'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.