Although many of around 500 public submissions in the government's public-consultation exercise back the insurance scheme, views are divided over the use of the start-up fund.

Some said all the money should be injected into the public health-care system on grounds that taxpayers' money shouldn't be used to subsidise people to buy private insurance.

Tim Pang Hung-cheong, a spokesman for the Patients' Rights Association, said that it would be better if the HK$50 billion were used as an endowment to generate interest gains to improve public services or provide subsidies for drugs for poor patients.

Health officials, however, think otherwise.

A senior medical source said the voluntary insurance scheme would draw more patients into the private sector and provide them with more protection. That would open up capacity in the public sector for the grass roots and needy people.

'The government can see the benefit of subsidising people to buy medical insurance, in that it can help the system as a whole,' the source said.

The government wants to use the HK$50 billion on three groups over 20 to 25 years - the young and early subscribers, the elderly, and people with pre-existing conditions.

Long-term subscribers to the scheme can receive government subsidies to pay for the premium after they reach age 65 or 70.

Young and early subscribers can enjoy a discount of up to 30 per cent within a period of time after the launch of the plan.

The future regulatory body overseeing the insurance scheme will set aside around 2 per cent of the total premium collected each year to set up a 'high-risk pool' for subsidising the higher premiums that people with pre-existing conditions will have to pay.

If the high-risk pool is used up, the government will use some of the HK$50 billion for a subsidy.

Health officials warn that the government's health-care spending, now at more than HK$40 billion a year, is certain to grow. They say public health care will remain a safety net for all Hong Kong people.

Many existing medical insurance plans carry limitations, such as excluding 'high-risk' groups including the elderly and chronically ill. Some insurers even refuse to renew plans if they fear the customers' claims could too be high.

The government-regulated Health Protection Scheme (HPS) offers some improvements for patients, including a guaranteed life renewal, no rejection of high-risk groups and portability among different insurers.

The new scheme would also cover some fixed-priced operations and treatment packages, letting patients be more certain about the bills when they walk out of the hospital. The scheme will also have a savings element, the details of which will be decided by the new regulatory body.

Insurance sector lawmaker Chan Kin-por said the industry was keen to discuss details of the plan with the government.

'The sustainability of the scheme is a major concern,' Chan said. 'People want to know how long the HK$50 billion can last for. Many need an assurance before they can make a commitment to a long-term insurance plan.'

Cheung Tak-hai, vice-chairman of the Alliance for Patients' Mutual Help Organisation, said the scheme would not be attractive to chronically ill patients on low incomes. 'Some treatments are so expensive in the private sector that the insurance cannot cover it all,' he said. 'For example, it cost more than HK$300,000 for a heart operation in the private sector, compared with only a few hundred dollars in the public sector.'

Cheung said that the scheme could at least shift some public patients to the private sector, shortening the waiting times for grass-root patients who will still have to rely on the public sector.

'The government has increased its funding for the Hospital Authority,' said Dr Leung Ka-lau, the legislator representing the medical sector. 'That takes care of most grass-roots people, so it is acceptable that it now spends some public money to take care of the middle-class to buy private insurance.'

Premium service

Key features of the insurance plan:

Would cover in-hospital services, specialist consultations, laboratory investigations and diagnostic imaging for those requiring admission to hospital, and chemotherapy or radiotherapy for cancer. Would not cover general outpatients

Would provide fixed-price packaged services for some specific operations and treatments

Insurers would not be able to reject subscribers and would have to guarantee policy renewal for life

The maximum premium paid by high-risk individuals, such as people with pre-existing conditions, would not exceed three times that of healthy subscribers

No-claims discounts on premiums of up to 30 per cent

Transferable among insurance companies

Insurers would have to report all costs, claims and expenses

Elderly people would receive government subsidies to pay their premiums if they have been signed up for a long time