Ihave reservation for the proposed Voluntary Health Insurance Scheme (VHIS) which is designed to ease the pressure on the public healthcare sector, allowing it to better serve those who cannot afford the health insurance while relieving the government of a financial burden.

Unfortunately, things are not going to work out that way. There are two possible scenarios. One is that the proposed regulated insurance ends up failing to attract a sufficiently large number of enrollees. This is quite likely, as services covered by the insurance and provided by private hospitals may not be really superior to those provided by our public hospitals. If so, there will be very little effect on the demand for public heatlhcare services.

The other scenario is that the regulated insurance product turns out to be highly successful, with many enrollees. The assumption in this case is that private healthcare services are widely considered to be superior. It can happen either because private hospitals perform very well, or public hospitals perform very badly. But in order for our private hospitals to do really well, they will have to poach top medical staff in the public healthcare sector to the private hospitals. This would mean that those stuck with the public healthcare sector will get a raw deal.

The hard reality is that Hong Kong as a whole is short of medical staff. Today, there is as much manpower shortage in the private sector as in the public sector. In 2003, for each in-patient discharged from or died in our public hospitals, there was 0.184 in-patient discharged from or died in our private hospitals. In 2013, the figure had already climbed to 0.233. In 2013, there were 3,882 private hospital beds, up from 2,902 in 2003. This compares with 27,400 beds in Hospital Authority (HA) hospitals, down from 29,533 beds in 2003.

With further expansion in the private hospital sector, the role of public hospitals is expected to decline even more. The under-staffing problems in our public hospitals will only get worse. A vicious cycle of overwork leading to exodus of staff, which, in turn, leads to even more overwork, and even more resignations, which, in the end, is going to ruin the reputation of our public healthcare sector.

This kind of dichotomy will not work well for Hong Kong society. After all, Hong Kong's working class generally do not earn a lot of money. Our household median income is about HK$22,900 per month. Most people still have to rely on the public healthcare sector. Maintaining the quality of our public healthcare is important.

Of the two scenarios that I have described, it is likely that enrollment will be low to start with, and adverse selection will render the private voluntary scheme unprofitable, putting pressure on the government to inject more money to subsidize the scheme. The government plans to inject HK$4.3 billion in subsidies for high-risk patients over a 25-year period, and to offer HK$256 million a year in tax rebates as an incentive to attract enrollment.

The government planned subsidies seem to me to be unrealistically low. It can be expected that more money will have to be injected into the scheme to keep it afloat. Instead of alleviating the drain on the public purse, the likelihood of even larger spending seems unavoidable.

It is much better if we take the public hospitals as the backbone of inpatient care for the people of Hong Kong, and to fund it adequately, both through direct appropriation from the annual budget and user charges. I have been advocating an "Excessive Burden Protection Scheme" for all. This means that user fees are to be raised while total annual user fee payments are to be capped at, say, 6% of household income divided by three.

Spending beyond the cap will be fully paid for by the government. A lower annual cap may apply to poor people who pass a means test. Just as the proposed insurance premiums rise with age, so the annual cap will also rise with age, to reflect the higher cost of caring for older people.

However, I would propose that the annual cap for the elderly be fixed at three times the regular rate. Because typically the cost of caring for the aged is generally five times or more the cost for caring for younger patients. In other words, the average subsidy for the elderly will actually be higher than that for others.

Raising user charges and capping elgible healthcare expenses is much simpler than the VHIS, which should be reserved for those who seek coverage beyond the basic standard care package that is available under the HA system.

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

(HK Edition 12/23/2014 page1)