Healthcare Policy Forum Newspaper Article Series:
Helping or harming the public healthcare systems?
George Cautherley, Convenor, Healthcare Policy Forum
The proposed private healthcare insurance scheme will benefit everyone, says the SAR government. The proposed scheme will benefit not only people who can afford private healthcare insurance (PHI) but also those who cannot, as well as the insurance industry. According to the government, the objective of the scheme which is relevant to those who cannot afford private healthcare insurance is this: through encouraging the uptake of PHI, the pressure on and thus the waiting lists in the public healthcare system can be eased. For those who cannot afford PHI then, it is entirely legitimate to ask whether the promise can be delivered, particularly when the uptake of PHI is going to be subsidized by public money. Given international experience, we are concerned that not only is PHI not likely to help the public healthcare system, but it may actually harm the system in time.
Indeed, one of the consultancy reports committed by the government has provided some evidence in this regard. Reviewing related literature, the consultancy reports that "there is as yet no concrete evidence" that PHI can relieve pressure on public hospitals. Citing Australia's PHI experience as an example, the consultancy says that the conclusions from different academic studies on the topic are mixed. Summarizing the findings of an OECD study on PHI, the consultancy writes: "PHI has not significantly assumed financing burdens from the public sector. Cost shifting from publicly to privately financed providers in systems with duplicate PHI has remained small."
In addition to the government consultancy's research findings just cited, we would like to supplement a couple of others here. Regarding Australia's experience, a study by an academic at La Trobe University is worth noting. The study concludes that it "has confirmed the findings of previous overseas studies that suggest that increased private sector activity is associated with increased public sector waiting times, the reverse of the rhetoric supporting policies to increase support for the private sector in order to take the burden off the public sector'." This study at the same time echoes the view of the Canadian Health Services Research Foundation that the hypothesis of reducing waiting time in the public sector through expanding the private sector is a "myth".
Concerning the experience of OECD nations, another study on five OECD nations by academics at the University of Toronto is equally important not to miss. It says: "International evidence provides no grounds for believing that the existence of a privately insured sector parallel to the public sector reduces overall waiting lists or times." "Waiting lists for publicly financed services are likely to respond to infusions of public, not private, finance." "Indeed, a resort to private finance is, on balance, more likely to harm than help publicly financed systems For those who would seek to improve publicly financed systems, the locus of reform efforts must remain the public system itself."
The findings that PHI cannot help but may in fact harm the public system are not difficult to explain. In the short to medium run, the supply of crucial medical resources, in particular medical personnel, is constrained and highly inelastic. Expanding the private sector will only draw resources out of the public sector and thereby reduce its capacity. Greater competition for limited supplies of medical resources between the two sectors will also bid up the prices of these resources. Cost inflation will result.
The private sector has an incentive to "cherry pick" the most profitable cases and less complicated cases while referring less profitable and more complicated cases to the public sector. If private wards and care services are available in the public sector, such perverse incentives will be further enhanced. Patients with PHI in this situation will also have an incentive to use private facilities in the public hospitals for more complicated illnesses. Given the general lack of critical-care facilities in private hospitals, public hospitals at the same time have to serve as a backup for all serious adverse contingencies in private hospitals. In the end, as an academic writes in the context of Australia, "nearly all emergencies and most of the oldest, poorest and sickest patients will be cared for publicly". There is evidence in Britain that length of stay in public hospitals is longer in areas with high levels of private inpatient services. Data from Australia also suggest that average complexity of cases is higher in public than in private hospitals. With shrunken capacity but increasing complexity of cases, that pressures on public hospitals will increase rather than reduce should be expected.
In systems where doctors can practise in both the public and private sectors simultaneously, there is yet another perverse incentive which bears on the length of waiting lists in the public sector. As payment levels are in general higher in the private sector, doctors may have an incentive to maintain lengthy waits or manipulate waiting lists in the public sector in order to increase demand for their private practice. Indeed, the OECD study studied by the government consultancy mentions this particular issue, as it writes: "In some countries, incentives created by higher payment levels in PHI markets have also encouraged providers to maintain long queues in the public system or refer patients to owned private facilities in order to sustain their private practice."
The government consultancy projects that PHI would relieve the patient load of public hospitals. However, it seems that its projection has neither modeled in the shift of medical personnel between the public and private sectors nor the long term supply of medical personnel. It is also unclear whether the projection has taken into account the perverse incentives of providers mentioned above - the perverse incentives of cherry picking and maintaining lengthy waits.
In the government consultation document, only the issue of healthcare manpower is discussed. There is no mention of the two perverse incentives of providers. The government even indicated recently that doctors might be allowed to practise in the private and public sectors simultaneously and expanding private facilities in public hospitals. All these add to our worry that the proposed private healthcare insurance scheme will only benefit people who can afford PHI and the insurance industry at the expense of the public system. The case that the proposed scheme will benefit everyone remains to be made by the government.
An abridged version of this article was published in SCMP on 25 October 2010.
除上述政府顧問提及的研究外，我們可再補充兩項相關研究。澳洲La Trobe University一位學者就澳洲經驗的研究有這樣的結論：研究再次證實其他國家早前的研究發現擴大私營醫療市場與公營醫療部門輪候時間的增加有關；這恰巧與支持擴大私營市場以減輕公營部門壓力的政治口號相反。
The above does not necessarily represent the views of the Foundation. Reproduction of the presentation requires written permission from the author.