HEALTH INSURANCE FOR OLDER POPULATION

Objectives 1.What can we learn from the previous health finance reform experience? 2.What are the major concerns of older health insured? 3.Health care insurance will alter the relationship between providers and patients, how?

Health Finance Reforms Hong Kong (1993 – 2008)

Healthcare Finance Reforms in HK (1993 – 2008) Towards Better Health1993 The Harvard Report1997 Lifelong Investment in Health2000 Building a Healthy Tomorrow2005 Your Health, Your Life2008

Media Responses towards Health Finance Options (March 13 – June 18, 2008) # of responses

What are HK people concerned about? Mean Benchmark – Personal Finance in Asia, Sept 2008, p65

Are People Willing to Cost Sharing? Yes, thus: 38.5% had medical insurance provided by employers. (HK Government Survey, 2006) 65% owned at least one health, medical or hospitalization insurance plan; 43% of these people with critical illness coverage. (AXA Protection Survey, 2007) 20% owned both employer and personal medical insurance. (AXA Protection Survey, 2007)

Why Futile? Lower income: had problems to make ends meet, any increase in contribution, will further reduce their take home pay. Middle and high income: had already made a major tax contribution, they do not want to make any increase in contribution without any promise of getting better service or more choice in return. “Development and Financing of HK’s Future Health Care” by The Bauhinia Foundation Research Centre, Health Care Study Group, 2007

Desired Features of a Health Care Product Hospital care, primary & prevention care, long term care Obtain the service at the right time and at the right location Allow people to change insurer/providers without penalty, and/ or seek medical care in Mainland China No one will be denied medical care because of age, pre-existing health conditions & means) Regulator Provider Insurer

Comprehensiveness, Universality Portability and Accessibility of Public Health Insurance: Canada ’ s Experience

The Canada Health Act (1984) Aim: To protect, promote and restore the physical and mental well being of residents of Canada and to facilitate reasonable access to health Services without financial or other barriers. (Section 3) Five Principles –Public Administration –Comprehensiveness –Universality –Portability –Accessibility

Test of Comprehensiveness Originally, = comprehensive coverage of all hospital services Today, = medically necessary (and non experiment) service. Political debate, = “government commitment”, “all encompassing care” and “right to health insurance, but not right to health care”.

At least, we need to know 1.What will the health plan coverage? 2.Will it be universal and accessible regardless of age and pre-conditions? 3.Will the health insurance plan portable? Before we make a fiscal commitment.

Health Insurance for Older Person

Nature of Insurance and Health Insurance To balance individual random risk with a large number of insured population. Health insurance –Medical events may be unpredictable, but the overall risk is predictable –Covering random, infrequent and costly health problems beyond one ’ s control –Ensures availability of money for unexpected medical expenses

Insurance Company ’ s Strategies in reducing their risks Medical underwriting: to screen out applicants who are too risky to be accepted. Risk selection –Don ’ t insure pre-existing conditions e.g., mental health, congenital illnesses –Drop those who get major illness e.g., heart disease Charge them with a higher premium –Premium increases significantly with age and people with pre-existing conditions Greatly increase co-payment

Very Difficult for Older Persons to be insured The Older = Risky Population 65 years made up 14% of BC population –47% acute care services –49% of PharmaCare expenditure –71% of home and community care –93% of residential care services Compare to 70 years old persons, a typical 85 years old persons use – 3 times more acute care services –12 times more community services –25 times more residential care services Ministry of Health 2006/07 Annual Service Plan Report, BC, Canada

Catastrophic Events are Rare but Expensive % Out of Pocket Health Care Expenditure in USA $3,588 $49,285 42% 58% 48% 52% $33,607 $1,658 Average Expense (US$) 5%95% Centers for Medicare and Medicaid Services (CMS) national health care expenditure; University of Michigan 2002 Health and Retirement Survey, McKinsey analysis.`

People Feel Prepared in USA % of respondents with an option of choosing an insurance The McKinsey Quarterly, June, % 28% 22% 20% 15% 49% 48% 65+

