I refer to the articles “”Working poor” in Singapore can’t make ends meet: NUS“, “Collective responsibility among citizens key to successful social policies: PM Lee” and “”Building trust comes from working together”, says PM Lee on Singapore’s social compact” (Channel NewsAsia, Sep 24).

149th Press Freedom ranking

It was like the umpteened time, of late in recent years, that my scheduled appearance in a live broadcast programme was being cancelled at the last minute.

As I was with someone when I received the communication informing me of the cancellation just less than a day before the scheduled programme, the person asked me – something along the lines of  ”What can it be that they may be so afraid of – that you may say? After all, you have appeared in hundreds of broadcast programmes, been interviewed a few hundred times by the media, a few hundred published letters in newspaper forums, etc,  in the last 15 years or?

Another person asked me – you have written thousands of articles – if you are asked to write your most important article or your last article, what would it be?

I have been keeping the above at the back of my mind for some time now.

Well, here’s my “most important article”:

Singaporeans contribute about $7b to Medisave in a year? 

Since as much as 9.5 per cent of our annual CPF contributions go to the Medisave account, how much of the $26.1 billion CPF annual contributions in 2012 were to Medisave? Based on my estimate, the Medisave contributions a year may be about $7 billion.

$60b total Medisave balance

In addition, of the CPF total due amount of $244.3 billion, $60 billion in FY12 was in the total Medisave balance, according to the Ministry of Health’s (MOH) web site.

One of the lowest public healthcare spending in the world?

According to the Ministry of Health’s (MOH) web site, Singapore’s healthcare public spending as a percentage of  GDP was about 1.4 per cent or $4.885 billion ($4.081 billion operating expenditure and $641 million development expenditure) in FY12, making it one of the lowest spending in the world.

Govt does not spend a single cent on healthcare?

So, from a citizen’s cash-flow perspective, if we pay about $7 billion a year into Medisave (which is taken by the Government vide non-marketable Government bonds which pay the same interest as the Medisave account) and the Government spends $4.885 billion a year – is it not in a sense, equivalent to the Government not having to spend a single cent on healthcare?

Even if we include the total Amount Withdrawn from Medisave for Direct Medical Expenses of $768 million, withdrawals to pay Medishield premiums of $446.7 millionand and Medifund grants to institutions of $98.2 million, in 2012 – the grand total sum including Government public healthcare spending may still be less than $7 billion.

Excess returns on Medisave?

Also, what about the excess returns earned by the Government on the $60 billion total Medisave balance (Temasek and the Government Investment Corporation (GIC) had annualised returns of 16 per cent in S$ terms for the last 39 years, and about 6 per cent in US$ terms for the last 20 years or so, respectively?

Medishield surplus?

What is the accumulated surplus of Medishield premiums collected less claims, plus interest since the scheme started? Is it still about $850 million of premiums exceeding claims for the last 10 years or so as last reported in Parliament? What about the premiums in excess of claims in the period before the last 10 years? Does this amount include the interest on the surplus all these years? If not, where has the interest gone to?

Annual operating deficit?

If the annual interest is included, would Medishield still be in operating deficit annually. In this regard, since the Medishield operating deficit statistics were for periods before the increase in Medishield premiums and deductibles from 1 March this year, is the current annual operating deficit still expected to be in deficit in the future?

Although we were recently told that Medishield is in operating deficit, Medishield claims were $327.1 million against premiums collected of $446.7 million in 2012, according to the CPF Board’s latest annual report for the year ended 31 December, 2012.

The loss ratio of 73 per cent (Claims divided by Premiums) may make ours, one of the most profitable national health insurance schemes in the world.

Medishield-Plus surplus?

When Medishield-Plus was transferred to a private insurer many years ago, was the then Medishield-Plus surplus transferred to the private insurer? If not, what happened to it? Was it transferred to the basic Medishield fund?

Medifund surpluses?

Since about $86 million of Medifund surpluses have been transferred to the protected Reserves, why were these surpluses not transferred to Medishield? If these were transferred to Medishield, how much would it add to the accumulated Medishield surplus now, including the annual interest over the years?

Increase Medishield premiums?

