Legislative Council

LC Paper No. CB(2)304/99-00
(These minutes have been
seen by the Administration)

Ref : CB2/PL/HS

LegCo Panel on Health Services

Minutes of meeting
held on Monday, 12 April 1999 at 8:30 am
in Conference Room A of the Legislative Council Building
Members Present:

Hon Michael HO Mun-ka (Chairman)
Dr Hon LEONG Che-hung, JP (Deputy Chairman)
Hon HO Sai-chu, JP
Hon Cyd HO Sau-lan
Hon CHAN Yuen-han
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Dr Hon YEUNG Sum
Hon YEUNG Yiu-chung
Dr Hon TANG Siu-tong, JP
Hon LAW Chi-kwong, JP

Members Attending :

Hon David CHU Yu-lin
Hon LEE Wing-tat
Hon LEE Kai-ming, JP
Hon Bernard CHAN
Hon Emily LAU Wai-hing, JP

Public Officers Attending :

Mrs Katherine FOK, JP
Secretary for Health and Welfare

Mr Gregory LEUNG, JP
Deputy Secretary for Health and Welfare 1

Mr Eddie POON
Principal Assistant Secretary for Health and Welfare (Medical) 3

Mrs Vicki KWOK
Assistant Secretary for Health and Welfare (Medical) 7

Mr Clement LAU
Assistant Secretary for Health and Welfare (Medical) 6

Attendance by Invitation :

Harvard Team
Professor William HSIAO
Professor Winnie YIP

Clerk in Attendance :

Ms Doris CHAN
Chief Assistant Secretary (2) 4

Staff in Attendance :

Ms Joanne MAK
Senior Assistant Secretary (2) 4

I. The consultancy report on Hong Kong's Health Care System

The Chairman welcomed representatives of the Administration and Professor William HSIAO and Professor Winnie YIP of the Harvard Team to the meeting.

2. The Secretary for Health and Welfare (SHW) thanked the Panel for the opportunity for presenting to Members and the public the report entitled "Improving Hong Kong's Health Care System: Why and For Whom?" (the Harvard Report). SHW said that in November 1997, the Government commissioned a team of economists, physicians, epidemiologists and public health specialists from the Harvard University to conduct a study on Hong Kong health care system and to recommend options to improve financing and delivery of health care. She said that the Government was open to various reform options. During the consultation period in the next three months, the Government would listen to the views expressed during public discussion of the Harvard Report. Thereafter, the Government would propose the way forward in a consultation document to seek support from the community.

Presentation by the Harvard Team

Assessment of Hong Kong's health care system

3. Professor Winnie YIP explained that the first part of the briefing would be on their assessment of Hong Kong's healthcare system: its strengths and weaknesses. The second part of the briefing would be on the development of options.

4. Professor YIP said that they used an evidence-based and consultative approach in conducting their assessment. Their findings were from the patients' perspective. Professor Yip highlighted the following achievements of Hong Kong's health care system -

  1. Hong Kong had a relatively fair and equal system -

    The majority of Hong Kong residents had equal access to health care services and similar utilization rates regardless of financial means. In addition, as the services were readily available in all communities, most residents did not need to travel more than 30 minutes to reach a provider.

  2. The establishment of the Hospital Authority (HA) in 1990 had brought steady improvement to the quality and efficiency of public hospitals -

    Patients had become more satisfied with the technical quality of care of providers as well the attitudes of health care personnel. Efficiency gains had also been made in specific areas such as procurement of drugs.

5. Professor YIP then pointed out that Hong Kong's health care system also had the following weaknesses -

  1. The sustainability of the current method of financing health care was questionable -

    Public health expenditure as a share of GDP went up from 1.9% to 2.5% between 1990 to 1996. Assuming that Hong Kong's economy would grow at a real rate of 5%, public health expenditure as a share of GDP would go up to 3.4 to 4% by 2016. Since the Basic Law stated that the increase in total government expenditure should be kept in line with growth in GDP, some public programmes had to be sacrificed if public health expenditure would take an increasing share of GDP. Public health expenditure as a share of government, which was 14% in 1996-97, might rise to 20 to 23% in the next 18 years. The factors for growth included ageing population, increasing specialization in medicine and rising demand for quality services and increasing adoption of technology.

