Health Care Abroad: China

September 20, 2010 By Robert Woo
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By Robert Woo
Undergraduate Research Fellow
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February 22, 2010

Editor's note: As the health care debate both nationally and here in Minnesota rages on, Minnesota 2020 will continue to bring profiles of other health care systems around the globe. It's our hope that seeing what works and what doesn't work will make for a better-informed debate.

Under the old socialist system, China used to have a grave-to-cradle health care system that lifted life expectancy from 35 in 1952 to 69 in 1982 despite extremely limited resources. After the transition to a market economy that started in the late 1970s, the old health care system was dismantled. In urban areas, hospitals were severed from their state-owned enterprise parents and were made to operate independently.   In rural areas, the "barefoot doctors" lost incentives to carry on the old practices and either became profit-driven or changed professions. 

While the market economy has worked magic across many sectors in China, the experience of it in the health care system has been a disaster. Insurance coverage is inadequate for almost everyone except government officials while soaring medical prices have bankrupt many people with low or even middle level income.

China's government-administered health insurance plans cover around 90 percent of the total population. However, it is fragmentary, insufficient and has developed in stages that exemplify the hierarchy of social order. Government officials have never stopped enjoying virtually free health care. In 1994, for employees in urban areas, a reformed scheme required employers to contribute 6 percent of employees' income while employees gave 2 percent.  In 2005, the government launched the New Rural Cooperative Medical Care System (NRCMCS) to overhaul the failing health system in rural areas. Under this voluntary scheme; residents, local governments, and the central government each contribute a portion. In 2007, the government extended urban health care insurance to all urban residents, including children, seniors, and the unemployed.

The medical insurance system for urban employees covered 180 million people by 2007, while 850 million rural residents have signed up on NRCMCS. Despite such extensive coverage, the actual "care" that it provides is hardly adequate. For regular and smaller ailments, the insurance plan will generally cover at least half of the costs. However, for expensive treatment such as surgery and hospitalization, it is usually left for individuals to bear the bulk of the expenses.

The situation is made worse by soaring prices. Under the market system, the doctors have fewer incentives to actually care about patients' health, but plenty of incentives to prescribe expensive medicines. According to the World Bank, 71 percent of Chinese had access to state health facilities in 1981; 12 years later, the figure was 21 percent. In 2005, individuals' out-of-pocket expenses for health care were more than 100 times what they were in 1980. 

The actual medical expense would have been even higher if government price controls on many medicines and medical equipments had not existed. Underscored by this observation is the fact that today's China only has extremely limited medical resources. A visit to a city or provincial hospital in China will make you instantly understand what I mean here. In those presumably best-quality hospitals, the rooms are crowded, gray-looking and suppressing and the hallways are congested. Doctors and nurses, despite being multitasking masters, cannot help but write "impatience" on their faces.  Rural residents, with no trust in their local hospitals' low quality and greedy doctors, trek long way here to look for better treatment, as well as a mountain of debts. I personally have witnessed a rural couple making the heart wrenching choice between saving their only daughter from a permanent coma or living their whole life on debt, while an impatient doctor scolded them for not comprehending his message before moving on to the next patient.  With such a limited supply and such an inelastic demand, It is not surprising that kickbacks to doctors, the so-called "red pocket" phenomenon, are so prevalent n Chinese hospitals that any campaign to eradicate it has failed.

The Chinese government has long recognized the failure of the liberalization in the health sector. Not only did it push for the aforementioned insurance coverage expansion since 1990s, it has also embarked on ambitious plan to "re-socialize" the system by cutting cost and expanding access. This urge is made greater by the global economic recession. For China's export-oriented economy, a drop in global consumption makes boosting long-suppressed domestic consumption crucial and inevitable. The government sees health care reform as a major step in this direction. In 2009 Beijing announced a long-term plan ultimately aiming at universal health care and said that it would spend $125 billion over the next three years building thousands of clinics and hospitals and expanding basic health care coverage to 90% of the population.

For a developing nation like China, the road ahead for its health care will not be easy. The government has warned that it doesn't expect to provide "safe, effective, convenient and affordable" health care to all citizens until 2020. "Health care reform is a long-term process," deputy finance minister Wang Jun told a news conference April 8. "It is impossible to invest the money today and make tangible process tomorrow.


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