Table of Contents

HK J Paediatr (New Series)
Vol 2. No. 2, 1997

HK J Paediatr (New Series) 1997;2:166-168

Address by the President of Academy of Medicine

Towards A Sustainable Healthcare Policy

D Fang

Keyword : Healthcare; Financing

Adapted from an address to the Hong Kong College of Paediatricians on 30 November, 1996.

The past few years have witnessed very substantial changes to health care in Hong Kong. The Hospital Authority with its major managerial reforms backed by vastly improved funding has given public hospital services a complete facelift. An overhauled Medical Registration Ordinance brought new powers to a greatly expanded, more accountable but more autonomous Medical Council, tidying up basic licensing, and at last introducing specialist registration. Before that the Academy of Medicine was established by unique statute, invested with the laudable task of achieving and maintaining a high standard of medical practice through structured training and continuing education.

One critical issue however remains unresolved, and that is the Government's long term policy on health care, or more specifically health care financing.

The people of Hong Kong enjoy good health with life expectancy rising steadily for 3 decades. Infant mortality rate stands at 4.3 per 1000 live births, second only to Japan in Asia, thanks in no small part to the excellent care provided by the members of this College.

Although the population has remained fairly constant at about 6.3 million, statistics show that services under the Hospital Authority(HA) have grown remarkably.1 For instance, patients discharged from hospitals grew from 710,081 in 1992/93 to 840,885 in 94/95, an increase of 18.4%. Accident and emergency department attendances leapt by 23.61% from 1.4 million to 1.73 million, while specialist out-patient attendances increased from 4.4 million to 5.2 million, or 17.5%.

These data speak for the success of the HA, but the burning question now must be, can the standard be maintained and is the growth sustainable?

Government's stated policy is that no one will be denied adequate health care because of lack of means. However Government does not have a definite policy beyond this bottom line statement. Interpretations of what adequate health care means and who are the financially needy stretch the imagination and there is clearly need for better definition.

Official figures put the 1995-96 public healthcare expenditure at $24,300 million or 12.7% of the total public expenditure.2 This compares with $7,724 million or 9.8% in 1990-91, and $3,439 million or 8.7% in 1985-86.3

It is quite obvious that the present growth is not sustainable, unless there is a shift in healthcare policy that recognizes the responsibility of the individual end-user.

Our economy is maturing and we are growing at closer to 5-6% GDP rather than the double digits of developing economies. Hong Kong thrives on low taxation and at current levels of taxation it is unforeseeable that growth in public healthcare expenditure will continue to outstrip that of GDP.

We also have a rapidly ageing population. 9% are now over 65 years but by the year 2000 they will reach 11.3%. Elderly people use up three times the resources necessary for health care, while medical inflation due to new technology and drugs always far exceeds general inflation. Public expectation on the other hand is now leaning heavily towards unlimited and high quality services at little or no cost to the user.

Many possible solutions to the impending downturn in healthcare spending have been proposed. Firstly, users could directly pay more. Currently they are paying 3% of in-patient and 20% of outpatient costs. This percentage should rise steadily to a more realistic level. A gradual increase is perhaps the least controversial solution and one which can be simply implemented. Of course more of the lower income groups will need to be exempted and these will include most of the elderly and the chronically ill.

In 1995 the Health and Medical Development Advisory Committee (HMDAC) proposed to the Secretary for Health and Welfare (SHW) to set up a publically accountable body that would determine the scope and the target population for highly subsidized hospital services. This transparent body should define which services (core) should be highly subsidized for all, and which (non-core) should not. Those who could afford to pay should be charged a reasonable fee for non-core services. This proposal failed to be adopted because of technical problems in implementation, but more importantly because of opposition from Legislative Council members representing the large and influential middle class.

An attractive model that has been studied is the Singapore Medisave Scheme.4 Under this scheme individuals are encouraged to share responsibility for their own health by saving part of their monthly income for future medical expenses. Contributions vary from 6 to 8% depending on age, and savings are managed and invested by the government. The savings are in the personal account of each individual and provides cash to pay for hospital and other expensive medical bills. This model has proven very successful and the number of patients relying on heavy government subsidy dropped from 66% of hospital admissions in 1982 to 19% in 1994. The Medisave balance grew from $3 billion to $11 billion between 1984 and 1994. For those with chronic and serious illness, supplementary insurance under the Medishield scheme can be purchased out of Medisave accounts. Sadly what works for Singapore may not work for Hong Kong, particularly under the present political climate.

