Apparently, there is a high degree of convergence in views on the importance of a sustainable healthcare system to the continuous provision of quality heathcare services to our community.

It has long been the Government's policy that no one will be denied adequate medical services due to lack of means. Over the years, the public and private sectors have served different but complementary roles, and together, have provided comprehensive health care of a high standard to the Hong Kong community.

The health indices achieved by our health care system are enviable. In 2002, the life expectancy at birth was 79 for men and 85 for women. The infant mortality rate reached as low as 2.4 per thousand live births in the same year, almost the best in the world.

While our existing healthcare system has served us well for many years, it has to evolve to meet the challenges. At present, our public health care services are heavily subsidised by general revenue. Fee income accounts for 4% of the Hospital Authority's recurrent operating budget.

The share of the public sector in the overall supply of services has been large. Over 90% of hospital services rendered to local residents are provided by the Hospital Authority. In this current financial year, the public sector healthcare recurrent allocation amounts to $31.9 billion, or 14.3% of the total recurrent public expenditure.

We expect the healthcare cost to continue to grow for several reasons. First, our population is ageing. At present, 11.7% of our population are at 65 or above, and we expect this figure will increase to 18.7% in 20 years' time.

Community aspirations will put pressure on healthcare costs

Older citizens have a greater cumulative risk of chronic illness and disability, requiring more intensive medical and rehabilitative services. Second, new technologies tend to be financially expensive and need to be managed to ensure they are appropriately applied and effectively used. Third, people tend to ask for more and better healthcare services as the community gets more affluent.

The ever-increasing community aspirations will put further pressure on the total cost. Of course, this is not unique to Hong Kong. 

In fact, there has been a decade-long debate on Hong Kong's healthcare financing policy. The first important milestone dated back to more than a decade ago when the document "Towards Better Health", or more commonly known as the "Rainbow Document", was published by the Government in 1993.

This consultation document highlighted the need for reform of our healthcare financing system. A total of five options were identified, including percentage subsidy approach, target group approach, co-ordinated voluntary insurance, compulsory insurance, as well as prioritisation of treatment.

As none of these options or a combination of them could attract an emerging consensus in the community, the status quo was preserved at the end of the consultation exercise.

Harvard study recommended Health Security Plan

In 1997, the Government commissioned the School of Public Health of Harvard University to conduct a study on the healthcare system and to recommend necessary changes. The final report of the study was published in April 1999, in which the consultants pointed out that the long-term financial sustainability of Hong Kong's healthcare system was highly questionable.

As a possible solution, the consultants proposed a Health Security Plan which would require a mandatory contribution of 1.5% to 2% of the salaries from the working population. This proposal was however not well received by the local community. In fact, it was rejected almost outright.

Opponents pointed out that while the concept of risk-pooling was appealing, it would involve inter-generation subsidisation; and given the ageing population and the declining percentage of young people in our society in the future, such an approach would put undue funding pressure on future generations.

Consultation document maps out three directions

In December 2000, taking into consideration the response to the Harvard Report, we proposed in the "Healthcare Reform Consultation Document" the pursuit of three strategic directions to address the issue. These three directions are:

* containment of costs and enhancement of productivity;

* a revamp of public fees structure; and

* initiating studies to assess the feasibility of establishing Health Protection Accounts in Hong Kong.

The consultation document gave rise to intense public interest. At the close of the four-month consultation period, over 700 written submissions were received from all sectors of the community. We had also attended a total of 152 briefing sessions with different stakeholders.

We noted from the public response that there was an undisputed consensus on the need for reform and many of our reform proposals in fact received wide support from the public. We are proceeding in pursuit of these strategic directions.

Efforts to cut costs, boost productivity ongoing

We always believe that the first place to look for better use of resources is from within the organisation. Reducing costs and enhancing productivity can yield significant savings for redeployment, and this effort must be a continuous one.

With an ageing population and increasing demand for long term care of the chronically ill, a better and more cost-effective way of providing healthcare services is to strengthen the community mode of healthcare delivery, particularly to the elderly. This will reduce the need for more expensive in-patient services as well as prevent or delay chronic conditions, and is thus a win-win strategy for both service providers and recipients.

In this connection, the Hospital Authority has implemented a number of new initiatives over the years. A notable example is the enhancement of medical care in residential care homes for the elderly through the Visiting Medical Officer programme, under which medical professionals from the private sector provide regular on-site medical consultation to the residents to supplement the support provided by geriatricians and community nurses from the public system.

For psychiatric patients, the Authority has also improved community-oriented care by strengthening the education of general practitioners and healthcare professionals in the community on elderly depression and suicide.

Greater networking helps bring costs down

On the organisational and administrative fronts, the Hospital Authority has also achieved higher cost-effectiveness by integrating and networking services among hospitals and hospital clusters, administrative downsizing at headquarters and hospital levels, rationalising and reengineering work processes, as well as centralising procurement functions.

We will continue to work with the authority to identify other means to improve productivity and efficiency in the fulfilment of its corporate plans and objectives.

Enhancing public-private collaborations is another important means to avoid unnecessary duplication of services and to even out capacity utilisation across the system, thereby optimising the use of limited healthcare resources.

