

large, well-ventilated room. Although instances of poor care or elder

abuse by FDWs and private nursing home care staff have been reported,

the true prevalence of ill treatment is unknown.

Official figures for total annual LTSS spending in Singapore are not

publicly available. Our calculations (Figure 1) show that LTSS expen-

diture on people aged 65 and over in 2015 comprised out-of-pocket

(OOP) spending (40%), government spending (42%), charitable do-

nations (9%), and LTCI (9%). In the United States, it is estimated

that the total LTSS expenditure for 2011 came from Medicare (35%),

Medicaid (31%), OOP spending (20%), private LTCI (6%), and other

sources (6%).

Shared Responsibility for Long-Term Care

Financing

The policy most emblematic of the individual responsibility principle is

that of mandatory savings through the Central Provident Fund (CPF).

Like 401(k)/403(b) plans in the United States, these savings belong

to the individual account owners without social redistribution. The

CPF system follows a life-cycle model in which Singapore residents

(citizens and permanent residents) accumulate savings in their prime to

be depleted in retirement. At the end of 2015, 75% of residents aged 25

Financing Long-Term Services and Supports: Ideas From Singapore 363

Figure 1. Estimated LTSS Financing Mix in Singapore, by Funding

Source

Out-of-pocket

40%

Means-tested

government

subsidies

26%

Government

subsidies to LTSS

providers

16%

Long-term

care insurance

Charitable

donations

Authors’ calculations based on projected and reported figures for 2015.

The composition of LTSS spending in 2015 was estimated using the

projected LTSS needs of elderly people (aged 65 and over with at least

one activity of daily living limitation needing human assistance) gener-

ated by a Singapore-specific long-term care system dynamics model.

We included estimated expenditures for home- and community-based

care, nursing home care, and care by foreign domestic workers. Using

estimated proportions of the elderly who are eligible for different levels

of means-tested government subsidies and estimated fees for LTSS, we

calculated the total out-of-pocket spending and the share of LTSS spend-

ing composed of means-tested government subsidies. With the latter

as the base, we estimated the relative sizes of charitable donations and

of government subventions to support the operation of LTSS providers.

Last, we calculated the share of LTSS spending paid for by long-term

care insurance using an estimated number of elderly claimants.

364 W.C.K. Graham and M. Bilger

to 55 years were active CPF members.

Depending on the members’ age,

12.5% to 37% of their total wages is mandatorily transferred into their

CPF accounts throughout their working lives. These savings are funneled

into 3 accounts: Ordinary, Special, and Medisave, on which their interest

is pegged to market interest rates, with guaranteed minimum rates of

2.5% for the Ordinary account and 4% for the Special and Medisave

accounts.

Limited preretirement withdrawals are allowed, without

penalty, to purchase housing, finance education, and pay medical bills.

On average, 60% of total preretirement withdrawals is for housing

consumption.

When individuals turn 55, their Ordinary and Special

accounts are combined to form Retirement accounts. Dedicated to health

care expenses, the Medisave accounts receive 8% to 10.5% of each

worker’s total wages. Funds in Medisave accounts can be used to pay for

inpatient care, for a small selection of ambulatory care services for chronic

diseases, and for health-related insurance within stipulated limits pegged

to public subsidy rates.

43,44

Singapore is a familialist society; that is, its social policies empha-

size the primary role of families in providing and financing long-term

care.

45-48

The government sends a clear signal that individuals should

seek help first from their immediate families by enabling family mem-

bers to pay one another’s hospitalization bills and health insurance pre-

miums using Medisave balances. One’s immediate family is defined as

one’s spouse, children, parents, and grandparents. In order to qualify,

grandparents must be residents of Singapore.

49,50

Under extraordinary

circumstances, Medisave can also be used to fund the hospitalization

expenses of extended family members such as in-laws, siblings, uncles,

aunts, nieces, and nephews.

Similarly, familial support plays a key

role in the United States. Forty percent of American adults are fam-

ily caregivers,

with 90% of community-dwelling seniors who need

long-term care receiving informal care from their spouses or children.

The American Association of Retired Persons (AARP) Public Policy

Institute estimates that the economic value of informal care provided by

families in 2013 (worth US$470 billion) exceeds that of total state and

federal Medicaid spending on health care and LTSS combined.

Community organizations form the second pillar of social support

in Singapore. In the early 1990s, the term “many helping hands”

was coined to describe the prominent role they play in helping the

disadvantaged. Under this communitarian approach, the government

strongly encourages and supports the charitable activities of voluntary

Financing Long-Term Services and Supports: Ideas From Singapore 365

welfare organizations (VWOs), racially organized self-help groups,

and religious groups.

55-57

Indeed, relative to government-operated

organizations, VWOs are believed to be better at providing services

and supports because their staff and volunteers are more dedicated to

and passionate about their work.

Targeted Assistance for the Poor

Just as the various Medicaid programs in the United States target aid to

those whose incomes are below thresholds based on the federal poverty

level, the Singapore welfare system is designed to target subsidies to the

truly indigent while discouraging dependency and moral hazard.

58,59

The welfare system provides assistance for long-term care financing pri-

marily through subsidies intended to lower out-of-pocket costs. Consis-

tent with the residual welfare model, the size of the subsidies is inversely

proportional to household i ncome. Monthly per capita household income

from work is used to determine both eligibility for aid and the amount

of that assistance. In households without income from work, an estimate

of the annual income that can be generated by renting out the household

residence is used instead. Separately, the Singapore government recog-

nizes that a cohort of residents born on or before December 31, 1949,

have not been able to accumulate sufficient CPF funds, owing to low

wages and a poorer economy in the country’s formative years.

Assis-

tance for the 450,000 members of this “Pioneer Generation” in the form

of top-ups to their Medisave accounts, premium support for the manda-

tory health insurance MediShield Life, subsidies for outpatient care and

medications, and cash assistance for disabled Pioneers with long-term

care needs is provided through earmarked funds.

These are all time-

limited measures, as the cohort will gradually age out of the system.

Centralized Governance and Administration

Due to Singapore’s relatively small size—it does not have a capital

and is not divided into states—its governance is highly centralized.

Instead, the country is divided into 15 towns, which are managed by

local municipalities called town councils.

Unlike states in the United

States, town councils are not expected to help fund LTSS for their resi-

dents. Instead, all important allocative decisions and policies related to

LTSS financing are made by the Ministries of Finance (MOF), Health

(MOH), and Social and Family Development (MSF). The MOF allocates

366 W.C.K. Graham and M. Bilger

government funds earmarked for LTSS, and the statutory boards report-

ing to MOH and MSF are responsible for determining eligibility and

disbursing subsidies.

Separation From Other Income and Housing

Policies

Singapore is a densely populated country with a well-developed,

wheelchair-accessible public transport system. As many as 80.4% of

resident households live in public housing—high-rise apartments built

by the Housing Development Board (HDB).The remainder live in pri-

vate apartments or landed property.

HDB apartments built since 1985

incorporate barrier-free designs. Older apartment buildings have been

retrofitted with features such as grab bars and antislip tiles in the bath-

rooms, ramps, and lifts that stop at every floor. HDB’s future plans are

to build “smart” homes equipped with remote sensing and alert systems

for the elderly.

Income and housing policies in Singapore are closely intertwined,

but not explicitly coordinated, with policies concerning long-term care

financing. Since large portions of CPF savings can be used to purchase

a home, 90.8% of Singapore resident households own their residential

property.

Then as property prices rise over time, one’s share of residen-

tial property as part of one’s total household assets rises correspondingly.

