BACK

POLICY PAPER

MORE PAPERS

Health Care for the Community into the 21st Century

HEALTH CARE FOR THE COMMUNITY INTO THE 21st CENTURY

A frequent and persistent accusation is that the Government has no policy on health care, a charge which is not allayed by the Green Paper "Towards Better Health".

Despite its laudable and somewhat utopian intentions, the statement that "no one should be denied adequate medical treatment through lack of means" does not add up to a policy on health care in itself. A proper policy must define as clearly as possible exactly what services the public sector should provide, what they will cost in total and how they will be paid for. To try and determine how a service will be funded without clearly defining in the first place what service is to be provided is putting the cart before the horse and renders the debate on the funding of health care a somewhat futile exercise.

The Hong Kong Democratic Foundation's (HKDF) view is that a proper comprehensive policy on the provision of health care services for the community must be established as a matter of urgency. The formulation of such a policy should be arrived at through addressing the following broad issues:

the desired mix of public and private health care services

the integration of the provision of primary health care and other ancillary services with secondary and tertiary health care

the role of the Department of Health

the real present cost of providing public health care service.

measures required to control the cost of the provision of both public and private health care services, including the fostering of a more competitive environment among providers

incentives to steadily move the consumption of health care services away from the public to the private sector

Health care is a very complex subject under any circumstances, but more particularly so in the Hong Kong context where so many factors have not been fully quantified, so that those who wish to enter the debate cannot do so from a properly informed perspective. Under these constraints, the HKDF cannot set out a detailed blueprint to represent a panacea for the ills of the present health care system. The most we can do, based on the best information available to us, is to sketch out the directions that might be followed in order to achieve a system of health care, encompassing both public and private providers, that offers a standard of service that satisfies the consumers at a cost the community is prepared to shoulder.

The system We Have Now

Hong Kong's present health care system consists of a mixture of public and private provision of services. The public sector provides about 90% of secondary and tertiary care facilities (including 23,400 hospital beds), with the private sector's share of these being only 10% (including 3,000 hospital beds). Whereas, conversely, it is estimated that the private sector delivers as much as 85% of primary care, with the public sector's contribution being only 15%.

Essentially, public services are available to all in the community at a nominal cost. However, the drawback to the public sector is that the system is overloaded, resulting in a generally poor environment and with the exception of the Accident & Emergency services, the general public mostly can only access it at considerable inconvenience.

The setting up of the Hospital Authority (HA) to run the public sector secondary and tertiary facilities has resulted in moves to address the problems of the public service and there is no doubt that improvements are gradually being implemented.

Private sector services are available to all who can afford to pay for them. However, the relatively small share of secondary and tertiary facilities accounted for by the private sector is indicative that the vast majority of the community do not have adequate financial resources to enjoy private medicine on a regular basis. Never the less, if estimates are correct that 40% of those using the private sector secondary and tertiary services are from households below the HK$14,000 per month income level, there is a strong desire in the community to use the private sector in preference to the public sector.

What Is the Cost Of Our Present Public System?

The present cost of our public system of health care is estimate in the Government's 1993/4 budget to be HK$14,690 billion, of which HK$12,340 billion is allocated to the HA for secondary and tertiary services and its Specialist Outpatient Clinics. Therefore, total public health care expenditure works out to be approximately HK$2,600 per person per year. Interestingly, the HA's share has fallen from 86% of the total for the 1992/3 year to 84% of the total for the 1993/4 year. Is this an early indication that its initiatives to implement professional management principles in the operation of its services are enabling it to control costs more effectively than the Department of Health might appear able to?

However, the cost of the public health care service as published in the Government's estimates and accounts is not the true actual coat. The Government figures do not reflect certain fringe benefits enjoyed by Department of Health staff, as these come under a separate account. No value is ascribed to the land occupied by public service health care facilities, for which the community has in fact paid through forgoing the revenue that this might have generated to the public purse if purchased on the open market. Also, various services such as laundry provided by the Correctional Services Department, provisioning by the Government Supplies Department, engineering by the Electrical & Mechanical Services Department, architectural and other services by the Planning, Environment and Lands Branch etc may not be accounted for in the Government's figures for health care expenditure of HK$14,690 billion.

What system Might We Be Looking For?

The facts that 85% of primary health care is provided by the private sector and that 40% of those using private sector secondary and tertiary facilities are below the HK$14,000 per month household income level would suggest a very strong bias in the community towards private medicine.

THE PRIVATE SECTOR ROLE

Under such circumstances, we should be seeking to encourage the shifting of the burden of provision of secondary and tertiary services from the public to the private sector, over a period of years.

Some impetus for this shift will be provided by the development of an increasingly affluent community, through the continued growth of our economy, more of whom would be prepared to pay for private medicine or whose companies would be prepared to assist through the provision of medical benefits.

However, additional initiatives are needed to accelerate this process. There is probably considerable scope for the private provider. of health care services to become more cost effective through the implementation of better management practices and this would be hastened by the provision of more competition in the private sector. In this respect a key requirement is the retraction of the prohibition by the Hong Kong Medical Council and which is supported by the Hong Kong Medical Association, against the formation of closed panels of doctors by medical insurers, which effectively prevents the development of managed care groups such as Health Maintenance Organizations and Preferred Provider Organizations. Also, a sensible relaxation of the requirement for doctor referrals for certain paramedical services and in respect of advertising by doctors would help create a more open and competitive market. Additionally, it should be mandatory for doctors to prominently display their list of charges and to ensure any patients referred to a private hospital by them be fully aware of the hospital's charges.

