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MediShield's Obscene Reserves Of $524m

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  • mellaniehewlitt@yahoo.co.uk
    This message was forwarded to you from Straits Times Interactive (http://straitstimes.asia1.com.sg) by MellanieHewlitt@yahoo.co.uk Comments By Mellanie Hewlitt
    Message 1 of 1 , Sep 30, 2004
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      Comments By Mellanie Hewlitt
      Singapore Review
      1 Oct 2004

      With an obscene amout of surplus in Medisave Reserves, huge hidden fiscal
      surpluses enrich the Singapore government and state enterprises but impoverish
      the private sector and tax payers.

      Lack of Transparency is a common issue with the CPF Board and State Owned
      Enterprises. The ST article (in 1 Oct 2004 issue) below is vaguely
      reminiscient of similiar revelations of the huge hidden reserves which the
      National Kidney Foundation had stashed away, even as it sort more charitable
      funding from the general public. Indeed the common theme in both CPF and NKF
      exercises is that they have the central objective of siphoning even more funds
      from tax-payers into the already fat coffers of many state owned vehicles. All
      this is cleverly done under the guise of schemes and policies which are
      supposedly designed to look after the welfare of Singapore Citizens.

      But the abuse is quite glaring since money only flows one way:- into the
      pockets of the state administrators. There is no outflow from the state to the
      public. What happens to the billions of dollars in reserves is also a total
      mystery.

      The high-surplus strategy lowers Singapore's standard of living. Deprived of
      disposable income by numerous taxes, Singaporeans consistently consume a share
      of GDP 10-20 percentage points below Hong Kong levels, while Hong Kong
      maintains a higher per-capita income. It was only recently that the CPF Board
      has also stepped up measures to sue "Medisave Laggards" who fail to top-up on
      their own Medisave accounts.

      These Big structural surpluses most benefit the ruling party, to the detriment
      of the private sector. Unconstrained by tight finances, the government pays
      cabinet members and civil servants some of the world's highest public-sector
      packages. See:
      http://groups.yahoo.com/group/Sg_Review/message/1182
      http://groups.yahoo.com/group/Sg_Review/message/3
      http://groups.yahoo.com/group/Sg_Review/message/1321

      A variety of analytical shields obscures the embarrassing size of government
      surpluses. Accounting principles differ from global standards. A bewildering
      array of statutory boards, government-linked companies, investment corporations
      and holding companies transact among themselves at undisclosed prices. Key data
      such as the government's share of national savings and the profits of holding
      companies and investment corporations are kept secret. One analyst calls the
      national accounts a "masterpiece of obfuscation." See:
      http://groups.yahoo.com/group/Sg_Review/message/87
      http://groups.yahoo.com/group/Sg_Review/message/1270
      http://groups.yahoo.com/group/Sg_Review/message/1170

      The other troubling issue which is tactfully avoided by the government is the
      fact that CPF investments (and returns/profitability of State Owned Companies
      as wells as GLCs and TLCs) are under performers and laggards well behind
      private sector standards. Is this is an intended result of figures manupulated
      to obscure huge returns, or are State Owned Entities really so appalingly bad
      at earning decent returns on investments? No one will ever know the answers.

      It is indeed cruel irony that State Organisations and Government Linked
      Companies are ripping-off the very individuals which they are established to
      protect. So blatant is the abuse of public funds that such occurences have now
      been institutionalised and formalised, with the Constitution re-written to
      allow the state and State Owned Enterprises direct access to state/public
      reserves. All this has happened with the blessing of the Auditors General
      office and Finance Ministry. See:
      http://www.singaporedemocrat.org/media_releases_display.php?id=119
      http://www.parliament.gov.sg/Legislation/Htdocs/Bills/0400012.pdf
      http://groups.yahoo.com/group/Sg_Review/message/1175

      Legitimisation of Corruption and Nepotism has been tansformed into a art-form
      by Singapore's Ruling Bureucracy, all at the expense of the man on the street.