  2. Hong Kong's health care system was highly compartmentalized -

    There were "thick walls" between the public and private sectors and between primary, secondary and tertiary care. The compartmentalized system had adverse effect on efficiency and quality of care. In addition, Hong Kong's health care system, being a hospital-dominated system with emphasis on medical specialization, was outdated. Such a system did not suit the needs of the society, which experienced growing incidence of chronic diseases and growing socio-health problems such as mental disease, substance abuse and violence.

  3. The quality of care was highly variable -

    Hong Kong had some of the best doctors and facilities but there was also widespread substandard medical care. Patients were dissatisfied with poor communication between patients and providers, long waiting time and the limited time physicians spent with patients. Hong Kong also lacked ongoing training in family medicine. In addition, while Hong Kong had a grievance procedure, very few patients understood how it worked and some patients lacked confidence in the grievance procedure. The highly variable quality of care was caused by several factors combined: physician dominance, the privilege enjoyed by the medical profession to self-regulate without strong check and balance measures put in place and the fact that patients did not have adequate information on how to make a rational decision in choosing a provider or the treatment option.

6. Professor YIP said that the achievements and strengths of Hong Kong's system should be preserved in future reforms. However, due to the major weaknesses of the system, Professor YIP doubted if the system would serve the interest of the public and patients in the medium or long run.


7. Dr LEONG Che-hung declared interest as a member of the Steering Committee for the Harvard Consultancy. He pointed out that although the Steering Committee had seen the Report, it had not yet endorsed it. Dr LEONG said that Hong Kong people and the medical profession in particular had known many of the problems raised in the Harvard Report for years. He would like to know whether the Government had the determination to reform the healthcare policy this time instead of solving problems by piece-meal solutions as in the past.

8. In response to Dr LEONG's question on the role of the Department of Health (DH), Professor YIP said that in general the trend was towards primary care and in Hong Kong there was a need to further promote family medicine. She said that there was discontinuity of care in the public sector due to lack of co-ordination and integration between out-patient care and in-patient care. She added that DH had done a reasonably good job on prevention and immunization and this role of DH should be maintained in any future reform.

9. Miss Emily LAU Wai-hing referred to a number of issues relating to doctors such as poor communication with and little time for patients and said that she wanted to know whether it was caused by a policy giving too much power to the medical profession. Professor YIP said that the phenomenon was due to three factors: physician dominance, a lack of check and balance and the fact that Hong Kong's patients were not very well informed. Professor YIP suggested that DH should take up more responsibility in educating patients.

10. Miss Emily LAU Wai-hing queried why Professor YIP did not mention doctors' responsibility in addressing the weaknesses. For example, doctors should spend more time to explain their diagnosis and treatment to patients. Professor YIP agreed that the medical profession should do more; but she wanted to focus on what Hong Kong could put in place to give the medical profession incentive to do more.

11. Mr David CHU Yu-lin asked about the market share and future role of traditional Chinese medicine. In reply, Professor William HSIAO said that spending on traditional Chinese medicine or Chinese herbal medicine amounted to less than 10% of health care expenditure. Professor HSIAO outlined their findings on traditional Chinese medicine as follows -

  1. Scientifically, there were evidences that traditional Chinese medicine or treatment had beneficial effect for certain diseases, but not all diseases.

  2. Many Hong Kong residents believed in traditional Chinese medicine, particularly when they had chronic diseases or when they were old and believed that they should have some nutritional supplement.

Professor HSIAO considered that traditional Chinese medicine had a role to play but that role needed to be carefully worked out.

12. Miss CHAN Yuen-han wanted to know if the problem of variable quality of care existed in the public or the private sector. Professor YIP said that the problem of variable quality of care was mainly in the private sector while the problem of long waiting time was found in the public sector. The problem of communication between providers and patients was found in both sectors.

13. In reply to Dr YEUNG Sum's question about the standard of primary health care in Hong Kong, Professor HSIAO said that family medicine physicians in the UK were trained in a whole range of skills to enable them to treat different types of patients. However, primary care physicians in Hong Kong might not have training in the whole range of skills. He pointed out that for family medicine to work effectively for the patients, several physicians should operate together so that they would have a full coverage in terms of specialty of knowledge and economy of scale. There would also be check and balance and peer pressure among the physicians. In the UK where three to five GPs worked in the same family medicine clinics, they would also incorporate community nurses into their clinics. Such working practices conveniently provided more comprehensive care for the patients.

