D. A FAIR AND EQUITABLE SOCIETY

D.1. The second major plank of the Budget has to do with our work to achieve a fair and equitable society.

D.2. We are driving important initiatives to help our lower-income families aspire for themselves, and enable every Singaporean to contribute to a better society. It is a determined, multi-year effort to keep up social mobility and do all we can to avoid becoming a society of permanent tiers. Equally, we are enabling a better system of care and financial security for the elderly and Singaporeans with disabilities.

D.3. A key feature in this year’s Budget is the Pioneer Generation Package. As the Prime Minister has stated, we are honouring this unique generation of Singaporeans who built up the country, although no package can fully reflect the contributions that our pioneers have made.

D.4. Budget 2014 will also enhance retirement adequacy and healthcare affordability for all Singaporeans, besides the Pioneer Generation, and strengthen support for persons with disabilities. In addition, we will take further steps to support children from lower- and middle-income homes.

D.5. As we enhance our social spending, however, I want to highlight two important challenges that we face.

D.6. The first concerns healthcare costs. Healthcare will be the main driver of the higher social spending that we will see over the next 10 to 15 years. It will happen as Singaporeans get older, but also as new medical treatments become available, enabling longer and better lives. The demand for medical treatment will inevitably grow.

D.7. We will have to find the right ways to fund these future healthcare needs. It means finding the right balance of funding: between tax-funded subsidies, collective risk-pooling through MediShield Life and ElderShield, individual co-payments and safety nets like Medifund for the needy. We must find a balance that is equitable to the poor, and that also ensures that we can fund quality healthcare on a sustainable basis, in the next decade and well beyond.

D.8. But equally important, we must ensure that healthcare cost inflation is controlled in the years to come. We cannot end up in a cycle of ever-increasing healthcare spending and funding needs – whether from the Government or citizen’s own pockets.

D.9. We therefore have to reshape our healthcare system to control costs, even as we ensure good healthcare outcomes. While we have to expand the capacity of our system in every area, from hospitals to home-based care, we must over time also reduce the over-concentration of patient load in our acute hospitals. Primary care providers like our family physicians and polyclinics have to play bigger roles. We are also developing the long-term care sector, to enable patients to receive continuing care outside hospitals, and close to home.

D.10. Besides rebalancing the system, we must also ensure that hospitals, doctors, insurers and patients have the right incentives, so that Singaporeans receive treatments that are both clinically sound and cost-effective. There are many lessons to be learnt from the experience of countries where healthcare costs have ballooned because incentives favour the most expensive treatments, even where benefits are doubtful or unproven.

D.11. The second key challenge is that of developing quality people for the social sector. We will not succeed without good people: with professional skills, empathy and the knack for helping those in need to find their own feet.

D.12. We need nurses, doctors and allied healthcare professionals; early childhood professionals and learning support specialists; social workers and counsellors; and imaginative leaders, who can build strong and effective networks across social services to tackle increasing complex social challenges.

D.13. In the coming years, we will be investing more in our people in the social sector. We will ensure they have opportunities to deepen their expertise, empower them to find creative solutions to problems, and give them the reward and recognition they deserve.

Promote Social Mobility

D.14. We will do more in this Budget to strengthen opportunities for lower- and middle-income students in our education system, both at pre-schools and at our Institutes of Higher Learning (IHLs).

Pre-school Education

D.15. Our existing financial assistance scheme for kindergartens is aimed at lower-income households. We will enhance this in two ways through the Kindergarten Fee Assistance Scheme (KiFAS). First, we will provide more fee assistance, and extend this to the middle-income group.

D.16. With this change, more households in the lowest quartile (up to $3,000 a month) will now pay just $3 a month, down from as much as $75 previously. A lower-middle income household that earns $4,800 a month will now pay $85 a month, compared to about $130 today.

D.17. The second change is that KiFAS will be made available to all Anchor Operators and MOE Kindergartens.

D.18. The Minister for Social and Family Development will provide more details at the COS.

