Ageing population and rising medical costs are challenges faced by all economically advanced countries and regions. Hong Kong is no exception. To maintain our existing healthcare service level, we must address the structural weaknesses in our current healthcare system promptly, in order to enhance the quality and efficiency of healthcare, reduce our reliance on hospital services, and ultimately improve the health of our citizens. Otherwise, quality healthcare services that we have long cherished will not be sustainable. In addition, increasing healthcare needs will most certainly affect our economy, weaken Hong Kong's competitiveness and reduce our investment in other areas of the society. In other words, the resources for other areas such as education or infrastructure may be reduced accordingly.

Reasons for the urgency:

Healthcare reform is a highly complex issue which involves many different aspirations, values and decisions of the society. One of the important considerations would be whether supplementary financing should be used for subsidizing healthcare for the whole population accessed through queuing and triage, or it should provide contributors with more and better choice to access healthcare more directly and readily. Given the far-reaching implications and the fact that it concerns every member of our society, we need to proceed cautiously and prudently at every step on the road of reform and act on the preference of the public. There is no absolute right or wrong on the direction of healthcare reform and supplementary financing arrangements. It hinges on the choice of the community. We intend to launch the consultation in two stages. In the first stage, we will consult the public on the concepts of the healthcare service reforms and the pros and cons of the various financing options. After considering the views obtained, we will formulate detailed reform proposals including supplementary financing arrangements and launch the second-stage consultation to further seek the views of the public.

The Hospital Authority (HA) has been adopting a number of measures over the years to balance its budget and enhance efficiency. There has been an average efficiency gain of about 1% within the public sector in the past. For the period between 2000-01 and 2005-06, public healthcare services have accumulated efficiency savings amounting to approximately 12% of their expenditure. HA will continue to review and improve the use of resources for greater efficiency and value-for-money. At the current level of health expenditure and services, the efficiency our public healthcare system compares favourably to those of many other advanced economies. However, our health expenditure will grow at a much faster rate than our economic growth. Thus the pressure on the public healthcare system caused by a rapidly ageing population and advances in medical technology cannot be eased by further efficiency enhancement alone. While we will continue to enhance both the efficiency and cost-effectiveness of our public healthcare services, we must face the reality that there is a need to seek supplementary financing to sustain our healthcare system.

The Government has pledged to increase the share of healthcare expenditure to 17% and draw $50 billion from the fiscal reserves to assist the implementation of healthcare reform. In addition, it is expected that in the coming 5 to 10 years, the overall healthcare service capacity in Hong Kong will increase by 10% to 20%. The challenge faced by our healthcare system is not one that can simply be met by building more hospitals. We need to enhance our primary care services and have healthcare professionals to help the public with disease prevention. We also need to promote public-private partnership in healthcare to enable patients to have greater autonomy and more choices in seeking healthcare services. All these are among our reform proposals in the current consultation exercise. At present, private hospital services are relatively expensive and not affordable to those uninsured. Also, under current practice, insurance premium will increase over time due to individuals' age and health conditions. If we can, through supplementary financing, find a way which can help the middle-income group use private hospital services at an affordable price, optimal utilisation of community resources can be achieved and the heavy burden on public healthcare services can be relieved. Those who need to rely on public healthcare services will also be benefited. The public healthcare system can continue to serve as an effective safety net for the community as a whole.

It is believed that many members of the public would appreciate the impressive standard of our healthcare services. The Hospital Authority has from time to time received letters of appreciation from dischargees commending the healthcare personnel for their professionalism. The healthcare reform is meant to identify a way to maintain the standard of our quality service in the face of rising medical costs and increasing healthcare needs due to rapidly ageing population. Indeed, we would also like to make our community healthier with lesser risk of falling ill through the enhancement of primary care and preventive care. The current consultation exercise also covers such issues as the expansion of primary healthcare services, and improvement on the collaboration between the public and private healthcare systems. The aim is to ensure that the community can continue to have a sustainable and reliable healthcare system and benefit from more comprehensive healthcare, more choice of services and better protection.

According to many overseas studies and experiences, the better developed the primary care system and preventive care, the healthier the public. The Government is thus determined to enhance primary healthcare services. This is one of the main directions of the healthcare reform. Supplementary healthcare financing is important because it can make available supplementary resources for our healthcare system and provide favourable conditions for the continuous improvements to our primary care services.