14. Dr YEUNG Sum was of the view that fees charged by private physicians varied a lot and price lists were not displayed at the clinics. In response to Dr YEUNG's comment, Professor HSIAO said that the pre-requisites for market competition had to be put in place before market forces could operate. Patients would then be able to make their choices of physicians based on prices, quality of services and the attitude of the physicians. Professor HSIAO pointed out that physicians were required to display their fees in the Mainland.

15. In response to Mr Lee Wing-tat's question on assumptions behind the projection of public health care expenditure, Professor YIP said that the assumptions were set out in Special Report No.6. There were assumptions about the ageing population, expected change in inflation rate, utilization change, increase in cost due to increased expectation on quality of care and supply changes.

16. Mr Lee Wing-tat noted that Hong Kong's health care expenditure as a share of GDP was about 4%, which was lower than that of many countries. He asked why the two professors considered that Hong Kong had a problem in health care financing. Professor YIP said that Hong Kong did not spend less on health than the Asian countries that had similar economic development and age profile as Hong Kong.

17. As regards Mr Lee Wing-tat's questions on the cost effectiveness of the health care system in Hong Kong and whether the degree of wastage could be quantified, Professor YIP said that they were not able to quantify inefficiencies since data was not available.

18. Miss Cyd HO asked for information on the ratio of expenditure on primary health care and hospital care and the ideal ratio between the two types of care. Professor YIP referred to the data in Special Report No. 1 that about 50 to 55% of public health expenditure was spent on hospital care and about 20% on specialist out-patient care. Professor YIP said that the ideal ratio would be covered in the second part of the briefing.

19. Mr Law Chi-kwong asked about the reasons for waiting time differences among different income groups. Professor YIP said that according to their household survey, the lowest income group had the longest waiting time probably because they tended to use public general out-patient clinics, which were more crowded than private clinics.

20. Mr LAW Chi-kwong also wanted to know how serious the problem of prescription of antibiotics was. Professor YIP said that the problem was quite widespread in the private sector and many physicians would feel that it was the practice of the norm. Professor YIP considered that patients would not want to have antibiotics once they learnt about the effect of not having a full course or over-consumption.

21. The Chairman said that one of the reasons for doctors not displaying their fees in their clinics was that such display might be considered as advertising and doctors were not allowed to advertise. He wanted to have the professors' opinion on the reason. Professor HSIAO said that advertising might not be the most effective way to promote competition since advertising could mislead patients. He said that physicians in other countries were allowed to advertise their qualifications, opening hours and location of clinics. Instead of advertising their fees, Professor HSIAO said physicians could display the price lists in their offices. He said that there should be strict and appropriate rules on how physicians advertised or publicized themselves.

22. The Chairman and Dr YEUNG Sum were of the view that it was difficult to monitor the performance of HA. The Chairman would like to have the views of the professors on the difficulty in monitoring the performance and efficiency of HA. Professor HSIAO said that their report contained findings on the performance of HA.

23. Dr TANG Siu-tong wanted to know what was the harm of compartmentalization when those who could afford went to see private physicians while the poor used public health care. Professor YIP said that many rich people and many of those who had employer medical benefits would also use public hospitals. Some of them consulted private practitioners initially before turning to public hospitals. Since there was no communication between the two sectors, it would mean repeated or duplicated tests. Professor HSIAO said that the problem was not particular to Hong Kong as Taiwan had experienced the same problem before the introduction of the national health insurance scheme.

24. Referring to drug prescription behaviour, Dr TANG Siu-tong was of the view that doctors used strong medicine because patients wanted to get well quickly. Professor YIP said that if patients knew about the long-term side effect of having strong medicine, they would not want to have that. Professor HSIAO considered that health care professionals concerned had the responsibility to educate patients on the side-effects of drugs.

25. In response to Dr TANG Siu-tong's question on whether the Government had done enough in health education, Professor HSIAO said that the Hong Kong Government could and should increase the support for health education and make health education more cost-effective.

