Your Health Your Life: What Options Did the Health Reform Bring to the Table?

The current healthcare system in Hong Kong is fraught with challenges. The rapidly aging population is leading to an unprecedentedly great demand of healthcare services. Statistics show that people aged above 65 accounts for 10% to 11% of the population in 2003, and projection indicates that the proportion will likely expand to 13.3% in 2016.

Besides, the healthcare system in Hong Kong is facing questionable financial sustainability. Rising medical costs due to innovation of medical technology and sophisticated training for medical professionals hinder the affordability and accessibility of the citizens towards quality medical services; the government has expanded public expenditure on medical services since 1990. The latest figures show that government budget on medical services constitutes of 4% of the city’s GDP in 2016, which is incoherent with the overall GDP growth of the city. The public and the government are both restrained by the financial pressure.

Apart from the financial predicament, low services efficiency and insufficient communication between public and private medical sectors, primary care and tertiary services, are drawbacks impeding the current healthcare system. Dominating the healthcare system, public hospitals are severely overcrowded while the private medical resources are hardly made the utmost use of. Statistics show that 95% of the population enjoys their in-patient services in public hospitals, while only 30% for the out-patient services. The quality of medical services has been inevitably undermined because of the ‘compartmentalized, hospital-based delivery system’.

In order to improve the medial services quality and better cater to the urgently expanding demand of healthcare services, the HKSAR government has embarked a comprehensive healthcare reform targeting the integration of public and private healthcare resources, enhancement on affordability and accessibility towards healthcare services, thus, to feasibly improve the long-term sustainability of the healthcare system.

Here we take a closer look on some of the popular options and proposals that are less appealing amongst the six options offered by the government.

First stage of public consultation on healthcare reform

Adopting the values and principles of social policy, the SAR government introduced “Your Health, Your Life”, a whole package of proposals for healthcare reform on 13 March 2008 for the first stage of public consultation. The purpose of these proposals is to relieve the pressure on the existing healthcare system by improving the services delivery and rationalizing the financial arrangements.

Hong Kong is a prominent aging society with more than 10% of the population aged above 65.
Photo by Emily Peng.

I. Social health insurance: favored by 30% of the population
Social health insurance (SHI) requires the working population to contribute 1% to 2% of their salary to finance healthcare for the population as an ensemble. The underlying notion of this proposal is calling for working people and their employers to pool the funds and share the risk, hence to cover a package of health services available to the insured and their dependents.

This proposal has gained the approval of merely around 30% of the population. One of the prominent features of this proposal is its function of wealth redistribution and risk-pooling due to its mandatory nature. More specifically, it extends financial risk protection to a larger proportion of the population, or provide better services protection to those who has already been covered. This extra financial security is seen to enable a greater number of people to enjoy primary healthcare services without incurring expensive out-of-pocket payments, making universal coverage more approachable and feasible. It also guarantees an equitable access to healthcare services for all members in the community because of the fund pooling effect, where the rich are able to shoulder the financial burden of the poor.

Critics have it that the tax-liked insurance scheme will impose financial burden on the working population with no solid guarantee of a judicious distribution of money. Some also expressed concern about the high administration cost embedded will significantly restrain the cost-effectiveness of the fund.

II. Medical savings account

Medical savings account (MSA) requires working individual to save a certain proportion of their salary and pay for their own medical needs in the future.

Such scheme has been practiced in Singapore, China, United States and South Africa over the last two decades. MSAs purport to ameliorate some of the major deficiencies unbridled in private health insurance, namely escalating costs, moral hazards, intentionally adverse selection, and gaps between coverage and actual co-payments. The scheme also encourages the healthy and energetic working population to take precautions beforehand, which can enhance their sense of self-responsibility towards their health. And with the individuals holding accountable for their future medical bills, financial pressure of their next generations will be reduced, which is a provident remedy to cope with an aging society like Hong Kong.

However, concerns have been expressed due to MSA’s mandatory nature. Similarities shared by MSA and Mandatory Provident Fund (MPF) hinder the mass incentive to participate to the scheme. The community worries the high administrative cost will only benefit the private sectors instead of the community members who are truly in need. Lack of risk-pooling effect may put the low-income groups and high-risk people into jeopardy. Last but not least, inadequate detail upon the specific time limits and regulatory usage of the money results in hesitation and disapproval of the public.

III. Voluntary private health insurance: most popular

Voluntary private health insurance (VPH) encourages citizens to purchase private health insurance plan in the market voluntarily. It means that individuals can choose among the health insurance products available in the market in accordance with their respective medical and financial conditions and their preference. This scheme is the status quo in Hong Kong, with approximately 70% of the middle class already staying insured. It also has gained the most approval from the society during the first stage of consultation, with 71% supported whereas only 13% opposed among all the supplementary financing options, where middle- and high-income groups account for the majority.

