Tackling Rising Healthcare Costs: The Challenge of Insurance Overuse

When faced with a sudden health crisis, many individuals turn to private health insurance for financial relief. For Grace Tay, this proved invaluable when her mother was diagnosed with amyotrophic lateral sclerosis (ALS). The coverage provided by her Integrated Shield Plan (IP) alleviated the burden of substantial medical expenses, which included consultations, scans, and ongoing medication that costs approximately S$3,000 (US$2,298) monthly.

Ms. Tay, an associate director at a financial advisory firm, explained that her mother’s co-payment was capped at S$3,000 a year. The family also incurred additional costs for physiotherapy sessions and nutritional supplements. “It allowed us to focus on caring for her instead of worrying about bills,” she noted. Ms. Tay’s experience underscores a broader trend among Singaporeans opting for extra coverage through IPs. This trend stems from the fear of unexpected health crises and financial strain.

Despite the comfort that IPs provide, Health Minister Ong Ye Kung highlighted a significant statistic: around half of patients with IPs still utilize subsidized public healthcare when hospitalized. He remarked that many of these patients could save on premiums by relying solely on the basic national health insurance, MediShield Life.

The surge in demand for additional coverage has contributed to a troubling cycle in the healthcare system. Minister Ong described this phenomenon as a “buffet syndrome,” where patients, encouraged by generous IP benefits, tend to over-consume healthcare services. This overconsumption leads to increased claims, prompting insurers to raise premiums, thereby making healthcare more expensive for everyone.

The Complex Dynamics of Healthcare Consumption

The interplay of patient behavior and institutional incentives exacerbates this issue. Patients with comprehensive IPs often agree to additional tests or treatments, as they do not shoulder the full costs. As noted by Assistant Professor Cynthia Chen from the National University of Singapore, the fee-for-service model incentivizes doctors to recommend extra procedures even when they may not enhance patient outcomes.

Minister Ong further revealed that policyholders with comprehensive riders are 1.4 times more likely to file claims, which are also significantly larger. This trend places immense pressure on insurers, who must respond with higher premiums. As these costs rise, consumers expect greater value in their coverage, leading to an unending cycle of demand and cost escalation.

The private health insurance landscape in Singapore is currently unsustainable. Minister of State for Health Rahayu Mahzam emphasized that excessive competition, rather than collusion, has led to this market failure, pushing insurers to offer overly generous policies that perpetuate rising claims and premiums. She cautioned that increased regulation could stifle innovation and worsen the situation.

Addressing the Healthcare Cost Crisis

The Singaporean government is acutely aware of the financial pressures healthcare costs exert on its budget. In 2025, the allocated healthcare expenditure is projected to reach S$20.9 billion, an increase from S$9 billion in 2015. Minister Ong forecasts that this could grow to nearly S$30 billion annually by 2030.

Despite rising premiums—approximately 20 percent over recent years—around 70 percent of Singaporeans hold IPs, reflecting a common preference for comprehensive coverage. For many, such as financial services manager Clyde Chye, the peace of mind provided by IPs outweighs the costs. Mr. Chye’s experience of being hospitalized with a viral fever, where his treatment costs were entirely covered, exemplifies the perceived value of IPs.

Yet, the insurance industry is feeling the strain. Mr. Chan Wai Kit, executive director of the Life Insurance Association, Singapore, noted that some insurers faced underwriting losses in 2024, as claims grew faster than premium income. The average claims increase ranged from 9 to nearly 28 percent in 2024, outpacing medical inflation, which hovers around 10 to 11 percent.

As healthcare costs continue to escalate, the Ministry of Health has initiated measures to manage overconsumption. These include encouraging insurers to redesign overly generous policies and establishing benchmarks for surgical fees to promote transparency and control costs.

The introduction of a claims management office aims to address fraudulent claims and maintain the integrity of the healthcare system. Yet, the challenge remains multifaceted. Dr. Peter Chow, CEO of IHH Healthcare Singapore, pointed out that balancing patient expectations with medical necessity in a competitive environment is crucial for sustainable healthcare.

Ultimately, the path forward may require collaboration among insurers, healthcare providers, and patients. Experts suggest that a cultural shift towards value-based care—where all stakeholders align their goals toward improving health outcomes—could help untangle the complexities of the current system. As Assistant Professor Chen emphasized, patients should actively engage in their healthcare decisions, questioning the necessity of additional tests or treatments.

In a landscape defined by fear of unforeseen medical costs, a thoughtful approach to insurance and healthcare consumption is essential. By addressing the underlying issues of overutilization and promoting informed decision-making, Singapore may find a way to stabilize its healthcare system while still providing effective care to its citizens.