26. Mr YEUNG Yiu-chung asked the professors to comment on the criticism that Hong Kong's health care system was closed against physicians from other parts of the world and against Chinese medicine practitioners. Professor HSIAO said that Hong Kong had a compartmentalized system but not a closed-door system. Professor HSIAO said that using the word "closed-door" would distract attention from the major issues that Hong Kong should examine. However, he considered that doctors in Hong Kong were a homogeneous group: they graduated from similar medical schools, were trained in a similar way and adopted the Commonwealth nations' practices. Dr LEONG Che-hung responded to the closed-door issue by pointing out that Hong Kong was no different from other countries in restricting graduates from other places from practising locally.

27. Mrs Sophie LEUNG LAU Yau-fun asked whether an analysis of the resources spent on drugs in Hong Kong as compared with other countries had been made. She expressed concern that overuse of medicine might cause damage to the liver and kidney. Professor HSIAO said that in primary care where services were mostly provided by private physicians, Hong Kong's spending on drugs was quite high. On the other hand, drug spending for hospital care and specialist care was low as HA was procuring drugs in a very cost-efficient manner. Therefore on balance, Hong Kong did not over-spend on drugs as a whole.

28. Dr LEONG Che-hung agreed with Dr YEUNG Sum that there had been little progress in improving primary health care since 1985. He urged the Government to make a commitment to improve the health care system.

29. SHW said that the Government was determined to reform the health care system. She said that unlike previous reviews which looked at individual parts of the system, the current review examined the overall healthcare system and reform in any one part would inevitably affect other parts of the system. SHW said that the Government's commitment on overall health expenditure would not decrease and might even increase in certain areas. The important question was where the increase should be and whether it would be cost-effective. SHW said that if Hong Kong had to contain its health expenditure at a reasonable level in the long run, more had to be done on prevention.

Reform objectives

30. Professor HSIAO said that it was important for Hong Kong people and leaders to decide what they wanted to achieve through health care reform. Professor HSIAO put forward the following as the objectives of the reform -

  1. Maintaining and improving fairness and equality of the system;

  2. Improving quality and efficiency or the cost-effectiveness of health care services;

  3. Assuring financing for health care to be sustainable;

  4. Meeting the future needs of the population; and

  5. Having control knobs or the ability to manage overall health expenditure inflation.

Professor HSIAO said that while there was no crisis in Hong Kong, there were some underlying and serious problems in the health care system. The reform objectives aimed to address these fundamental problems.

Guiding principle

31. Professor HSIAO said that members of the Steering Committee had consensus on the following guiding principle for health care reform in Hong Kong -

"Every resident should have access to reasonable quality and affordable health care. The government assures this access through a system of shared responsibility between the government and residents where those who can afford to pay for health care should pay."

Reform options

32. Professor HSIAO said that the reform options were based on the working assumptions that the Government's spending for health care would be kept at a constant share of GDP. Professor HSIAO put forward the following options for discussion -

  1. Status quo

    The fundamental problems in the system would become more serious as time went by.

  2. Cap the Government budget

    Quality of and access to public health care services would fall. Those who could afford would go to the private sector and the demand for private insurance would grow. The public sector would be left with the problems of the poor, the elderly and disabled who would not be able to buy insurance. Capping the budget would not be a viable solution for Hong Kong in the long run.

  3. Raise user fee

    User fees would need to increase 17 to 23 times by 2016. Patients who now paid $68 for hospital care would have to pay $1,400 for each day of hospitalization in 2016. There would be an outflow of patients to the private sector and an increase in demand for private insurance. It would not solve the problems of the present hospital and specialist dominated system.

  4. Health Security Plan (HSP) and MEDISAGE

    This option had two components in meeting the multiple needs of the population. A MEDISAGE programme was proposed to deal with the need for elderly care. Compulsory enrollment in an insurance (HSP) was proposed to cover large medical expenses of the population.

    Under MEDISAGE, employers and employees would contribute 1% of wages to individual savings accounts for long-term care insurance. If the worker died before retirement, the money became part of the worker's estate. If the worker lived to age 65, the government would require that person to withdraw money from the account to buy a single premium paid-up insurance policy for long-term care. According to international experience, if everyone was required to save for their own long-term care, the working population would need to save 8% of the wages; the amount was so large that at least 75% of the people could not save that much. But by pooling the risk, 1% of wages accumulated with investment would be sufficient.

