The flaw in the Voluntary Health Insurance scheme
The fundamental flaw in the Voluntary Health Insurance Scheme (VHS) is it was designed to run parallel to the public healthcare system and provide similar protection — yet it is voluntary. The government hopes that when people who can afford it opt for the voluntary plan, pressures on Hospital Authority (HA) resources will be reduced. Secretary of Food and Health Ko Wing-man said the government will not back down from the HA’s commitment to serving the public. Indeed, if a patient encounters serious illnesses that require major operations such as liver transplants, the HA hospitals will be the only place he or she can get these services. The VHS gives people the option of choosing their preferred doctors in the private sector. They may then enjoy speedier services than possible in the HA hospitals.
The question is: If the HA offers timely and reliable services, who will pay thousands of dollars, and in the case of chronic patients deemed to be in the “high-risk pool” tens of thousands of dollars a year, and be cared for in a private hospital which may not offer better services than a HA hospital? It is only when the public is dissatisfied with the HA that they will buy a standardized private health insurance plan.
The government proposed that the standard plan must include 12 minimum requirements, which would appear attractive in the absence of a well functioning HA. These include guaranteed renewal without re-underwriting; coverage of pre-existing conditions subject to a standard waiting period; guaranteed acceptance with premium loading capped at 200 percent of the standard premium and etc. Given that we have an HA, and our public hospitals are supposed to offer timely and reliable services, these otherwise attractive features may not lure many to pay so much more for only marginal improvements to services.
In the scenario that there is widespread perception the HA is not functioning well, many people will enroll in the VHS. There will then be major increases in demand for private hospital services and doctors in private practice. The chances of HA hospitals losing their experienced doctors to the private sector cannot be dismissed. A spiral of poorer performance could take hold in the public The author is the director of Centre for Public Policy Studies at Lingnan University. hospital sector.
Given the government’s plans that those in the high-risk pool could be charged an extra 200 percent loading, many who belong in this category are likely to remain with the HA. If so the HA hospitals will be under considerable pressures. Moreover, because the government does not regulate the level of fees, private fees will escalate either under cost pressures or due to the lure of profits. Thus even if those who belong to the high-risk pool opt for VHS, pressures will mount on the government to offer more subsidies to the high-risk pool. Thus, either the HA will run into deficits and require more funding, or the high-risk pool will go into deficit and private insurers will demand more subsidies.
Overseas, Switzerland requires everybody to buy a standard health insurance plan. This is a nonprofit one; only supplementary plans are allowed to make a profit. Interestingly, as well as requiring everybody to buy basic health insurance, Switzerland also puts a cap on annual co-payments paid by patients. This ranges from 300 Swiss francs to a maximum of 2,500 Swiss francs. Presently, in the US, Obamacare also requires all American citizens not already covered by Medicare or Medicaid to buy health insurance.
In Hong Kong if the VHS expects people to buy private insurance (which costs thousands or even tens of thousands of dollars) and is still be responsible for some cost sharing, then why not just raise the fees charged by the HA to more reasonable levels and put an annual cap on them? The cap could be reduced for poorer people and the HA could also get more resources. The HA will then will be in a better position to provide better services. Private insurers can provide supplementary insurance — as they do already.