Bursaries at our Institutes of Higher Learning (IHLs)

D.19. We will significantly enhance bursaries at our IHLs.

D.20. First, we will enable more students to qualify for bursaries by raising the per capita monthly household income threshold from $1,700 to $1,900. The bursaries will hence benefit students from two-thirds of all Singaporean households.

D.21. For university undergraduates, those from the lowest one-third of households will see bursaries increase to $3,600 a year. Middle-income students will see a $450 increase to $2,600 a year. This is besides the Tuition Fee Loan and Study Loan schemes that enable students to pay for their university education interest-free while they are studying.

D.22. Similarly, polytechnic and ITE students from middle-income households will receive increased support, besides the substantial support that we will continue to provide for those from lower-income families. ITE bursaries for lower-income students will be significantly higher than their fees, helping them defray their living expenses.

D.23. These changes will together cost up to $147 million more each year. The Minister for Education will provide more details at the COS.

Enhance Healthcare Affordability

D.24. We are taking significant steps to enhance healthcare affordability for Singaporeans by introducing subsidies for MediShield Life, and expanding subsidies at Specialist Outpatient Clinics (SOCs). We will also raise CPF contributions to better provide for the future medical needs of Singaporeans.

MediShield Life Review

D.25. The MediShield Life Review Committee has been reviewing the various parameters of MediShield, taking into consideration the feedback received. It is reviewing benefits such as claim limits and co-insurance rates so that MediShield Life provides better protection against large hospital bills and reduces patients’ share of the bill.

D.26. Naturally, these significant enhancements will require higher premiums. However, the Government will ensure that premiums remain affordable for the lower- and middle-income groups. We will do so in two ways:

a. First, we will provide them with significant permanent subsidies, so that they can fully pay their remaining premiums out of their regular Medisave contributions. We will also provide further assistance for those in financial difficulties.

b. Second, to ease the transition into MediShield Life we will provide a subsidy to offset premium increases for the first few years, including for those who are higher-income.

D.27. We will finalise the details of the subsidies after the Committee has completed its work.

Specialist Outpatient Clinics Subsidies

D.28. We will also do more to keep outpatient care affordable for the lower- and middle-income group.

D.29. Today, all subsidised patients enjoy 50% subsidy on average for general Specialist Outpatient Clinics (SOC) services, including consultation and diagnostic tests. We will raise subsidies for lower- and middle-income Singaporeans to 70% and 60% subsidy respectively. This will be especially helpful for patients who require regular treatment at the SOCs because of their conditions.    The subsidies for SOC services will be implemented from September 2014.

D.30. Apart from SOC services, patients also have to spend on medication. We will similarly enhance subsidies for medication. However, as this has to be implemented across different healthcare settings, the enhancements will be introduced early next year. MOH will provide the details later.

D.31. To illustrate how these subsidies work, consider someone in his 50s who is lower-income and suffers from chronic illnesses such as high cholesterol and hypertension. These changes would mean reducing his annual SOC charges by almost half from $480 to $265, once the subsidies for services and medication are implemented.

D.32. An estimated 400,000 patients will benefit from the enhancements. It will cost an additional $123 million per year.

CPF Medisave Contribution Rate

D.33. Everyone has to play a role in meeting future healthcare costs. The Government is significantly increasing its support for lower- and middle-income individuals, and providing a special package for the Pioneer Generation. For individuals, as I mentioned earlier, MediShield Life premiums will go up so as to pay for the enhanced benefits they will receive. It is important for employers to play a role too in this national effort to provide for the future healthcare needs of Singaporeans. Indeed, it is in employers’ interest to have a healthy and motivated workforce.

D.34. We will therefore raise the CPF employer contribution rate by 1 percentage point for all workers. This increase will be channelled to the Medisave Account.