There has been a call, mostly from the insurance industry, to encourage voluntary private insurance. Currently 14% of the public have some form of private health insurance. So long as public services are entirely affordable and also of high quality the need to purchase insurance will not really be there. Further the so-called administrative costs are usually very high, at 25% or more, and people with chronic illnesses or pre-existing conditions are often excluded. Therefore unless there is a major policy change, and Government is willing to set more stringent requirements to effectively monitor the insurance industry, it is difficult to see further growth beyond the present 14%. However private health insurance will continue to appeal to those who demand personal attention, free choice, and easy access.

Recently Government has been studying managed care as a viable option. Managed care is said to offer a modern-day solution to runaway healthcare costs by champing down on fees for service, through capitation, which is a fixed disbursement per capita for a given period. There are numerous variations of managed care in the U.S.A. but most schemes are controlled by a third party, which can be a giant for-profit company listed on the New York Stock Exchange, whose earnings have tripled or quadrupled within 2 to 3 years.

Basically these companies will sell schemes to large and middle-sized employers. They will then offer doctors' groups a fixed annual amount per capita for comprehensive care of a predetermined number of patients, irrespective of the amount of services that will actually be provided. This is like our previous school medical services scheme. The doctors stand to gain financially if patients visit them less frequently and if less investigations are ordered, less referrals to specialists and less hospital admissions made. Beyond a certain break-even point additional services output by the doctors lead to a net loss or negative income. Thus there is an incentive for doctors to save on healthcare resources. On the one hand they can do so by providing the minimum necessary, at the risk of losing future contracts. On the other hand they can save through greater efficiency and more effective prevention.

Managed care is going through some radical reforms in the U.S., spurred by consumer discontent over quality and lack of choice. However not all managed care schemes lead to a compromise of quality. Some HMO's and managed care organizations such as the non-profit Kaiser Foundation do provide quality care at affordable prices. One leading authority has said that doctors in the USA have neglected to look after their own interests, losing control of their finances and even their practices to middlemen, and that it will take 20 years before the doctors are back in control of quality two-party healthcare schemes.

In response to the "Rainbow Document" of the Government, there is also the managed interface model proposed by the HA. This is, to quote, "a comprehensive service delivery scheme whereby healthcare services and providers are organized under one or multiple purchasing agencies who act as consumer advocates, purchasing healthcare packages on their behalf, specifying standards and evaluating service quality". Primary care providers are again the gate keepers controlling the use of more expensive secondary and tertiary care services. Before this proposal can apply, we must give primary care a gigantic push, and revolutionize the control of the healthcare budget.

In order for any savings plan to succeed, the present disincentive to save, that is virtually free health care, should be reduced. The public must be educated on the individual's healthcare responsibilities. Incentives should be instituted on the other hand to provide and to join the different schemes whether run by public or private institutions.

In case any of the above, or better, schemes are adopted, the principle remains that no one will be deprived of adequate care through lack of means.

It remains to be seen whether Government has the political will to establish a long term policy, for even now the waiting time for non-emergency specialist outpatient and inpatient services is becoming unacceptably long. The estimated public healthcare expenditure for 1996-97 is $24,755 million, a mere 1.9 per cent increase over 1995-96. The HA has already seen the necessity to enforce budget savings in all its hospitals. The utopia of high quality, highly subsidized and easily accessible care is rapidly fading before us.

Certain Legco members have called for reaching into our much-brandished Government reserves, citing the relatively low percentage of GDP spent on public health. If the Government should ever yield to their demands, the opportunity for an economically sound and sustainable healthcare policy will be forever lost.

Hong Kong must learn from the bitter experience of drastic cutbacks in healthcare spending by the American, Canadian, Australian and other western governments, or we will certainly be forced to manage our healthcare financing by crisis.


1. An Introduction to Hospital Authority, Hospital Authority, May 1996.

2. Health and Welfare Branch, Hong Kong Government.

3. "Health Care Expenditure as a Share of GDP" (Revised on July 30, 1996), Census and Statistics Department.

4. "Health Care Financing - The Singapore Model." Address by Dr. Kwa Soon Bee to the International Health Federation Pan Regional Conference and Hong Kong Hospital Authority Convention, June 14, 1996.


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