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17 On Public Health Care Finances In this essay I discuss the cost of financing public health care in Hong Kong assuming the present health care system remains largely unchanged. I will make some simple projections of the public cost involved, interpret the results, and discuss the consequences. Public health care services have declined and I believe the main reason has been the low supply of health care professionals, mainly doctors and nurses. If Hong Kong fails to increase the supply of doctors and nurses, then the cost of attracting and retaining them into the public sector will certainly rise, and this will add further burden to the already growing total public health care expenditures. I believe it is necessary and desirable to import more doctors and nurses into the public health care services. The shortage of nurses is particularly acute and it would be necessary to contemplate more aggressive policy measures. The cost of health care depends critically on the size and age structure of the population. Table 17.1 presents figures on the average health care expenses per 1,000 population in the period 2009–11. Health care expenditures increase rapidly after age 65 and especially after age 75. Table 17.1 Hospital Authority health care cost per 1,000 population ($ million) 2009–10 2010–11 Age below 15 3.2 3.3 Age 15–64 3.1 3.2 Age 65–74 11.4 11.4 Age 75 and above 25.0 25.2 Overall 5.0 5.1 168 Contradictions in Quality of Life Issues By applying these figures to other periods, we can estimate the hypothetical “constant cost” of health care funding that is required to support the Hospital Authority in the past and into the future. This is a useful exercise because we can compare it with actual expenditure and also apply it to the projected future make-up of the population to estimate how much health care funding may cost us in future. Rising Unit Cost of Health Care Workforce In Figure 17.1, I plot the “constant cost” health care funding for the Hospital Authority backwards to 1992/93, based on 2009–11 costs. This exercise shows that the “constant cost” of health care funding has increased over the past two decades at an annual real rate of about 2.1%, reflecting the growth and ageing of the population. ln (Actual Expenditure of HA) ln (Projected Expenditure of HA at Constant Cost) 9.20 9.40 9.60 9.80 10.00 10.20 10.40 10.60 10.80 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 ln(X) Figure 17.1 Projected constant cost and actual Hospital Authority expenditures, 1992–2011 On Public Health Care Finances 169 I also plot the actual expenditures of the Hospital Authority adjusted for consumer price inflation. These were initially significantly lower than the hypothetical “constant cost” of health care funding—almost 53% lower—reflecting an actual lower cost structure. The gap narrowed over time as funded expenditures began to rise rapidly and by 2000/01, had caught up with the 2009–11 cost structure. This was the best period in the history of the Hospital Authority. It was widely recognized that service quality improved during this period and an important contributing factor was probably more generous funding. However, since then the cost structure has remained largely unchanged except to catch up with consumer price inflation, with negative consequences for the quality of health care services. The “true constant cost” required to support the same quality of health care services will have risen faster than consumer price inflation, driven by the fact that about 85% of the cost structure is related to human resources and health care personnel costs have definitely risen faster than inflation. Moreover, medical equipment and capital costs have most likely also risen faster than consumer price inflation. Therefore, adjusting for the inflation rate alone would understate the increase in the “true constant cost” of the same quality health care services from 1992/93 to 2010/11. The Decline of Service Quality Unfortunately, a good deflator for health care services is not available. But the fact that actual expenditures and hypothetical “constant cost” expenditures are almost the same suggests that the quality and level of service delivered by the Hospital Authority since...


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