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LCQ11: Health expenditure

     Following is a question by the Hon Cyd Ho and a written reply by the Secretary for Food and Health, Dr York Chow, in the Legislative Council today (March 16):


     A study in the United States indicates that medical inflation has long been two to three times higher than general inflation. The trends in the United States as well as other member countries of the Organisation for Economic Co-operation and Development also show that medical inflation has been on the rise. There have been comments that the plan of the Government of Hong Kong to allocate $50 billion for subsidising members of the public to buy medical insurance will definitively push up the public's demand for private healthcare services, and both the public and private healthcare systems will also raise their expenditure on staff so as to increase manpower and to train and retain staff. As a result, the proposed medical reform measures will definitively aggravate medical inflation in Hong Kong. In this connection, will the Government inform this Council:

(a) of the inflation figures of Hong Kong's healthcare expenditure in the past three years, and the basis adopted by the authorities in arriving at such figures;

(b) given that there have been comments that the Hospital Authority (HA) can reduce the impact of new drugs on medical inflation by not including all the new drugs in its Drug Formulary, of the medical inflation in Hong Kong in the past three years as estimated by the authority if all the new drugs needed by patients had been included in the Drug Formulary;

(c) given that there have been comments that the authorities' subsidising members of the public to buy medical insurance will push up the demand for private healthcare services, thus aggravating brain drain from the public to the private healthcare system, how the authorities will tackle the problem of competition for talents between the public and private healthcare systems, and whether it knows HA's measures to ensure that public hospitals can retain talents;

(d) whether it has assessed the anticipated market shares of the services provided by the public and private healthcare systems when the $50 billion is used up; whether it has assessed if patients will return to the public healthcare system from the private healthcare system when the Government ceases to subsidise members of the public to buy medical insurance; if the assessment result is that such situation will happen, how HA can increase its manpower within a short time to cope with the demand; and

(e) whether it knows HA's expenditure on the payroll for healthcare staff in each of the past five years, with a breakdown of the expenditure and the payroll by rank and grade (i.e. consultants, doctors, registered nurses, enrolled nurses, chemists/laboratory technicians, physiotherapists, occupational therapists, pharmacists, medical social workers, radiotherapists, other allied health professionals and healthcare supporting staff), and the authorities' plans to speed up staff training for various grades to ensure sufficient manpower supply?



(a) "Medical inflation" generally refers to the rise in medical costs due to advances in medical technology and public expectations for healthcare to keep up with such advances. It is a common phenomenon, and in no way unique to a certain place or region. The characteristics of a healthcare system would have a bearing on its medical inflation. In Hong Kong, our healthcare system operates on a dual-track system with both the public and private healthcare sectors providing services to the public.

     The concept of "net medical inflation" (i.e. medical inflation rate over and above per capita real Gross Domestic Product (GDP) growth) was adopted when projection was made on the future growth of health expenditure (up to the year 2033) in the Consultation Document on Healthcare Reform published in March 2008, having regard to international experience as well as local trend of health expenditure. The assumption is that, in the long run, the net medical inflation rate of public health expenditure would be 0.8 percentage point per year on average over and above per capita GDP growth rate while the net medical inflation rate of private health expenditure would be 1.6 percentage points over and above per capita GDP growth rate.

(b) The Hospital Authority (HA) has implemented the Drug Formulary (the Formulary) with a view to ensuring equitable access by patients to cost-effective drugs of proven safety and efficacy through standardisation of HA's drug policy and drug utilisation. HA has been expanding the coverage of the Formulary under an established review mechanism in order to benefit more patients. In the recent two years, there has been an annual increase of more than 10% in HA's overall expenditure on drugs owing to an increase in the number of patients, changes in the prices of drugs, expansion of the clinical applications of drugs and inclusion of new drugs into the Formulary, etc. The expansion of clinical applications of drugs and inclusion of new drugs into the Formulary have brought about an increase of around 5% in the overall drug expenditure.

(c) to (e) The second stage public consultation on healthcare reform ended on January 7, 2011. We are now analysing the views of the public received and collated in the second stage consultation on healthcare reform. We will take into account the analysis in working out the way forward including any specific proposals to be taken forward. The use of the $50 billion earmarked in the fiscal reserve for implementing healthcare reform, and the possible provision of financial incentives for any supplementary financing proposals to be implemented, as well as long-term healthcare manpower planning, will be considered as part of the way forward of healthcare reform.

