8th ASHK Appointed Actuaries Symposium Healthcare, Financing and Insurance Presentation by Thomas Chan Deputy Secretary, Food and Health Bureau 4 November 2008
Rapidly Ageing Population In 2008 1 out of 8 persons was an elderly person. By 2036 1 out of 4 persons will be an elderly person. Population profile in 2008 & 2036 Age group 85+ 80-84 75-79 70-74 Male In 2008 Female Age group 85+ 80-84 75-79 70-74 Male By 2036 Female 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 400 300 200 100 0 100 200 300 400 Thousands 400 300 200 100 0 100 200 300 400 Thousands Source: Hong Kong Population Estimates Mid-2008, C&SD Hong Kong Population Projections 2007-2036, C&SD
Population ('000) 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 Rapidly Ageing Population Projection of total population, elderly population and elderly dependency ratio, 2008-2036 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 450 400 350 300 250 200 150 100 50 0 Elderly Dependncy Ratio (No. of persons aged 65 and above per 1000 persons aged between 15 and 64) 0-14 15-64 65 or above Elderly Dependency Ratio Source: Hong Kong Population Estimates Mid-2008, C&SD Hong Kong Population Projections 2007-2036, C&SD
Rapidly Ageing Population 600 Elderly dependency ratio, 1996-2031 Number of elderly aged 65+ per 1000 population aged 15-64 550 500 450 400 350 300 250 200 150 100 50 Actual Japan United Kingdom Switzerland Hong Kong Singapore Projection Australia Canada 0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Hong Kong Japan Singapore Switzerland United Kingdom United States Source: Hong Kong Population Projections 2007-2036, C&SD; OECD Health Data 2008 (Jun 2008); Australian Bureau of Statistics; Statistics Canada; National Institute of Population and Social Security Research, Japan; U.S. Census Bureau, International Data Base; Government Actuary's Department, UK; U.S. Census Bureau; Statistics Finland
Rapidly Ageing Population The elderly population has greater healthcare needs The elderly population uses on average six times more in-patient care than the population aged below 65. Average no. of bed days per 1,000 persons 12,000 10,000 8,000 6,000 4,000 2,000 Average number of public hospital bed days utilized by age (2007) 0 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85 + Age group Source: Data from Hospital Authority
Per capita health expenditure as % of per capita GDP Rising Medical Expenditure Per capita total expenditure as percentage of per capita GDP in HK and selected economies (1991-2004) 16 14 USA 12 Switzerland 10 Australia 8 Japan UK 6 Hong Kong 4 Singapore 2 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: OECD Health Data 2008 (Jun 2008); WHO NHA Series; Singapore Ministry of Health; HKDHA: 1990-2004.
Average annual growth rate 8% 7% 6% 5% 4% 3% 2% 1% 0% Rising Medical Expenditure Medical Inflation - advance in medical technology, higher public expectation, rising medical cost -> medical inflation is driving increase in health expenditure everywhere Average annual real growth rate of total health expenditure and real growth rate of GDP in HKG and selected economies (1995-2004) Average annual real growth rate of GDP Average annual real growth rate of total health expenditure Japan Switzerland UK USA HKG Australia Singapore Source: OECD Health Data 2008 (Jun 2008); WHO NHA Series; Singapore Ministry of Health; Statistics Singapore; HKDHA: 1990-2004.
Source: Hong Kong s Domestic Health Accounts: 1990-2004 Financial projection of Hong Kong s total expenditure on health from 2004 to 2033 Rising Medical Expenditure 10% Health expenditure as % of GDP 1990-2033 9% Health expenditure as % of GDP 8% 7% 6% 5% 4% 3% 2% 1% Past Health expenditure in HK in 1990-2004 Projection Health expenditure in HK in 2005-2033 Total health expenditure Public health expenditure Private health expenditure 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Economies HK Australia Canada Finland UK Austria Belgium Japan Korea Netherlands Switzerland US Singapore Comparison of public health expenditure and public spending in different economies Total health exp as % of GDP 5.2 8.8 10.0 8.2 8.4 10.1 10.4 8.2 6.4 9.3 11.3 15.3 3.4 Public health exp as % of GDP 2.8 5.9 7.0 6.2 7.3 7.7 7.4 6.7 3.5 7.6 6.8 7.0 1.2 Public exp as % of GDP 19.7 34.4 39.3 48.9 44.5 49.3 48.6 38.2 28.9 46.1 35.9 36.6 21.3 Highest personal income tax 15.0% 45.0% 46.4% 49.3% 40.0% 42.7% 45.1% 47.2% 35.5% 52.0% 37.8% 41.3% 20.0% Sales tax - 10% 6-16% 22% 17.5% 20% 21% 5% 10% 19% 7.6% 2.9-7.25% 7% Public health exp as % of public exp 14.5 17.1 17.9 12.7 16.4 15.6 13.9 17.7 11 16.4 18.6 19.1 5.4 Source: OECD Health Data 2008 (Jun 2008); WHO NHA Series; HKDHA: 1989/90-2004/05; Inland Revenue Authority of Singapore; Federation of Tax Administrators; Inland Revenue Department, HK; Wikipedia.