Primary healthcare is usually taken to mean the first point of contact individuals and the family have with a continuing healthcare process and constitutes the first level of care in the context of the healthcare system. It is the base upon which the rest of the healthcare system is organised. This point can be illustrated by reference to a match in which a team with a strong defence enabling any minor problems to be dealt with and remedied promptly has a bigger chance to win. Likewise, stronger primary healthcare results in better health of the population at lower cost and greater user satisfaction. For this reason, the Government is determined to enhance primary healthcare services. This is one of the main directions of the healthcare reform. Supplementary healthcare financing is important because it can make available sufficient supplementary resources for our healthcare system and provide favourable conditions for continuous improvements to our primary care services.

To enhance primary healthcare in Hong Kong, we propose to develop basic models for primary care services; establish a family doctor register; subsidise individuals for preventive care; strengthen public health functions; and improve public primary healthcare.

General practitioners, family medicine specialists and any other specialists can be family doctors if they provide comprehensive primary care services in accordance with the basic models. Specialists can provide both primary care and specialist care at the same time.

For continuous enhancement of the quality of primary care, we believe that doctors on the family doctor register must undergo continued professional training and medical education. Therefore, we recommend that training requirements and timeframes for compliance with such requirements be set for doctors to be included in the family doctor register.

The Government and healthcare professionals will be involved in the development of the basic models we have proposed for primary care services with an aim to provide a compendium of open information for reference by individuals and healthcare professionals so that they have a clear understanding of the most basic services, including preventive care services, which should be provided as primary care. These models are available for reference by all primary care providers.

Another proposal is to subsidise individuals to undertake basic preventive care services set out in the basic models. Since the provision of comprehensive primary care services relies on a long-term relationship between a patient and his/her family doctor, subsidies can only be given for preventive care provided by family doctors on the family doctor register.

No. There will be more room for collaboration between the public and private sectors in the future. This will allow healthcare professionals to have a choice or even allow a two-way flow of healthcare professionals between the two sectors, so that they can serve in both sectors at the same time. Our public healthcare system needs greater flexibility in allowing healthcare professionals with experience and expertise who provide services in the private market to serve the general public in the public sector.

Currently, there is significant public-private imbalance in our healthcare system with heavy reliance on public services and a lack of healthy competition between service providers of the two sectors. PPP offers greater choice of services for the community and helps promote healthy competition and collaboration between the public and private sectors. The purchase of healthcare services from the private sector by the Government is a cost-effective means to provide public healthcare services, while subsidizing individuals to use healthcare services in the private sector allows more members of the public to choose private healthcare services. Through these means of making better use of resources in our healthcare system, we can relieve the pressure on our public healthcare system and those who need to rely on public healthcare services can also benefit.

At present, the provision of healthcare services in Hong Kong is heavily relied on the public sector, with over 90% of in-patient services being provided by public hospitals under the Hospital Authority (HA). The public-private imbalance in the demand and supply of the service has impeded the collaboration and healthy competition between the public and private sectors, which would also limit the service choices for many members of the public.

To enhance the overall efficacy of our healthcare services, we plan to have greater collaboration between the public and private sectors through public-private partnership (PPP). One of the PPP models takes the form of procurement of services from private healthcare providers such as the Cataract Surgeries Programme currently implemented by the HA. Eligible patients participating in the Programme will be given a fixed subsidy of $5,000 for receiving cataract surgeries at private eye clinics. Patients may be required to co-pay no more than $8,000. Also, the HA is going to conduct a pilot project to procure general out-patient services from private doctors in Tin Shui Wai. If these projects are proven to be successful, procurement of more healthcare services from private doctors and hospitals may be considered.

We will also explore the feasibility of other PPP models such as the introduction of PPP in hospital development. Pursuing PPP in hospital development will not only enable optimal utilisation of land but also make room for shard use of facilities and equipment, thereby maximising the use of resources and bringing about a reduction in costs.

We are also actively studying the establishment of multi-partite medical centres of excellence in paediatrics and neuroscience. The idea behind this initiative is to establish a medical centre to draw together top expertise of the relevant specialties from the public and private sectors and the academia to provide medical treatments for patients with complex illnesses. Such a medical centre would also provide a platform for cross-fertilisation of expertise between medical professionals and promote further advancement in the expertise of these specialties in Hong Kong.

Our long-term vision is to develop a territory?wide information system for healthcare professionals in both public and private sectors to enter, store and retrieve patients' medical records subject to authorisation by the patients. An electronic health record system will enhance continuity of care by allowing healthcare providers to have reference to a patient's whole medical history maintained in the system to achieve a more accurate diagnosis. Besides, access to comprehensive medical information of patients by healthcare providers can minimise duplication of investigations, which will be particularly of benefit to patients on referral. The privacy of patients will be duly protected. Without a patient's authorisation, no healthcare provider is allowed to access the patient's medical record in the system. Besides, any input, storage and retrieval of data will be recorded in the system for cross-checking purpose.

The Secretary for Food and Health has appointed a Steering Committee on Electronic Health Record Sharing to provide the steer, build consensus and gather expertise for the initiative. The Steering Committee has set up three working groups to specifically address the fundamental issues relating to the development of the electronic infrastructure including the protection of privacy.

We will uphold our long-established public healthcare principle, i.e. no one should be denied adequate healthcare through lack of means. The Government will remain the primary financing source for our healthcare system and continue to provide accessible and affordable public healthcare services for all. However, our ability to sustain the public healthcare safety net will inevitably be strained as a result of an ageing population and rising medical costs.

If we are able to introduce supplementary financing to provide additional resources for the healthcare system, and relieve the pressure on our public healthcare services, more resources can be devoted to strengthen our public healthcare safety net. For example, we may consider the introduction of a personal limit on healthcare expenses for chronic patients or patients struck by catastrophic illnesses requiring costly treatments, such that those whose healthcare expenses have exceeded the limit may receive additional financial assistance. We may also have the resources to strengthen the existing standard public medical services, for instance by incorporating drugs or treatments which have been proven effective into the scope of standard services or as subsidized items.

This reader is a CSSA recipient. Under the existing mechanism, CSSA recipients can be exempted from payment of fees for public healthcare services. Low-income people can also apply for a medical fee waiver and their applications will be approved as long as their household income and assets are lower than the prescribed level (i.e. passing a means test). Nevertheless, this medical fee waiver mechanism still lacks flexibility as patients with household income and assets over the prescribed level (i.e. failing to pass the means test) are not eligible for a waiver even if they require a long period of hospitalisation or need expensive treatment or medicine not covered in the standard services.

In the healthcare reform consultation currently underway, one of the issues to be explored concerns the enhancement of public healthcare safety net and this includes exploring the idea of "a personal limit on medical expenses", which involves the imposition of a limit on the level/amount of total annual medical expenditure incurred by a patient who use public services. If the medical expenditure of a patient exceeds the prescribed amount in one particular year, the patient is allowed to use medical services at a discounted rate or free of charge in the remaining period of that year. This measure can afford protection to those families which are able to meet general medical expenses and save them from financial ruin in the event that any of their family members unfortunately suffers from illnesses requiring costly treatment. Whether this measure will be put in place hinges on your views and please let us have yours on the proposal before the consultation ends.

If the current healthcare system remains unchanged, and the Government will have to face ever increasing public health expenditure, the following situations may arise:

A large budget surplus does not happen every year, and there is no guarantee that the surplus situation will continue. Past experience has already shown us that the financial situation of the Government changes according to the economy. A one-off budget surplus is not something that can be relied on to meet recurrent healthcare expenses.

The challenges faced by our healthcare system now cannot be simply resolved by a short-term increase in funding for public healthcare services. In addition to increasing the resources for the healthcare system, we also need to undertake reforms on healthcare services. For example, we should allocate more resources to enhance primary care for improving the health of our community; we should promote public-private partnership and develop electronic health record sharing so as to provide the community with more choices and greater autonomy, thus realizing the concept of "money following patients". We should also strengthen the existing public healthcare safety net. These are necessary to fulfil our vision for healthcare reform. We need a stable and sustainable financing source in order to carry on healthcare reform, to improve healthcare services and to enhance the health of the community for the long term. It is therefore necessary for us to introduce supplementary healthcare financing (a source of healthcare funding other than taxation).