At the end of 2000, residential property represented 51% of total assets

for Singaporean households, compared with 28% in the United States.

Thus, many lower-income households in retirement are “asset rich and

cash poor.”

66,67

To rectify this situation, the government i ntroduced measures to cap

the amount of CPF savings that can be used for property financing and

to increase the amount of CPF savings—the retirement sum—that must

be set aside at age 55.

68,69

A lease buyback scheme (similar to reverse

mortgages) has been implemented to allow retirees to tap their housing

wealth while continuing to live in their properties.

70,71

The Housing

and Development Board also began building elder-friendly studio apart-

ments with 30-year leases and offering cash incentives to encourage older

people to “right-size” into smaller apartments, thereby unlocking home

equity in the process. While these measures help increase retirement

income, a portion of which may be used to pay for LTSS, none of them

addresses the issue of long-term care financing directly.

Financing Long-Term Services and Supports: Ideas From Singapore 367

Limited Government-Administered

Intergenerational Cross-Subsidizing

Under the current political climate, new social insurance programs are

unlikely to be created in the United States. Similarly, the Singapore gov-

ernment has also resisted adopting a social insurance–based financing

system. Specifically, it rejects the form of direct intergenerational cross-

subsidization inherent in pay-as-you-go (PAYG) pension systems. It is

not opposed, however, to using general revenues to subsidize LTSS use by

low-income residents. Thus, some degree of government-administered

intergenerational transfer exists. Even so, public subsidy is one of sev-

eral sources of LTSS financing in Singapore. The Singapore system also

relies on LTSS financing through private i ncome and savings, private

long-term care insurance (ElderShield), charitable donations, and infor-

mal intergenerational transfers within families. To limit the amount of

intergenerational transfer it administers, the government seeks to fi-

nance public subsidies using income generated from endowment and

trust funds whenever possible. It achieves this by setting aside budget

surpluses to create or top up such funds regularly. Although capital

endowments come from the current generation, such arrangements are

not strictly PAYG, as these funds will also benefit, in the future, those

individuals whose taxes helped to seed these endowments today.

The purpose of these schemes (Table 1) is to ensure that government

financing for LTSS is sustainable. Forecasting future long-term care

expenditure is, however, extremely challenging, given the multitude of

variables—disability rate, duration of disability, availability of informal

care, and cost of LTSS—for which good estimates are lacking. Whether

the government and individuals have set aside sufficient funds remains

to be seen.

Long-Term Care Financing Policies

in Singapore

Long-Term Care Insurance

The United States has had a long-term care insurance market since

1974.

A prototype LTCI policy that served as a template for

policies that are common today was described by Meiners in 1983.

comparison, LTCI is a relatively new financial instrument in Singapore.

368 W.C.K. Graham and M. Bilger

Table 1. Financing Schemes for Retirement, Health and Long-Term Care

in Singapore

a,b

Focus Program Description

Retirement CPF Ordinary

Account

Mandatory savings for housing,

insurance, investment, and

education

Proportion of wages saved decreases

progressively with age, from 23%

(ࣘ 35-year-olds) to 1%

(> 65-year-olds)

CPF Special

Account

Mandatory savings for old age and

investment in retirement-related

financial products

Proportion of wages saved decreases

progressively with age, from 6%

(ࣘ 35-year-olds) to 1%

(> 65-year-olds)

Health care

(3Ms)

Medisave

Mandatory savings to pay for

hospitalizations and approved

health-related insurance

Proportion of wages saved increases

progressively with age, from 8%

(ࣘ 35-year-olds) to 10.5%

(> 65-year-olds)

MediShield Life

Basic Mandatory health insurance

administered by CPF board

Supplemental Voluntary private health insurance to

augment MediShield Life

Medifund A government safety-net program to

help indigent patients with their

medical bills

Long-term care ElderShield

Basic

Voluntary long-term care insurance

with automatic enrollment feature

Default coverage: $400/month ×

72 months

Supplemental

Voluntary additional long-term

care insurance to augment Basic

coverage

Optional coverage $500 to $5,000/

month × from 10 years to lifetime

Continued

Financing Long-Term Services and Supports: Ideas From Singapore 369

Table 1. Continued

Focus Program Description

Medifund Silver A government safety-net program to

help indigent elderly patients with

their medical and long-term care

bills

IDAPE A government financial assistance

program for indigent elderly

people who were not eligible for

ElderShield

PioneerDAS A government financial assistance

program for disabled elderly

Singaporeans born on or before

December 31, 1949 (the Pioneer

Generation)

FDW Grant A government grant for low- and

middle-income families that need

to hire FDWs to help care for

disabled family members,

$120/month

FDW Levy

Concession

All families that need to hire FDWs

to help care for disabled family

members pay the concessionary

FDW levy of $60/year instead of

the full FDW levy of $265/year

Abbreviations: CPF, Central Provident Fund; IDAPE, Interim Disability Assistance Pro-

gram for the Elderly; PioneerDAS, Pioneer Generation Disability Assistance Scheme;

FDW, Foreign Domestic Worker.

Information obtained from the websites of the Central Provident Fund Board

(www.cpf.gov.sg) and the Ministry of Health (www.moh.gov.sg).

Dollar amounts are given in Singapore dollars. The exchange rate (1 SGD = 0.7356 USD)

is as published on the New York Times website on September 13, 2016.

ElderShield was developed in 2001 and implemented in 2002 after

the government concluded that financial protection against catastrophic

spending on severe disability, which is a low-probability, high-cost event,

is best provided through insurance.

Currently, among Singapore res-

idents aged 40 to 83, 65% are covered by basic ElderShield plans, and

22% have supplemental coverage.

The basic level of ElderShield cov-

erage pays a fixed cash benefit of S$400 (US$294) per month for 6 years,

regardless of the actual level of disability beyond the minimum level

370 W.C.K. Graham and M. Bilger

needed to qualify for a claim. Supplemental ElderShield plans are op-

tional add-ons that can be bought only by those already covered by the

basic ElderShield plan. These plans pay out higher monthly cash benefits,

ranging from S$500 (US$368) to S$5,000 (US$3,678) for longer peri-

ods, ranging from 6 years to life.

76-78

A 90-day waiting period between

claim submission and benefit payout applies to both types of LTCI plans.

Healthy Singapore citizens and permanent residents between the ages

of 40 and 65 without serious preexisting disability or serious chronic

medical conditions are eligible for basic ElderShield coverage. All resi-

dents with Medisave accounts are automatically enrolled into this default

plan when they turn 40. Health declaration forms that accompany the

enrollment notification packets help screen out individuals with severe

disabilities.

Exact figures for the prevalence of disability at different

ages are not available, but the official estimate places the disability

prevalence rate of the resident population at 3%.

New enrollees are randomly assigned to one of the 3 private, for-profit

insurers—NTUC Income, Great Eastern Life, or AVIVA—contracted to

the Singapore government to offer both basic and supplemental Elder-

Shield plans. This method of choosing vendors through competitive

bidding is similar to that used to implement the Federal Long-term

Care Insurance Program (FLTCIP).

These insurers in Singapore are

large, reputable companies that offer a wide range of insurance products

in addition to ElderShield.

82-84

Their contracts are subject to renewal

approximately every 5 years, at which time these insurers are required

to return excess premiums collected (relative to payout) to policyholders

in the form of premium rebates. While the set of terms and conditions

for basic ElderShield coverage is the same for all, these insurers have

considerable latitude in the design and marketing of their supplemental

plans, subject to regulation from the government.

