Government sets prices to recover costs not make profits

1. I refer to Mr Wu Yan Tai (???)'s letter (LHZB, 27 Feb 07), Medicine from public hospital costs more than that in private clinics! (????????????!) asking how the government sets its charges for fees, goods and services to avoid overcharging the public.

2. The government has several measures in place to ensure that public sector agencies do not set fees higher than necessary. All government agencies are allowed to set fees and charges at a level that only recovers the cost of services provided. If there are market comparables, government agencies are required to price their fees and charges at the comparable market rate even if they are below full cost recovery. Government agencies are required to review their fees and charges annually.

3. The government keeps its costs down through stringent procurement policies, and achieves cost savings through initiatives like the Economy Drive, Cut Waste Panel, and e-Government. These savings have helped to prevent fees and charges from rising despite inflationary pressures. For example, water charges, driving licences, HDB flat transaction fees, sports council facilities usage fees, and marriage registration fees have remained unchanged since 2002.

4. Mr Wu raised the specific example of healthcare expenses, citing that a certain anti-diarrhoea medication is priced higher in the SGH pharmacy than in a private one. The government does not control the prices set by hospitals or clinics. Instead, it relies on market forces and disclosure to help keep prices at reasonable levels. For non-prescription medications, competitive pressure from private sector pharmacies helps to keep prices in polyclinics and restructured hospitals down. For other medical costs, the government publishes the bill sizes for common medical procedures in order to allow public hospitals to benchmark against one another.

JACQUELINE POH
DIRECTOR (FISCAL POLICY)
MINISTRY OF FINANCE