Private insurance model a prescription for deceit
'We hope that the government will maintain a competitive environment for the sector. It will help bring down the cost.' So said Peter Tam Chung-ho, executive director of the Hong Kong Federation of Insurers, in response to the consultation on health-care-financing reform. But when health care is delivered in a commercial insurance market, there is only one way for costs to go - up - through running expenses and fraud.
The government's proposal is to pool health-care-financing risk with a flat premium insurance scheme open to all, and administrative costs of no more than 5 per cent. The basic insurance cover envisioned is a regulated standard-benefits product, coupled with an invitation to the insurance industry to offer optional top-up policies.
Experience in the US has shown that the cost of health care financing predicated on this basis tends to escalate ineluctably, with administrative costs reaching up to 20 per cent to 25 per cent.
Such inefficiency contributes to the high cost and fragmentation of the insurance-oriented system in the US, where an estimated US$230 billion in health care spending goes to insurance administration yearly.
The other major source of wastage in competing insurance-dominated systems is due to health care fraud, and the measures (corporate and legislative) that become necessary to combat it. The 'Your Health, Your Life' consultation document contained an artful reference to 'control of moral hazards' but, curiously, did not elucidate further.
Medical insurance fraud is widespread, and overwhelmingly committed by health care providers; deception by consumers is comparatively rare. 'White collar' (or more properly 'white coat') fraud deprives health care systems of huge amounts of revenue intended for patient care. In the US, the Government Accountability Office estimates that US$1 out of every US$7 spent on Medicare is lost to fraud. Estimates of health care insurance fraud are in the order of US$100 billon per year in America, Euro30 billion (HK$363.6 billion) in Europe and up to A$2 billion (HK$14.8 billion) in Australia.
The incentives for fraudulent practices in a billing-based system are easily identified. Patients may seek cover for services they were not entitled to or may attempt to transfer cover to non-entitled persons. Doctors are motivated by gain through unauthorised benefit, and find willing accomplices in laboratory/X-ray facilities, hospitals and industry. The most common types of fraud are false claim schemes by medical practitioners, which include: billing for services that were not provided; misrepresentation of what was provided and when; providing unnecessary services or ordering unnecessary tests; and falsification of the provider recipient.
Concealed incentives (kickbacks) are endemic and sophisticated: examples include doctors referring to colleagues in return for payment (or overpaying for rents or administrative services); doctors recommending tests from a laboratory or X-ray facility in which they have a financial interest; industry payments to entice doctors to use drugs or technology; and hospital inducements to admit patients for treatment.
The scale of resources siphoned away from clinical care has spawned a whole new industry to counter such practices and to return lost revenue to the system. The US Office of the Inspector General at the Department of Health and Human Services was established to identify and eliminate health care fraud. The attorney general reported last year that US$2.2 billion was returned to the federal government in judgments and settlements in the preceding year.
Without cost-control and anti-fraud measures, reform of health care in Hong Kong, based on individually ministered insurance, will not bridge budgetary expectations.
Darren Mann is a clinical associate professor (honorary) at the Chinese University of Hong Kong and examiner in surgery of the Royal College of Surgeons of Edinburgh
