Healthcare & the Government in Asia Lawrence Tsui Director, Life & Health Swiss Reinsurance Company.

Healthcare & the Government in AsiaLawrence TsuiDirector, Life & HealthSwiss Reinsurance Company

Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 2

Agenda

The Role of Government in Health

Government vs Insurer Objectives

Impact of Government Policy on Private Insurers

Conclusions and Lessons



3


Government Private

General Taxation

Social Health

Insurance

Private Insurance

Out of Pocket and

Other

China 19.1% 25.6% 3.9% 51.4%

Hong Kong 54.8% 0.0% 12.4% 32.7%

India 21.8% 4.4% 1.5% 72.3%

Japan 15.5% 65.8% 2.6% 16.1%

Korea 11.3% 43.6% 4.1% 41.0%

Malaysia 44.1% 0.3% 8.0% 47.6%

Singapore 31.0% 1.6% 1.9% 65.5%

Thailand 66.3% 6.9% 5.2% 21.6%

Who pays the bills?

Split between Government and Private Expenditure on Health

Source: WHO World Health Statistics 2010, Hong Kong Health Department


Funding / Financing

– Redistribution of wealth via general taxation

– Establishment of funding vehicles for health financing

Supply / Resourcing

– Licensing and regulation of facilities and healthcare providers

– Establishment and maintenance of healthcare facilities

Pricing / Cost-Control

– Negotiating / setting the price of healthcare services

– Limiting access to healthcare services

Regulation

– Regulation of insurance business and insurance companies



Government Hospitals Private Hospitals

Price Access Price Access

China SHI Long Wait No No

Hong Kong Subsidy Wait No No

India Almost Free Long Wait No No

Japan SHI SHI For SHI only For SHI only

Korea SHI SHI For SHI only For SHI only

Malaysia Subsidy Wait No No

Singapore Tiered Subsidy

Varies by Tier No No

Thailand Almost Free Wait No No

What does the Government control?


China Coverage of SHI copaymentsCoverage for non-SHI services and private hospitals

Hong Kong Coverage for private hospitals

India Coverage for private hospitals

Japan Coverage of SHI copaymentsCoverage for room upgrades and non-SHI services

Korea Coverage of SHI copaymentsCoverage for room upgrades and non-SHI services

Malaysia Coverage for private hospitals

Singapore Coverage for non-subsidised public hospital chargesCoverage for private hospitals

Thailand Coverage for private hospitals

Why purchase Private Health Insurance?


Government vs Insurer Objectives

8


Maximise access to healthcare

– Restrictions on underwriting and cancellation of insurance

– Restrictions on policy exclusions and product design(eg pre-existing conditions, policy limits)

– Restrictions on pricing of private health insurance (especially risk rating)

Control government expenditure on healthcare

– Controls over provider charges and reimbursements

– Increased restrictions on government-funded healthcare(eg means testing, increased copayments, etc)

– Encouragement of or incentives for private health insurance(eg tax deduction, subsidy, etc)

Government objectives for healthcare


Restrictions on underwriting

Restrictions on policy exclusions and product design

Restrictions on pricing

Choice of provider

Withdraw government funding

Compulsory / near-compulsory

Level-playing field for incumbents and new entrants

Compulsory cover and/or cross-subsidy pools

Standard provider charges

Encourage private provision

Linkages and Conflicts


Below Poverty Line (BPL) population

– limited access to healthcare

– limited ability to pay for major healthcare

RSBY involves multi-party partnership

– government – central and state

– insurers – PSU and private

– hospitals and healthcare providers – public and private

– intermediaries – Self Help Groups and NGOs

– TPAs and Smart Card / IT Vendors

Case Study: India RSBY


Government Role

– Financing of premiums up to Rs.750 per family per annum(with Rs.30 co-contribution from insured family)

– Promotion of schemes to ensure maximum take-up

– Tender process for insurers and service providers

– Coverage design and structuring to balance access to care with cost control

– full cover for pre-existing conditions, including maternity (since Apr 2009)

