Subsidy and other Preoccupations 7

One of the shortcomings of means testing which Mr Chang did not bring up in his letter featured yesterday is the fact that means testing, when it comes to subsidy for hospitalisation, is a crude tool.

Patients are admitted to the acute-care hospital for a variety of reasons, and the costs can therefore vary very much depending on the condition and treatment. Under the proposed means testing scheme a patient who passes the means test will enjoy an 80% subsidy, while a patient who fails the means test will receive something perhaps closer to the B2 class subsidy level of 65%.

At the lower end of the scale, say a 5-day admission for chronic obstructive lung disease at Alexandra Hospital, this 15% difference translates to something in the region of $300.

At the higher end of the scale, say a 12-day admission for a coronary bypass at National University Hospital, the difference is in the region of $2000.

So while the percentage differences are the same in both cases, angry doc believes that it is the absolute amount that patients are worried about.

Further, angry doc believes that the absolute amount needs to be seen as a percentage not just of the total hospital bill, or against the per capita household income, but as a percentage against the total hosehold income and what it means in terms of the reduction to the per capita household income.

Let me illustrate this with a couple of examples, using a threshold of $1000 per capita per month (see here for why I chose this value) and two patients whose incomes are $100 above and below this threshold respectively.

Mr A, who has a wife one child, earns $3300 a month. His per capita houshold income is $1100 and he fails the means test.

Mr B, who lives with his parents, wife, and two kids, earns $5400 a month. His per capita household income is $900 and he passes the means test.

Mr A and Mr B are both admitted for coronary bypass. Mr A's bill comes up to $4844, while Mr B's bill is $2768.

Mr A's bill translates to 12% of his total annual income, and Mr B's bill translates to 4.3% of his total annual income.

In other words, Mr A, whose absolute total annual income is lower than that of Mr B, pays a higher fee than Mr B, both in terms of absolute amount, as well as in percentage terms.

angry doc can easily see why Mr A will think means testing is an unfair system.