This scheme has been favored because it offers a wide range of alternatives for the citizens to choose, safeguarding their autonomy on making their own choices based on a voluntary ground. Moreover, for those who are capable and are willing to pay more in order to receive private medical services with better quality, they are entitled with the freedom to do so, which, on the other hand, is able to alleviate the pressure imbalance between public and private healthcare sectors.

Shortcomings of this scheme are suggested by a few people, as they are worried about the capability of the scheme to ensure a continuous and full-rounded health security for the underprivileged and the high medical risk groups. Private insurance companies are more likely to turn down those consumers with pre-existing conditions for policies renewal, in some cases with significant increase on reinsurance premium. As such, it has failed to meet the principle of a sound and responsible healthcare system as it violates the code of access equity.

IV. Mandatory private health insurance

Mandatory private health insurance (MPH) requires a specified group of the population to subscribe to a regulated private health insurance scheme for their own healthcare protection. Different from the voluntary private health insurance, it is mandated to be taken out under legal framework on a population-wide basis. Premium for MPH is usually community‐rated, i.e. all the insured irrespective of age, gender and health conditions are charged the equitable premium for the same insurance plan covering the same benefits.  Besides, the government will take care of the premium for the low‐income and under‐privileged groups by making direct payment for them or offering subsidy. This scheme received moderate level of support from the public, with 44% supported and 31% opposed in the poll, trumping the tax increase option.

The strongest merit of MPH can be seen as the guarantee of risk-pooling because it is mandatory in nature. It realizes a continuous and non-selective healthcare security whereby all the members in the community are able to enjoy the protection. Because the mechanism is run by the industry but monitored by the government, market malpractice can be maximally reduced by government’s proper intervention.

MPH’s mandatory nature also incurred major opposition against the scheme. The relatively healthy working population opposed the scheme because they regard it as an unfair approach to demand them to pay the equal amount of premium as those with higher medical risks. Some business groups also differed with the employment-based scheme because they remain skeptical pertaining whether MPH can offer a universal coverage based on such ground. Overuse and abuse of medical resources are also brought into concern because of the moral hazards occurred to both the insured and the healthcare services providers, whereby driving up the premium for MPH.

V. Personal health reserve

Personal health reserve (PHR) is a combination of the Voluntary private health insurance and the Mandatory private health insurance.

PHR has combined the virtues of both VPH and MPH, creating a stable pool of finance resources to sustain the accessibility and financial capability of a certain group of individuals towards the medical services they demand. By combining the saving scheme and the insurance scheme, PHR not only accommodates the current medical needs but also taking precautions for the future medical demand. It could also effectively ease the burden of public healthcare sectors for it streamlines the public pressure by enabling people who are financially capable to make the utmost use of private healthcare services.

Nevertheless, PHR also intergraded certain drawbacks of both VPH and MPH. The complexity of the scheme attracts worries on a high level of administrative cost, hence leading to sky-high premium which far exceeds the affordability of most of the community’s members. Also, people are concerned that by introducing the PHR, a two-tiers services structure will be incurred, where those who has subscribed to PHR will enjoy better quality medical services and those who are not covered by PHR are only entitled to a second-class treatment.

Second stage of public consultation on healthcare reform

After the first stage of public consultation, the public has expressed both consensus and divergence towards the six supplementary financing options proposed by the government. On one hand, the society has recognized the necessity of healthcare reform based on three reasons, which is the rapidly aging population, rising medical costs and pressure imbalance between public and private healthcare systems. On the other hand, the public worried about the implementation of a sustainable healthcare system which is able to cater to the majority of the population.

During the first stage of consultation, the public generally expressed preference towards the voluntary private health insurance while prevailingly oppose the options with mandatory nature. Having considered extensive public opinions, one year after, the government proposed that for the public healthcare system, they are going to strengthen the safety net; for the private healthcare system, they are going to launch the Health Protection Scheme, which encompass a comprehensive medical financing scheme called Voluntary Supplementary Healthcare Financing Scheme (自願醫保計劃). The design of this scheme has combined the major appeals public has towards the healthcare reform. It strengthens the government’s regulation on market operation while reserves partial autonomy for the market to function by itself.

Shortly after the launch of the insurance scheme, Dr. Ko Wing-man, the Secretary for Food and Health of Hong Kong, announced that the to-be-launch-next-year voluntary healthcare financing scheme has been further modified with the high-risk pool reinsurance mechanism, the no turn-away policy, lifelong renewal, and portable insurance plans being held back temporarily.

Medical financing has been discussed in the government agenda over two decades. To find and design a best healthcare model to fit Hong Kong can be a bold exploration, and there is no litmus test for that. Yet, there is still a long way ahead to go, which requires the government and the community to closely and efficiently collaborate as an ensemble and aim at the same goal.

Reporter: Sarah Wong

Editor: Emily Peng

Copy Editor: Cassadee May Wong

Content Manager: Emil Aaby

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