John C. Goodman

In 1984, Singapore instituted a revolutionary idea: a system of compulsory saving for medical expenses. That was the same year my colleagues and I at the National Center for Policy Analysis introduced the idea of Health Savings Accounts in this country.

After almost three decades, Singapore has now come to the attention of a lot others, including a book by Brookings, and a whole slew of posts by bloggers.

At the risk of disappointing you, Singapore does not have a free market for health care. What it does have is an alternative to the European/American welfare state, in which private saving and private insurance do what employers and governments do in other countries. The Singapore philosophy is:

• Each generation should pay its own way.

• Each family should pay its own way.

• Each individual should pay his own way.

• Only after passing through these three filters, should anyone turn to the government for help.

If the United States adopted a similar approach to public policy, there would be no deficit problem in this country.

How the system works. In Singapore, people are required to save for health care, retirement income and other needs. They can use their forced saving to purchase a home, pay education expenses, and purchase life insurance and disability insurance. For individuals up to age 50, the required saving rate is 36% of income (nominally divided: 20% from the employee and 16% from the employer). Of this amount, 7 percentage points is for health care and is deposited into a Medisave account. Individuals are also automatically enrolled in catastrophic health insurance, although they can opt out.

Self-insurance. A controversial issue both in the United States and in Singapore is: can individuals be counted on to manage some of their own health care dollars in a responsible way or does health care work better if all the dollars are controlled by insurance companies, employers or the government? After three decades of experience, Singapore has shown the world that individual self-insurance works and it works well.


John C. Goodman

John C. Goodman is Senior Fellow at The Independent Institute and author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts."