LC: SHW's speech at Budget sitting

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Following is the speech by the Secretary for Health and Welfare, Dr E K Yeoh, at the Budget sitting in the Legislative Council today (April 17):

Madam President,

I wish to thank Members for expressing their views on the Budget proposals and would like to take this opportunity to respond to your views and concerns.

First of all, I would like to cover welfare services. Let me reiterate that the objective of our social policies in the present challenging economic climate is to provide an environment where everyone has the opportunity to develop their potential. Necessary support should be provided to those hardest hit by the rapid changes in circumstances, as well as to disadvantaged groups. Our aim is to help our people to enhance their ability to help themselves and to boost their will-power to do so.

Welfare Services

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Welfare Expenditure

Some Honourable Members have referred to the provision of welfare services in the context of both current and future government expenditure.

I would like to present a few facts which will speak for themselves. Recurrent public expenditure on social welfare is $32 billion in 2002-03, an increase of 58 per cent over the $20 billion spent in 1997-98. Social welfare is the third biggest spending area of the Government, accounting for 14.6 per cent of total recurrent public expenditure in 2002-03, as compared with 11.8 per cent in 1997-98.

Increase in direct welfare service expenditure has risen from $6.1 billion in 1997-98 to around $10 billion in the current financial year. This substantial growth in welfare expenditure is reflected in all service areas.

It is therefore clear from statistics that we are already blessed with substantial resources in the welfare portfolio and we remain firmly committed to provide adequate resources to implement the social policies expounded by the Chief Executive.

However, even in the best of times, resources are finite and all of us, the Government, members of this Council, service providers, and welfare recipients themselves, we all have a responsibility to ensure that these resources are utilised in the most cost-effective way and more so when there are going to be severe, constrains on public spending. The introduction of the Lump-Sum grant funding initiative has given welfare NGOs much greater flexibility in their operations and is a very significant directional change in the way welfare services are financed and commissioned. This change has empowered NGOs to revisit their service objectives. It has enabled fundamental reorganisation of how welfare services are managed and delivered and facilitated re-engineering of many processes. These changes have released resources to meet changing needs and have benefited the clients whom we seek to serve.

I shall just give one example. In order to strengthen support for families, an Integrated Family Service Centre model has been created, which is designed to bring together existing resources in the family service centre operations to provide services which are based and outreached into the community. The new centres will provide a continuum of preventive, supportive and remedial services. As such, they will meet the changing needs of families in a more holistic manner and make it easier for clients to access the appropriate services.

Review of Social Security Schemes

On social security, some Honourable Members have commented on expenditure provisions for the Comprehensive Social Security Assistance (CSSA) and Old Age Allowance (OAA). I wish to reassure Honourable Members that the Government is committed to providing a safety net to offer financial assistance to those in need in the community.

The total provision of $22 billion for the CSSA Scheme and Social Security Allowance (SSA) Scheme (of which the OAA Scheme is a part) in this financial year, an increase of 57 per cent over the provision of that in 1997-98, is roughly 10 per cent of the recurrent public expenditure. This is a strong testament to our commitment to provide financial assistance to those members of the community who suffer financial difficulties due to various reasons to help them meet basic needs. Currently our CSSA system is helping 400 000 needy recipients, while another 457 600 elders and 102 600 disabled persons are receiving assistance under the SSA Scheme.

Given the enormous resources involved in the CSSA and SSA Schemes, it is only prudent and responsible of us that we review the situation from time to time to ensure that public resources are directed to those genuinely in need, and examine whether there are options in utilising public resources even more effectively and efficiently, and this would also enhance our capacity to target even greater assistance to those most in need.

In this connection, we do not believe that an across the board increase in the OAA, as some Honourable Members have suggested, is an appropriate way forward. As I said previously, an across the board increase in the OAA rate would effectively reposition this allowance as a universal basic pension. International experience has demonstrated that such a scheme, funded from general revenue, would be difficult to sustain and in our local context, would be unsustainable.

In view of the ageing of our population and the differences in the socio-economic and demographic profiles of the current generation and the future generations of older persons, we have been considering the provision of financial support for needy elders in the context of the three pillar model recommended by the World Bank. The objective of our study is to develop a long-term sustainable safety net that better targets resources at those needy elders to meet their basic needs, and which takes into account our local circumstances, particularly our low and simple taxation system. However, how to achieve the objective is a complex issue, which we need to examine further very carefully. I would like to take this opportunity to clarify that there are no plans at hand for any major changes, which has been a subject of much speculation recently. If and when there are plans to introduce major changes to the system, we will certainly consult the Legislative Council and the public first.