D.35. To help employers manage this increase, the Government will provide them with a 50% offset, through a one-year Temporary Employment Credit (TEC). Employers will receive an offset of 0.5 percentage points of wages, up to the CPF salary ceiling of $5,000. Both the CPF contribution rate change and the TEC will take effect from January 2015 to give employers sufficient time to factor the changes into their business plans. The TEC will cost $330 million. (Refer to Annex B-2.)

D.36. Our younger workers will benefit significantly from this increase, but so too will middle-aged workers. For example, a 40-year-old earning a wage of $4,000⁸ will increase his Medisave savings by $20,800 by the time he retires at age 65.

D.37. As a result of this adjustment, the overall CPF contribution rate will be 37%, with employers contributing 17 percentage points and employees 20 percentage points. At 37%, the overall rate is higher than the range of 30% to 36% that was targeted in 2003.

D.38. We deliberated on this increased contribution rate carefully, taking into account future needs. Compared to a decade ago, life expectancy has increased, and will very likely move up further in Singapore. The demand for healthcare services has also increased, as advancements in medical care become available.

D.39. We do not expect to make further changes soon to total CPF contribution rates, beyond this 1 percentage point increase. In the longer term, any further changes will have to be carefully considered by the tripartite partners, taking into account economic conditions, business costs and competitiveness.

D.40. With higher Medisave contributions, we will allow elderly Singaporeans to use a portion of their Medisave more flexibly across a range of outpatient treatments. This is on top of the existing Medisave withdrawal limits for specific chronic conditions and other treatments. The Minister for Health will elaborate at the COS.

Honouring our Pioneer Generation

D.41. Taken together, the review of MediShield Life – including the subsidies we will provide for Singaporeans – as well as our enhanced SOC subsidies, are significant improvements in healthcare accessibility and affordability. These are changes that we will sustain for the long term for all Singaporeans.

D.42. Let me move on now to the Pioneer Generation Package which provides a special package of support on top of these enhancements.

Criteria for the Pioneer Generation

D.43. As the Prime Minister has announced, the Pioneer Generation Package will be for the first generation of Singaporeans who were living and working in Singapore after we became independent.

D.44. The Pioneer Generation Package will thus be for those who were at least 16 years old in 1965. Within these age cohorts, we have – for practical reasons – included those who became citizens before 1987. This is because our manual records before that are incomplete with regard to the dates they became citizens. However, we know that more than 90% of those who became citizens by 1987 were already living in Singapore before 1970.

D.45. In total, about 450,000 Singaporeans fulfil the criteria. There may be people who marginally miss out on the precise criteria, but have good claims to be counted among the Pioneer Generation. We will hence establish a panel to assess appeals on a case-by-case basis.

Pioneer Generation Package Benefits

D.46. There will be three key components to the Pioneer Generation Package – Outpatient care, Medisave Top-ups and MediShield Life subsidies.

D.47. These special benefits that we are providing the Pioneer Generation will not be differentiated by income because our objective is to honour the contributions of this whole generation. However, members of the Pioneer Generation who are less well-off will benefit more where there are higher underlying subsidies for all lower-income Singaporeans – such as at the SOCs, as I have just announced.

(I) Outpatient Care

D.48. Many of the Pioneer Generation require outpatient treatment, either for common illnesses or for chronic conditions, such as diabetes and high blood pressure. We will provide them with additional subsidies in three areas:

D.49. First, SOCs and polyclinics. As I have just explained, we are increasing SOC subsidies for the lower- and middle-income. We will give the Pioneer Generation a further 50% off their subsidised bills at SOCs. What this amounts to is that all Pioneer Generation members will get a 75% to 85% subsidy for treatment at SOCs. Similarly, the Pioneer Generation will receive an additional 50% off their subsidised bills at polyclinics.

D.50. Second, Community Health Assist Scheme (CHAS) benefits, which are important because private GPs play an integral role in our primary care system. CHAS is currently targeted at lower- and middle-income Singaporeans. Under this package, all Pioneer Generation members will get more:

a. Those who are not on CHAS will now qualify;

b. Those already on CHAS will enjoy additional subsidies, which will be similar to our enhancements for the Pioneer Generation at SOCs and polyclinics.