Comparison of source of healthcare financing Economies HK Australia Canada Finland UK Austria Belgium Japan Korea Netherlands Switzerland US Singapore General taxation 54.8% 67.0% 69.3% 61.1% 87.4% 31.5% 4.6% 17.4% 12.5% 4.0% 17.2% 32.7% 27.9% Public Social health insurance - - 1.4% 14.9% - 44.7% 66.6% 64.8% 42.6% 77.7% 43.0% 13.1% 5.8% Source of financing Private health insurance 12.4% 7.4% 12.5% 2.2% 1.0% 4.7% 5.4% 2.5% 3.3% 5.9% 8.5% 36.0% 1.9% Private Note: All figures are in 2006, except figures for Australia and Canada are in 2005 and 2007 respectively. Out-of-pocket payments/ other sources 32.7% 25.6% 16.8% 21.8% 11.6% 19.1% 23.5% 15.2% 41.6% 12.4% 31.2% 18.2% 64.5% Source: OECD Health Data 2008 (June 2008); WHO NHA Series; HK DHA 1989/90 2004/05.
Per Capita TEH (US$ PPP) (log scale) 10,000 1,000 Hong Kong has spent relatively less on health compared to OECD countries 10,000 100,000 Per Capita GDP (US$ PPP) (log scale) 2004 Source: OECD Health Data 2008, June 2008 Hong Kong s Domestic Health Accounts: 2004/05 Australia Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Iceland Ireland Italy Japan Korea Luxembourg Mexico Netherlands New Zealand Norway Poland Portugal Slovak Republic Spain Sweden Switzerland Turkey United Kingdom United States Hong Kong SAR, China
Share of public expenditure on health (%) 100 90 80 70 60 50 40 30 20 10 although public spending is commensurate with the different levels of public revenue between countries 0 0 10 20 30 40 50 60 Public revenue as a % of GDP Source: OECD Health Data 2008, June 2008 2004 Hong Kong s Domestic Health Accounts: 2004/05 Australia Austria Canada Czech Republic Finland France Germany Greece Hungary Ireland Italy Japan Korea Luxembourg Mexico New Zealand Norway Poland Portugal Slovak Republic Spain Sweden Switzerland United Kingdom United States Hong Kong SAR, China
Service Reform Healthcare Reform Hospital Care? Primary + Hospital Care Market Reform Public Provision? Public + Private Provision Financing Reform Tax-funded? Tax-funded +
Healthcare System Present Public Secondary/ tertiary healthcare Primary healthcare AED Public hospital (inpatient, SOPD) 29.1b subsidize 95% GOPC 4.5b subsidize 93% 4.Insufficient protection in safety net 2.Bottlenecks in public service 1.Primary health care not comprehensive enough 5.Lack of sharing of medical record 3.Publicprivate imbalance Private hospital 4.9b Private sector (general/specialist outpatient) 12.6b Private Public Source: Hong Kong s Domestic Health Accounts: 2004/05
Healthcare System Future Money follows patient Service benchmarking Secondary/ tertiary healthcare AED Public hospital (acute & emergency, underprivileged, catastrophic, training) PPP/ subsidize Private hospital Electronic Health Record System SOPC (Public) PPP/ subsidize SOPC (Private) Primary and community healthcare Public primary care (underprivileged, preventive care) PPP/ subsidize Private primary care (family doctors, dentists, TCM, allied health, community care) Subsidize preventive care
Healthcare Financing Present Public healthcare (mainly inpatient and specialist outpatient) 29.1b secondary/tertiary 4.5b primary Private healthcare (mainly outpatient) 4.9b hospital 12.6 b primary Government funding 31.9b Govt budget Tax Public fees 1.7b User pay Public Out-ofpocket 11.4b Private insurance Employer provided insurance Premium [x]b Insurance 6.1b Source: Hong Kong s Domestic Health Accounts: 2004/05
Healthcare Financing Future??? Money follows patient Service benchmarking Public healthcare PPP/ subsidize Private healthcare Increase govt funding Increase public fees Co-pay Increase insurance Govt budget SHI MSA Private insurance Employer provided insurance Increase tax Public
Financing what do we need? Save for future healthcare Subsidize the poor & underprivileged Share out the healthcare risk Support service and market reform
Insurance does it fit the bill? Yes Risk-pooling/sharing Subsidize the sick Purchaser role Choice of service Money follows patient? No No saving in general No wealth re-distribution Risk-pooling at what cost? Moral hazards Lack continuity & certainty
The Health Insurance Triangle Insurers anti -selection risk selection premium hike moral hazards cost control autonomy Patients demand supply Providers
Where can we meet? Voluntary Group/Individual Small risk pots Underwriting Itemized charging Unsubsidized Self-regulated Mandatory Portability/Continuity Large risk pool Age-banded/ Community-rated Case-mix pricing Incentivized Regulated
Can insurance do better? Less exclusions Premium guarantee Renewal guarantee Better continuity/portability Provision for future Incentives to stay on Price transparency Health-outcome-oriented Utilization/cost-control
What the industry needs? A level-playing field Incentives Product features comparison? E-Platform? Cost/utilization benchmarking? Collective bargaining? Re-insurance or shared-pool? Consumer buy-in
Thank You