As a result, en-

rollees can choose among different premium payment durations (fixed

or lifetime), different additional cash benefits (for dependents, for reha-

bilitation, and in the event of death), different claim criteria (2 instead

of 3 ADL limitations), and different payout periods (10 years, 12 years,

or lifetime).

New enrollees may opt out within 3 months of enrollment. When

ElderShield was launched in 2002, Medisave account holders aged 40

to 69 were automatically enrolled, and 33% of those enrolled in this

manner dropped out in the first year.

By 2006, the opt-out rate of

new enrollees had dropped to 14%.

Those who opt out may reenroll

Financing Long-Term Services and Supports: Ideas From Singapore 371

later, subject to underwriting. Enrollees may also switch insurers at any

time. There are no penalties for new enrollees if they switch within the

initial 90-day opt-out period. Those who switch later will be subject to

underwriting by the new insurer, and the premiums paid to the original

insurer will be forfeited.

Finally, policyholders may obtain basic and

supplemental coverage from different insurers. That is, they are free to

purchase supplemental plans from any of the 3 insurers at any time

before they turn 65, irrespective of their basic ElderShield insurer as-

signment. Insurers may contact new policyholders by phone directly or

through third-party marketers to sell their supplemental plans. These

plans conduct their initial risk screening through a short questionnaire.

This screen flags those applicants whose risk profiles warrant medical

examination. Rejection rates for supplemental plans are not published.

As long as they do not already have serious ADL limitations, automati-

cally enrolled individuals will retain basic ElderShield coverage even if

they have preexisting medical conditions.

In principle, all healthy 40-year-old residents without serious ADL

limitations have the same premiums when they are automatically en-

rolled in the default basic ElderShield plans. These premiums, which

were last adjusted in 2007, amount to S$175 (US$129) and S$218

(US$160) per year for males and females, respectively. Annual premi-

ums are payable until age 65. Residents who are not part of automatic

enrollment (ie, those without Medisave accounts) may apply for cover-

age on their own. Age- and risk-rated annual premiums for ElderShield

are determined at the time of enrollment. Premiums for supplemen-

tal plans range widely. For healthy 40-year-old males in 2016, annual

premiums ranged from S$217 (US$160) to S$3,134 (US$2,305). These

premium levels correspond to lifetime cash benefits of S$500 (US$368)

to S$5,000 (US$3,678) per month.

76,77

Medical underwriting applies to

supplemental plans. Those who enroll at older ages or have preexisting

medical conditions such as diabetes face higher premiums. Medisave

funds may be used to pay ElderShield premiums, with an annual with-

drawal limit of S$600 (US$441) per enrollee.

Enrollees with insuf-

ficient Medisave funds may tap the Medisave accounts of immediate

family members or pay out of pocket. Annual premiums in excess of

S$600 (US$441) must be paid out of pocket.

Since ElderShield is not tied to employment, coverage is maintained

regardless of the policyholders’ employment status, although coverage

can be lost if the premiums are not paid. Policyholders are granted a

372 W.C.K. Graham and M. Bilger

75-day grace period from the premium due date, after which the policies

lapse. However, policyholders may apply for reinstatement of coverage

within 180 days after the end of the grace period. A nonforfeiture clause

in more comprehensive supplemental plans allows policyholders who

have paid a stipulated minimum number of premiums to claim prorated

benefits instead of losing coverage altogether if they are unable to con-

tinue paying premiums.

Data on the prevalence of lapsed ElderShield

plans are not available.

Similar to the United States, Singapore’s regulations allow for the

amendment of premium and benefit levels of active policies, although

the phenomenon of rapidly rising premium rates has not been observed.

In fact, premium rebates have been issued twice in the past 14 years.

El-

derShield plans, both basic and supplemental, do not have cash-surrender

value. Unlike the United States, none of the LTCI policies offered in Sin-

gapore provides inflation protection.

Because people with serious preexisting ADL limitations and those

aged 70 and older in 2002 were ineligible for ElderShield at its launch,

the government created a parallel cash subsidy program, the Interim

Disability Assistance Programme for the Elderly (IDAPE), to ensure

that they also would have access to benefits. IDAPE benefits are subject

to the same disability requirements as ElderShield and are means tested.

Eligible individuals receive between S$100 and S$250 (US$74 and

US$184) per month for a maximum of 6 years.

ElderShield enrollees may claim benefits at any age after enrollment.

Benefits for basic ElderShield plans are payable when people are un-

able to perform 3 out of 6 basic activities of daily living (ADLs), as

determined by MOH-accredited physicians.

92,93

Simulations performed

using a Singapore-specific long-term care system dynamics model

pro-

jected that in 2015, 3% of people over 65 had 3 or more ADL limitations

requiring human assistance. Assessment for eligibility also takes into ac-

count the claimant’s cognitive status. Individuals with cognitive deficits

(eg, dementia) are graded as dependent even when they are physically

capable of ADLs.

There are no restrictions on how the cash benefits

are used. ElderShield claimants are not required to comply with any

stipulated care plans or seek care from “approved” providers.

One important difference between the two countries’ LTCI policies

is the types of benefits. Most American LTCI policies offer service

benefits, while ElderShield plans offer only defined cash benefits.

95,96

In the United States, only a few insurers offer the option of claiming

Financing Long-Term Services and Supports: Ideas From Singapore 373

LTCI benefits in cash. When they do, the amount of cash that can be

disbursed is based on the value of the original service benefit that can

be claimed. Usually, only a fraction of the service benefit allowance can

be received in cash.

Another major difference is one of expectations. In the United States,

LTCI is expected to cover most, if not all, of LTSS expenses. In contrast,

basic ElderShield coverage is meant only to help defray the cost of paying

for formal long-term care. Singaporeans who can afford it have the option

of purchasing higher levels of coverage with benefits large enough to

cover most of their expected LTSS expenses, but a high level of coverage

is not the default. This reflects not only the government’s aims of making

the default option affordable and promoting a high uptake of LTCI but

also a concern of not nudging individuals into a plan that might be

deemed excessive by those who are able to rely on informal care or other

financial resources.

The ElderShield LTCI scheme as described is currently undergoing

a major review following the rollout of mandatory MediShield Life,

an enhanced version of the preexisting and nonmandatory catastrophic

health insurance MediShield.

Subsidies Through Public Funds

While public assistance for LTSS in the United States is administered

mostly through Medicaid programs, public funding streams for long-

term care financing in Singapore flow in 3 ways: grants to lower operating

costs of VWOs, reimbursements paid to service providers for the care of

subsidized patients (hereafter referred to as means-tested subsidies), and

other subsidies disbursed directly to LTSS recipients.

Grants to VWOs can fund up to 50% of their operating costs and

up to 100% of their capital costs.

In order to quickly ramp up the

provision of nursing home care, the government rolled out the Build-

Own-Lease program in 2012.

Under this scheme, the government

bears the full capital cost of setting up nursing homes. These facilities

are built and owned by the government but are leased out for operation

by VWOs or private companies.

By lowering the LTSS providers’

costs, the government is indirectly lowering the out-of-pocket costs to

care recipients.