D.51. Third, Pioneer Generation Disability Assistance. Those who have moderate to severe functional disabilities often face much higher long-term care expenses because they require assistance to feed themselves, bathe or move around. Under the Pioneer Generation Package, they or their nominated caregivers will receive cash assistance of $1,200 a year.

D.52. The subsidies for SOC and polyclinic services, as well as disability assistance, will be implemented in September 2014. The additional CHAS benefits will be implemented in January 2015. The Minister for Health will provide more details at the COS.

(II) Medisave Top-ups

D.53. The second component of the Pioneer Generation Package comprises annual Medisave top-ups of $200 to $800 for the Pioneer Generation. These are on top of the regular GST Voucher – Medisave payouts for older Singaporeans. Older Pioneer Generation cohorts will enjoy larger top-ups. The Medisave top-ups will be paid out from August this year. The Pioneer Generation can also look forward to the more flexible Medisave for all older Singaporeans, that I spoke about earlier. (Refer to Annex B-1.)

(III) MediShield Life Subsidy

D.54. Many of the Pioneer Generation, especially the older ones, are currently not covered by MediShield.

D.55. MediShield Life will cover all Pioneer Generation members, including those with pre-existing conditions. They will receive enhanced coverage for large hospital bills. We will also provide the Pioneer Generation a special subsidy to ensure that MediShield Life premiums are highly affordable for them.

D.56. The special subsidy will increase with age. All Pioneer Generation members will enjoy subsidies starting from 40% of the MediShield Life premium at age 65, rising to 60% of the premium at age 90. This means that a 65-year-old today – who is expected to live to 85 – will get a 50% average subsidy over his lifetime.

D.57. The MediShield Life Review Committee is currently reviewing the benefits and premiums, which will be ready later this year. However, the Government’s intent is clear:

a. For Pioneer Generation members aged 80 and above in 2014, we intend to fully cover their premiums through a combination of premium subsidies and Medisave top-ups.

i. This will be the case even for those who are currently not covered under MediShield, and who will now enjoy the benefits of MediShield Life.

b. For those who are younger, for example, aged 70 in 2014,

i. If they are on MediShield today, with the new premium subsidies and Medisave top-ups, we aim for them to pay only about half of their current premiums.

ii. If they are not on MediShield today, they will be brought onto MediShield Life. They should still pay less than current premiums.

D.58. The MediShield Life subsidies will be implemented in end-2015, when MediShield Life is rolled out.

Summary of Pioneer Generation Benefits

D.59. Let me summarise. All members of the Pioneer Generation will receive the special benefits of the Package regardless of income. They will also get it for the rest of their lives.

D.60. First, for outpatient treatment. They will get a further 50% discount on their subsidised bills in SOCs and Polyclinics. They will also receive CHAS benefits. These will be on top of the underlying subsidies. And for those with moderate to severe disabilities, they will get cash assistance of $1,200 per year under the Pioneer Generation Disability Assistance Scheme

D.61. Second, Medisave top-ups. The Pioneer Generation will receive $200 to $800 every year, with the older cohorts receiving more. This is on top of the annual Medisave top-ups in the GST Voucher. They will also be able to use their Medisave more flexibly for a range of outpatient treatments.

D.62. Third, MediShield Life will be affordable For those 80 and above in 2014, we intend to fully cover their MediShield Life premiums through a combination of MediShield Life subsidies and Medisave top-ups. For those who are younger, around 70 in 2014, we aim for them to pay only about half of their current premiums, with the rest covered through premium subsidies and Medisave top-ups, if they are on MediShield today.

D.63. I will explain how I will fund the Pioneer Generation Package later.

Further Help for Older Singaporeans

D.64. We want to provide more support for other older Singaporeans. As I mentioned earlier, they will benefit from subsidies for MediShield Life and the enhanced subsidies for SOCs. We will introduce further measures to help them.