      ST Article follows:

      MediShield has reserves of $524m
      by Salma Khalik
      1 Oct 2004

      THE Government-run MediShield insurance has reserves that exceed the total claims it has paid out since its inception 14 years ago.

      The Central Provident Fund Board, which runs the three MediShield schemes, told The Straits Times that it has $524 million comprising both premiums collected and the investment income generated from that.

      Till the end of last year, it had paid out a total of $516 million to settle 715,000 claims.

      MediShield was set up in July 1990 to encourage people to buy medical insurance by allowing them to pay for it with Medisave money.

      The claims paid out each year have never exceeded the premiums collected, although the difference between the two has narrowed in recent years.

      In the first eight years, claims amounted to less than half of the premiums collected. Figures from the CPF Board showed that, last year, it collected $98.7 million in premiums and paid out $80.2 million to settle over 94,000 claims.

      Dr Lily Neo, chairman of the Government Parliamentary Committee on Health, described the $500 million in reserves as 'mind boggling'.

      'But it is good to know about the large amount as it will give people confidence in the MediShield scheme.'

      Given the huge sum, she said, MediShield should quickly enhance the claim limits to help people facing huge medical bills.

      The cheapest MediShield scheme gives policy holders a maximum of $30,000 a year and $120,000 in a lifetime. There are also varying limits on the claims for each treatment.

      But the huge reserves have led to questions on whether the Health Ministry should go ahead with its plan to raise premiums. The ministry has argued that the premiums - which range from $12 to $1,950 a year - have to go up as payouts from MediShield are not enough for the big medical bills faced by five to 10 per cent of policy holders.

      Financial planner Leong Sze Hian thinks it will be difficult to explain to the people why MediShield premiums have to go up when it has so much money in reserve.

      He described MediShield as one of the healthiest insurance schemes in the world.

      Commercial insurance companies, he said, usually work on 'a loss ratio of over 100 per cent', which means they pay out more in claims than they collect in premiums.

      Their profit comes from investment income generated during the time between premiums paid and claims made.

      Agreeing, National University of Singapore health economist Phua Kai Hong said: 'It's inefficient when you collect more than you pay out.'

      While agreeing that the reserves seemed high, Mr Nishit Majmudar, chief financial officer at Prudential Assurance Singapore, said the gap between premiums and claims had been closing, possibly because of better benefits.

      When contacted, a Health Ministry spokesman said that, since 2002, the benefits paid out under the basic MediShield scheme had been higher than the premiums collected.

      To enhance the scheme further, premiums would have to go up, she reiterated, adding that the ministry would ensure that they remained affordable.

      ---------------------------------------------------------------------------------

      ST Forums
      1 Oct 2004

      Have CPF investors fared better since 1993-2002?
      I REFER to the articles, 'New rules give CPF investors more legal protection' (ST, Sept 29) and 'CPF sounder way for retirement' (ST, Sept 15).

      According to the CPF website (www.cpf.gov.sg), the number of people investing their CPF under the CPF Investment Scheme (CPFIS) has increased by 103 per cent, from 359,675 in 1996 to 729,666 this year. The total amount invested has increased by 195 per cent, from $8.2 billion in 1996 to $24.2 billion this year.

      How has CPF investors fared over the years?

      Last year, I wrote to the Forum, asking for the cumulative rate of return for CPFIS investments. The CPF Board replied that 65 per cent of CPF investors did not beat the 2.5 per cent interest rate on the Ordinary account, on a cumulative basis for nine years, from Oct 11, 1993, to Sept 30, 2002.

      Now that another year has passed, and the CPFIS crosses its 10th anniversary, I would like to ask whether the statistics have improved.

      While a fully self-reliant retirement system has its merits, it would seem that the majority of Singaporeans may not have done well, relying on the CPFIS.