Means-tested subsidies are another avenue of public funding for long-

term care. Even when services are provided by VWOs, recipients are

374 W.C.K. Graham and M. Bilger

expected to pay service fees. Subsidized LTSS recipients pay a fraction

of the full-fee price of care, while the government reimburses LTSS

providers the remainder. In other words, the out-of-pocket expenditure

for someone receiving LTSS from a VWO is equal to the portion of the bill

that remains after the government grants and means-tested government

subsidy have been applied. Because the subsidies are calculated based

on a universal set of standard prices (also called “norm costs”) for LTSS,

subsidy sizes are uniform for recipients within each subsidy level. In

order to meet the demand for LTSS, the government is making such

subsidies increasingly “portable” so that private LTSS providers can be

reimbursed in the same manner for a subset of their clients.

Means testing is carried out at the household level. Specifically, it

is based on the monthly per capita household income (MPCHI), or

the income from work of all the care recipient’s immediate and dis-

tant relatives living at the same address. In principle, all those living in

households with an MPCHI of S$2,600 (US$1,913) or below are eligible

for some level of public subsidy. To put things in context, households

with an MPCHI of S$650 (US$478) or lower are eligible for urgent

public assistance.

100

Using this as the de facto poverty line—an official

one does not exist—public subsidies are available for households whose

MPCHI is up to 4 times the poverty line. Given that the median MPCHI

is S$2,500 (US$1,839),

101

roughly half of Singapore’s resident house-

holds are eligible for subsidized care. Families applying for additional

public assistance are subject to family-level means testing, in which case

the incomes of non-co-resident family members are also included.

102

Household-level means testing is in line with Singapore’s governing

principle of relying on families first, as retirees living with economically

successful relatives tend to receive smaller public subsidies than do re-

tirees who live on their own or with less well-off relatives. Since roughly

two-thirds of elderly Singaporeans co-reside with their children,

103

substantial number of retirees are affected by such means testing. Adult

children who live apart from their elderly parents are not completely free

of responsibilities. Singapore’s filial responsibility law, the Maintenance

of Parents Act,

104

allows parents to sue adult children for maintenance,

even though few do.

105

Public subsidy levels are inversely proportional to the MPCHI. Singa-

pore citizens receive higher rates of subsidies than permanent residents

do. The levels of subsidy for citizens range from 30% to 80% for

HCBS and from 20% to 75% for nursing homes. (Corresponding

Financing Long-Term Services and Supports: Ideas From Singapore 375

subsidy levels for permanent residents are 15% to 55% and 10% to

50%, respectively.

106

) Thus, recipients with an MPCHI of S$1,801

(US$1,325) to S$2,600 (US$1,913) bear 70% to 85% of the full-fee

prices of care, whereas those with an MPCHI below S$701 (US$516)

bear 20% to 45%. Based on data from the General Household Survey

of 2015

and the Families and Households Report for 2010-2014,

107

we estimated that 63% of community-dwelling Singaporeans aged 65

years and over are eligible for subsidized LTSS and that 26% of them

qualify for the highest level of subsidy. Medifund Silver, a safety-net

program of last resort, is available for those who cannot afford the post-

subsidy expenses.

108

In addition, the Seniors’ Mobility and Enabling

Fund (SMF) provides subsidies for assistive devices, home health care

consumables such as feeding tubes and diapers, and transportation to

day service centers.

109

The third way that public funds are used to finance LTSS is by making

grants directly to care recipients. Specifically, the government hands out

cash (S$120 per month, US$88) to households that choose to hire FDWs.

This FDW grant offsets approximately one-tenth of the monthly FDW

expense. It is means tested, and the care recipient has to have at least 3

ADL limitations as determined by standardized medical assessment.

110

In addition, the government also uses tax expenditure to lower the

cost of hiring FDWs. The tax for employing an FDW (termed the

“monthly FDW levy”) is less than a third of the usual rate (S$60 instead

of S$265 per month, US$44 instead of US$195).

111

Most recently,

the government launched the Pioneer Generation Disability Assistance

Scheme (PioneerDAS), which provides an additional S$100 (US$74) per

month to senior citizens with 3 or more ADL limitations to help defray

LTSS costs.

112

Charitable Donations

In the United States, the majority of long-term care providers are for-

profit.

113

The opposite is true in Singapore, where most social welfare

services, including LTSS, are provided by VWOs.

114

At last count, there

were a total of 2,217 registered VWOs.

115

Ninety-one of those reg-

istered under the Social and Welfare sector are identified as providers

of elder care services (homemaking, home personal care, meal delivery,

center-based day care), and 30 of those registered under the Health

sector are listed as providers of institutional care (nursing homes and

376 W.C.K. Graham and M. Bilger

chronic sick hospitals), home medical services, and day rehabilitation.

116

Approximately two-thirds of the 12,000 nursing-home beds in Singa-

pore are managed by VWOs.

117

Many of these VWOs are religion

based, but others were started by secular communities or through pri-

vate philanthropy.

115

Some VWOs are large and operate throughout the island, whereas

others are small and serve specific communities near their facilities.

There is a competitive market for home and community-based services

(HCBS), as recipients may select from a number of providers located near

their homes and switch providers at will. Nursing home beds, however,

are in short supply. Most beds in VWO-operated nursing homes are

subsidized and are almost fully occupied. Recipients who are not eligible

for public subsidies or who are unable to wait for bed openings tend to

use private nursing homes. Although nursing homes and other LTSS

providers are regularly audited by the MOH, detailed objective quality

ratings such as those presented on Medicare’s Nursing Home Compare

website

118

are not publicly available. The government helps maintain

service quality by equipping VWOs with “best practice” operational

guidelines

119

and encouraging their adherence to those models through

licensing requirements, training, and performance-based funding.

114,120

VWOs are expected to raise funds to augment their income from

government grants and service fees. Those VWOs that are better at

attracting donations have larger operating budgets and can, at their

own discretion, use their income to further lower the price of LTSS for

some or all of the senior citizens under their care. We estimate that

9% of total LTSS spending in 2015 came from charitable donations (see

Figure 1).

Singapore’s LTSS Financing Policies

at Work

We now illustrate the mechanisms by which these financing policies

help offset LTSS out-of-pocket expenditure for 6 simplified hypothet-

ical recipients (Table 2). These cases were generated using 2 levels of

disability (mild: 1 to 2 ADL limitations; and severe: 3 or more ADL

limitations) and 3 levels of informal care availability (full time: a healthy

retired spouse; limited: a working child; and none: recipient lives alone).

For example, a person suffering from weakness on one entire side of the

Financing Long-Term Services and Supports: Ideas From Singapore 377

Table 2. Estimated Monthly LTSS Expense (Full, Unsubsidized Fee) by Level of Disability and Availability of Informal Care

Quantity of LTSS Recommended per Month

(Unit Fee)

Hypothetical Long-Term

Care Recipients,

Home

Medical

Home

Nursing

Home Oc-

cupational

Therapy

Home

Physical

Therapy

Home

Personal

Care

Meal

Delivery Transport

Senior Day Care

Regular

Intensive

(Regular Full Day:

S$55/day;

Estimated Average

Monthly LTSS

Expense

in SGD

Level of Disability and

Level of Informal Care

(S$183/

session)

(S$79/

session)

(S$113/

session)

(S$113/

session)

(S$26/

hour)

(S$5/

meal)

(S$45/2-way

trip)

Intensive Full

Day: S$70/day)

(1 SGD = 0.7356

USD

)

I 1-2 ADL limitations,

helped by healthy retired

spouse

n/a n/a 4 4 16 12 n/a n/a $1,378

II 1-2 ADL limitations,

helped by full-time

working child

n/a n/a n/a n/a n/a n/a 20 Regular: 20 days/

month

$2,000

III 1-2 ADL limitations, no

informal care available

n/a 1 n/a n/a n/a 36 20 Regular: 20 days/

month

$2,266

IV 3+ ADL limitations,

helped by healthy retired

spouse

1 2 4 4 36 56 n/a n/a $2,468

V3+ ADL limitations,

helped by full-time

working child

1 2 n/a n/a n/a n/a 20 Intensive: 20 days/

month

$2,641

VI 3+ ADL limitations,

informal care available

VWO-operated

: low -

high

n/a n/a n/a n/a n/a n/a n/a n/a $2,100 - $3,500

Private

: low - high n/a n/a n/a n/a n/a n/a n/a n/a $3,500 - $8,300

Continued

378 W.C.K. Graham and M. Bilger

Table 2. Continued

The estimates were generated from multiple sources. For home care, we relied on an anonymous survey of home care providers. Representatives of both

VWOs and private providers were surveyed. The s urvey was approved b y the IRB of the National University of Singapore. We mailed the questionnaire to 8

providers that the Agency of Integrated Care identified as able to offer a comprehensive range of home care services. The questionnaire contained vignettes

describing two 75-year-old female care recipients with chronic right-sided weakness, one with 2 ADL limitations, and the other with 5 ADL limitations.