     As stated in the healthcare reform second stage consultation document, the Government's commitment to healthcare is set to continue to increase as we reform the healthcare system with a view to enhancing the long-term sustainability of the healthcare system. We will continue to uphold the public healthcare system as the safety net for the whole population, which is strongly supported by the public. The Government's annual recurrent expenditure on health will increase from $30.5 billion in 2007-08 to $39.9 billion in 2011-12, with substantial increase in resources being allocated to improve public healthcare services. The funding provided to HA by the Government will also be increased to $36.1 billion.

     Healthcare reform and service enhancement have to be supported by human resources. HA has always been striving to enhance the professional competence of its healthcare staff, improve their working environment, promotion prospect and remuneration package so as to attract and retain talents. Following the implementation of new career development structures for doctors, nurses and selected grades of allied health practitioners since 2007, HA has, in recent years, launched a series of training programmes to support the development and career advancement of its healthcare staff under the new structure.

     For doctors, HA has implemented a new career structure for the grade since October 2007. The initiatives include introducing a new "nine-year training contract" to cater for the needs of specialist training and ensure that doctors undertaking specialist training have enough time to complete their training, as well as raising the starting pay points of Residents and Associate Consultants. Apart from filling all vacancies of doctors in recent years, HA has created additional posts of Associate Consultants and Consultants to address actual needs and enhance the promotion prospect of doctors. Besides, HA has been actively carrying out the Doctor Work Reform to rationalise doctors' working hours and improve their working environment.

     HA is now in active discussion with staff representatives and doctors' unions on measures to retain talents and improve manpower. The proposals under consideration include creation of more promotion posts of Associate Consultant, grant of special honorarium for extra duties, and provision of more supporting staff to assist doctors in ward duties, etc.

     As for the nursing grade, HA has introduced a new career development structure for nurses by phases from June 2008 to broaden their promotion pathway. The relevant initiatives include the creation of the post of Nurse Consultant to broaden the clinical career development pathway of nurses; adjustment of the management duty allowance granted to Department Operations Managers; establishment of additional Advanced Practice Nurse positions in clinical departments to provide more supervisory support; provision of more flexible terms of employment; extension of the contract period of Registered Nurses to six years; and provision of permanent employment terms to eligible full-time contract Registered Nurses, etc.

     As for the allied health grades, HA introduced in 2008-09 a new model of professional development for the Diagnostic Radiographer, Physiotherapist and Occupational Therapist grades and created such senior posts as Consultant Therapist/Diagnostician in individual grades. In addition, to tie in with the development of the allied health grades, HA established the Institute of Advanced Allied Health Studies in 2007 to devise structured long-term training plan for allied health practitioners, including a three-year in-service training course organised for new recruits of 13 allied health grades.

     HA's total expenditure on payroll for healthcare staff in the past five years is set out at Annex.

     We expect a substantial increase in the demand for healthcare practitioners in future. The Government has been working in tandem with the triennial academic development planning cycle of the University Grants Committee (UGC) and has encouraged the relevant tertiary institutions to increase student places for publicly-funded programmes for healthcare disciplines. In 2009-10, UGC increased the number of places for degree programmes in medicine and nursing and associate degree programmes in nursing from 250, 550 and 110 to 320, 590 and 160 respectively. In 2010-11, the number of senior year places in nursing has also been increased from 40 to 100. Furthermore, having considered the Government's advice, UGC increased the number of student places for several health professions in 2009-10. The number of first-year degree places for physiotherapists, occupational therapists and radiographers were increased from 60, 40 and 35 to 70, 46 and 48 respectively in 2009-10. On the other hand, HA nursing schools will continue to organise Registered Nurse Higher Diploma programme and Enrolled Nurse training programme to ensure continuous supply of nursing manpower.

     In the light of the various measures to be implemented to improve the healthcare system, including the proposed Health Protection Scheme, if implemented, we will continue to assess the demand for manpower and conduct manpower planning to ensure the availability of sufficient healthcare practitioners to meet service needs.

Ends/Wednesday, March 16, 2011
Issued at HKT 15:01


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