Healthcare & the Government in Asia Lawrence Tsui Director, Life & Health Swiss Reinsurance Company Agenda The Role of Government in Health Government vs Insurer Objectives Impact of Government Policy on Private Insurers Conclusions and Lessons Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 2 The Role of Government in Health Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 3 Who pays the bills? Split between Government and Private Expenditure on Health 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% Source: WHO World Health Statistics 2010, Hong Kong Health Department Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 4 The Role of Government in Health 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 5 What does the Government control? Government Hospitals Private Hospitals Price Access Price Access SHI Long Wait No No 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 Almost Free Wait No No China Hong Kong Thailand Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 6 Why purchase Private Health Insurance? China Coverage of SHI copayments Coverage for non-SHI services and private hospitals Hong Kong Coverage for private hospitals India Coverage for private hospitals Japan Coverage of SHI copayments Coverage for room upgrades and non-SHI services Korea Coverage of SHI copayments Coverage for room upgrades and non-SHI services Malaysia Coverage for private hospitals Singapore Coverage for non-subsidised public hospital charges Coverage for private hospitals Thailand Coverage for private hospitals Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 7 Government vs Insurer Objectives Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 8 Government objectives for healthcare 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) Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 9 Linkages and Conflicts Restrictions on underwriting Compulsory / near-compulsory Restrictions on policy exclusions and product design Level-playing field for incumbents and new entrants Restrictions on pricing Compulsory cover and/or cross-subsidy pools Choice of provider Standard provider charges Withdraw government funding Encourage private provision Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 10 Case Study: India RSBY 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 11 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 12 Case Study: Australia 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) Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 13 Case Study: Australia Old Private Health System New Private Health System – No underwriting except for waiting periods and product design exclusions – No underwriting except for waiting periods and product design exclusions – Community Rating All pay the same regardless of age, sex, health status Couples pay 1.5 x Single Families pay 2.0 x Single – Lifetime Community Rating Rate depends on the age at which member entered the Private Health Insurance system Lowest Rate for entry < 30, increasing by 2% pa – Spiral of declining membership (especially among younger lives), increasing costs, increasing premiums, leading to declining membership – Burden of healthcare costs shifting to Medicare Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 – Medicare Surcharge High earners (A$70,000 pa) pay tax surcharge (1%) if they do not have private health insurance – Private Health Insurance Rebate Premium is subsidised by the government (now means-tested) 14 Case Study: Hong Kong 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 15 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 16 Case Study: Hong Kong 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 17 Impact of Government Policy on Private Insurers Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 18 Intersection between government policy and private insurance 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 19 Case Study 1: India RSBY 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 20 Case Study 2: Korea What is going on with Ages 0-4? Korea Population Hospitalisation Incidence Trends Hosp Incidence vs 2003 220% 200% 180% 160% 140% 120% 100% 80% 2003 2004 2005 2007 2006 Year Overall Age-Adjusted Incidence Ages 5-19 Incidence Ages 0-4 Incidence Ages 20-59 Incidence Ages 60+ Incidence Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 21 Case Study 2: Korea 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 22 Case Study 3: Japan What is driving this trend? Japan Hospitalisation Claims Cost Trend - Male 120.0% Experience vs 2001 (= 100%) 115.0% 110.0% 50-54 105.0% 55-59 100.0% 60-64 95.0% 65-69 90.0% 70-74 85.0% 75-79 80.0% 75.0% 70.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 23 Case Study 3: Japan 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 24 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 25 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 26 Case Study 4: 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 27 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 28 Conclusions and Lessons Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 29 Conclusions and Lessons 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 Lawrence Tsui | 13th Global Conference of Actuaries | February 2011 30 Questions? 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