For each disability level, 3 possible informal care availability levels were described: high (helped by 77-year-old healthy, retired husband), moderate (helped

by 50-year-old unmarried daughter who works full time), and low (recipient lives alone). We assumed that severely disabled recipients who live alone would

require nursing home care and omitted that vignette from the survey. We asked respondents to indicate the types and quantity of home care services that

they would recommend in each of the 5 remaining vignettes. Respondents were specifically asked to assume that an FDW would not be hired and to

make their best recommendations without regard to the recipients’ financial status. Respondents were also asked to provide the unsubsidized full fees their

organizations would charge for the recommended services. Based on the responses, we were able to work out the recommended types, quantities, and average

unsubsidized fees of home care services for each vignette. Fees for day care and nursing home care were obtained through direct inquiry made to providers of

the respective services.

Typically, only the first 18 home-based therapy sessions are subsidized. Care recipients may appeal for more subsidized home-based sessions, pay full-fee for

home therapy, or transfer to subsidized center-based therapy.

Home Personal Care services include bathing, maintenance exercises, light housekeeping, meal preparation, grocery shopping, medical escort, and

companionship.

Regular senior day care refers to community-based supervision and support. Sociorecreational activities, maintenance therapy, and meals are provided.

Intensive senior day care refers to community-based care for bed- or wheelchair-bound nursing home–eligible individuals with high care needs.

To obtain the monthly totals, units of weekly services are multiplied by 4 and the corresponding unit fees. Similarly, units of daily services are mult iplied

by 20 and the corresponding unit fees.

All average and total fees are expressed in Singapore dollars. The exchange rate stated is as published on the New York Times website on September 13, 2016.

Expenditures are estimated based on the assumption that senior day care is not used when informal care availability is high.

People with severe cognitive impairment are eligible for ElderShield benefits and other subsidies directed at people with 3+ ADL limitations whether or

not they are actually physically impaired.

VWO-operated nursing homes serve primarily subsidy-eligible recipients. Shared accommodations consist of 2-,3-,4-,6-,8-,12-, or 24-bed non-air-

conditioned open wards.

Estimated expenditures include room and board, and recurring charges for consumables (eg, diapers and milk feeds), ambulance transport to medical

appointments, on-site medical care, and goods and services tax.

Estimated expenditures are for private nursing homes that are not part of the portable subsidy scheme. Shared accommodations consist of 1-,2-,3-,4-,5-, or

8-bed open wards. Rooms are generally air-conditioned except for the 8-bed open wards.

Financing Long-Term Services and Supports: Ideas From Singapore 379

body (hemiparesis) who needs only supervision or minimal assistance

with activities of daily living is considered mildly disabled and ineli-

gible for ElderShield, IDAPE, and PioneerDAS benefits. But a person

who is incontinent, is wheelchair dependent, and requires maximum

assistance for bathing and dressing is considered severely disabled and

is therefore eligible for insurance payouts and other benefits.

To estimate the magnitude of LTSS expenses for the recipients in these

hypothetical scenarios, we gathered the expert opinions of medical social

workers, rehabilitation therapists, and care managers currently working

for LTSS providers. Based on written descriptions of the hypothetical

scenarios and without making any assumptions about the recipients’

income, the experts were asked to list the types and quantities of LTSS

that they would recommend. They were also asked to provide, whenever

possible, the full f ee unit price (unsubsidized price) of each recommended

service. Because the sets of available services and the corresponding

eligibility criteria varied among HCBS providers, this exercise yielded a

range of LTSS arrangements for each scenario. We integrated the different

recommendations and created 6 plausible hypothetical care packages.

The average monthly LTSS expense for each package was estimated

using both expert-supplied and publicly available price lists.

121

The

types and quantities of LTSS recommended and the estimated monthly

full-fee expense are shown in Table 2. In the case of nursing home care

expense, the estimated monthly fee includes room and board, as it does

in the United States. LTSS fees are slightly lower in Singapore, where, for

example, the unsubsidized daily rate for senior day care ranges from S$55

to S$80 (US$40 to US$60), compared with the median rate of US$68

122

in the United States. As expected, LTSS expense is the lowest for people

with 1 to 2 ADL limitations who have ready access to informal care. The

expense then rises with increased disability and decreased availability of

informal care.

Based on these figures, we estimated the out-of-pocket LTSS expense

for 70-year-old females with 3 or more ADL limitations who are cur-

rently receiving services. In this analysis, we estimated the outcomes

for 3 types of ElderShield enrollees: those with basic, Medisave Supple-

mented, or Medisave and OOP Supplemented coverage. Those who do

nothing after being automatically enrolled will have basic coverage by

default. Those individuals who choose to direct the maximum allow-

able Medisave withdrawal amount (S$600 or US$441) to ElderShield

have Medisave Supplemented coverage. We assumed that they always

380 W.C.K. Graham and M. Bilger

allocate S$600 (US$441) of Medisave funds to buy as much coverage as

is possible f or their age at enrollment. A third group of people, com-

prising those who increase their premium level beyond the Medisave

withdrawal limit by topping it up with a proportion of their disposable

income at time of enrollment, have Medisave and OOP Supplemented

coverage. We assumed that the value of such cash top-ups is equivalent to

1% of the annual average per capita household income in 2007, which

amounts to S$256 (US$188).

123

In this simulation, we also assumed

that everyone enrolled in 2007, when supplementary plans first became

available.

Based on the assumptions laid out in Table 3, we then calculated the

cash benefits that can be claimed by each type of ElderShield enrollee.

Table 4 demonstrates the offsetting effects of subsidies and different

levels of ElderShield coverage on monthly OOP expenses as expressed in

Singapore dollars and as percentages of the full fees. As expected, higher

levels of ElderShield coverage correspond to lower OOP expenses for

recipients who are ineligible for subsidies. Subsidies alone reduce OOP

expense by up to 80% for eligible recipients without ElderShield cover-

age. In combination, the reduction in OOP expense can be substantial.

To illustrate, consider the recipients in scenario IV (see Table 4). The

OOP expense of people with basic coverage receiving a 30% subsidy is

nearly halved after both subsidies and ElderShield benefits are applied.

For the poorest people with basic coverage, the combination of an 80%

subsidy and ElderShield benefits brings OOP expenses down to just 3%

of the full fee.

