The SAR government is presenting its latest proposal on healthcare financing to the Executive Council Today. News reports say it will feature incentives for voluntary participation in private health insurance. The proposed incentives, if successful in increasing participation, will siphon off a significant number of patients from public hospitals to private ones, relieving much of the burden on the Hospital Authority (HA). With many patients siphoned off to private hospitals, the proposals are presented in the hope that access to care in public hospitals will also become easier, involving shorter queues and allowing an improvement in quality as well.

Unfortunately, there is little reason to believe that the proposed scheme will fly. The greatest problem with it is that unless people subscribe to top-up plans, the services covered will be no better than what is currently available in public hospitals. If so, why should people subscribe to the basic plans?

The government is under strong pressures, indeed, seen to be obligated to continue to offer healthcare services to the public at the same level as today or better. Indeed, since the basic coverage proposed will not cover the more costly kinds of care, the government sees the HA as the caregiver of last resort, particularly in complex cases that require advanced expertise and equipment. The question that will not go away then, is "what is the point?"

What is even more disheartening is that premiums are expected to increase as people get older, rising to about HK$5,500 a year for those 60 or above - though a "no claims" bonus would apply to healthier individuals. Moreover, on top of the premiums, co-payments or deductibles will be required. Clinic visits will not be covered. Deductibles chargeable for in-patient care would amount to HK$2,000 for the first HK$10,000, HK$9,000 for the next HK$90,000, and HK$11,000 for costlier operations or procedures. In the case of chemotherapy, up to HK$40,000 may be payable by the insured. These represent onerous payments, on top of the insurance premiums.

If the services to be obtained in private hospitals are no better than those made available in public hospitals but require more out-of-pocket expenses in addition to the premiums, the odds are that people will simply not subscribe to them, notwithstanding government incentives.

There is also a rising public concern about the quality of care in private hospitals, which must be addressed by the government. At present, medical incidents in private hospitals must be reported to the government, but they may be concealed from the general public. In contrast, all medical incidents at HA hospitals have to be made public. There is concern that private hospitals have been too much influenced by the profit motive, that their quality is perceived to be no better than that of public hospitals. If so, "why bother?"

To the extent that the government is spending public money to provide incentives, certainly some people would respond, and sales by private insurers will rise. But it is quite unlikely that the number of subscribers will be enough to cause a material difference to the caseload at public hospitals. The incentives for people to take up private insurance will be seen as just another arrangement to boost business for the private sector, similar to the widely held perception of the Mandatory Provident Fund.

Still, there are some good points in the report. The consultants who prepared it list maximum claims for various surgical operations. Setting the prices right is important because if it is up to the caregiver to set the price, insurance coverage will soon be depleted. If the prices are set too high, there is a strong possibility that medical procedures will be driven by supply-side demand. Caregivers who seek profit may simply recommend more services than are necessary for the patient.

If I were the government, instead of spending money on incentives to purchasers of private insurance, I would use a "price and cap" strategy. "Price and cap" simply means raising the charges at public hospitals to more reasonable levels. That will allow capturing, say, 10 per cent of the cost instead of the current 3 percent; at the same time capping the annual out-of-pocket eligible healthcare expenses to no more than HK$5,000 for everyone under 45, and no more than HK$15,000 for those over 65, would spare citizens the need to buy "basic insurance". Coverage would be universal and automatic. Individuals could still have the option to buy "top-up" insurance. With the additional resources made accessible through the higher charges, patients will receive better care. The poor will be allowed a lower cap and be subject to 50 percent discount for all charges. I would also make available a "Lifetime Healthcare Supplement" of HK$300,000 available to each citizen. This would be discretionary on the part of the patient, subject to the lifetime limit and a requirement that patients make matching payments on the amount paid out. For the poor, I would match HK$3 of supplementary benefit for every dollar of patient contributions.

The author is director of the Centre for Public Policy Studies, Lingnan University.

(HK Edition 09/28/2010 page4)