– cashless reimbursement via biometric smart cards after pre-authorisation

– restricted to up to 5 family members and Rs.30,000 per annum

– fixed package rates for key treatments (780+ with slight variations between states) including pre and post hospitalisation, day surgery

– full choice between empanelled hospitals (public or private)

– limited provision for transport allowance

Case Study: India RSBY


Healthcare in government hospitals is mostly free

– Medicare – funded from general tax revenue and surcharges)

– Often subject to long waiting lists for non-emergency treatment

Private health insurance primarily covers

– elective procedures (no waiting list)

– choice of doctor

– private room (government or private hospital)

– maternity and ancillary benefits (dental, optical, etc)

Case Study: Australia


Old Private Health System

– No underwriting except for waiting periods and product design exclusions

– Community Rating All pay the same regardless of age, sex, health statusCouples pay 1.5 x SingleFamilies pay 2.0 x Single

– Spiral of declining membership (especially among younger lives), increasing costs, increasing premiums, leading to declining membership

– Burden of healthcare costs shifting to Medicare

New Private Health System

– No underwriting except for waiting periods and product design exclusions

– Lifetime Community RatingRate depends on the age at which member entered the Private Health Insurance systemLowest Rate for entry < 30, increasing by 2% pa

– Medicare SurchargeHigh earners (A$70,000 pa) pay tax surcharge (1%) if they do not have private health insurance

– Private Health Insurance RebatePremium is subsidised by the government (now means-tested)

Case Study: Australia


Government hospitals costs HKD 100 (USD 13) per day

– People feel like they are already paying for hospital care

– People do not know what the actual cost is (subsidy is around 95%)

Private hospitals cost much more (HKD 1,000+ per day)

– Private hospitals and doctors are free to charge as they wish

– There is no “standard” fee schedule for doctors and surgeons

– Charges vary according to the hospital room type (proxy for what the patient can afford)

Current HK public healthcare system (already low expenditure relative to OECD countries) is unsustainable with current tax base, ageing population and medical inflation

Case Study: Hong Kong


Healthcare reform

– still under discussion (after many years!!!)

– increase government expenditure on healthcare (from 15% of government revenue to 17% by 2012)

– key proposals

– enhance primary care

– promote public-private partnership

– develop electronic record sharing

– strengthen public healthcare safety net

– reform healthcare financing arrangements

– key hidden objective – pay more for healthcare



Private insurance initiatives – “signals” received so far

– voluntary participation

– objective of portability

– insurance and savings components

– restrictions on pre-existing condition exclusions and cancellation of in force policies

– prevent discrimination against elderly and high risk policyholders

Key concerns from private industry

– moral hazard from underwriting / exclusion restrictions

– unsustainable cross-subsidies between high and low risk lives in voluntary environment

– little control over medical service provider fees



Impact of Government Policy on Private Insurers

18


Insurance covering “gaps” in government reimbursement

Funding system for healthcare providers

Supply of healthcare facilities, especially in countries where demand outstrips supply

Shifting provision of healthcare between government and private healthcare facilities

Changes in regulations relating to treatments, pharmaceuticals, medical devices, etc

Intersection between government policy and private insurance


Government action influences claims behaviour

– High level of awareness/education about RSBY in the community generally leads to high claims experience in the early phase of the scheme, especially related to treatment for pre-existing conditions

– However, active promotion and high enrolment rates should also lead to lower claims experience in the long run, with more healthy lives enrolled

– Government efforts to increase the scope of coverage beyond the original scheme design could lead to increased claim costs / lower profit margins for insurers (extensions of coverage are much more common than removal of coverage)

– Areas with a higher density / supply of empanelled hospitals generally have worse claims experience

– Potential conflicts between political objectives and insurer objectives

Case Study 1: India RSBY


What is going on with Ages 0-4?

Case Study 2: Korea

Korea Population Hospitalisation Incidence Trends

80%

100%

120%

140%

160%

180%

200%

220%

2003 2004 2005 2006 2007

Year

Hos

p In

cide

nce

vs 2

003

Overall Age-Adjusted Incidence Ages 0-4 Incidence

Ages 5-19 Incidence Ages 20-59 Incidence

Ages 60+ Incidence


From January 2006, National Health Insurance copayment for inpatient hospital treatment for children aged 5 or below was reduced (mostly from 20% to 0%)

Changes in government policy cause changes in healthcare seeking behaviour

Case Study 2: Korea


What is driving this trend?