Our calculations confirm that Singapore’s LTSS financing system is

designed primarily with the bottom half of the income distribution—

and especially the poor—in mind. The means-tested, tiered subsidy

system allows the majority of elderly Singaporeans to be eligible for

subsidies, and the low-cost basic ElderShield plan provides further fi-

nancial protection for eligible claimants. Elderly Singaporeans in the

upper half of the income distribution, however, bear the burden of LTSS

expenditure almost entirely on their own, through a combination of

ElderShield benefits, personal assets, and family support.

Even though the government’s official policy stance is one of self-

reliance and familial responsibility, public spending already constitutes

a substantial portion (42%) of total LTSS expenditure (see Figure 1).

With family size shrinking due to a persistently low fertility rate, the

Financing Long-Term Services and Supports: Ideas From Singapore 381

Table 3. Assumptions About Premiums and Benefits Used in Estimating

the Out-of-Pocket Expenses of 70-year-old Females

a,b,c

ElderShield

Basic

Medisave

Supplemented

Medisave and

OOP

Supplemented

Premium/year $1,156.39

$600

$856

Cumulated

premium

$5,796.95 $12,000 $17,120

Monthly cash

benefit

$400 $523 $653

Payout period 72 months Lifetime payout Lifetime payout

We assumed that all these females enrolled in ElderShield (basic or supplemented) plans

at age 61 in 2007.

All premiums and benefits are expressed in Singapore dollars. The exchange rate (1 SGD

= 0.7356 USD) is as published on the New York Times website on September 13, 2016.

Calculations are based on NTUC Income premium tables; benefit levels are proportional

to premiums paid and are prorated when the exact premium amounts do not appear on the

premium table. All plans are assumed to be fully prefunded.

OOP stands for the out-of-pocket portion of premiums of supplemented ElderShield

plans.

We modeled 61-year-old females who paid $1,156.39/year under an accelerated 5-year

schedule.

We modeled enrollees who met the maximum Medisave withdrawal limit for ElderShield

premiums. For this group, the annual premium is $600. According to the premium table,

these enrollees should make 20 annual premium payments.

We modeled enrollees who, in addition to meeting the Medisave withdrawal limit, further

topped up their premiums with OOP. OOP is assumed to be equal to 1% of the annual

average per capita household income in 2007 (OOP = $256). Thus for this group, the

annual premium is $856. According to the premium table, these enrollees should make

20 annual premium payments.

This is the total amount of insurance premium to be paid throughout the pay-in period.

number of people who can realistically rely on family members for

informal care and financial support will decline. Financing strategies

facilitated by the pooling and sharing of Medisave funds within families

will become less effective. As a result, the government is under pressure

to adopt alternative policies to cope with the upcoming rise in demand

for public assistance. The government’s principle of individual and fa-

milial responsibility has already shifted to that of shared responsibility

within society at large, as evidenced by the new MediShield Life insur-

ance scheme, which is a mandatory version of the previous MediShield

insurance scheme.

382 W.C.K. Graham and M. Bilger

Table 4. Estimated Average Monthly Out-of-Pocket Expenses for 70-year-old Females With 3+ ADL Limitations, After

Applying Subsidies and ElderShield Benefits, in 2016

Estimated Out-of-Pocket Expenses for Home- and

Community-Based Care by Government Subsidy Levels, Based on

Per Capita Household Income (% of Fees Subsidized)

ࣙ $2,601

$1,801−

$2,600

$1,601−

$1,800

$1,101−

$1,600

$701−

$1,100

$0−

$700

Level of Informal

Care Available

Size of

Elder-

Shield

Benefits

(0%) (30%) (50%) (60%) (75%) (80%)

IV) Help from healthy retired spouse

Uninsured $0 $2,468 $1,728 $1,234 $987 $617 $494

100% 70% 50% 40% 25% 20%

ElderShield Basic $400 $2,068 $1,328 $834 $587 $217 $94

84% 54% 34% 24% 9% 4%

Medisave Supplemented $523 $1,945 $1,205 $711 $464 $94 $0

79% 49% 29% 19% 4% 0%

Medisave and OOP

Supplemented

$653 $1,815 $1,075 $581 $334 $0 $0

74% 44% 24% 14% 0% 0%

Continued

Financing Long-Term Services and Supports: Ideas From Singapore 383

Table 4. Continued

Estimated Out-of-Pocket Expenses for Home- and

Community-Based Care by Government Subsidy Levels, Based on

Per Capita Household Income (% of Fees Subsidized)

ࣙ $2,601

$1,801−

$2,600

$1,601−

$1,800

$1,101−

$1,600

$701−

$1,100

$0−

$700

Level of Informal

Care Available

Size of

Elder-

Shield

Benefits

(0%) (30%) (50%) (60%) (75%) (80%)

V) Help from full-time working child

Uninsured $0 $2,641 $1,849 $1,321 $1,056 $660 $528

100% 70% 50% 40% 25% 20%

ElderShield Basic $400 $2,241 $1,449 $921 $656 $260 $128

85% 55% 35% 25% 10% 5%

Medisave Supplemented $523 $2,118 $1,326 $798 $533 $137 $5

80% 50% 30% 20% 5% 0.2%

Medisave and OOP

Supplemented

$653 $1,988 $1,196 $668 $403 $7 $0

75% 45% 25% 15% 0.3% 0%

Continued

384 W.C.K. Graham and M. Bilger

Table 4. Continued

Estimated Out-of-Pocket Expenses for Nursing Home Care by

Government Subsidy Levels, Based on Per Capita Household

Income (% of Fees Subsidized)

ࣙ $2,601

$1,801−

$2,600

$1,601−

$1,800

$1,101−

$1,600

$701−

$1,100

$0−

$700

Level of Informal

Care Available

Size of

Elder-

Shield

Benefits

(0%) (30%) (50%) (60%) (75%) (80%)

VIa) No informal care, VWO nursing homes

Uninsured $0 $2,100 $1,680 $1,260 $1,050 $840 $525

100% 80% 60% 50% 40% 25%

ElderShield Basic $400 $1,700 $1,280 $860 $650 $440 $125

81% 61% 41% 31% 21% 6%

Medisave Supplemented $523 $1,577 $1,157 $737 $527 $317 $2

75% 55% 35% 25% 15% 0%

Medisave and OOP

Supplemented

$653 $1,447 $1,027 $607 $397 $187 $0

69% 49% 29% 19% 9% 0%

VIb) No informal care, private nursing homes

Uninsured $0 $3,500 n/a n/a n/a n/a n/a

100%

ElderShield Basic $400 $3,100 n/a n/a n/a n/a n/a

89%

Continued

Financing Long-Term Services and Supports: Ideas From Singapore 385

Table 4. Continued

Estimated Out-of-Pocket Expenses for Nursing Home Care by

Government Subsidy Levels, Based on Per Capita Household

Income (% of Fees Subsidized)

ࣙ $2,601

$1,801−

$2,600

$1,601−

$1,800

$1,101−

$1,600

$701−

$1,100

$0−

$700

Level of Informal

Care Available

Size of

Elder-

Shield

Benefits

(0%) (30%) (50%) (60%) (75%) (80%)

Medisave Supplemented $523 $2,977 n/a n/a n/a n/a n/a

85%

Medisave and OOP

Supplemented

$653 $2,847 n/a n/a n/a n/a n/a

81%

All dollar values are expressed in Singapore dollars. The exchange rate (1 SGD = 0.7356 USD) is as published on the New York Times website on September

13, 2016.

Fixed defined cash benefits for 70-year-old females are shown in this column.