5-Year CPF Medisave Top-Up

D.65. To help those not eligible for the Pioneer Generation Package with their healthcare expenses, I will provide a Medisave top-up of $100 to $200 annually over the next five years to Singaporeans aged 55 years and above in 2014. The vast majority, those living in HDB flats, will get $200 a year. (See Table 3.)This special top-up is on top of the annual GST Voucher – Medisave that those 65 and above can receive.

D.66. This is expected to cost around $440 million over 5 years.

CPF Contribution Rates for Older Workers

D.67. In recent years, we have boosted our support for older workers to help them remain meaningfully employed. Schemes such as the Special Employment Credit (SEC) and Workfare Training Support (WTS) encourage employers to hire and invest in training them.

D.68. Our efforts at improving the employability of older workers are showing results. The employment rate of older residents aged 50 to 64 has risen steadily from 56% in 2003 to 70% in 2013.

D.69. We had made a commitment in 2012 to give older workers aged 50 to 55 the same contribution rates as their younger counterparts. We made the first step in that year with a 2.5 percentage point increase. Smaller increases were introduced for workers aged 55 to 65.

D.70. NTUC has called for contribution rates for older workers to be increased this year. The Singapore National Employers’ Federation (SNEF) also supports some adjustments in contribution rates, but has cautioned that rates be increased gradually to preserve the incentive for employers to hire older workers.

D.71. Following consultations amongst tripartite partners, we will take a second step towards raising the contribution rates for them. This will be on top of the 1 percentage point increase in the Medisave contribution rate, which I announced earlier.

D.72. We will raise CPF contribution rates for those aged 50 to 55 by 1.5 percentage points – 1 percentage point from the employer and 0.5 percentage points from the employee. We will also raise the employer contribution rate for those aged 55 to 65 by 0.5 percentage points.

D.73. All increases in employer contributions will be allocated to the Special Account. As some older households may still be servicing mortgages, the 0.5 percentage points from employees will go to the Ordinary Account. (See Table 4.)

D.74. As a result of these changes, a 50-year-old worker earning a wage of $3,000⁹ will have $6,500 more in his retirement savings at age 65.

D.75. To help employers adjust, we will provide a one-year increase in the SEC of up to 0.5 percentage points. This comes on top of the existing SEC of up to 8% of wages, and will offset the increase in older worker contribution rates. This temporary increase in SEC will cost an additional $30 million.

D.76. Like the Medisave contribution increase announced earlier, the higher contribution rates for older workers, as well as the SEC offset, will begin from January 2015 onwards.

Enhancement of Parent Relief

D.77. I will also enhance income tax reliefs to give greater encouragement and recognition to individuals supporting their parents and grandparents.

D.78. I will increase parent relief and handicapped parent relief by up to $3,000, with those individuals who are staying with their elderly dependants enjoying a higher relief quantum. (See Table 5.)

D.79. This measure will benefit about 170,000 individuals, supporting 208,000 dependants. It will cost about $27 million a year.

D.80. Currently, the relief for a parent can only be claimed by one child. Following a public consultation last year, I will allow the sharing of parent relief in recognition that care for parents is a shared responsibility among family members. (Refer to Annex A-5.)

Greater Support for Persons with Disabilities

D.81. Our next set of initiatives for Budget 2014 concerns support for persons with disabilities. We have over the last decade significantly expanded support for them, to help at each stage of their lives.

Strengthening Early Intervention

D.82. We will enhance subsidies for the Early Intervention Programme for Infants and Children (EIPIC). For children with special needs, access to early intervention in the form of therapy and educational support services helps greatly in developing their potential and their ability to be independent. However, it is resource-intensive and therefore costs more, which places a higher strain on the finances of families with such children.

D.83. We will enhance subsidies so that more middle-income households can benefit. Those earning above median household income (up to the 80^th percentile) will now benefit from a further 20% to 50% subsidy, on top of an enhanced $500 base subsidy that benefits all Singaporean children enrolled in EIPIC.