Conclusion

In essence, we must strive for enhanced productivity, greater cost-effectiveness and other gains so that our dollars provide maximal assistance both in qualitative and quantitative

terms to recipients of our services and to target our assistance to those most in need. In this context, it is necessary to remind ourselves that resources are finite and there will always be disadvantaged people in the community. What we must do is to ensure that these limited resources are directed to those most in need.

Health Services

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I shall now turn to Health. Some Honourable Members have commented on a number of very fundamental aspects of our health policy. I welcome this opportunity to clarify our policies and restate our agenda in order to reduce the amount of misinformation, which has been generated particularly in the recent past and facilitate informed and constructive discussion.

Good health is a pre-requisite for individuals to flourish as citizens, family members, workers and consumers. Improving health is therefore a key concern of not just this Government, but governments all over the world, as it can contribute to higher economic growth and improve community well-being. The health sector plays a critical role in bringing about health improvements. Through its provision of preventive, curative and rehabilitative services, the Government aims to provide goods and services that benefit the public.

Health is fundamentally different from other things people want. It is an inalienable asset, and in this respect it somewhat resembles other forms of human capital, such as education and professional knowledge. But it is also different from them in crucial respects. It is subject to large and unpredictable risks and cannot be accumulated, as knowledge and skills can. Health is radically different, unlike other assets which people can insure against loss or damage. The poor also need protection against health risk fully and as well as the more affluent. In contrast where other assets such as housing are concerned, the need for such protection either does not arise or arises only in proportion to income. The basic biological difference between health and other assets, exaggerates forms of market failure, such as moral hazard and imperfect and asymmetric information that occurs for other goods and services. It explains directly or indirectly much of the reason why markets work less well for health then for other things and why there is a need for a more active and a complicated role for the state. In fact, I have taken this out of the World Health Report by the World Health Organisation. It provides an understanding why governments all over the world are involved in and invest substantial resources in their health care system.

In the overall context of healthcare services, it is therefore essential that they are delivered to benefit the society as a whole, not just those individuals who are able or willing to pay for them. This is reflected in our long held policy that "no one will be denied adequate medical treatment for lack of means". There is therefore a critical need to adopt

a holistic approach, and not a blinkered view, to examine

rationally our health care system, and policies. It is against this background that I offer the following response to comments on the health sector.

It is in the context of the responsibilities expected of, and role undertaken by Government, as I referred to earlier, that governments all over the world are facing daunting challenges. And we are no different here. The problems of our own health sector are well recognised and have been discussed and well researched. Government began addressing these problems in 1985, when it commissioned W.D. Scott Pty Co., to review the medical and health services which subsequently led to a decision to set up the Hospital Authority. The functions of the Authority are enshrined in the Hospital Authority Ordinance, Chapter 113, Part I, Section 4. It would be beneficial for an informed discussion to revisit what the Ordinance requires of the Authority and I would like to take this opportunity to state some of the key functions expected of the Authority.

"The Authority shall ¡V

(i) to use hospital beds, staff, equipment and other resources efficiently to provide hospital services of the highest possible standard within the resources obtainable;

(ii) to improve the efficiency of hospital services by developing appropriate management structures, system and performance measures;

(iii) to improve the environment in public hospitals to meet the needs of patients;

(iv) to attract, motivate and retain more qualified staff;

(v) to encourage public participation in the operation of the public hospitals system; and

(vi) to ensure accountability to the public for the management and control of the public hospitals system;

(d) recommend to the Secretary for health and Welfare, for the purposes of section 18, appropriate policies on fees for the use of hospital services by the public, having regard to the principle that no person should be prevented, through lack of means, from obtaining adequate medical treatment;"So the HA does no more than it is required in the Ordinance.

The reforms undertaken by the Hospital Authority have been what was required and expected of it by the Government and this Legislature, and the focus was on reorganising the public hospital system , transforming management, creating a governance structure and system, enhancing efficiency and quality and improving responsiveness.

However, recognising that the reforms set upon by the Hospital Authority was only the first step, Government issued a consultation document "Towards Better Health" in 1993 to address the deeper, structural problems affecting the health care system. However, the proposals were not accepted by the public and little change ensued as a result.

Our next proposal for change has its origins in the study report of the Harvard Team "Improving Hong Kong's Health Care System. Why and for Whom?" commissioned by the Government and published in 1999. The Study assessed Hong Kong's health care system in the following areas : cost-effectiveness of the system, equity, risk-pooling, efficiency, sustainability and quality.