Measures aim to optimise resource use

We have implemented a number of initiatives in recent years, such as developing referral protocols on various diseases/illnesses in consultation with the Hong Kong Medical Association, implementing a pilot scheme in the New Territories East hospital cluster to refer ante-natal patients to private doctors under a shared-care programme, et cetera. We will continue to explore areas where resource-sharing arrangements between the public and private health sectors can be gainfully pursued.

We agree with members that given the finite resources, public funds should be channelled to assist lower income groups and to services of major financial risks to patients. A full-scale review of our public fees structure was conducted in 2001 with a view to targeting government subsidies at areas with the greatest needs.

The review also examined how the relative priorities of services provided may be reflected in the subsidy level and how inappropriate use and misuse of services can be minimised. We have in fact reported back the results of the studies to members and how we will be proceeding in the days ahead.

Revised fee structure helps stop abuse

Following completion of the review, we introduced in November 2001 a new fee for accident and emergency services. Last April, we have further adjusted the fee level of some other public healthcare services. The revised fee structure has proven effective in influencing public behaviour in the desired direction.

Twelve months after implementation of the new charges, the utilisation rate of our accident and emergency services has decreased. Compared to October 2002, the total number of semi-urgent and non-urgent cases in October 2003 has decreased by around 29,000 attendances, reflecting a reduction in inappropriate use of accident and emergency services.

It should be noted that the revamped fee structure has not affected the affordability of public healthcare services to the community. Recipients of Comprehensive Social Security Assistance continue to enjoy waivers of their medical expense.

To assist vulnerable groups in the community who are non-CSSA recipients, we have introduced an enhanced medical fee waiver system since April 2003 to provide protection from undue financial burdens. Moreover, the maximum validity period of waiver certificates has been increased from six to 12 months.

Further fee restructuring may be needed

The impact of the revised fees on service utilisation will be evaluated on an on-going basis. Such evaluations will shed light on further fee restructuring that may be needed to ensure that public subsidies are channelled to various services in the most appropriate manner.

The third element of our overall comprehensive review of the financing system is the health protection accounts. To strengthen the long-term financial sustainability of our healthcare system, we have floated in the earlier consultation document the idea of introducing health protection accounts in Hong Kong.

Simply put, account schemes require individuals to set aside a proportion of their wages during working years to meet the increase in expenditure on healthcare after retirement. In effect, the substantial healthcare spending during old age would be spread over a longer time span, and the financial burden on the account-holders' offsprings or relatives would be lessened.

Study group examines merits of health protection accounts

To examine in greater depth the merits of account schemes, we have formed a study group involving medical doctors, epidemiologists, actuaries, economists, statisticians and social scientists from local universities, the Hospital Authority and the Department of Health. In addition, overseas academics from renowned universities have contributed to the process as external advisers.

The group has conducted a number of inter-related studies covering healthcare services utilisation, saving behaviour of the general public, public attitudes and preference on health protection accounts schemes, as well as relevant actuarial and econometric modelling researches.

The findings of these studies are being reviewed by the overseas advisers. We intend to discuss with the Health Services Panel of this Council later in the year how we shall be proceeding with the longer term financing proposal in the light of these studies.

Overseas experiences provide reference points

In developing the different proposals in the last decade, we have, in fact, studied and drawn reference to overseas experience in identifying a suitable healthcare financing model for Hong Kong.

The study group has, in the course of its work, researched into the healthcare financing models of major economies worldwide. The first salient finding is that most healthcare systems feature a mix of funding sources ranging from general taxation, social health insurance, out-of-pocket payments, private health insurance to medical saving accounts.

Apparently there is no one-size-fits-all formula as to what combination of these sources would best suit a particular economy or country. In actuality, the optimal mix would depend on the unique circumstances and challenges faced by an economy such as the tax regime, demographic features, patient behaviour and preferences, et cetera.

Another point of interest is that there is considerable diversity across economies in terms of the predominant funding source. In the case of Europe, general taxation is the primary source of funding in a number of countries including the United Kingdom, Denmark, Sweden, Italy and Spain while social health insurance contributions are the principal source in Germany, France and the Netherlands.

 The healthcare systems in Australia and New Zealand are substantially funded by income taxes.As regards Asian economies, social healthcare insurance schemes are adopted in Japan, Korea and Taiwan.The Mainland and Vietnam have mostly relied on taxation to finance their healthcare systems while medical saving accounts contribute significantly to funding the healthcare system in Singapore.

The Administration is as concerned as the Legislative Council about the longer-term financial sustainability of our healthcare system. Building on the achievements made in respect of productivity enhancement and the restructured fees, we are conducting a number of studies that will enlighten on the new financing models that could be contemplated for Hong Kong.

Public consultation planned after study findings are reviewed

It is our intention to continue the dialogue with the public on the way forward after thoroughly reviewing the study findings.

As rightly pointed out by some healthcare financing experts, the public acceptability and political deliverability of any reform option are as important as its worthiness in the sustainability dimension. From what I have heard in this Council, there doesn't seem to be any consensus on the options that we should be proceeding with.

Given the complexity of this subject and the far-reaching implications a new financing arrangement may have on our community and the economy, we will certainly consult this Council, the major stakeholders and the general public thoroughly before making any further proposals.

Dr Yeoh Eng-kiong gave this address in the Legislative Council.