D.84. For example, after the enhancements, a middle-income household with per capita income of $1,875 would pay less than $300 per month – compared to $600 previously, depending on the service their child requires.

D.85. Lower-income households will also see a decrease in monthly expenses. They will now pay a nominal monthly fee as low as $3, down from $50 a month today.

Transport for Persons with Disabilities

D.86. Our next set of initiatives is to reduce the cost of transport for the disabled community.

D.87. In January 2014, we announced a new government-funded fare concession scheme so that persons with disabilities who travel by bus and train enjoy 25% discount on adult fares. Beyond public transport, we will move decisively on two other fronts.

D.88. We will introduce subsidies of up to 80% for those who require dedicated transport services to access special education and care services. This will apply to the lower two-thirds of households.

D.89. There are also those who rely on taxis as they are unable to travel by public transport or tap on dedicated transport. We will subsidise those in the lower half of households through a new Taxi Subsidy Scheme, covering up to 50% of the cost.

D.90. The Minister for Social and Family Development will elaborate on these initiatives at the COS.

Enhanced Handicapped Dependant Reliefs

D.91. Finally, apart from the increase in reliefs for handicapped parents which I announced earlier, I will also boost support for individuals with handicapped dependants. Reliefs for those caring for a handicapped spouse, sibling or child will be increased. Starting from YA2015, each relief will be increased by $2,000 to provide greater recognition and support to these individuals. This measure will benefit about 11,500 taxpayers.

D.92. Collectively, these initiatives to support persons with disabilities will cost the Government an additional $30 million a year.

Additional Support for Singaporean Households

D.93. Finally, I will provide in this Budget some additional support, especially for lower-income groups and retirees, to help them with their costs of living. (Refer to Annex B-3.)

One-off GST Voucher – Cash: Seniors’ Bonus

D.94. Older Singaporeans are broadly most affected by increase in cost of living, especially retirees with little or no incomes. We will provide eligible Singaporean seniors with a special GST Voucher – Cash: Seniors’ Bonus (See Table 6). This will effectively double the GST Voucher – Cash that they usually receive. The additional cash will help them offset some of their daily expenses.

D.95. About 675,000 Singaporeans aged 55 and above in 2014 will benefit from this. This will cost $170 million.

One-off GST Voucher – U-Save Special Payment

D.96. We will also provide a one-off GST Voucher – U-Save Special Payment this year. The rebates will be larger for those in smaller flats (See Table 7). Through these additional rebates, eligible households will be able to free up cash for their other expenses.

D.97. This will benefit approximately 800,000 HDB households, and will cost the Government $110 million.

One-off Service and Conservancy Charges Rebates

D.98. We will also provide one to three months of Service & Conservancy Charges (S&CC) rebates. (See Table 8). 1- and 2- room HDB households will receive a total of three months of rebates for this year, while 3- and 4-room households will receive two months of rebates. This will cost the Government $80 million.

How Singaporeans will Benefit

D.99. These enhancements in social support outlined in Budget 2014 will help all Singaporeans, with a special emphasis on the needs of our seniors.

D.100. The Pioneer Generation will get assurance on their healthcare costs for the rest of their lives. (See paragraphs D.59 to 63 for a summary of the benefits to the Pioneer Generation.)

D.101. Our lower- and middle-income families will enjoy enhanced assistance for pre-school and tertiary education. They will also benefit from the increased subsidies at our SOCs, and they will receive subsidies for MediShield Life later on. In addition, they will benefit from increased employer Medisave contributions. Those who are older will also see increased CPF contributions. Further, our enhanced tax reliefs will help the large number of Singaporeans who look after their parents and grandparents.

D.102. Persons with disabilities will benefit from our increased support for early interventions when they are young. Our new transport subsidies will also help them in their schooling years, during their working lives and beyond. Finally, their families will benefit from the enhanced tax reliefs for handicapped dependants.