Government subsidy levels are shown in the row below. The government defines "norm costs" for each type of LTSS presented in Table 2. The subsidies

are applied to these "norm costs" and not to any additional markups. We assumed that the full, unsubsidized LTSS fees calculated in Table 2 consist only

of "norm cost" values. Dollar values in the rest of the table represents the out-of-pocket payments that care recipients face after ElderShield benefits and

government subsidies have been applied. The percentage value below each dollar value shows the out-of-pocket payment expressed as a percentage of the

full, unsubsidized fee. We assumed that the recipients are Singapore citizens and applied the corresponding subsidy levels.

The lower estimates of nursing home expenditure depicted in Table 2 were used in these calculations.

386 W.C.K. Graham and M. Bilger

While the LTCI take-up rate is high in Singapore, the level of cash

benefit is low for most enrollees. When the ElderShield scheme was first

introduced in 2002, policymakers deemed that the premiums associ-

ated with the monthly benefit of S$400 (US$294) would not be overly

burdensome for most people. Even though supplementary plans were

introduced in 2007, two-thirds of current ElderShield policyholders re-

main insured at the default basic level. The current default monthly

benefit of S$400 is low relative to the LTSS expenses we estimated in

Table 2 and even relative to the cost of hiring an FDW, which exceeds

S$1,000 (US$736) per month. However, it is important to keep in mind

that the system was not designed to fully cover LTSS expenses in efforts

to limit dependency and moral hazard but instead to promote shared

financial responsibility. Another concern is that the 6-year payout pe-

riod might be too short. A recent study of Singaporeans with acquired

disability found that one-third of those with 3 or more ADL limitations

were still alive 6 years later.

124

While one-third of ElderShield enrollees

have supplementary coverage, details of their benefit levels and payout

duration have not been published, and the adequacy of their insurance

plans cannot be empirically assessed. One way to raise the cash benefits

is by extending the pay-in period. In some countries that rely on social

long-term care insurance, such as Germany and the Netherlands, peo-

ple are enrolled as soon as they enter the workforce.

125-127

Faced with

growing fiscal pressure, policymakers in Japan are considering a policy

revision that would require contributions to their social LTCI program

to start at age 20 instead of 40.

128

The Singapore government chose to

start automatic enrollment for ElderShield at age 40 in an effort to min-

imize opt-outs, as younger adults are thought to be more prone to future

discounting. However, clear evidence for or against this assumption is

lacking.

129

Therefore, lowering the automatic enrollment age remains a

potential strategy to raise prefunding levels in Singapore.

Although it offers flexibility, ElderShield’s cash benefit has drawbacks.

In countries like the United States, where service benefits are the norm,

LTCI plans are designed to pay up to a set dollar limit per day for services.

Accordingly, insurers take on most of the risk of price and quality

inflation. In Singapore, ElderShield’s cash benefit means that insurers

do not have to take on that risk. This lack of inflation protection greatly

affects the enrollees, as most of them are expected to claim benefits 20

or more years in the future. We conducted simulations (available upon

request) showing that at its current level, the basic ElderShield benefit

Financing Long-Term Services and Supports: Ideas From Singapore 387

will offset 6% to 9% of estimated unsubsidized monthly LTSS expense

in 2037, down from 11% to 16% today. Even though the government

reviews ElderShield policies regularly and has raised basic ElderShield

coverage from S$300 (US$221) to S$400 (US$294) per month and

extended the payout period from 5 to 6 years,

85,88,130

inflation remains

a problem that has not been fully addressed.

Even with automatic enrollment, not every Singaporean aged 40 and

over is covered under ElderShield. We estimate that up to 27% of 40-

year-olds are uninsured each year because of preexisting disabilities,

nonmembership in CPF, and opt-out at enrollment age. Informal work-

ers who do not have Medisave accounts and those with too little saved

up, such as women who drop out of the labor market early, run the risk

of lapsing even if they were initially enrolled. Others choose to opt out

after being automatically enrolled. If the government wants the LTSS

expenses of the most vulnerable people to be partly financed through

LTCI, it will have to consider providing them with premium support,

as it now does for those covered by the MediShield Life program. Public

education is also needed to heighten people’s awareness of their potential

LTSS financing needs and to help inform their choice of benefit levels.

These all are known challenges that the ongoing review of ElderShield

will attempt to address. The appointed committee is expected to an-

nounce its conclusions and recommendations by the end of 2017.

131

Singapore’s relatively recent LTSS financing system certainly is still a

work in progress, but the way it combines tiered, means-tested public

subsidies to LTCI and other private resources is a valuable idea that other

countries might consider.

LTSS Financing Ideas From Singapore

The long-running discourse about how to finance long-term care for el-

derly Americans has continued after the repeal of the CLASS Act.

6,132-135

The CLASS insurance program was ultimately not implemented because

there was uncertainty regarding the program’s long-term financial sus-

tainability owing to its vulnerability to adverse selection.

136

The concern

was that the resulting upward pressure on premium levels, which were al-

ready considered too high, would create an insurance death spiral.

137,138

Independent of CLASS’s shortcomings, the LTCI markets face

several well-documented challenges. Large intertemporal risks lead

388 W.C.K. Graham and M. Bilger

to high transaction costs, which in turn give rise to expensive

insurance plans.

139-142

Asymmetric information results in a dverse

selection.

139,141-143

In addition, consumer irrationality in the forms of

myopia, underestimation of one’s risk of needing LTSS, narrow fram-

ing, and bounded rationality further contribute to the low uptake of

LTCI.

1,144-148

In regard to bounded rationality, many Americans are

unaware that LTCI exists, that they are eligible for coverage, or that

their existing health care insurance plans do not cover LTSS.

144,149

Com-

plexity in the myriad of LTCI plans on offer also deter some American

consumers from getting coverage, as they are overwhelmed and con-

fused by the marketing information.

146

While ElderShield shares some

design features with CLASS, such as early enrollment and the offer of

cash benefits, its implementation is very different.

First, the Singapore government sets clear expectations about the

role of ElderShield. In the United States, buyers of LTCI see being

insured as a way to protect their assets, financial independence, and

living standards.

150

Consequently, LTCI benefits must be sufficiently

large in order to match higher LTSS costs in the future. Indeed, the

average annual premium of LTCI plans in the individual market has been

rising and was US$2,283 in 2010.

150

This mind-set is not mainstream

in Singapore, however. The policy goal for ElderShield has never been

to be the primary payer for LTSS expenses.

Rather, it is designed

to augment individuals’ own resources, both social and financial, as

well as public subsidies in defraying LTSS expenses.

The Singapore

system does not provide full financial protection against LTSS expenses

but instead uses LTCI to reduce the financial burden, whereas public

subsidies provide additional help to low-income individuals. Thus, the

government chose a relatively low monthly benefit as the default for

basic ElderShield coverage. As a result, basic LTSS coverage can be

bought from private insurers at correspondingly affordable premium

rates (US$129 to US$160 per year). The provision of basic coverage

has the added benefits of raising awareness and highlighting coverage

shortfalls to potential buyers of supplemental LTCI.

Second, enrollment in ElderShield is subject to medical underwrit-

ing. One of the design features leading to high premium estimates in

the CLASS program is the lack of medical underwriting.

