Skip to content

Observations on China’s Health Care System

The issue of reforming the health care system has always been a sensitive topic in China. On September 16, 2006, the Second Summit Forum for China’s Health Care Industry was held in China Europe International Business School (CEIBS) in Shanghai. The government officials who spoke at the forum remained cautious when dealing with the media.

They repeatedly stressed that reporters must not disclose their names or identities. As one of the officials explained, “I’m concerned about the possible problems it may cause.” Of even more interest, a few officials requested that their host delete their speeches from the forum’s stenographic records.

Contrary to his peers, Yin Dakui was the only speaker who dared to make his name public. The former deputy minister of the Ministry of Health is now the president of the Chinese Medical Association. His speech was titled” Develop a Fair and Highly Efficient Health and Medical Services System.”

Dr. Yin graduated from Tongji Medical University in Wuhan, Hubei Province, in 1964 and became a medical doctor. Having served various posts in the health care industry, including vice president of Western China Medical University, director of the Health Department of Sichuan Province, and deputy minister of the Ministry of Health, Yin is very familiar with the issues concerning China’s health care and medical systems.

The statistics he shared at the forum stunned the audience:

1. Total health care funding in China covers only 20 percent of the population. A national survey on health care conducted in 1998 indicated that 87.4 percent of China’s farmers used their own money to cover their medical treatments, 37 percent of farmer patients who needed medical treatments did not visit doctors; and 65 percent of farmer patients who needed in-hospital treatment did not get hospitalized. As of 1989, coverage by the Cooperative Medical Scheme, a medical security system created for the rural areas in China, dropped to only 4.8 percent, although it bounced back to 15 percent in 1995.

2. Among the 191 member countries of the World Health Organization (WHO), China was ranked fourth from the bottom, or 188th, according to a 2000 ranking by WHO with regard to health care funding and the fairness of the distribution of funds.

3. In 2003, the Health Ministry conducted its third survey on China’s health services. The result showed that 48.9 percent of the patients who needed treatment did not get it, 29.6 percent of patients who should have received in-hospital treatment did not get hospitalized, and 44.8 percent of the urban population and 79.1 percent of the rural population did not have any medical coverage. One hundred thirty million urban residents had basic health insurance and 50 million of them enjoyed free medical care.{mospagebreak}

4. In 2005, a new system under the Cooperative Medical Scheme covered 156 million people in the countryside.

5. According to a survey by the Chinese Academy of Sciences, 80 percent of the government’s total medical care budget is used to serve the segment of the population dominated by 8.5 million Communist Party and military officials. As disclosed by the Ministry of Supervision and the Ministry of Personnel, two million cadres nationwide are under long-term care. Among them, 400,000 officials occupy V.I.P. wards, hotels, or resorts for extended periods of time, costing the government 50 billion yuan (US$6.3 billion) each year.

The data shows that there is marked unfairness in China’s present health care system.

Dr. Yin Dakui explained that health care coverage is a key barometer in judging a country’s health care policy and system, while fair access to health care is one of the most important components of a country’s social equality. Therefore, the government must take fairness into account when formulating health policies, Yin argues. Under any circumstances, essential medical care and public health services are public services and therefore must be provided by the government.

Getting Treatment Is Difficult, and Few Can Afford It

An expert from the Development Research Center (DRC) of the State Council, who requested his name be kept anonymous, argued that while China’s health care system has undergone a full-scale reform in the past 20 years or so, it is imperative to have further reform.

On the one hand, medical services and technology have improved to some degree, and the micro-efficiency of the medical services organizations has also seen improvement. On the other hand, the cost of medical services has surged, making affordability a prominent issue. By and large, “the fairness and effectiveness of health funding have systematically deteriorated,” which has negatively impacted China’s economic and social development. It greatly increases the burden of illness on the public, decreases consumer expectations, leads to poverty, causes severe conflicts among different social classes, and negatively affects social stability.

The root cause of unaffordable services and the difficulty in getting medical services lies in the health care system and the way it operates, Dr. Yin Dakui added.

First of all, not enough attention has been paid to community medical and health standards. Normally, 70 to 80 percent of patients ought to be treated in their local communities. In practice, community medical services are poor and people do not trust their community hospitals. As a result, they go to higher-level hospitals regardless of their illnesses. This has caused a tremendous waste of medical resources.{mospagebreak}

Secondly, the issue of the lack of medical and health coverage for the majority of farmers has not been resolved. The former three-tier prevention and heath network has disappeared, although the authority is racing to establish a new type of cooperative medical system in the rural areas. A new “test system” has expanded to 40 percent of the counties in China and is expected to cover 80 percent by 2008. In 2010, this system is projected to cover virtually all rural residents.

Thirdly, the current development plan for a public health system is insufficient. Prevention must be the major task. Preventive health care is a strategy that requires less investment and results in better effectiveness.

Dr. Yin argued that people tend to seek better services when they need medical treatment. “When a person becomes ill, he often wants to see the best doctor and have the best medicine. This is, of course, unrealistic.”

Dr. Yin stressed the difference between the public hospitals and state-run hospitals. When the government builds a hospital, it should cover the funding for both personnel and all other expenses. In reality, only eight percent of the funding for public hospitals comes from the government, while in large public hospitals it’s a bleak 1 to 3 percent.

Dr. Hendrik Jan Bekedam, WHO’s Chief Representative in China, pointed out that China’s public hospitals rely on billing patients to cover 50 to 90 percent of the wages of their staff members. This leads to an increase in patient volume in the hospitals but also to a lack of attention to prevention and other essential services. In the meantime, it also results in an excessive number of unnecessary prescriptions and diagnostic tests, where cost control is often hard to achieve.

