HKUST recently hosted its first Business Insights Presentation Series of 2011. The topic du jour was healthcare financing. Professor Siu Fai Leung, Department of Economics, HKUST presented on the state of the healthcare system in Hong Kong and potential new plans in the works.
History of healthcare
Leung started off by explaining what exactly Hong Kong health reforms have been, “You may think of [them] as being characterised as a steady stream of documents, each about the government in the last 17 years or so.” These documents list the suggested changes in improving the Hong Kong health system.
Leung gave some interesting facts; Hong Kong has the second highest life expectancy in the world, with men expected to live 79.4 years, women even longer. He then showed a graph of public healthcare expenditure as a percentage of GDP, “The expenditure is low by international standings, at only 2.5% of total GDP, compared to over 10% in Canada.” Updating the statistics on hospital beds, he noted that 20% of the beds in Hong Kong are now found in private hospitals. He also noted that Hong Kong has close to two doctors and roughly 5.5 nurses per 1,000 people. Just looking at these measures alone, it would appear that Hong Kong has an impressive health care system.
He went on to show the figures of projected health expenditures. In 2010 the total was around HKD 14,500 per person. This number is expected to increase as high as HKD 33,300 per person by the year 2030. These figures are based on current healthcare reforms.
To cover new reforms, the government has earmarked HKD 50 billion. It has not been decided how the money will be spent.
My Health My Choice
The government has recently released a new healthcare proposal called My Health My Choice. It is a detailed proposal on what the government will be doing, and the way it would like to reform the healthcare sector. The government has been quick to note that they will not change, but in fact continue to increase spending in the healthcare sector. Leung highlighted, “The government wants to provide choices to the public, so they will keep on spending money, but they also want to have specialisation.” The public healthcare system wants to focus on these target services:
- Acute and emergency care
- Care for low-income and under-privileged groups
- Catastrophic illness requiring professional teamwork, advanced technology and high cost
- Training of healthcare professionals
For any other issues, the government would like to steer people to use the private market.
In order to do this, the government wants to introduce an insurance system. Thus, the Health Protection Scheme (HPS) has been devised. The goal is to steer people towards using the private sector, and encourage them to rely less on the government thus allowing the government to better focus on the target areas mentioned above. With key components, such as:
A government supervised and
regulated scheme
Reducing public queues to better focus on target services
Enhancing transparency and competition in the private healthcare system
For a comparison of benefits, please see Table 1 below.
Leung pointed out that the HPS is not a long-term solution and said, “The government hopes that the private sector will accept these deals in issuing underwriting policies.”
What is covered by the HPS
The basic HPS will cover:
- Hospital admission and ambulatory procedures
- Specialist out-patient consultations
- Chemotherapy or radiotherapy for cancer
Leung noted that primary care is not covered. He also noted that the government would like the insurance companies to provide ‘top up’ coverage like maternity leave. Any ‘top up’ coverage will not be regulated and is completely optional. He also pointed out that with this scheme, high-risk groups must be covered.
Government response and evaluation
On 7 January 2011, the HPS reform scheme went to the government for deliberation. Shortly after, they released a statement which Lung summed up, “The ballpark premium is around HKD 100 per month, with the government maybe contributing double that.” Under the HPS, the HKD 50 billion will be used as a matching fund for any premiums. “The scheme will encourage policy holders to save, with the aim of finding 500,000 people to join the scheme.”
Leung provided his evaluation of the scheme, “This is a very complicated scheme, that has been well thought out with several reports. The question is: is insurance a good way to relieve healthcare financing? From an economic viewpoint, it is a good idea to pool the risk together and have every person share it. This will decrease the cost for every-one. In the future, we will have to rely on insurance to pay for our expenditures, as we will not be able to afford large medical expenses on our own. The big question is: Should this be compulsory— like Canada or voluntary— like in the US? Through much debate, it has been found that Hong Kong prefers voluntary insurance, hence My Health My Choice.”
From a different point of view, Hong Kong is a smaller market, with no public insurance, so the government may have a tough time introducing a public health insurance scheme, as public insurance will demand a set rate. Currently in Hong Kong, there is a competitive market for private health insurance, and if the government starts to regulate the market, we will see a decrease in competition amongst healthcare plans. Leung notes, “The cost of implementing this scheme will be high to begin with, and you will need a very complicated regulatory body, which is not seen in any other country…It will come down to Hong Kong to choose what to do with this scheme.”
My Health My Choice and HR
While this reform has not been implemented yet, and it is unknown at the time of writing if the government will actually decide to reform at all, there could be large changes in the way HR managers work with insurance companies. The biggest change is that there will be a regulatory body dictating what is covered and not covered in health plans. While there will be a drop in overall insurance costs, there could be a rise in cost of additions, such as dental and overseas travel, to the health plan of employees.
Leung pointed out, “Healthcare reform in many countries is very controversial, and generally reforms are a disguised income redistribution from the middle class to the lower class. With most reforms, you encourage the middle class to put in more money, while the lower class will not have to contribute.” If this does happen, companies could see more and more of the middle class just staying with private healthcare or insurance.
If the reform is adopted, then HR managers will have to learn a new set of rules and regulations, and will have yet another insurance scheme to talk about with their employees. Interesting times are ahead for HR managers, insurance companies and healthcare industries in Hong Kong.
Paul Arkwright
Publisher