      LEONG SZE HIAN


      ----------------------------------------------------------------------------------------


      Singapore -- Fiscal Predator: Huge hidden fiscal surpluses enrich the Singapore
      state but impoverish the private sector

      By Dan Fineman
      6 May 2004
      Far Eastern Economic Review
      (c) 2004 Dow Jones & Company, Inc.

      Austere fiscal policies hurt Singapore more than possibly any country on the
      planet. Although Singapore markets itself as a low-tax country with world-class
      social programmes, in reality the government taxes heavily and spends little.
      The resulting huge surpluses -- largely hidden and off-budget -- strengthen the
      ruling party but weaken the economy. Unless the government drastically loosens
      fiscal policy, businesses will lose competitiveness and long-term growth will
      slow.

      Singapore's political system and fiscal strategy are inextricably intertwined.
      Only a government dominated by a single party could consistently post such large surpluses and only an extraordinarily well-financed state could exert such extensive control over political and economic life.

      Big structural surpluses most benefit the ruling party, to the detriment of the
      private sector. Unconstrained by tight finances, the government pays cabinet
      members and civil servants some of the world's highest public-sector packages.
      Although generous salaries discourage corruption, they also lure the best talent to the government and ruling party. Private enterprises -- and rival political parties -- suffer brain drains. When campaigning, the ruling party argues that the opposition lacks capable leaders. Because high pay has attracted the island's brightest to the government camp, the claim rings true.

      A variety of analytical shields obscures the embarrassing size of government
      surpluses. Accounting principles differ from global standards. A bewildering
      array of statutory boards, government-linked companies, investment corporations
      and holding companies transact among themselves at undisclosed prices. Key data
      such as the government's share of national savings and the profits of holding
      companies and investment corporations are kept secret. One analyst calls the
      national accounts a "masterpiece of obfuscation."

      Actual surpluses greatly exceed the already impressive stated numbers. From 1991 to 2001, the government reported surpluses averaging 3.6% of GDP, but Mukul Asher of National University of Singapore calculates an adjusted average of 9.7%, nearly triple the announced figures. Official budgets exclude land-lease revenues, investment income and profits from off-budget state bodies. Because Asher includes only publicly disclosed revenues, his adjustments understate real surpluses.

      The high-surplus strategy lowers Singapore's standard of living. Deprived of
      disposable income by numerous taxes, Singaporeans consistently consume a share
      of GDP 10-20 percentage points below Hong Kong levels, while Hong Kong maintains a higher per-capita income. Their high-revenue, low-expenditure government leaves Singaporeans a smaller slice of a more modest pie.

      Overly stringent fiscal policies sap Singapore's competitiveness. Excess
      surpluses depress the cost of capital and encourage firms -- many state-owned --to overinvest. According to JPMorgan, listed Singapore companies provided a
      return on equity below the non-China developing Asian average in four of the
      last five years and half the United States benchmark since 1996.

      An excessively pro-fiscal design is contributing to a looming crisis in
      Singapore's national pension plan, the Central Provident Fund, or CPF. Rather
      than invest balances on beneficiaries' behalf, CPF pays contributors a low,
      artificially determined interest rate. The state pockets as a hidden tax the
      potentially huge difference between the actual investment yield and what
      beneficiaries receive. In contrast to most countries' schemes, Singapore allows
      working contributors to pay medical bills with plan balances. The resulting
      outflow depletes retirement funds but relieves the government of potential
      health-care liabilities.

      Arguably, provisions allowing home buyers to tap CPF balances work to similar
      effect. State entities own an estimated 85% of the island's land. If, as some
      analysts believe, CPF financing has contributed to high land prices, the
      government gains from home purchases, while pension balances dwindle. Largely as a result of its fiscally friendly features, CPF will prove grossly inadequate for meeting individual retirement needs.

      Slower economic growth has eliminated reported surpluses this decade, but the
      lack of change in broader fiscal policies indicates that actual balances remain
      high. Until the dominant-party political system that thrives on outsized
      surpluses undergoes fundamental reform, Singapore will struggle with an
      underfunded pension plan, inefficient businesses and sickly consumption.
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