The success or failure of the latest plan to reform health care financing hinges on a simple question: can a voluntary medical insurance scheme give patients a better deal? Translated, that means lower premiums, better coverage and cheaper medical services. Health officials are confident that the plan can fix certain 'market failures' and increase patients' bargaining power by putting them into a bigger risk-sharing pool, but private doctors say the effect could be limited and even dangerous. The government is conducting a three-month public consultation on the controversial voluntary Health Protection Scheme, as it is called. It aims to cover 300,000 to 500,000 people, and provides a 'standard plan' for hospital services. Unlike most existing insurance policies that exclude high-risk patients, the government-regulated scheme will provide guaranteed renewal for life, and inclusion of people with pre-existing conditions. To increase market competition, policies are portable between insurers and employers. The scheme will provide coverage of fixed price 'packaged services' at private hospitals so patients are more certain about the prices and procedures covered. Undersecretary for food and health Professor Gabriel Leung said the government was confident the scheme could lower medical fees and keep premiums under control. 'The government scheme aims to restructure the market instead of taking over the market. Right now different insurers have their own pools of patients. We will pull all these pools together for better risk-sharing,' Leung said. 'It's like a bulk purchase of services for better prices.' At present, 2.4 million Hong Kong people are covered by health insurance. The market - 90 per cent of it taken by about 10 insurers - shares three million policies. Government statistics show that in 2006/07, private health insurance financed HK$9.8 billion worth of care, while the public health care sector spent HK$37 billion and out-of-pocket payments by patients accounted for another HK$26 billion. Although private health insurance payouts accounted for about a quarter of the health care spending, they represented only 10 per cent of Hong Kong's total in-patient load. Leung said if the scheme were implemented, more patients would be financed through insurance, so public health care expenditure could be concentrated on the needy. Premiums will be largely decided by the insurers' expenses in three areas: patient claims; medical costs; and insurers' administrative fees and commission paid out to agents. The Hong Kong Federation of Insurers' figures show that the claim ratio for individual insurance plans over the past five years was below 60 per cent. As insurers make between 3 and 5 per cent profit, this means nearly 40 per cent of the premiums of individual plans go on commission and administrative costs. Leung said he was sure the scheme could better control the market prices to avoid the premiums reaching unaffordable levels. First, private hospitals and doctors were expected to cut prices if they wanted to get that big group of patients covered by the government scheme. Second, as the government standard plan covered hospital services only, administrative costs would be less than existing individual plans that also covered outpatient clinics. Third, increasing market transparency could create more competition. Insurers would have to publicise their annual premium incomes, claims, administrative expenses and commission expenses. The government will set up a new statutory body to regulate the scheme and work out the level of premium through negotiations with various parties. However, no details are available on how this will operate. Hong Kong Medical Association president Dr Choi Kin casts doubt on whether the scheme can achieve its purposes. 'The officials keep saying that packaged services can better control prices. In fact, this direction is dangerous.' Choi said under fixed-price packaged services, doctors would have to bear the costs of high-risk patients, and low-risk patients would have to pay more than necessary in order to even out the cost of high-risk patients undergoing the same operations. 'If a low-risk patient and a high-risk patient are to pay the same fee, the risk-sharing function will be shifted from insurers to the doctors and patients. It is unfair,' he said. Choi admitted the scheme would push down doctors' fees in the long run. 'But in the short term, most private hospitals have a booming business, there is not much room for price reduction,' he said. Insurance imbalance Private health insurance payouts account for only 10 per cent of the total in-patient load The number of people covered by health insurance in Hong Kong: 2.4m The amount (in HK dollars) insurers spend on their health care each year: $9.8b