Win-wins for all

As New Territories towns come close to collapsing under the weight of Mainland shoppers, even the pro-landlord/tourism Standard starts to look alarmed. It calls for a ‘win-win’ in what it describes as a tussle between ‘market forces’ (beneficiaries of the cross-border arbitrage-distortion) and ‘government’ (the local residents). Meanwhile, after suffering a week-long mob-assault from the Hong Kong commentariat, Financial Secretary John Tsang gets an exceptionally brutal kick in the teeth from a South China Morning Post column.

What’s the connection? Deep in the bowels of the bureaucracy-business nexus, a plot is afoot to establish a ‘win-win’ in line with Tsang’s obsession with expropriating and hoarding the population’s wealth for the benefit of private interests. It is all about increasing the quality and quantity of healthcare services by getting the middle class to pay higher hospital bills – and, at the same time, somehow getting enough extra money flowing through the system to enable the insurance industry to skim some off for itself as well.

Even the Standard grudgingly admits that it is unrealistic to find a  ‘win-win’ in the fight between people who benefit and people who lose from the influx of Mainland shoppers. Now imagine finding a way in which four different interests – middle-class consumers of health services, the John Tsang ‘your-money-is-ours’ bureaucracy, the insurance industry and the private medical sector – all emerge better off and satisfied from health-financing reform.

No, it can’t be done. Just as the shops and MTR in Sheung Shui and Fanling prove that you can’t get a quart into a pint pot, so this long-running absurdity proves you can’t get a quart out of one either.

No-one disagrees that Hong Kong needs to expand, and therefore put more resources into, hospital services. (If the city increased all health spending by roughly 50-100%, it would be in line with that of most developed economies as a percentage of GDP.) The simple solution is: just do it – with all its land-based revenues, the government can easily afford the extra expenditure. If we want to be ‘prudent’, we can also reasonably ask middle-class people who can afford it to pay more for public-hospital bills, currently capped at HK$100 a day regardless of treatment. We could even re-jig the largely pointless group health insurance many employers offer (the payouts for in-patient care are so low that people just use public hospitals anyway) to cover such higher bills.

But that would be too simple: it would presume that taxes continue to pay for most hospital care, and the private sector wouldn’t get a slice. Instead, generations of proposals for healthcare finance reform have attempted to force the middle class to buy at least some private insurance and to migrate to a larger private-hospital sector. Leaving aside the bureaucrats’ fears that the government will still have to subsidize all this at some stage, this presents two big problems.

First, the insurers will expect to make a profit somehow. One of the reasons virtually no developed economy in the world apart from the US tries to rely mainly on private insurance to pay for healthcare is that the numbers don’t add up. A US hospital with 900 beds employs 1,300 billings clerks. It’s simple economics, not political ideology: a single-payer system focuses money on care rather than admin. Second, Hong Kong’s private hospitals – like the ‘luxury’ housing developers or the Direct Subsidy ‘elite’ Schools – are focused on serving the wealthy rather than the middle class. Although they use public resources (cheap land grants), they are under little obligation to serve broader social needs. Meanwhile, the private doctors minimize competition from overseas-trained rivals and similarly focus on high-margin business.

The government bravely presses on. The latest move is to require private hospitals to reveal how much they will charge for treatments. And behind closed doors, the insurers’ lobby are trying to work out a way to be part of the win-win solution; the ideal for them would be a Mandatory Provident Fund type-arrangement, where your monthly premium payments are handed to them on a plate, and they enforce enough restrictions on coverage to ensure that they cover all their admin costs (no-one expects health insurance to make a profit on underwriting).

Recent correspondence to them from the government suggests that officials are putting on a brave face in assembling a workable ‘HPS’, or health protection system…

Note the concerns about getting the young and healthy into the pool. This has been a worry for Obamacare in the US; the difference is that while the US is trying to move towards more rationalized, universal coverage, Hong Kong’s officials are almost seeking to do the opposite. Note also that the taxpayer will subsidize people who buy insurance; one obvious question will be whether this public money wouldn’t be used more efficiently directly injected into front-line health services rather than spent on billings clerks.

So, we have bureaucrats trying to get a ‘win’ through keeping public money rather than spending it on the middle-class; the insurers wanting to get a ‘win’ by (on the contrary) getting government to bribe the middle-class into buying insurance; and the private medical providers no doubt wanting a ‘win’ by capitalizing on this new market segment somehow suddenly able to pay puffed-up bills. And the middle class will ‘win’ too. Obviously.