Members will recollect that the report was highly critical of our system, however, the consultants acknowledged the following achievements : Our assessment of the Hong Kong health care system show that Hong Kong has a relatively equitable system, in terms of access and utilisation and resource distribution. As a result of the 1990 reform of the public hospital system through the establishment of the Hospital Authority, Hong Kong has also benefited from improvements in certain aspects of quality and productive efficiency in specific areas. Evidence indicates that the cost-effectiveness of the Hong Kong system is similar to its neighbouring Asian nations (with specific reference to Singapore and Japan) and compares favourably to European advanced economics.

The consultants also highlighted three key weakness of

the current system:

(1) The quality of health care is highly variable which

the consultants ascribed to the privilege enjoyed by

the medical profession to self-regulate without

interference and inadequate oversight from external

organisation;

(2) The long-term financial sustainability of the current

health care system is highly questionable; and

(3) Hong Kong's health care system is highly

compartmentalised, threatening the organisational

sustainability, quality and efficiency.

In response to the comments of the public on the report,

Government in December 2000, release for public consultation

proposals for health care reform in the document "Lifelong

Investment in Health".

The objective of the document was to set out strategic

reform proposals for the three main components of our healthcare

system ¡V the organisation and provision of health services,

mechanisms for assuring the quality of care and the funding

and long term financing highlighted by the Harvard Team, and

also sought to address the weaknesses identified by the team.

I shall first bring Honourable Members up-to-date on the

latest state of the reform proposals. Following the period

of public consultation, we are now pressing ahead with individual reform measures where there has been general agreement in an incremental way. The objective of this comprehensive health care reform exercise is to ensure that our health care system will continue to provide quality and affordable care to the community in the light of changing circumstances, such as the ageing population, the advances in medical technology and the ever-rising public expectations. Equally important is to ensure the financial sustainability of our system so that we will not pass an undue financial burden to future generations. The public health care sector is already under tremendous stress, and the budget for keeping it going accounts for about 15 per cent of the total government recurrent expenditure.

In the short term, Honourable Members will begin to see new measures being put in place. The strengthening of preventive measures for all individuals in a holistic manner, better integration of primary and secondary care subsequent to the transfer of general out patient clinics from the Department of Health to the Hospital Authority, and the gradual introduction of Chinese medicine in the public sector, are just a few examples. We have also initiated discussions with health professional bodies and health provider organisations on the question of quality. For the medium term, we are undertaking to develop an electronic Health Information Infrastructure to facilitate better and timely sharing of health information and patient records between the sectors, thus improving the consistency and standards of care we provide to patients.

At this juncture, I would like to say a few words on the financing of our health care in particular. This has been a topical issue which has attracted considerable debate and discussion. I would like to quickly re-visit our current method of financing our health care. In Hong Kong, our health care system has been financed primarily by tax revenue. It has the merits of being relatively simple to administer. It is also a system that can be simplier to manage, both in terms of budgetary control and quality assurance, with a budget that can be found internationally to be the most effective way of cost and contentment.

However, we should also recognise that private resources for health care also provide an essential part of our current funding which is equivalent approximately to the current public financing. With the shortcomings of relying solely on tax revenue as the main means of financing health care, we have, therefore, proposed three strategic measures in the context of the health care reform to ensure the long-term financial sustainability of our health care system. In developing the proposals, we have in fact examined the three primary sources of financing health system, i.e. tax revenue; mandatory contributions, either through insurance or savings; and voluntary contributions, i.e. private insurance or out of pocket expense. The three measures that we are proposing in fact represent the minimum changes that is required to sustain the system. And these three measures include rigorous cost containment and productivity enhancement to be undertaken by the public sector, a revamp of our current public fees structure, and the introduction of an individual medical savings scheme, namely, the Health Protection Account. The first two proposals are intended to be implemented in the short term, while the Health Protection Account will be a longer-term proposal.

On cost containment and productivity enhancement, I am acutely aware of the need to first look within the system to identify savings and improvements, before searching for new revenue sources. Therefore the Hospital Authority has been implementing a series of measures to achieve the objective of doing more with less, of doing better with the same, without compromising the quality and standard of care provided to patients. According to the Harvard Report, it was projected that there would be an annual increase of 4 per cent in public health care expenditure. But in fact, government subvention to the Hospital Authority has been capped at approximately 2.2 per cent per annum to meet the needs of our population growth and changing demographic structure.

