Issue 235

April, 2008

For Your Own Good:
What is Wrong with the Healthcare Reform Consultation Document?

Dr. SHAE Wan-chaw

(Dr. Shae Wan-chaw is associate professor of Department of Applied Social Sciences, Hong Kong Polytechnic University)

The government’s recently released Healthcare Reform Consultation Document ( makes a powerful case for a drastic financial reform of Hong Kong’s public healthcare system from one that is largely funded by government general revenue to one that involves mandatory medical insurance and medical savings accounts. Its argument is based on the following core assumptions:

  1. That individuals should be responsible for their own health. The current healthcare system, by subsidizing 95% of the healthcare costs, does not encourage people to do so as they have little incentive to use public health service in a more discreet manner.
  2. That advances in medical technology is the major factor for the escalation of public health expenditure. Future advances will almost definitely lead to further increases in the costing of public healthcare services.
  3. That with an aging population, the situation could only get worse.
  4. That the current system is financially as effective as it could be, further room for improvement in effectiveness is limited. Any further improvement in public health services could only be done by either rising tax bills or reduced funding for other public services.

Given these assumptions, the inference that the current system will not be sustainable in the long run seemed impeccable. However, these assumptions are not incontestable, and it is in the interests of the public they be openly debated. There are at least two issues with regard to its logic of inference, namely, that the need for such a drastic reform is over exaggerated; and the options suggested would accelerate rather than control the escalating healthcare expenditure, though it may lighten the government’s responsibility by increasingly tightening the belts of the public.

Assumption 1 is simply not true. We live in a world full of risks and hazards where individuals have little choice or control, hence the importance and justification of risk-sharing, through a largely publicly funded healthcare system. Many patients use public healthcare services (especially emergency services) because that is the only service available to them. And the level of payment can always be adjusted should the government want to minimise the rising healthcare costs caused by service-users. More troublesome is the rising healthcare costs caused by service-providers which the Document has under emphasised.

There is no doubt that there are some elements of truth in assumptions 2, 3 and 4; but they are not the whole truth. The aging population, for example, is as much a social reality as a social construction of reality. Leaving aside the right of abode issue of ‘mainlanders’ born of Hong Kong parents, the mandatory retirement age policy creates many financially dependent ‘seniors’ who would otherwise be still economically active, thus contributing toward the government’s general revenue while at the same time also reducing their demand on healthcare services (retirees’ health conditions tend to deteriorate faster than non-retirees). In the financial year of 1988/89 (that is, before the establishment of the Hospital Authority), public health expenditure was HK$5.673 billion, or 8.7% of total government expenditure. In 2007/08, public health expenditure rose to HK$30.5 billion, or 15% of total government expenditure. Clearly, these increases cannot be accounted for by the combination of advances in medical technology, an aging population, and improved services. The Harvard Report (1999) has already pointed out that while the overall annual growth rate of hospital beds from 1993 to 1997 was 3.8%, the overall annual growth rate of HA staff in the same period was 5.5%, with consultants being 15.2%, and management 17.4% respectively (Harvard Report 1996:46, Table 4.15). Of the 4,935 doctors employed by the HA in 2006/07, nearly a third of them (1,512) are associate consultants or above, costing the HA more than HK$4 billion per year. Again in 2007, the salaries of the top 5 highest paid executives alone consumed more than HK$18 million (Hospital Authority Annual Report 2006/07). With almost 83% of the recurrent public health expenditure going to Hospital Authority personnel, it is of course unlikely that any minor adjustment of the current system (such as fee-raising or cut down on drug subsidies) that leaves their salaries and packages intact would have any significant impact on the level of public expenditure.

Nor do the economic laws of supply and demand apply to the private sector of healthcare. As is well known, physician earnings in the private sector are high both in comparison with physicians overseas and other professionals in Hong Kong Fees for procedures in Hong Kong’s private sector are substantially higher than those in US, even after adjustments for cost of living differences (Harvard Report 1999:50-51). Although the numbers of doctors in Hong Kong increased from 1.45 per 1,000 people in 1997 to 1.63 in 2002, the Hong Kong Medical Association’s (2003) Doctors’ Fee Survey 2002 found that the median consultation fee did not drop accordingly. Instead, it rose by 14% from 1999 to 2002. Over the same period the average annual increase in income was merely 0.86%; and the aggregated consumption goods index dropped more than 3% per year (Hong Kong Economic Times, 8 April 2008, p. A3). This shows that the market for medical and health services is not a ‘free’ one. Already there are voices that doctors in our public hospitals are underpaid, hence ‘the great exodus’ of them into the private sector where they can earn ‘real money’. But this is precisely my point, any further increase in healthcare expenditure, public or private, that does not involve a radical restructuring of the Hospital Authority, a holistic healthcare manpower policy, and regulation of the health service pricing system would easily end up in the drain.

In an attempt to gain more popular support for a mandatory medical insurance scheme, the Secretary for Food and Health has recently announced that a mechanism to monitor and standardize private medical fees will be set up if such a scheme is adopted in a financing revamp (The Standard, 31 March 2008, p.2). While this is a laudable move in itself, it is not clear why the government has done nothing for so many years, and why it has to be tied to the adoption of a mandatory medical insurance scheme. Moreover, it is unlikely that such a mechanism in itself would succeed in lowering private medical fees in the long run without reforming the ‘fee-for-service’ payment method and increasing the supply of healthcare professionals at the same time.