After reading the above, and if we get all the answers and statistics to show that there is no deficit in running the Medishield scheme – will you still think that Medishield premiums need to be raised?

Medishield does not cost the Govt a single cent?

In conclusion, does it mean that, in a sense,  the Medishield scheme does not cost the Government a single cent?

Govt does not spend a single cent on CPF too?

I shall now talk about why the Government does not, in a sense, spend a single cent on CPF too?

CPF contributions exceed withdrawals?

According to the Department of Statistics’ Monthly Digest of Statistics September 2013, withdrawals of CPF for all purposes was $11.7 billion in 2012, and contributions for the year was $26.1 billion.

This means that annual contributions far exceed withdrawals by a ratio of about 2.2 in 2012.

With the Total Amount Due to members at $244.3 billion as of July 2013, and the 2.2 ratio of contributions to withdrawals – does it mean that the Government may have unfettered use of our CPF funds for various purposes, over the years, presently and into the future?

In this connection, we may simply be paying too low an interest on the bulk of our CPF savings, at just 2.5 per cent on the Ordinary Account. I believe we have been paying one of the lowest pension interest rates in the world.

Other than the utilisation of our CPF funds by the Government issuing non-marketable Government bonds to the CPF Board at the respective actual interest paid in the different CPF accounts of Ordinary, Special, Medisave and Retirement accounts, Temasek and GIC have achieved annualised returns of 16 per cent for about 39 years from inception and about 6 per cent (in US$ terms) for the last 20 years or so, respectively.

Since CPF is our own money, at arguably the highest pension contribution rate of 36 per cent in the world, does it mean that the Government, in a sense, does not spend a single cent on CPF?

Does not spend a single cent on HDB too?

We have arguably the most expensive public housing by multiples of income to price (and therefore by this measure – the most unaffordable public housing in the world), and the so called HDB Concessionary Loan at 2.6 per cent has always been higher than what the banks have been charging on HDB bank loans since they were allowed to offer HDB bank loans from 1 January 2003,

Which other countries in the world makes so much money on its public housing by linking ever rising prices to market prices under our Market Subsidy Pricing policy, instead of the costs of building them?

What is the breakdown of HDB BTO flat prices into land and construction costs for all the different flat types?

Is this not like another “indirect’ tax on Singaporeans?

Public housing in Singapore, in a sense,  does not cost the Government a single cent, because it acquired land very cheaply and sells at a profit.

Singaporeans use a lot of their CPF to pay for public housing, and when they borrow from the Government to pay – the Government also makes money by taking the pension funds of Singaporeans, at 2.5% and charging 2.6% on the mortgage loans.

Budget surpluses and the Reserves?

What happens to all the tax and other revenue if we don’t spend a single cent on healthcare, CPF and HDB?

Well, arguably it goes to spending in other areas, Budget surpluses and ultimately to the Reserves.

What is the year-to-year difference between our Budget Surpluses versus our Surpluses (under IMF reporting standards)?

My estimate –  if you include land sales and the return on reserves, the Government may have made a surplus of S$ 187 billion cumulatively during the eight years from 2005 to 2012, compared to S$17.35 billion reported in the budget documents, and about $32.1 billion difference for the last year alone.

Any other Govt in history?

In the annals of modern history, has there ever been any other Government that literally, does not spend a single cent on healthcare, public housing and pensions?

Perhaps our greatest challenge and issue going forward, may be how long a Government can continue to literally not spend a single cent on healthcare, public housing and pensions? Watch this video explaining this –  http://m.youtube.com/watch?v=RrAPE7lzakw&desktop_uri=%2Fwatch%3Fv%3DRrAPE7lzakw

P.S. After you have watched the above video, you may also like to read “Trust is a many-splendoured thing: What will make people to trust or not trust the Government?” and “Being poor is more than having too little money: An inclusive society must ensure the less advantaged are not marginalised” (Straits Times, Sep 28).

Leong Sze Hian

Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, Wharton Fellow, SEACeM Fellow and an author of 4 books. He is frequently quoted in the media. He has also been invited to speak more than 100 times in 25 countries on 5 continents. He has served as Honorary Consul of Jamaica, Chairman of the Institute of Administrative Management, and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional qualifications. He blogs at http://www.leongszehian.com.