Hong Kong, a city internationally renowned for its high standard of living, quality social services, and its attraction as a global tourism destination, is facing a crisis when it comes to the provision of local healthcare services. This issue is this; Hong Kong is one of the most expensive places to seek medical treatment in the world, in fact according to many insurance companies Hong Kong is tied with Israel for second place in terms of most expensive healthcare costs, just behind the USA. Offering high quality public healthcare services that are heavily subsidized by the government has allowed this reputation to continue in recent years, yet the Government of the SAR is starting to feel the pressure on the budget with billions of dollars being spent on healthcare every year, with the actual figure of healthcare expenditure set to rise by 2011 to HK$ 48 billion (US$ 6.15 billion).
This is a serious issue for Hong Kong, and contributing to an already grim situation is the fact that the number of elderly persons in the city is expected to double by 2028, couple this with the elderly’s increased need for healthcare and general medical inflation around the world and it becomes fairly obvious that this is a situation that needs addressing. In fact, when examined closer it seems that the problems that Hong Kong is experiencing are running along the same lines as those associated with the American healthcare system, namely that large amounts of money are being spent for little or no return while the overall cost of medical services and treatment continues to rise at the fastest rate ever.
The solutions being proposed in the most recent public consultation on healthcare in Hong Kong are extremely varied. Ranging from purely out-of-pocket payment to personal healthcare reserve, the 6 options all have their pros and con’s and a number of these choices sound like some of the ones being thrown around by American political parties in the primary elections. Below is a brief outline of the various options being suggested in Hong Kong:
- Out of Pocket Payments
This option, as the name suggests, is fairly straight forward. An out-of-pocket healthcare scheme would force all but the poorest Hong Kong residents to pay for their treatment out-of-pocket. However, under this option the government would continue to subsidize public healthcare services and slightly raise the prices associated with all treatments. So while members of the public would see medical costs rise, the overall cost of medical treatments would still remain relatively low.
- Social health insurance
A social, or national, health insurance scheme would force members of the work force to contribute a pre-determined percentage of their monthly salary towards the public healthcare system. This is an initiative that is already in place in a number of other countries and one that has experienced a large amount of success around the world. However the major complaint the Hong Kong population has with this proposal is that it would be in addition to a number of taxes already in effect. Currently middle class citizens in Hong Kong have to pay a 15% income tax and a 5% mandatory provident fund tax (forced retirement fund). The introduction of a social health insurance scheme would see an additional monthly tax of 5%, bringing the annual middleclass tax rate up to 25%, an extremely large amount for a place with a worldwide reputation for relatively low taxes.
The major benefit with this proposal however, would be with regards to the fact that medical costs will continue to remain low, and people will not have to delve into their personal finances in order to receive quality treatment.
- Medical Savings Account
This option would work along the lines of a disaster relief fund. A specific portion of the Hong Kong population (namely the lower and middle classes) would be required to contribute money into a specially created fund in order to meet any future medical costs. People with these accounts will have the option to invest the money that they save, much along the lines of the Mandatory Provident Fund scheme, and all monies accrued in the fund can be used to pay insurance premiums, so in actuality this type of proposal is extremely flexible and comprehensive. However it does not address the issue that many employees in Hong Kong receive health insurance coverage through their job, so an enforced extra account would hurt their monthly salaries, much in the same way as the social health insurance idea.
A medical savings account could potentially be an extremely effective solution. However individuals should be able to ‘opt out’ if they so choose. In order to do so they should have to prove that they have coverage through some other means, or in the case of many expatriates living in the city, that they will not remain in Hong Kong for long enough for this scheme to be of any practical use. Outside of this the medical savings account proposal would still create a higher ‘tax’ if you will as individuals must contribute.
- Voluntary Private Health Insurance
Hong Kong has an extremely vibrant insurance industry, and this proposal would involve creating incentives for individuals to obtain private health insurance rather than depend on the government funded public healthcare services. Giving individuals a dollar-for-dollar tax break on all health insurance premiums would help to ensure that Hong Kong residents obtain more protection without actually hurting their own finances to the extent of the other reform ideas.
A voluntary insurance scheme, with incentives (such as tax breaks etc.), would ease the pressure on the government in terms of funding, ensure that a large portion of the Hong Kong population is able to receive coverage under their own health insurance, and create a safety net for an aging population. The other direction that could be taken with this idea is to force employers to provide their employees with some form of medical coverage, so in the event of a catastrophic situation the burden of provision would be taken off an already strained healthcare system
- Mandatory Private Health Insurance
This proposal would force every Hong Kong resident to obtain health insurance, much like the previous ‘voluntary’ idea, but on a ‘must do’ scale. While the suggestion of health insurance is good, it is the mandatory part that potentially creates the issue. If this scheme were enforced then there would most likely be the creation of ‘preferred’ health insurance providers, much in the same way that there are only a certain number of MPF funds. This would stagnate the thriving Hong Kong insurance industry in addition to creating insurance policies that only cover the most basic necessities.
One of the questions asked with the ‘mandatory’ health insurance scheme is with regards to regulation and what will be done to ensure that adequate coverage is provided. Not every individual will be able to afford the better quality plans, and this could potentially lead to a whole host of individuals who are ‘under insured’, a problem that the USA is experiencing at the moment, and this is something that will contribute to even more issues with the Hong Kong healthcare service.
- Personal Healthcare Reserve
The personal healthcare reserve proposal is a mixture of the Medical Savings Account idea and the mandatory health insurance initiative. This proposal would require a specific portion of the Hong Kong population to deposit savings into a personal account which would then cover the costs of private health insurance before and after retirement. These accounts would be linked to investment options with a view to building up capital for a person’s retirement and thereby creating a ‘retirement healthcare fund’. In this sense the Personal healthcare reserve idea is extremely similar to the MPF scheme as the goal is to force individuals to set aside healthcare funds for their retirement.
So there you have it, the 6 ideas currently being floated in regards to reforming the Hong Kong healthcare system. Essentially these changes are only targeting the middle and upper classes of society as the government has promised that it will retain its commitment to low-income and underprivileged elements of Hong Kong society. However the proposals as they stand at the moment will potentially have a massive impact across all of Hong Kong.
It is not only Hong Kong that is experiencing these types of issues, the costs associated with medical treatment around the world have been getting more expensive, and medical inflation is at an all time high. Nations that run a national healthcare system, and nations that operate on open market ideals alike are facing trouble, and although Hong Kong may not have the answer, it is starting to look at the problem before it becomes even more of an issue.