THE PUBLIC SECTOR ROLE

As an increasing share of the provision of health care services moves over to the private sector, the public sector would take on the role of safety net in the provision of medical care to society, catering primarily to the economically disadvantaged and probably assuming much of the responsibility for ensuring the availability of "high cost" treatments, such as transplants, certain types of cancer therapy and even AIDS management.

Since the provision of effective primary care has a crucial bearing on the need for secondary and tertiary services, it seems an anomaly that the provision of this should be left to a separate body and it would be logical if this function was incorporated into the sphere of activity of the HA, which then could more appropriately be renamed the Health Authority (HA).

An additional service that would benefit if it were integrated into direct ambit of our proposed HA would be the Ambulance Service.

THE ROLE OF THE DEPARTMENT OF HEALTH

The Department of Health ought to have no involvement in the provision of any type of health care service. Its role should be concentrated on the development of health care policy and the regulation and monitoring of all the providers services for health care needs.

How Do We Handle The Cost?

A policy must be developed to restrain the growth in the cost to the general revenue of the provision of public health care services.

CONTROLLING THE COST

A prerequisite for this is to establish the real cost of our present public system, based on modern accounting practices and standards. Medical equipment should be capitalized and depreciated, not taken into recurrent expenditure and accrual accounting should be employed. Once this is known a programme should be implemented to see if and where economices might be made without reducing the level of provision of service. Next we need to ascertain whether this type and level of service is acceptable to the community at its present cost and, if not, the needs and cost tolerance should be established, so that this can be used as the basis for future planning.

It would be sensible for four or five year plans, including cost estimates, to be established and towards the end of these cycles a review of the public's view of the service provided and future expectations be undertaken to provide the basis for planning the next cycle.

Annual expenditure should be indexed to the inflation rate, with the proviso that improvements should always be sought so as to try to keep the cost of providing the existing services, at least at the same standard, below the rate of inflation.

The granting of additional funds over and above the provision to compensate for inflation, to provide for expanded or enhanced services should be governed by a formula based on, but not necessarily commensurate with, the rate of growth in GDP.

The system should allow the HA the flexibility to offer relevant services to the private sector, where it is either the only provider or can do so at a lesser cost. The revenue generated would be retained by the HA. In cases where the private sector can provide services cheaper than the HA, it should not hesitate to contract these out to the private sector, where practicable.

However, in practice, it should be expected that as more and more people are able to transfer to the private sector, there will be a reduction in the level of provision of service the HA will need to provide. This could well result in it being appropriate for the HA to sell off some of its facilities to the private sector.

With regard to charging for public sector services, we do not believe the community wishes to see any significant change from the present system and therefore we do not recommend that it should be changed to any great extent.

We do not support suggestions that the HA should recover some of its costs through the provision of semi-private beds, partly because we doubt that the general public would embrace such a scheme, preferring to go the whole way and use the private sector and partly because we believe it is best that the HA be seen as a provider of public medicine only.

Consideration should be given to the possibility that the well off should only be allowed access to the public sector system if they pay for the full cost recovery of the services they receive.

INCENTIVES TO GO PRIVATE

As stated earlier, we believe the creation of more competition in the private sector will result in lower costs and thus enable more members of the community to transfer.

Competition in the private sector should also enable the insurance industry to offer more affordable coverage with acceptable benefits and thus act as an incentive for a wider segment of our community to convert to private medicine.

The HKDF believes that there is a good case to be considered for the Government to provide financial assistance to encourage the less well off to take up medical insurance.

At present medical insurance covering an adequate level of in-patient and out-patient service can be obtained for an annual premium of around HK$3,000 per person. The HKDF proposes that the Government institutes a pilot scheme whereby it issues vouchers to 300,000 people, not presently covered by health insurance, subsidising the cost of purchasing a year's worth of health insurance.

If the Government was to offer a subsidy to these 300,000 to the tune of an HK$1,000 contribution towards the cost of the purchase of their private insurance, it would cost the public purse only HK$300 million for a year and, if at a subsidy level of HK$1,500 per person, HK$450 million. However, it would probably move at least 30,000 patients out of the public hospital system and considerably more out of the public outpatient system. Based on the HA's 1993/4 forecast expenditure of HK$12,340 billion, for a cost of HK$300-HK$400 million (2.4%-3.6%) depending on the level of subsidy, 5% of the present public hospital patient population would be switched to the private sector, effecting a worthwhile saving.

On the assumption that the pilot scheme proved to be successful, it would probably be economic to extend the voucher private insurance subsidy scheme to well over 1,000,000 people.

Conclusion

As the Clinton Administration experience over the reform of health care seems likely to demonstrate, there is no such thing as a quick fix. Health care expenditure has become so much of a juggernaught that it will take years to turn around. This is a fact that we must bear clearly in mind as we embark on our own debate as to how to handle the issue of health care in Hong Kong.

What we need to do is to work towards a steady implementation of improvements and reform in our system. We should seek to establish a framework that is flexible enough to accommodate, at one end of the private sector, a Rolls Royce service for those who wish to and can afford to drive down that road, through a permutation of schemes down to the Honda Jazz service at the other end, yet underpinned with a safety net of a good standard, very low cost, public sector service for those whose circumstances are insufficient to enable them to entertain private medicine.

Hong Kong Democratic Foundation
October 1993