Lessons from Hong Kong's neighbours on health care reform
Alex He says transparency and better regulation can keep costs down
Hong Kong is now halfway through its three-month public consultation on health care reforms. A mix of cautious optimism and pessimism pervades society. Instead of getting locked into domestic debates, we should broaden our horizons and look at international experiences to contribute to discussions. A good place to start is health care reforms on the mainland, in Taiwan, South Korea and Singapore, which offer a rich menu of policy lessons.
The ultimate purpose of health insurance is to shield individuals and households against the financial risks caused by illness. However, there is ample evidence in East Asia that health insurance often promotes an excessive use of medical resources, which in turn fuels an escalation in costs. This is rampant on the mainland and in South Korea, where hospitals have both incentives and the leeway to provide unnecessary services.
In Taiwan, some of those insured take advantage of the generosity of their national health insurance by seeking excessive amounts of prescriptions. Thus, containing the increase in medical costs is vital to the sustainability of health insurance. It is, however, easier said than done, and ultimately depends on proper regulation of hospitals and doctors. Regrettably, Hong Kong faces a less-than-conducive environment to do so.
First, most people with voluntary medical insurance will seek care in the private sector, but the outdated regulatory framework on private care is a major hurdle. Lessons from South Korea are telling. In this private-hospital-dominated system, the government has few ways to control such hospitals, which are then able to exploit their market power by increasing the services and treatment with the greatest profit margin. Out-of-pocket payments in South Korea's total health spending are around 50 per cent, meaning patients continue to suffer financially despite having insurance.
The most cited criticism is the lack of transparency regarding fees and services. Hong Kong's private health care system has been historically underregulated, with the government possessing little critical information about the system. The forthcoming insurance scheme will provide the first opportunity to lay down a basic regulatory framework.
Singapore offers a good example of transparency. Since 2003, the government there has required all public hospitals to release their average bills for common conditions and procedures. The data is regularly published on the government's website to help patients make a choice. This initiative is due to be expanded to private hospitals. Evidence suggests it has led to a marked decline in hospital costs. Similar schemes could be used in Hong Kong.
The second obstacle to curbing rising medical costs is the payment mechanisms for private providers in Hong Kong, under which they are paid for every procedure, test and prescription. The painful lessons learned on the mainland and in South Korea show this system pushes up costs as it offers strong incentives to provide unnecessary services for profit. Alternative payment methods, such as payments per person, rather than per service, have dramatically reduced medical expenditure on the mainland and in Taiwan. Sooner or later, Hong Kong will have to join this global trend to cope with skyrocketing expenditure.
Finally, outpatient care should be properly integrated into the new insurance system. While it's natural for such insurance to cover mainly inpatient costs, there is evidence from rural areas on the mainland that bias against outpatient services may increase people's financial burden, especially those suffering from chronic diseases. This lesson is relevant to Hong Kong in light of the rising prevalence of diabetes, hypertension and other chronic conditions. The inclusion of selected outpatient services into the insurance plan will help increase its attractiveness to the young and healthy population.