The argument behind Assumption 4 even came close to intimidation. The Document bluntly states that ‘If we do not reform the healthcare system and its financing arrangements, and need to meet the increasing public health expenditure by the public purse to avoid the level and quality of public services from declining, you will be affected by either of the following situations’, namely, ‘rising tax bills’ and/or ‘reduced funding for other public services … [such as] education, social welfare or security’ (p. vi, #12). This misleads people into a forced but false choice. Take security as an example, in 2007-08, the government spent HK$24 billion on security, or 11.7% of its recurrent expenditure. As of 2007, the Hong Kong Police Force has an establishment of 32,404 officers. In other words, there are roughly 476 officers per 100,000 people. This compares favourably with other metropolitan cities such as Tokyo (358), London (413), or New York (461). Not to mention we also have close to 4,000 auxiliary forces and another 1,200 forces under the Independent Commission Against Corruption. Neither does Hong Kong’s crime figure justify such a huge force. In 2007, there were only 80,796 criminal offences; meaning that each police officer has only 2.49 cases to deal with in the entire year, compared with 6.6, 6.28, and 3.19 cases per officer per year for Tokyo, London, and New York respectively (2007 figures for London and New York; 2002 for Tokyo). Moreover, the security force as a whole had enjoyed higher rises in the more affluent years of the 1990s, and suffered less cuts in the lean years of the early 2000s, both in terms of salary levels and manpower numbers. It is simply not true that some public services should not receive a ‘reduced funding’. If the government is unable to control the costs of our public services, is it fair to shift this burden to the public by coercive means such as mandatory health insurance and medical savings?

This comes back to the issue of whether we need a drastic reform of our current system. Hong Kong has the lowest infant mortality rate among all modernised societies; its people’s life expectancy at birth is second only to Japan. Hong Kong men’s life expectancy even surpassed that of Japanese men since 2005 (OECD Health Data 2005). All these have been achieved by a relatively low level of health expenditure. In 2004 total health expenditure accounted for a mere 5.3% of GDP (2.9% for public health expenditure alone). Even the Document acknowledges that Kong Kong’s current healthcare system is one of the best in the world; and if so there is absolutely no reason why the system should be changed drastically. An alternative way of interpreting these figures is that the health condition of a population is the result of numerous factors, where both the quality and quantity of healthcare services may only be of secondary importance. There is a certain level of healthcare services beyond which further investments would yield little improvements in terms of health benefits. This interpretation does not lend support to the Document’s recommendations either. There is ample international experience to support the prognosis that a mandatory health insurance would result in an uncontrollable escalation of healthcare costs, often without concomitant health benefits; and simple arithmetic calculations would demonstrate that mandatory medical savings would be of little help to those in need. Whereas financing our healthcare service out of government general revenue at least has the additional advantages of being both flexible and politically accountable. Tax rates and government expenditure levels may rise and fall, subject to the government’s policy priorities and legislative monitoring, which ideally reflects changing social conditions and public demands rather than just political bargaining and lobbying; whereas the setting up of a statutory body to look after the mandatory scheme would create yet another runaway monster which major preoccupation will be the ceaseless pursuance of its own interests, just like the Hospital Authority and other similar bodies.

Nothing in the above analysis suggests that health is unimportant, that there is no room of improvement for our healthcare services, or that we should not invest more on them. On the other hand, even if the government is flooded with surplus, as it currently is, it still does not automatically justify an increase in public health expenditure. Whether it should do so depends on two considerations – whether it can bring real benefits commensurate with the increased budget, and whether the public wants to, after balancing the pros and cons of an expanded budget for public health vis-a-vis that of other public services. And the public can only make such a decision ‘rationally’ if they are provided with sufficient information. Despite its being voluminous, it is not immediately apparent that the Document has been successful in doing this. But the impression that the government is figuring out our level of affordability so that it can tap as much of our incomes as possible into such services without at the same time doing its best at controlling healthcare costs is appalling. Not only does it undermine the government’s self-professed legitimating ideology of ‘small government, big market’, it also goes against the very idea of holistic health itself. Surely the former should mean the respect of individual initiatives rather than the adoption of draconian measures by the government to create a ‘big market’ for healthcare and insurance industries. Likewise, the holistic conception of health does not mean that the government should force people to pay more for their health. Rather, it highlights first and foremost the importance of our ability to negotiate physical and social realities both cognitively and emotionally, to make informed choices and to act upon them over sustained periods of time. But for most people the proposed ‘options’ are more likely to be debilitating than empowering. Ultimately, the Document is beset with a paternalist-managerialist mentality that not only runs against this ideal, it is also self-contradicting - it wants to maximise people’s access to healthcare but does not want to increase public expenditure or streamline its bureaucracy; it wants people to receive the best available medical treatment but does not want to better coordinate its services or regulate healthcare costs. It can only lead to its (il)logical conclusion: coercing people into buying insurance and/or saving money ‘for their own good’ without confronting vested interests. If the government can coerce us to buy medical insurance this time, we may be forced into buying other things in future. Whether this is an ethically justifiable position is for all of us to judge, and act accordingly.


Last Updated : 25/04/2008