Hong Kong currently has a robust economy and a strong fiscal position. It is the best time for the Government to work together with the community to prepare for our future, introduce healthcare reform, and lay a solid foundation for quality healthcare services for every one of us and our future generations.

The Chief Executive has pledged to increase recurrent government expenditure for health and medical services from 15% at present to 17% in 2011-12. Based on Hong Kong's current economic situation and the Government's financial position, we estimate that this will represent an increase in annual recurrent expenditure of about $10 billion. The Financial Secretary has also committed to draw $50 billion from the fiscal reserve to assist the implementation of healthcare reform when the supplementary financing arrangement has been finalised after consultation. These clearly demonstrate the Government's commitment to shoulder the responsibility for healthcare financing together with the community.

In any event, the Government will continue to be the major pillar for financing our healthcare system. The Government will continue to uphold its long-established public healthcare policy that no one should be denied adequate healthcare through lack of means. The public healthcare system will also remain, as at present, a safety net for the whole population, in particular the low-income and under-privileged groups.

However, even with increased government commitment on healthcare, we still cannot surmount the challenges posed by an ageing population and rising medical costs. The ratio of the working-age population to the elderly population is 6:1 at present, but will drastically decrease to 5:1 in 10 years' time and 3:1 in 20 years' time. Meanwhile, due to our ageing population and the use of more advanced medical technology, our total public health expenditure is projected to increase from about $38 billion to some $127 billion. Therefore, we need the whole community to work together, to build a consensus, to undertake healthcare reform and to introduce supplementary healthcare financing. If we can come to a supplementary financing model, the Government will examine how to provide financial incentives to contributors of the supplementary financing scheme, e.g. tax deduction, start-up capital or other forms of direct subsidy.

At the first stage consultation, we would like to listen to the views of the public on the concepts of the healthcare reform, as well as the pros and cons of the supplementary healthcare financing options. At this stage, we are open-minded on who should contribute to supplementary financing. After collecting and consolidating public views, we will formulate more concrete proposals on supplementary healthcare financing arrangements for launching the next stage of consultation. In any event, the Government is committed to shouldering the responsibility for healthcare financing together with the community.

We do not have any concrete proposals on the details of any of the financing option in this first-stage public consultation exercise. The level of contribution would very much depend on the design of the supplementary healthcare financing option, the number of participants and their affordability. However, in studying various supplementary healthcare financing options, we have for illustrative purpose made an assumption that the contribution rate would be around 3-5% of the participant's income subject to an upper limit on the level of contribution. This is out of the consideration that too low a contribution rate would not be administratively cost-effective, and would not bring about substantial supplementary financing. A 3-5% contribution rate by the working population would provide a substantial amount of supplementary financing that can help meet increasing healthcare needs. This, coupled with the reform of the healthcare market and service structure, should make the increase in future healthcare needs and expenditure a less unbearable burden, thus enhancing the sustainability of our healthcare system substantially.

We certainly hope that everyone is in good health and free from illnesses. However, nobody can foresee whether and when they will need healthcare. Furthermore, healthcare reform covers not only public healthcare services, but also the whole healthcare system. Different supplementary healthcare financing options will have different impacts on those who use the services provided in the private market.

In the discussion of supplementary financing, the community should consider not only what kind of healthcare protection would suit them best, but also whether it can promote the sustainability of the overall healthcare system and maintain high quality services. Setting up a contributory social health insurance, establishing individual medical savings accounts, or taking out suitable health insurance are all different means of preparing for the future.

Above all, healthcare reform concerns every one of us. We need to work with the community to take it forward.

The Government welcomes members of the public to express views on the healthcare reform consultation document and discussions are not confined to the six proposed supplementary financing options. The Government is open-minded on the concerned options and any different views and any proposals apart from the six proposed options or any combination are welcome.

The ongoing consultation is the first part of the two-stage consultation exercise. We hope to first seek the views of the public and know more about their preferences in order to build a consensus on an option acceptable to the public and best-suited to the circumstances of Hong Kong. Pending views collected and narrowing down the areas of discussions, we would work out the concrete proposals on the most favoured supplementary financing option for the second stage consultation. The next stage of consultation is expected to be launched next year and the public will be consulted on issues related to operation mode of the option, administrative structure and how to regulate before coming to a decision.

According to the statistics of the World Health