IJC_H1_ECON_CASE_STUDY_Q1

2011 JC2 H1 Economics Prelim 2: Case Study Question 1 Source: US Bureau of Labor Statistics Source: Kleiner Perkins Caufield & Byers Figure 1 Figure 2 Extract 1: Challenge to control rising healthcare costs Touching on the hot topic of healthcare reform in his keynote speech at the Economist Conferences, Health Minister Khaw Boon Wan said politicians bore part of the blame for rising costs. In Singapore, patients have to shoulder part of the cost for healthcare services, and thus look for value for money and do no t over-consume. But when politicians promise free healthcare, they distort th e market, causing over-consumption and heavier burden for government amidst slower economic growth globally. Singapore is not immune to risi ng costs, especially with it s rapidly aging population. However, the government has been keeping its healthcare expenditure at below 4% of its gross domestic product (GDP), or under US$8 billion. This is a figure that many find "amazing" – compared to 16% of GDP (US$ 2.4 trillion) for the United States. When designing the healthcare system, t he Singapore government tries to allow the market to function, such as promoting comp etition among providers, publicising their performance and making sure consumers seek value for money. There is also universal coverage for all our citizens th rough multiple levels: heavy government subsidy, compulsory health savings a ccount and a low-cost national insurance scheme with deductibles and co-paymen t. The result is a high standard of healthcare, accessible to all citizens, and among the most cost-effective in the world. Adapted from The Straits Times, 3 Apr 2010

Extract 2: Globalisation of Healthcare Cost is a major driver of the rapidly gr owing medical tourism in Asia, catering to patients who travel across national borders to receive medical treatment, integrated with leisure activities as a package. The pr ice of a medical procedure in Asia is sometimes only 20 to 30% of that in the United States. Besides this cost benefit, other considerations include productivity loss due to untreated medical conditions and long wait times due to t he lack of access in constrained healthcare systems in the West. This, together with a sophistic ated travel industry ensuring ease and affordability of travel, provides the backbone for Asia medical tourism. Another critical reason for the growth of Asia medical tourism is the improvement in the healthcare standards. Many hospitals have invested in expensive developmental research on medical technol ogy and prescription drugs. Wealthy individuals in Asia who prefer first-world quality treatment within the region tend to visit Singapore and their inelastic demand represents a more lucrative revenue stream. The tiny island nation of Singapore has em erged as an Asian medical tourism hub in the p