In contrast,

affordability of ElderShield premiums for basic coverage is enhanced by

excluding people with serious preexisting ADL limitations from the risk

pool. Individuals with certain chronic medical conditions can enroll in

Financing Long-Term Services and Supports: Ideas From Singapore 389

ElderShield if they accept higher premium loads. Such medical under-

writing is pragmatic, since insurance is meant to provide support when

low-probability, high-impact events occur. It is more expensive and less

efficient to insure people whose probability of needing LTSS is known

to be high. This practice is not at odds with the policy principles articu-

lated by the US Senate Committee on Long-Term Care. Its report states

that “an effective, publicly-funded safety net is essential for those with

limited lifetime resources, including those whose physical, intellectual,

or cognitive disability originate early in life.”

By creating a separate

long-term care financing program for people with disabilities, based on

government subsidies, charitable donations, and savings (both private

and CPF balances), Singapore is able to keep ElderShield premiums

affordable.

Third, to contain adverse selection, the enrollment age is set at 40

years. This is comparable to the average enrollment age in France (40

to 44 years

) and is lower than that in the United States, where 24.7%

of new LTCI enrollees applied between the ages of 45 and 54, and

54% applied between the ages of 55 and 64.

Early enrollment has the

additional benefit of increased time for prefunding, as well as prefunding

during people’s most productive years. Since ElderShield premiums have

been stable since its launch and are payable for only 25 years from

age 40, enrollees have not had to face the uncertainty of rate hikes or

the burden of premium payments in their retirement years. Further,

unlike CLASS, which has a 5-year waiting period, ElderShield enrollees

may make claims at any time after enrollment. Together, these attributes

help make ElderShield coverage a palatable default option.

Fourth, the automatic enrollment feature of ElderShield circumvents

issues related to consumer irrationality. By not requiring much or any

action on the enrollees’ part, the government no longer has to rely on

individuals to overcome their tendencies to procrastinate and to avoid

contemplating unpleasant future events. In the behavioral economics

literature, such use of the default option is referred to as a “nudge.”

151

While automatic enrollment is likely the main driver of the high rate

of ElderShield coverage in Singapore, it is not sufficient by itself. By

making premium payment automatic and relatively painless for Singa-

poreans through the use of CPF funds, the government also effectively

decreases the salience of this expense, thereby reducing the likelihood

of opt-out among those actively exercising their ability to choose. Note

that salience reduction is another application of behavioral economics

390 W.C.K. Graham and M. Bilger

principles that aim at influencing behaviors.

152

Even though the United

States does not have the equivalent of a CPF system, allowing Ameri-

cans to tap their 401(k)/403(b) accounts, individual retirement accounts

(IRA), or Section 125 accounts to pay their LTCI premiums may enable

automatic enrollment and lessen the impact on their levels of disposable

income, thereby encouraging more people to buy LTCI. The downside

of such an approach would be a reduction in retirement savings. This

concern may be mitigated by requiring the maintenance of minimum

retirement account balances and setting withdrawal limits. An alterna-

tive path to automatic enrollment in the United States may be through

the development of employer-sponsored LTCI programs by modeling

incentives and regulations on those that are currently in place for retire-

ment savings programs. These ideas are consistent with recommenda-

tions from both the BPC and the SCAN Foundation.

2,24

The Singapore

case demonstrates such recommendations are actionable and may have

desirable outcomes in terms of LTCI uptake.

Fifth, ElderShield payout in the form of defined cash benefits ad-

dresses the issue of consumer bounded rationality because it reduces the

complexity of LTCI plans for consumers, a problem that has plagued

LTCI markets in the United States for years. In the United States, how-

ever, insurers tend to offer service benefits, as claim rates are perceived

to be higher with cash benefits.

Another issue is that the cash ben-

efit may not be spent on LTSS but on other goods instead. However,

the practice of offering LTCI benefits in cash i s not new; a number

of European countries have managed cash benefit systems for years.

153

This model gained traction in the United States after the first Cash and

Counseling demonstration projects were conducted in 1998.

154

Today,

such participant-directed programs that disburse Medicaid long-term

care benefits as cash to older people are available in all 50 states and

the District of Columbia.

155

In Singapore, ElderShield payouts may be

disbursed to the beneficiaries, to their caregivers (if the beneficiaries are

medically certified to lack mental capacity), or to LTSS providers directly.

Strict eligibility criteria and the requirement of evaluation by accredited

independent assessors minimize the possibility o f fraud. When payouts

are disbursed to caregivers, they are committed, in writing, to use the

cash only for the care and benefit of the beneficiaries.

156

Since public

financial assistance for LTSS is limited and is provided only after appli-

cants demonstrate that they have exhausted all other possible sources of

funding, ElderShield benefits are less likely to be misused.

Financing Long-Term Services and Supports: Ideas From Singapore 391

Last, a possible reason cited for the small LTCI market in the United

States is crowd-out by substitutes such as readily available informal

care,

157

and alternative LTSS funding sources such as home equity

158

or Medicaid.

143,159

Some level of crowd-out could exist in Singapore,

although the phenomenon has not been well studied. However, instead

of crowding out LTCI, Singapore’s tiered public subsidy structure may

be complementary to the development and maintenance of an LTCI

market. Those with a low MPCHI see the benefit of retaining inex-

pensive basic ElderShield coverage because the cash payout does defray

a meaningful portion of their postsubsidy OOP expense. People with

a moderate MPCHI are better able to afford supplemental plans and

may be motivated to buy more coverage, since they face proportion-

ally higher postsubsidy OOP expenses. Finally, LTCI is one source of

financial protection for those who are ineligible for public subsidies.

Accordingly, LTCI can appeal to individuals along the entire income

distribution.

Debates about optimal long-term care financing policy through in-

surance contain an inherent tension between the breadth and depth of

coverage. The former is indicated by LTCI take-up rates; the latter is

measured by the degree of financial protection LTCI provides. If one

wants to limit budgetary pressure posed by public LTSS financing, the

problem becomes one of maximizing private contributions to LTCI by

those who can afford it so that public funds can be directed at those

who cannot. By this formulation, the total private contribution to be

maximized is the product of the take-up rate and the depth of coverage,

as the latter is proportional to LTCI premiums. The Singapore LTCI

system can be described as one in which high take-up is achieved at the

expense of depth of coverage. A moderate increase in basic coverage is

unlikely to negatively affect take-up rates and is likely one of the goals

of the policy reform currently under way. The United States likely lies,

however, on the other side of this trade-off, as lowering insurance cover-

age would likely increase take-up rates and total private contributions

to LTCI.

US policymakers face the challenge of integrating elements of pri-

vate LTCI and social insurance programs to meet the nation’s long-term

care financing needs. The Singapore case illustrates how LTSS can be

financed through a mix of public and private sources comprising tiered,

means-tested public subsidies and government grants to LTSS providers

that lower LTSS prices, charitable donations, voluntary LTCI, and other

392 W.C.K. Graham and M. Bilger

private resources from the care recipient and his or her family. While

the optimal mix of private and public options will ultimately depend on

the national and political context of the United States, it is worth not-

ing that hybrid financing systems like Singapore’s can be implemented

incrementally. This is especially relevant to the United States, given its

current polarized political context that makes finding a compromise on

any far-reaching reform extremely unlikely.

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Funding/Support: None.

Conflict of Interest Disclosures: Both authors have completed and submitted the

ICMJE Form for Disclosure of Potential Conflicts of Interest. No disclosures

were reported.

Acknowledgments: The authors would like to thank the editor, Walter Edgar

Theseira, Phua Khai Hong, and one anonymous reviewer for their valuable

comments and suggestions.

Address correspondence to: Marcel Bilger, Health Services & Systems Research Pro-

gram, Duke-NUS Medical School, Singapore, 8 College Rd, Level 4, Singapore

169857 (email: [email protected]).