As reported to the LegCo Health Services Panel meeting in April, HA has already achieved 11 per cent saving through its own productivity enhancement initiatives even before the introduction of the Government's Enhanced Productivity Programme. In addition to this, HA has achieved another 3 per cent savings in 2000/01 and 2001/02. This year it is expected to achieve a further 2 per cent savings. I foresee such cost containment and productivity enhancement measures will continue with the development and implementation of new strategies, including their new cluster-based management to achieve further economies of scale and efficient use of resources, continuing administrative downsizing of the HA Head Office and hospitals, re-engineering and streamlining of work processes, creation of new cost-effective systems of providing care, and rigorous management of new medical technologies to ensure their cost effectiveness, etc.

On the subject of fee restructuring, our study on this important subject is nearing completion, and I would like to take this opportunity to restate the objective of this exercise. It is not a means to generate additional revenues to finance the current budget deficit of the Hospital Authority, nor is it a tool for the Government to gradually reduce its commitment to health care. Rather, the key objective of revamping our public fee structure is to better target our finite resource at the poor and the needy, and at medical services which carry major financial risks to patients. Through the revision of the current public fees structure, we will also be able to influence patients' health-seeking behaviour and decisions, hence enabling the reduction of inappropriate use of public medical services. Furthermore, the revised fees structure will create opportunities for participation by the insurance industry and collaboration with the private sector. Both sectors have indicated that they welcome such a move, and are prepared to work closely with us in devising innovative insurance and health care products to cater for the new demand arising from the community. We are in the process of formulating our proposals and timetable of our fee revision, and we shall present our recommended package to the Legislative Council Welfare Services Panel for discussion in the latter part of the year. I can assure Honourable Members that in finalising our proposals, we shall give due regard to the affordability of the general public, and that there will continue to be a safety net for those who lack the means to pay for their medical services. Contrary to some of the concerns expressed by Members, the fee restructuring will be beneficial to the low income and chronically-ill in the longer run.

As for the proposed Health Protection Account, it is one of the most contentious reform measures which attracted much debate. In the light of the public feedback received on this model, we are conducting in-depth studies to examine different aspects of the Health Protection Account. Upon completion of the detailed study, we will be consulting you again and the public on this proposal. While there is no immediate urgency to implement this Scheme, the public should be properly informed of its value, significance and importance. The Scheme is designed to enable individuals to accumulate a fair amount of savings throughout their working life to cater for their own medical needs upon retirement. Not only is this Scheme in line with the concept and practice of a shared responsibility undertaken also by the individual for her or his own health, care needs in the future, it also safeguards our next generations from being unduly burdened by the medical expenditures incurred by us as we become more frail inevitably in the future. To the community as a whole, the saving accumulated represents an important supplementary funding source to complement the financing to be provided by the Government. I believe this hybrid model of health care financing is a preferred option for Hong Kong, having regard to our societal value, affordability, public aspiration and the Government's continued commitment to heavily subsidise health care. That said, I am open to persuasion and debate if anyone can counter-propose an even more viable, socially-acceptable, and more attractive financing model.

A final point I would like to cover is the issue of public/private interface, there has been much criticism against the over-dominance of the public sector. I must point out that health care is produced not only in hospitals and in clinics. In respect of in-patient care, it is true that the public sector accounts for 94 per cent. But even in this sector, increasingly people are moving more to the day care. And in fact this number has no meaning as more and more people in the day care, then the requirement for them to stay in the hospitals will decrease. In respect of primary out-patient services, the private sector accounts for 85 per cent of the market and we believe there is still much rooms for expansion. The Harvard Report pointed out that one of the strengths of our local health care system is equity and accessibility, that no one has to reduce their use of health services due to an inability to pay or they have to travel long distances to receive care. This can be attributed to the Government's commitment to assure every resident access to adequate hospital care and the Government's allocation of a significant portion of its budget to health care. The current market share of the Hospital Authority is the result of the provision of affordable and quality service to the wider public. It is definitely not, as some have alleged, a deliberative attempt to crowd out the private sector, which has their important role to play.

On several occasions, I have reiterated our fundamental policy to maintain a dual system of care in Hong Kong, with the public and private system each playing a role complementary to one another. The greatest benefit of this is more choices of care provided to patients, and a more flexible and creative use of health care talents in Hong Kong. We see the important roles and great strengthens of our private system. A private health service complements public health care. It is against this background that I am chairing two working groups with representatives of private practitioners and private hospitals. Using the working groups as a forum for dialogue, members have been working very hard to devise innovative packages and care plans which could facilitate better patient flow between the two sectors and give patients more choices when they are in need of treatment.

