Healthcare reform is in the news again in Hong Kong.

Secretary for Food and Health Dr Ko Wing-man said the government would consider tax incentives to attract the middle class to buy medical insurance and make more use of private medical services under the government-sponsored Health Protection Scheme (HPS). Key features of the scheme include coverage for high-risk individuals with pre-existing medical conditions, and guaranteed renewal for life.

Medical insurance coverage with those kinds of terms is unheard of with commercial insurers. That's why I'll be the first to sign up when the scheme becomes available. I belong to the high-risk category because I have quite a few chronic medical problems and I'm aging.

If such insurance coverage were offered by a commercial insurer, it would have cost an arm and a leg. The HPS, however, will be heavily subsidized to make it affordable for all. The government has said it will set aside up to HK$50 billion to help high-risk patients.

Despite government hospitals' reputation for high standards, most people who can afford it would rather pay for the five-star comfort in private hospitals. And for certain non-life threatening diseases, waiting periods in public hospital can be years while private doctors can probably take care of the problem within a week.

Private insurers charge exorbitant premiums for high-risk patients and have non-payment clauses for pre-existing conditions and age limits because medical care is expensive in Hong Kong. Medical insurance in Hong Kong is generally a money-losing business, kept afloat by the parent company or mainstream insurance businesses. Insurers lose money because private doctors and private hospitals milk them dry.

For example, a patient with a deluxe policy can stay in a deluxe room in a private hospital. I can understand the room costs three times as much as a general ward bed, but why should the hospital charge the insurer triple for blood tests, X-rays and even a Band Aid? And why should the private doctor also charge triple for all procedures and the daily visits?

In Hong Kong, it is not unusual for doctors to first ask their patients about their insurance coverage before laying out treatment plans. Insurance gives them carte blanche to charge the insurer as much as they can get away with.

Another problem with private healthcare in Hong Kong is that charges for treating the same surgical or medical problem can vary widely. That's why fixed-fee treatment packages have been discussed repeatedly in recent years. The government hopes fixed-fee packages can improve fee transparency in the private sector, but private doctors are not receptive to the idea. In theory, any model of fixed-fee medical packages is about risk-sharing, and there should be no changes in private doctors' earnings in the long run. The reality is that fixed-fee packages take away their chance to put a price tag on every little thing they do for their patients.

When I was a consultant for a medical insurance company, it was not unusual for me to come across claims of thousands of dollars for "bedside tests" such as the "tilt test" and the "tensilon test". Though uncommon and slightly time consuming, these tests should be part of the physical examination and should not have been charged extra.

The Hong Kong government's main challenge in the proposed HPS is that it has to rely on the take-up rate of both private insurers and private healthcare providers. The government wants insurance policies with superior coverage at fair rates, but insurance companies want a profit and the private doctors and private hospitals want to make as much money as possible from our cash-rich government. If they know they hold the trump card, the government will have no choice but to compromise its ideals for their co-operation.

To take away their trump card, the government could start its own insurance company and private hospitals. A government-run insurance scheme would be more cost-effective because of the high costs private insurers face in developing insurance packages, marketing, processing claims, and executive salaries. Government-run private hospitals could be associated with the two medical schools, which have the experience running world-class hospitals, and could provide enough top-notch professorial doctors for patients to choose from. These government-run private hospitals can implement fixed-fee packages with impunity.

Granted, government-run insurance and healthcare would be wrought with the usual bureaucratic baggage, but it beats seeing a big chunk of the HK$50 billion intended for helping the high-risk patients going into the pockets of private insurers, private doctors and private hospitals.

The author was a consultant pathologist for the Hong Kong government and St. Paul's Hospital before his recent retirement. He was a lecturer at the Medical Faculty of the Chinese University of Hong Kong and a diplomate of the American Board of Pathologists.

(HK Edition 11/08/2013 page9)