China Unveil Health Reform Plans

Posted on Apr 19, 2012 by Sergio Ulloa (G+)

Important new details surrounding China's ambitious plans to improve their national healthcare and insurance systems are beginning to emerge. A circular issued by the State Council General Office on Wednesday outlines several of the Mainland government's reform objectives for 2012, and how this could impact those involved in the state healthcare system over the coming year. The rapid economic rise of China over the past few decades has brought many benefits to the country, lifting millions out of poverty and improving the overall health standards of their citizens greatly in tow. However, despite this notable progress, many structural health issues in China remain unresolved. The adverse health consequences of more urbanized, ageing, and increasingly quality-demanding populace have placed the communist state's over-strained medical infrastructure and healthcare system under considerable pressure. There are also large disparities between the country's more affluent urban dwellers and poor urban and rural inhabitants in terms of access to medical services, affordability and quality of care. China's healthcare system has been described by critics as an overloaded pay-as-you-go bureaucracy with medical services often proving too difficult to access, too expensive, and too variable in quality between various parts of the country, particularly in rural regions. Many among the rural poor have limited their use of healthcare services for purely financial reasons, since the costs of treating a serious illness or injury could wipe out a family's life savings. China's central government has taken some steps in addressing these problems. China launched a RMB 850 billion (US$125 billion) healthcare reform plan in 2009 and a far-reaching social insurance law last year. Important advances have been because of this investment, especially with regard to improved access and equality to medical services and insurance coverage across China. According to government statistics, around 96 percent of the Chinese population are now covered by some basic form of medical insurance, compared to just around 15 percent a decade ago. The country's infant mortality rate meanwhile has fallen to under 12 per thousand from 15 per thousand over the past three years, while the rate of mothers dying in childbirth falling to 26 per 10,000 from 34 during that period as well. However, despite these notable strides, medical costs have continued to rise as a share of total household expenditure in China. Alleviating these cost concerns thus remains a pressing concern for the Chinese government, as it needs citizens to start spending more of their considerable savings, rather than holding onto their money for medical emergencies, to boost domestic consumption. New insurance mechanisms are being implemented by the government to cover a significant portion of medical costs and to help lower the impact of high out-of-pocket payments. The Mainland government's chief objective is to continue expanding their state medical care insurance plan until no less than 95 percent of the population are covered and have access to affordable public healthcare facilities. According to the circular, the government will work to achieve this target by administering an annual subsidy of CNY240 (US$40) per-capita that will cover some basic medical services for urban and rural residents starting this year. A big obstacle to healthcare reform in China is the state's public hospital system, which has long been the country's predominant treatment network due to the continued lack of primary care facilities and other options. Chinese public hospital monopolies and their staff benefit from the current health system because they are allowed to make up for the lower government-set prices on medical services by charging their own higher prices on patients for drugs and diagnostic tests. These public hospitals have come to rely on the non-subsidized services for a big chunk of their revenues. According to industry experts, this has helped foster a healthcare environment burdened by fraud where expensive drugs are over-prescribed and unnecessary diagnostic tests are frequently pushed on patients for kickbacks from pharmaceutical companies. As insurance coverage has extended throughout the country, these practices have in fact gotten worse. Public hospitals now use every means available to get money out of the patients themselves or the national insurance fund to cover their operational expenses. The government has taken note of this development and are apparently determined to drive down healthcare costs despite facing numerous challenges from vested hospital interests that see reform as a threat, both to their for-profit status and to the income of practicing doctors and hospital administrators. The circular stressed the importance of improving regulatory oversight with regards to pharmaceutical quality, compensation and distribution mechanisms in China over the next couple of years. As part of this arrangement, the government will soon release a list of which drugs will be made subsidized for Chinese citizens under the state's medical insurance scheme. The drugs on this list have their prices kept artificially low as part of the government's plan to contain out-of-pocket costs for Chinese patients. Not only will the number of essential pharmaceuticals increase but so will the type and quality of drug. More specialty products, including those for common illness like cancer and cardiovascular disease, are expected to be added to the list soon. The government intends to take a more active role in negotiating better prices for patients and public hospitals. These are all part of the effort to continue increasing the access and service capacity of grassroots medical facilities in rural areas across China in 2012. According to the circular, the 2012 reform plan includes a pilot program that will change how 300 county hospitals are funded for the year. County-level hospital were selected for the scheme as they generally receive a manageable number of rural patients and are under control of local health departments, which makes reform efforts easier. Instead of depending on drug sales, inducements and other kickbacks for income, these public hospitals will instead by financed by increased government subsidies and key adjustments made to staff salaries and medical service and supply pricing systems. The experience gained from this preliminary initiative will then be used when developing a similar reform agenda for the more trafficked and complex public hospitals in urban areas. Speaking on the healthcare reform agenda outlined in the circular, Vice-Premier Li Keqiang told reporters that more work would be done to accelerate the development of the country's medical insurance system, expand the coverage of the state healthcare network, lower drug prices, and raise healthcare subsidies for all Chinese citizens. To do this Li pledged that the state would separate medical services from pharmaceutical management, increase doctors' income and restructure the funding equation between patients, hospitals and insurance providers. Crucial to this development too will be the input of the private healthcare and insurance sectors.