Liu Yuanli, director of China Projects Department, Harvard School of Public Health, proposed that the (Chinese) government should completely fund some of its public hospitals to enable them to escape the pressure of needing to generate funds. The government should relax its control over the rest of the hospitals but continue to enforce taxation and maintain its administration and monitoring duties.

Is Lack of Government Funding the Major Culprit?

One of the unanimous viewpoints among the forum attendees was that government funding for the health care sector is insufficient.

“With 22 percent of the world’s population, China’s health budget amounts to merely 2 percent of the total health care cost of the world. With the lack of government funding, financial support from the government totals 5 percent of total expenses for the provincial-level hospitals, a number that drops to 1 percent in the municipal and county-level hospitals. It ranges between 1 and 5 percent for the township hospitals in China,” commented Dr. Yin.{mospagebreak}

Dr. Yin’s data indicated that out of total medical costs of 660 billion yuan (US$83 billion) in China in 2003, the government shouldered only 17 percent. In contrast, the governments of the European Union cover 80 to 90 percent; the U.S. government covers 45.6 percent with free Medicare and Medicaid for seniors, the poor, and the disabled; and Thailand’s government funds 56 percent of their medical expenses. On the other hand, many developing nations, including India, Cuba, North Korea, Sudan, and Burma, have implemented free medical care systems.

Dr. Bekedam from WHO also indicated that the Chinese government’s funding for health services is severely lacking. Two-thirds of the population has to pay medical expenses out of their own pockets, totaling 56 percent of overall health expenses. As the third nationwide survey for health services in December 2004 showed, medical services in China have become the third largest consumer expenditure.

The data provided by another health official at the forum confirmed Dr. Bekedam’s comment. The percentage of China’s budget earmarked for health care has dropped from one-third of the total budget in 1978 to 17 percent in 2003. During the same period, health care expenses borne by the Chinese people have surged from 20 percent to 50 percent.

“Given China’s enormous financial capability, it is impossible for China to satisfy all of its medical and health demands, the expert from the DRC argued.

Another participant at the forum disagreed. He said that China’s growing economy could afford to cover its medical and health costs, but the problem is that government funding is disproportionate. “Just as education funding is focused mainly on major colleges and universities, medical funding is also geared mainly to major hospitals. Do we want funding for bare necessities or luxuries?” The expert from the DRC concurred that the key to fixing China’s health care system is to distribute the medical resources fairly.

Government funding is certainly very important, but it’s not the most important prerequisite, Dr. Yin said. “Health care expenses total 5.6 percent of China’s GDP, which is not a particularly low figure. It is not necessarily true that the larger the amount in the health care budget the better. The United States once spent 17 percent of its GDP on health care, but it wasted a lot of resources. The key, Dr. Yin concluded, lies in the structure of overall health expenditures. The ratio of what government should pay compared to what society and the individual should pay must be appropriate.”

Is Essential Medical Coverage for Everybody the Solution?

Dr. Yin Dakui argued that the government must be responsible for the essential medical services. “When they are sick, people can get treated,” he said. These essential medical services must be standardized, their effectiveness must be guaranteed, and they must be inexpensive.{mospagebreak}

Another expert concurred. It is universally agreed that medical services should be distributed based on needs, while funds should be collected based on ability to pay. “The people who need medical services the most are the low-income, who are more susceptible to illnesses but less able to afford them. This is also the group that needs help the most.” He explained that the practice in North America is to provide for those that need it most. Medical insurance in the United States provides for seniors, the disabled, and the poor. Likewise, the Mexican government also ensures that low-income people have access to medical services virtually for free.

WHO’s representative in China, Dr. Bekedam, also suggested that the Chinese government consider full coverage of its people for the essential services, including mandatory medical coverage and the improvement, expansion, and merging of the current medical insurance and medical subsidies programs. The key is to ensure the accessibility of health services in regions lacking resources and to establish a safety network for the poor. The service packages should cover the essential health services. Special attention should be paid to the western regions and the poor.

The representative from the DRC recommended that China should establish a public health and essential medical coverage system that covers the whole spectrum of demographics. In terms of the development of the health care system, community health services must be strengthened so that services are accessible. Preventive care and early detection (of illnesses) must be the focus, which will improve the efficiency of the medical investment and resolve 80 percent of the issues. At the same time, reinforcing community health services is a necessary but not sufficient condition to achieving the goal of providing health protection to everyone. A system to ensure basic medical services must be established. One option is to develop a public health and basic medical care system that covers everyone.

One official at the forum disclosed that it was estimated that 150 to 200 billion yuan (US$18.9 to $25.3 billion) in annual funding would be sufficient to establish a basic medical care system that covered the entire nation. “This amounts to between 1 and 1.5 percent of the GDP, 5 to 7 percent of the national fiscal income, or one-fourth to one-third of China’s current total expenditure on health. It is economically sound. It is true that a low investment can also produce good health results.”

A full-spectrum basic medical care system, however, as the official said, requires the support of an overall systematic reform, including organizational and administrative approaches that can fairly select health and medical structures, properly identify service content and service standards, fairly consolidate resources, reasonably establish an effective purchase and supply system for basic drugs, develop an effective inspection and evaluation system for service quality, and build an effective mechanism for accountability among government organizations.{mospagebreak}

In the meantime, an insurance system for non-essential medical services needs to be developed to meet higher demands. Then, second- and third-tier medical service systems need to be perfected, and the non-profit and for-profit institutions must be allowed to coexist, with different administrative approaches. The drug system has to be improved as well.

Translated by CHINASCOPE from