Routine – Adequate Coverage? Projected 2014 out-of-pocket health care expenses by US retirees by service category (Nov 2005, McKinsey on Health) (hospice, professional services)

Catastrophic – Adequate Coverage? Projected 2014 out-of-pocket health care expenses by US retirees by service category (Nov 2005, McKinsey on Health) (hospice, professional services)

Sufficient Amount? You buy at age 20, the benefit you accumulate will at age 65 = HK$300,000 –2% employee and 2% employer contribution $300,000 = 10 days stay in a private hospital with medical care and ($10,000 per day) + 12 months stay in a decent private nursing home ($15,000 per month). Benchmark – Personal Finance in Asia, Sept 2008, p60

Long Term Care Insurance: the Japan ’ s Case

Health Care Insurance in Japan NHI (National Health Insurance by all levels of government) covers self employed and elderly – 36%. EHI (Employees Health Insurance) 56% –GMHI (Government-Managed Health Insurance by Ministry of Health, Labor & Welfare) covers small and medium size companies’ employees 30% –SMHI (Society-Managed Health Insurance) covers large companies’ employees – 26% Civil Servant and Teachers – 8%

Long Term Care Insurance in Japan Welfare service program + Health service system for the Elderly 2000, Long Term Care Insurance – at home and institution services –Type 1 (65+) –Type 2 (40 – 64) for people with 15 specific diseases (dementia etc.) Financed by taxes (51%), LTCI contribution* (37%) and copayment (12%) Long Term Care Certification required * 1% of pension from elderly pension; 1% of health insurance from younger population

Public Social Health Insurance Act and Exceptional Medical Expenses Act the Netherlands ’ Case

The Health Insurance Act Regardless the age or health status of a resident, a private insurer: –cannot refuse to cover him/her for the basic insurance plan –has to charge everyone joining the basic plan the same rate of premium (approx. 1,050 euro per year) Residents can switch to another private insurer after a year Citizens under 18 pay no premium

Exceptional Medical Expenses Act Paid through Tax. Rate is income related (13.45% in 2005). Eligibility is determined by CIZ. Benefit can be in kind or in cash. Copayment is mostly required. Benefits cover home care, residential care homes, nursing homes, hospital and rehabilitation (normally after the stay paid by HIA – 365 days).

Financing of HIA Source: The new care system in the Netherlands, Ministry of Health, Welfare and Sport, the Netherlands Health Insurance Board Pay insurers for children’s premiums and to compensate for financial disadvantage in insuring high risk individuals Excessive health expenses

Beyond Health Insurance

Healthcare Relationship Map Original Source of Funds Ultimate Source of Funds Public Providers (HA, DH, SWD) Private Providers Consumers Patients/ Clients Employers Taxpayers 3rd Party Payers

Health Care Insurance is a Complex Business Disability Impairment Outpatient care Inpatient care Pharmaceuticals Institutional care End-of-life care Preventive care Basic care Treatment of serious condition Disease, illnesses Major medical event Accident Mental illness Savings Investments Insurance Longevity Insurance Reverse Mortgage

Managed Health Care Supply and Demand Discharge planning: length of stay Case management Utilization review Disease management Medical innovation, technology evaluation Assessment of provider Ever expanding and innovation driven nature of modern health care, is like a powerful engine with no brake.

Health Care Advice from Health Insurance Providers Health related finance advice – if they have adequate coverage – how much they have to pay and what the plan will cover Support in navigating the complex heath care system especially after a major illness Support and guidance in dealing with chronic conditions Preventive health advice Treatment advice

Conclusions 1.We need to know the features of health care products – comprehensive, accessible, universal and portable, before we choose a or multiple health care finance options. 2.Health insurers will not find the older insured “profitable”, government funding support to health care finance for older persons (e.g., long term care insurance) appears to be the only alternative. 3.Health care insurance (as 3rd party payer) will ultimately alter the relationship between health care providers and receivers. We need to be aware of the unintended consequences of such changes e.g., managed care