This is necessary because health is not attained just by adduces of care. There is a well-known quote in the medical circle that we find amusing or amazing, "The operation was successful but the patient died". I think this is not as amazing as on the face value because in the instances of some patients, many older patients have very successful operations. But after the operations are done and the patients are discharged from the hospital. Most of the studies found that half of these elder patients are dead within next year because after they are discharged from the hospital, the after care is poor and of course most of these individuals requires a lot of rehabilitation before they can really get down on their feet and enjoy quality of life. So when you look at this as a very extreme example, health care is provided in a continuum and it is very important that we do not forget that. When we look at our total health care system, we not only look at the private or public system, we are looking at the system in totality. We are not looking at absolutes in care at certain time points, we are looking at the whole care that we provide before the person is born and after the patient dies. We look at the bereavement we pay for the loved ones.

The deliberation process in the working groups has just started and a number of constructive and feasible proposals have been identified. I have been very encouraged by the very open minds and positive attitudes that we need to build up mutual trust between the public and private sector which is a fundamental basis for any collaborative schemes to materialize, because we share in fact a common objective because we are both working to improve a common health care system, and for us to achieve a better public/private interface, we both need to collaborate and work together.

The Hospital Authority is devising clinical guidelines and protocols on patient referrals with a view to ensuring that patients who are in stable condition are referred back appropriately to their GPs for proper follow-up. Each hospital will put in place audit mechanism to monitor the compliance with the guidelines. In addition, individual hospitals are discussing many programmes with their private counterparts. The objectives are twofold. While these programmes will give patients more flexibility and choices in their treatment process, it also make better use of the resources and talents in the private sector. We also need the full participation of the private sector. We need to re-assess their strengthen and realign their resources in order to better serve the needs of the community. The issue of variable quality of care, as highlighted in the Harvard Report as one of the weaknesses of our health care system, is another area that needed to be tackled. I am heartened to observe that the medical profession, and the private providers are really looking at how to enhance the qualities but also encourage that the private hospitals have implemented a system of accreditation to safeguard and improve their quality of service. In my view of course, this is a step in the right direction, and I am confident that the health sector would continue their effort in this critically-important aspect.

Notwithstanding the above we also need the full participation of the private sector. They need to re-assess their strengthen and realign their resources in order to better serve the needs of the community. The issue of variable quality of care, as highlighted in the Harvard Report as one of the weaknesses of our health care system, is another area that needed to be tackled. I am heartened to note that the medical profession and the private providers are really looking at how to enhance their quality. I am also encouraged that that the private hospitals have implemented a system of accreditation to safeguard and improve their quality of services. In my view, of course, this is a step in the right direction, and I am confident that the health sector will continue their effort in this equally and critically-important aspect.

Finally, I would like to say a few words on the comments made about the "positioning" of private sector and comments about how one should be limiting services in the public sector. On the face of it, it sounds like an simple enough, and to some, attractive proposition, which I surmise would provide plenty of scope for private sector participation. The proponent of this suggested that the Government should confine itself to providing "essential services" and the "non-essential" ones will have to borne by individual residents. Regrettably, we do not have a definition of what is meant by "essential" and "non-essential". And in the context of what I have just said, this medicine and health services are provided in the continuum and that we need to really have the appropriate services provided by the appropriate people. The role of primary care is equally important because in medicine, we are not just talking about prevention in totality, but we have three levels of prevention: primary prevention, secondary prevention and tertiary prevention. Primary prevention is done primarily by the Department of Health, but is both contributed by the public and private sectors to prevent illnesses and diseases. Secondary prevention is early detection of illnesses like picking up hyper-tension and diabetes, so that these individuals can be better treated and that they don't suffer the subsequent consequence of these illnesses which will lead to specialist care and more expensive services. Tertiary prevention is the prevention of complications of illnesses. Of course, the primary health care sector has a very important role to play in preventive services and the continuation of these services is important in the health care system if we are going to look at the total efficiency of the whole system. So, by necessity, we would have to explore to see what sector would do what, but this division of services would be defined by how medical services are organised and not whether they are in the private or public sector. Madam President, we are, in fact, willing to accept criticism and constructive proposals on further improvements to our health care system. And I shall certainly be very happy to carry on this health care debate with Honourable Members of the Council in either this forum or in the Health Services Panel.

Thank you very much.

End/Wednesday, April 17, 2002

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