HEALTH CARE REFORMS IN CHINA

REFORMING CHINA’S HEALTH SYSTEM

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Health insurance card In 2016, Chinese leader Xi Jinping unveiled the country’s first long-term blueprint to improve health care since the nation’s founding in 1949. Called Healthy China 2030, it pledged to bolster health innovation and make access to medical care more equal. In the plan President Xi Jinping promised to overhaul China’s antiquated and underfunded public health system and deliver affordable and accessible health care for all.

According to the Financial Times: Beijing has increased state spending on healthcare from about 2 percent of gross domestic product to nearly 3 percent in the late 2000 and 2010s as it rolled-out a basic system of state-backed medical insurance covering 95 percent of the population. China has achieved “some of the most pronounced gains” in healthcare access and quality improvement worldwide from 2000 to 2016,according to research published in The Lancet in 2018. But it added that the country’s regional disparities were among the widest. [Source: Tom Hancock and Wang Xueqiao, Financial Times, December 31 2019]

In the aftermath of the SARS epidemic in the early 2000s, the Chinese government embarked on the country’s most ambitious effort to reform its health care system in a decade in part to address the rural-urban health care inequality. In China’s 12th Five-Year Plan period (2011-15), medical security, drugs and services were targeted for reform. In the early 2000s, they were each under the jurisdiction of a separate institutions whose work, according to China’s health minister, was “coordinated in anything but a smooth way”. In response, the ministry proposed that the government agencies that oversee public health, medical security, family planning, environmental protection and sports be gradually integrated into a single ministry. [Source: China Daily, August 21, 2012]

In the early 2000s, China experimented with reforms aimed at improving health care for peasants. The most important is an insurance plan in which participating farmers must make an annual payment of a little more than a dollar to gain eligibility for basic medical treatments. Many peasants have complained that even the dollar payment is too big a burden and that in any event the coverage the plan theoretically provides is inadequate. In March 2007, the Chinese government announced it would increase subsidies for medical aid in the countryside by around $1.2 billion, almost double the 2006 figure, in part to offset increases in the prices of drugs and medical services [Source: Howard W. French, New York Times, January 14, 2006]

Need for Healthcare Reform in China

Lucy Hornby of Reuters wrote: “The soaring cost of chronic disease could tax China's effort to offer basic healthcare to 1.4 billion people. Almost one out of every eight Chinese households was racked by catastrophic health expenses in 2011, according to a paper recently published in the medical journal The Lancet. [Source: Reuters]

“Healthcare reform is needed to rebalance the economy, since Chinese salt away their savings in part because of fear of being wiped out by devastating illness. But the burden of chronic illnesses could worsen as Chinese eat more and live longer. Diabetes, for instance, now afflicts nearly 10 percent of Chinese adults -- roughly the same proportion as in the United States -- up from 1 percent in 1980.

“Even if treatment for diseases like diabetes are normalized, doctors acknowledge that the announced government healthcare spending of nearly $175 billion through to 2015 is only the beginning. The Ministry of Health has a pilot program to cover some chronic diseases, which may be extended to dialysis, the treatment for kidney failure that can stem from diabetes.

“Peking Union Medical College Hospital specialist Xiang Hongding told Reuters: "At the moment actually there is no real appreciation of how much medical reform will cost. But the nation is committed, even if the cost is high, to resolve the problem...We're a socialist country, if the government wants to get something done, it can.”

Efforts to Fix China's Health Care Problems

China is trying to fix its health care system.The government's goals include: 1) Improve health services, in part by building 2,000 county hospitals and 29,000 township hospitals and ensuring that each of the country's nearly 700,000 villages has a clinic; 2) expand state health insurance from 70 to 90 percent of the population, or an additional 200 million people - equivalent to two-thirds of the U.S. population; 3) reduce drug costs by controlling prices for medications deemed essential; and 4) in the longer term, seek ways to cut back on unnecessary treatment and drug prescriptions that are blamed for skyrocketing fees at public hospitals. Plans have also aimed to improve health centers in rural and remote areas as well as equalize health services between urban and rural areas. The government began to reform the operations of public hospitals in 2009. [Source: Gillian Wong, AP, Washington Post, November 30, 2009]

