Healthcare spending may reach 3.5% of GDP in 2030

March 5, 2012

SINGAPORE – Finance Minister Tharman Shanmugaratnam said a key challenge to sustaining a fair and progressive tax system in Singapore is healthcare spending.

Wrapping up the Budget debate in Parliament, he said healthcare spending is going to be biggest driver in the increase in expenditure over the next ten to 20 years.

He said Singapore is currently spending about 1.6 % of the GDP on healthcare.

By 2016, it would go up to 2 % of GDP and by 2030 when the rapidly aging population will be the biggest driver of rising expenditure going forward, healthcare spending may reach around 3.5 per cent of GDP, taking into account demographic changes and higher medical inflation.

Mr Tharman stressed that Singapore should focus on achieving international standards for healthcare outcomes rather than simply on increasing spending.

He said: “It has to be said that we are getting relatively good outcomes compared to most countries despite spending much less dollar inputs. Second, target the subsidies where they are most needed. There will be a need for subsidies and there will be groups which have affordability problems which we must help them. But (we need to) target it where it is most needed and not broadly across the board. This is what we are doing in this year’s Budget and going forward.

Mr Tharman also encouraged Singaporeans to find a low cost care setting environment to save cost.

“Instead of staying in hospitals for a long period at a very high cost, (one can) move to a lower cost setting in the community or the home,” he said.

Mr Tharman said the government is aggressively increasing its subsidies for home-based care and community based care so that people can enjoy being at home and the community at a lower cost to the tax payer.

He countered suggestions by the Workers’ Party for Singapore to spend 6.1% of GDP like first world, developed countries.

Giving health care as an example, he said if its spending was raised to 6% of GDP, this would mean taxes would rise significantly across the board.

“If it is GST, it has to rise to about 20%. If it is corporate income taxes, it will have to rise to above 40%. If it is personal income taxes, it will have to rise across the board with a top line rate moving to about 60%,” he explained.

He added: “Mr Low Thia Khiang also spoke about first world social safety net. I think you were congratulating us for moving to a first world safety net. I felt very intimidated when you said that because I don’t like the idea of this first world safety net because it means first world taxes and first world debts and I don’t like both ideas. I think all of us here have an inherent dislike for the level of taxes or the level of debt that comes with first world social safety net.”

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