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A Realistic Prognosis for Medical Reform

04-14 15:43 Caijing

China's new health care reform plan provides for better care and protection, but not universal public access and coverage.

By Hu Shuli


(Caijing Magazine)China’s long-awaited medical reform plan arrived as spring flowers bloomed around Beijing. It consists of two documents: an “opinion on deepening health care reform” from the Central Committee of the Communist Party of China (CPC) and the State Council; and “key points for implementing medical and health reform (2009-’11).”


These lengthy documents, spanning more than 20,000 Chinese characters combined, are clear in principle and spell out a feasible plan. They’ve also drawn encouraging responses from the public.


While pleased by the plan’s unveiling, we must at the same time underscore the need for a realistic attitude toward medical reform. Access to medical care is a matter of life or death, so the reform issue is subject to strong emotions. But good sense and reasonableness will ensure the reform’s implementation, as well as build a foundation for future improvements in the health care system.


Compared with service levels under the current medical system, the new plan will undoubtedly bring progress. Although China’s economic reforms and opening-up over the past 30 years have resulted in spectacular achievements, public health and social security services lag far behind. Personal spending levels relative to disposable income are too high, and access to medical services is inadequate. These are widely recognized flaws in the system, leading to oft-heard complaints about difficulties in obtaining health care and exorbitant prices for medical treatment.


The medical reform plan aims to provide basic health care, gradually enabling equal access to public health care services, and expanding coverage to urban and rural residents. The government plans to spend 850 billion yuan (US$135 billion) in new funds to subsidize medical costs for urban and rural residents, build or renovate medical facilities, and train staffs and increase health facilities at county, township and village levels, especially in central and western parts of the country. These are important measures.


The proposal is well thought out, methodic and goal-oriented. It also has a timetable. It’s entirely possible that, after the 2009-’11 period, there will be visible improvements in basic public health services.


Nevertheless, we should be careful about having any high expectations. Not only do the reforms require time and resources, but medical services under the health care system are likely to be limited even if the plan’s first stage is fully implemented. It will still be a far cry from the universal health care coverage envisioned by some people, and nothing like so-called “universal coverage.”


For example, China now has four types of health insurance coverage: “public health care” mainly for civil servants and the employees of non-profit organizations owned by the state; basic health care for workers in cities and townships; a health care plan for residents of cities and townships; and a new rural cooperative health care system. Except for the first group, which is funded by the state, insurance for workers in townships is paid jointly by enterprises and employees, while township and rural residents pay on a voluntary basis for health services that also receive some state subsidies. For many reasons, then, coverage beyond the “public” system is quite limited.


The reform plan aims to provide basic medical care, improve primary health care services and expand coverage, while setting a goal to provide 90 percent coverage for township workers and residents in three years. Participation will be mandatory for township workers. Whether that coverage can meet its target depends on implementation of the mandate and the new plan’s feasibility. But other township and rural residents can voluntarily opt in or out of the plan. From next year on, the state will raise annual subsidies to 120 yuan per person for residents, but the insured still will have out-of-pocket expenses that may turn some people off. In other words, even with the reform plan and expanded coverage, some people will still be left out of the system.


Participation in the public health care system entitles a patient to medical bill reimbursements. Unlike those insured in a state-funded plan, most patients are affected by an upper limit for reimbursements. The new plan sets a ceiling that’s six times an average worker’s wages or the disposable income level of a township resident. The ceiling for farmers is six times average total income. Currently, the average national annual income of each rural resident is 4,761 yuan (US$697), but only 3,000 yuan (US$ 439) in western regions. For farmers, especially those in poor areas with serious illnesses, the affordability gap would still be great.


Some blame hospitals and their profit motives for limited access to and high costs of medical care. They think the new proposal will rein in hospitals and push down costs quickly.


Hospital operations, medical resource distribution and medicine price controls are too complicated to discuss here. But based on details emerging from the latest plan, we know a main reason for high medical care costs is that some care is financed through medicine sales. Hospitals, which have had to find ways to make ends meet following state subsidy cuts, should not bear all the blame. Finding a solution means going back to what got the system into this bind.


The plan calls for “gradually eliminating mark-ups on drugs as a source of revenue, and relying solely on fees for services and government subsidies.” A hospital will make up for the reduced income “through fees for newly established medical services, by adjusting some fees for technical procedures, and through additional government subsidies.” As the simple math shows, medical care service prices are unlikely to be drastically reduced.


In fact, as long as we recognize the importance of advanced medical technology, we also must be prepared to face inevitably higher medical costs. Health care economics shows that rising costs are unique to the medical industry; technological advances often mean higher costs, not savings. In the West, rising medical costs in line with rising incomes are normal. In China, finding ways to curb medical costs and improve access can only be discussed in relative terms; only by accelerating a pluralistic approach to providing health care, ensuring competition for services, and establishing a streamlined oversight framework can reasonable medical costs be expected.


The reform plan will be implemented in two stages. One goal calls for providing basic health care, effectively easing cost burdens, and making it easier to access medical care by 2011. The other goal is to provide essential health services, meet the needs of various care levels, and raise the quality of public health by 2020.


Unrelenting effort will be necessary for at least the next 10 years to meet these goals. Because of this, we all the more stress that the expectations for medical reform must be reasonable and realistic.


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