Government plans to offer tax break in bid to cut public health bill

Extra incentive will be offered to families who take out private medical cover to counter rising cost of hospital care amid ageing population

PUBLISHED : Monday, 13 January, 2014, 4:59am
UPDATED : Monday, 13 January, 2014, 2:16pm

Tax breaks will form the core of a government plan to cut spending from the swelling public hospitals budget and shift the burden to the private sector.

Government spending on the Hospital Authority has leapt 63 per cent to HK$44.4 billion in the 2013/14 financial year from HK$27.2 billion in 2006/07.

It is currently rising at about twice the pace of inflation.

Future expenditure could be even higher given the rapidly ageing population and an imbalance in the number of doctors in the private and public systems. About 40 per cent of doctors are in the public system and care for 90 per cent of hospital patients, while the other 60 per cent of doctors treat the remaining 10 per cent privately.

The government plan seeks to redress some of that balance.

Individuals who buy a health insurance package covering all dependents - including their spouse, children and parents - will get an extra tax deduction, a Food and Health Bureau spokesman told the Post.

"The measure [tax deduction] is effective and well-targeted in the sense that most of the taxpayers fall within the working population," he said.

The proposal is part of the government's Health Protection Scheme (HPS) under which all medical insurance products will have to meet minimum requirements laid down by the government. The aim is to ease the burden on public hospitals by encouraging people to take out private insurance schemes and use private health care.

The Post revealed last year that health bosses were also planning a HK$4.3 billion scheme to revolutionise the care of patients with long-term illnesses to further ease the burden on the public health system.

They would receive an annual government subsidy of HK$7,200 to buy medical insurance and use private care services.

The Food and Health Bureau estimates 69,800 people with chronic illnesses would qualify by 2016, according to a source.

But a lawmaker and a professor both believe the HPS will remain unpopular with the public and is unlikely to be approved by the Legislative Council.

The lawmaker for the insurance sector, Chan Kin-por, said the effect of tax breaks would be limited as only 37 per cent of the population pays tax and the average salary tax they pay is about 8 per cent. He said a tax allowance of up to HK$20,000 a year would be needed to persuade people to take out the insurance policies.

A professor at Polytechnic University, Peter Yuen Pok-man, said the HPS proposal was unlikely to be approved "under the current political environment".

"The scheme is unpopular and the government is in a weak position and has no mandate vote in Legco," said Yuen, director of the Public Policy Research Institute. He said Hongkongers were unlikely to support medical reform that required them to dig deep into their pockets.

"Mandatory medical savings are the most desirable financing mechanism for an ageing population. However, the political climate in Hong Kong is such that it is almost impossible to implement that at this stage."