    Under the HSP, employers and employees together would pay 2% of wages. The plan would cover large and unexpected medical expenses for in-patient care and out-patient specialist care for certain chronic diseases such as cancer and diabetic conditions.

    It was suggested that the government should target to help those who did not have the capability to help themselves and should direct fund to the most cost-effective health care. It was suggested that the government should allocate a large portion of HA's current budget to provide primary care for low-income households. The other part of the current HA spending would be for paying premium for the poor and the unemployed and for subsidizing the elderly and low-income households.

    Under the proposal, patients would have a choice as to where to obtain services and "money followed the patients". This would provide strong incentive for hospitals and specialist clinics to respond more to the needs and wishes of patients. If the patients' needs were not reasonable, the providers would try to educate the patients why their demand was not reasonable. The proposal would provide a level economic playing field for the public and private providers and would break down the walls between them. However, this option would not address the problem of compartmentalization: the walls between primary care, secondary care and tertiary care would still exist.

  5. Competitive Integrated Health Care

    The financing arrangements in this option would be similar to those of the previous option but the benefit package would be expanded to include all the services: preventive care, primary care, out-patient care, hospital care and rehabilitation etc. Under this option, the HA would be re-organized into 12 to 18 regional Health Integrated Systems that could contract with private general practitioners and specialists to provide a defined benefit package of total care. In addition, private hospitals and physician groups could similarly organize themselves into integrated systems to provide "total care". This option removed the compartmentalizations of health services and there would be flexibility and greater choices for patients.

33. Professor HSIAO concluded his presentation by pointing out that Table 1.2 of the Executive Summary provided an evaluation of the options. He emphasized that the options were put forward for discussion purpose. Other options might be put forward or the options could be modified. He considered that although Hong Kong was not in an acute stage of the problem, the longer reforms of health financing were postponed, the higher the costs would be.


34. Dr LEONG Che-hung asked how much would have to be paid by the same patient, who stayed in a public hospital several days for an operation and paid $500 now, when HSP was implemented. Professor HSIAO said that the individual would be covered under HSP and would have to pay about $5,000. Dr LEONG was of the view that the option was like raising user fee from $500 now to $5,000 then. He considered that all the proposed options did not preclude the possibility of raising user fee. Professor YIP commented that under the raise user fee option, a patient having the same operation and length of stay would have to pay about $11,000 to $12,000. Professor HSIAO added that the premium could be raised to 2? to 3% of wages if a lower payment by the patient was desired.

35. In response to Dr LEONG Che-hung's question on what the contribution of 1% to MEDISAGE would cover, Professor HSIAO said that it would pay for a benefit package for 2? years. If the elderly needed to go to a nursing home, they would have to pay for the first six months of the service. In addition to nursing home, the benefit package would also include visiting nurse service, physiotherapy done at home and home-maker service, which helped the elderly to be maintained at home rather than to be institutionalized. Professor HSIAO highlighted the fact that MEDISAGE would not cover services paid for under HSP such as acute care.

36. Miss Emily LAU Wai-hing was of the view that "money follows the patients" was a good concept. She would like to know if other countries used means-testing in deciding who should pay for public health services. Professor HSIAO said that their proposal did not include means-testing because means-testing required elaborate administrative apparatus and had loopholes. Professor HSIAO suggested that the Government should pay premiums for the elderly and the unemployed. He also suggested the Government to use wage records held by the Mandatory Provident Fund (MPF) Authority in identifying the low-income people for subsidy.

37. Miss Emily LAU Wai-hing was concerned that the administrative fee for the compulsory insurance scheme would be high. Professor HSIAO said that overseas countries spent less than 5% of total funds on administrative expenses. In Taiwan, the administration expenses for the national insurance programme amounted to less than 2% of total funds. He added that in substituting the existing system with a new mechanism, there would be offsets in administrative expenses.