Case Study 3: Japan

Japan Hospitalisation Claims Cost Trend - Male

70.0%

75.0%

80.0%

85.0%

90.0%

95.0%

100.0%

105.0%

110.0%

115.0%

120.0%

1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Expe

rien

ce vs 2001 (=

100%

)

50-54

55-59

60-64

65-69

70-74

75-79


Average duration of hospital stay in Japan has historically been the longest in the developed world

– Overall ~34 days in 2005, 3 times the OECD average

– Acute ~20 days in 2005, also 3 times the OECD average

– “Social” hospitalisation for Long-Term Care stays in hospitals

Japanese Government is running out of money

– Consistent budget deficits (forecast 8% of GDP in 2010)

– Very high government debt (200% of GDP)

Demographic pressure

– Ageing population, low birth rate

– Shrinking tax base

Case Study 3: Japan


Changes in government health policy

– caps on the number of hospital beds per region

– overall reduction in number of acute hospital beds from 12 per 1,000 lives in 1996 to 9 per 1,000 lives in 2005

– increased National Health Insurance copayment

– from 0% to 10% for lives ≥ 70 in 2002

– from 10% to 20% for lives < 70 in 2003

– from 20% to 30% for lives < 70 in 2003

Case Study 3: Japan


Changes in government health policy (contd.)

– introduction of pilot scheme for hospital financing in 2003

– from per diem fee for service basis

– to Diagnosis-Procedure Combination (DPC) basis with per diem compensation varying by cause of hospitalisation and reducing with length of stay

– DPC system being gradually rolled out more widely (82 hospitals in 2003 to 360 hospitals in 2006 to 1,283 hospitals in 2009)

– introduction of national long-term care scheme in 2000

– shift LTC provision from hospitals to home care and other community facilities

– targeted reduction in designated LTC hospital beds from 360,000 in 2006 to 210,000 by 2011

Case Study 3: Japan


Advanced Medical Treatment (AMT)

– Social Health Insurance (SHI) in Japan has a special classification of “new” and “experimental” treatments

– Example: proton / particle beam radiation therapy for cancer

– Average cost for these treatments is high (hence, their classification outside the normal SHI list

– Partial reimbursement from SHI is allowed but majority of cost (mostly the excess over “standard” treatment cost) will be borne by patient

– Many insurance companies in Japan offer reimbursement benefits to cover Advanced Medical Treatments (subject to a cap), often with long term premium rate guarantees

Case Study 4: Japan


What’s the risk?

– AMT list can be changed at the discretion of the Japanese Ministry of Health, Labour and Welfare and is subject to annual review

– From 65 listed AMT treatments in 1999-00, the list has grown to 118 AMT treatments in 2007-08, but some have shifted into the mainstream SHI list and others have been delisted

– From 128 designated hospitals permitted to perform items on the AMT list originally, 430 hospitals are now permitted

– At various different times, total cost of AMT across Japan has been increasing at between 20% and 100% per annum

– Few disincentives for government to add to AMT list (SHI just pays “normal” treatment cost), but strong disincentives for government to shift treatments into mainstream SHI where it pays a higher proportion of the cost

Case Study 4: Japan



29


Private Health Insurance develops around government framework

– product design unique to country healthcare system

Government Healthcare objectives often conflict with interests of Private Insurers

– level playing field and long-term sustainability are key

Changes in Government Healthcare Policy can cause changes in private health insurer claim costs

– monitor developments carefully and retain pricing flexibility, especially where private insurance covers “gaps” in government schemes


Questions?


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Healthcare & the Government in Asia Lawrence Tsui Director, Life & Health Swiss Reinsurance Company.

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Transcript of Healthcare & the Government in Asia Lawrence Tsui Director, Life & Health Swiss Reinsurance Company.