With inflationary pressures building, 40% of insurers in a survey in Hong Kong forecast that medical inflation will increase significantly over the next three years, 40% expect a marginal increase, with the status quo favoured by 20%, says Aon, the leading global professional services firm providing a broad range of risk, retirement and health solutions, in its inaugural Asia Healthcare Trends Report 2017/18.
In the period 2014–2016, the Report tracked a moderate reduction in the medical inflation rate in Hong Kong from 9.0% to 7.5%. However, inflationary pressures have been building on several fronts, notably an ageing population and a public health system struggling to cope with increased demand.
The predominant experience of Hong Kong’s medical insurance community is that inpatient costs are the primary driver of medical inflation, with only 20% of carriers citing outpatient claims.
Over the course of the last two and a half decades, there has been a demonstrable change in the proportional split of Hong Kong’s total health expenditure (public and private) by provider type. In the period from 1989/90 to 2013/14 the outpatient (ambulatory) share has declined from 44% to 31% whilst inpatient has risen from 28% to 43% .
However, looking at the private system in isolation the proportional split between inpatient and outpatient costs changes somewhat. Again, reliant upon 2013/14 data Aon observes that the bulk of private health expenditure (52%) was consumed at the outpatient level. There is also evidence to suggest that the overstretched public hospitals have channeled patients into the private system, reflected in the fact that in the decade between 2006/07 and 2015/16 private health expenditure increased at CAGR of 8.8% compared to 6.8% in the public system
Hong Kong’s medical insurers were unanimous in assessing medical fees to be both their top inpatient cost component and the component primarily responsible for driving medical inflation. By modality, 50% selected unitary cost as the principal driver of inflation.
Consistent with Hong Kong’s inpatient experience, medical fees emerged as the number one outpatient cost, followed closely by diagnostic expenses.
Befitting its status as a mature market, 80% of insurers are tracking inpatient readmission and 60% offer Chronic Disease Management programmes, which are achieving a modest level of impact. All insurers report the capability of providing claims reporting, 60% annually, 20% quarterly and 20% at other frequencies. The reported impact of claims reporting on cost management is relatively modest.
In terms of mitigating demand for healthcare services, insurers note that wellness scores particularly highly. Other popular demand-side initiatives include imposing co-pays on non-network providers, imposing employee premium co-pays and imposing other deductibles. In terms of restricting supply, pre-authorisation of high cost inpatient procedures rates well but restricting specialist access to GP referrals less so. One reason for this is likely to be that in private practice, specialists combine specialty care with general care.
Employee wellness initiatives rated strongly. This is an encouraging sign of insurers, healthcare providers and employers looking to tackle the burden of chronic disease through encouraging employees to adapt healthier lifestyle behaviours. The two wellness initiatives that attracted equal top billing are health screening and women’s health.
The inaugural Aon Asia Healthcare Trends 2017/18 surveyed insurers across 11 different markets, and provides quantitative analysis of key risks and cost drivers on a market-by-market basis and prevailing cost management and employee wellness initiatives.