38. Dr YEUNG Sum considered that it might not be the right time for introducing health insurance as the working population would have to contribute 5% of wages for retirement benefit in the coming year. Dr YEUNG asked if a designated tax at 1 to 2% on top of the current tax rate would be a solution to problems of health care financing. In response, Professor HSIAO said that an earmarked tax for health according to overseas experience would impair a government's ability to make good fiscal policy. Professor HSIAO said that there would be a great deal of preparation before Hong Kong could implement the health insurance scheme and Hong Kong could introduce the scheme when the economy bounced back.

39. Miss CHAN Yuen-han hoped that the Government would extend the consultation period to enable a more extensive public discussion on the Harvard Report. She asked if the professors had taken into account Hong Kong's social conditions in drawing up the options. She also asked whether it would be better to solve the problems under the existing structure. Professor HSIAO informed members that they had examined about 20 options before putting forward the five options, which were the fairest and most workable. Professor YIP added that under the HSP, the resources allocated to HA at the moment would be re-directed to pay premiums for the poor, the elderly and the low-income people.

40. Miss CHAN Yuen-han asked how much the contribution rate would increase in future. Professor HSIAO said that the percentage would go up over time but health expenditure would go up much faster under other options. Under the HSP, there would be mechanism for managing expenditure inflation and directing funds to the poor and the low-income people.

41. Mr Bernard CHAN asked for details about the long-term care insurance: why it should be purchased at age 65 but not earlier, whether it would be offered by private companies, whether it would cover spouses and whether there could be top-up benefits. Professor HSIAO said that private companies would offer the long-term care insurance policy. He explained that the insurance would be purchased at age 65 so that for those who did not live to 65, the money would become part of their estate. In addition, a larger sum could be accumulated if the money was put into individual accounts for investment instead. Professor HSIAO clarified that MEDISAGE would not cover spouses and top-up benefits could be allowed with restrictions.

42. In response to Mr LAW Chi-kwong's question, Professor HSIAO said that MEDISAGE did not cover spouse because 70% of the families had both spouses working. However, the benefit package of MEDISAGE could be modified to cover spouses but the contribution rate would be higher than 1%.

43. Mr LAW Chi-kwong did not understand why MEDISAGE would be privately run and he was worried that the lower-income groups would not be able to save enough for long-term care insurance. Professor HSIAO said that they wanted to use market forces where companies compete with each other to give better services for those who needed long-term care. Professor HSIAO said that the Government would subsidize those who could not save enough for long-term insurance. Professor YIP added that MEDISAGE would only cover long-term care for the elderly and not all the care they needed and so acute care for the elderly would still be covered under the HSP.

44. Mr LEE Wing-tat was of the view that when money followed the patient, services would be commercialized and there would be induced consumption. He wanted to know about the amount of waste in other health care systems. Professor HSIAO said that the amount of waste depended on two things: payment method for providers and the definition of benefit package. To minimize waste, Professor HSIAO said that patients would be required to pay a lump sum for using hospital services to discourage unnecessary consumption. In addition, he suggested that hospitals should be paid on a case-mix basis, which according to international experience did not create waste.

45. Miss Cyd HO was of the view that if the working population had to contribute for health care, it was tantamount to broadening the tax base. She was worried that the employees would have a heavy burden in contributing to both health care and MPF. Professor HSIAO noted that MPF would be a burden to workers but employers and employees would only need to contribute 3% in total for health care. The Government could subsidize those low-income people with a monthly income less than $8,000 to address the concern on income disparity between the rich and the poor. Professor YIP added that if the Government spent more on health, it would spend less on other programmes such as education and housing, which would also affect the poor.

46. In response to Dr YEUNG Sum's remark that the middle class instead of the poor would have more things to worry about under the proposal, Professor HSIAO said that he expected opposition to the proposal would come from the upper-income class.

47. The Chairman invited the SHW to respond to questions raised by members during the meeting. SHW said that the Government was open about how to reform the health care system. She said that the Government needed time to consider how to reform the existing system and what should be the future system. Even though the HA was an important part of the health care system and used a lot of resources, the Government did not want to resort to piece-meal solutions by considering how to reform the HA only.

48. The Chairman concluded the meeting by saying that he hoped that there would be more discussions on the subject in the future. He thanked Professors HSIAO and YIP for attending the meeting.

49. The meeting ended at 11:10 am.

Legislative Council Secretariat
5 November 1999