I note that many MPs have supported the principle of means testing and agree that subsidies, whether for healthcare, education, housing or other livings costs, should be targeted according to need.

I also agree with Mr Loh Meng See, Mr Zainul Abidin and the others that we need to proceed carefully. Mr Gan Kim Yong has suggested that MOH adopt a multi-tiered approach, rather than an all-or-nothing framework to determine the subsidy level, with an appeal mechanism for deserving cases. I think that is a workable pragmatic strategy. We have to make judgments. We have to look at many factors. It is not just his pay, it is not just his wealth. It is his family obligations, his family circumstances, his needs, his outlook. A judgment has to be made but we should avoid having a step function, where a small difference in the judgment makes a big difference in the subsidy which he gets. There has to be some smoothness in what he gets.

The step-down care sector and the primary care services, which means the community hospitals, nursing homes and home nursing, where means-testing has been running since July 2000, use a three-tier subsidy level. We have some experience doing this. We will continue to accumulate experience. I assure MPs that we will try and learn how it works in practice and we will consult extensively before settling on the rules for expanding means testing to other parts of the healthcare sector.

As we target our medical subsidies at those in need, we will also need to ensure that healthcare remains affordable for the middle income group. Our current 3M health financing framework is quite sound - Medisave, MediShield and Medifund. Our Medisave is actually a very important part of this scheme. We introduced it in 1984. The amounts have been building up gradually. On average, Singaporeans are saving more than enough in their Medisave accounts to provide for their needs - themselves and their families. If we look at the CPF accounts, each year, contributions to Medisave amount to about $2.5 billion, while withdrawals amount to only about $1 billion.

So for most Singaporeans, affordability is not a problem. The problem arises if you are unlucky, because not everybody has the same medical expenses. $1 billion is on average. But if you happen to have an accident or a serious illness requiring expensive treatment, you may be in trouble. So there is a problem. The solution to that is to make greater use of medical insurance, beyond MediShield, to cater for non-catastrophic illnesses, so as to stretch the Medisave dollar. It has to be properly designed - there must be co-payments, there must be deductibles. But I think with risk-pooling, with Medisave, we can make the Medisave dollar go further and we can lift the worry which many people have, that is, just in case, they have kidney disease or are incapacitated, who is going to look after them and how they are going to cover this. This is something which MOH is studying.