Gillian Wong of Associated Press wrote: “In a country with 1.3 billion people, to achieve the goal of health for all is by no means an easy job,” Chinese Health Minister Chen Zhu wrote in The Lancet, a British medical journal, “However, we are determined to transform these challenges into opportunities.” Some say the answer to China’s health care problems is private spending and investments. Gordon G. Liu, a professor of economics at Beijing University’s Guanghua School of Management, told the Washington Post that by letting people with money spend more on care would create more incentives for doctors to work harder and attract more talented people into the medical profession. Poor people would benefit as the system as a whole improves. Others say this approach would only widen the gap between the care given the rich and the poor and leave the poor neglected as doctors seek out wealthy patients.

The government has set up a number of pilot programs with some allowing doctors to work at community or for-profit clinics without losing their jobs and others to work at hospitals where doctor salaries and medical fees are fixed and carefully studying the results with cost-benefit analysis. Liu, who taught at the University of North Carolina, told the Washington Post: “It’s very interesting to see politics in China. Sometimes they are very old-fashion and sometimes so liberal, even more than in the U.S. Thus it said “since you guys are debating, lets do an experiment and see which way works better.” I tell my colleagues that what you’re doing is very consistent with your “scientific development philosophy” rather than being like a dictator telling us what to do like in the past.”

Affordable medical services also could help reduce China's dependence on exports by encouraging people to stop saving so much for potential medical costs - and spend their earnings on consumer goods instead. Bai Zhongen, chairman of the economics department at Tsinghua University’s School of Economics and Management in Beijing, told the New York Times said the school did a survey in 2007 about the effect of rural health insurance on consumer behavior and found that in government-sponsored health insurance areas, people are spending more. [Source: Edward Wong, New York Times, January 21, 2009]

Over the past couple of decades China’s subsidized system of socialized medicine has been dismantled and replaced with a privatized system that is expected to pay for itself. Financial responsibility has been handed over to local and provincial governments and hospitals and doctors themselves who have to rely more heavily than they did before on fees collected from patients. In areas where people have money, namely the cities, the health care services are reasonably good, but in rural areas, where people often can’t afford to pay their medical bills, the health care is very poor.

To improve efficiency hospital staffs are being cut, unqualified doctors are being fired and patients are being charged more money. Most hospitals are having a hard time trimming their bloated unqualified staffs even there are laws on the books that require doctors without proper degrees to be transferred to low-level jobs.

In the cities hospitals and doctors are becoming more competitive. At some Shanghai hospitals, patients can chose the doctor who treats them. Posters with the doctor' names, photographs, specialties and resumes are posted on the walls. Popular doctors are awarded with more business while unpopular ones are transferred or laid off.

Responding to criticism about the high cost of medical care the Chinese government is making an effort to reestablish rural medical cooperatives and set limits on what medical facilities can charge for drugs. It has also promised to boost spending in public health, especially in the countryside. One benificiary, retired farmer Shi Xiulan, 56, told AP at at a clinic in the village of Xihu in Ningxia. “It's so convenient. I don't have to travel far to see the doctor, and it's affordable,” She spends 1 yuan for diabetes and high blood pressure medications, instead of the 300 yuan she used to fork out at the county hospital. “Peasants like us usually have no money for medicine.”

China is pumping $124 billion in health care over three years from 2009 to 2011 to bring health coverage to all 1.3 billion Chinese, make health care more affordable and improve the system.

In August 2009, as part of its program to make health care more affordable, the Chinese government issued of list of more than 300 commonly-used medicines to be sold at controlled prices. In April 2009 the government announced plans to build thousands of new hospitals and put a clinic in every village. China also has an ambitious plan to create a community hospital system. To staff such a system its needs 165,000 doctors.

Implementing Health Care Reforms in China

Sixty percent of the funding is supposed to come from regional governments, and it's unclear how poorer ones will come up with the money. The central government has laid out a broad strategy but left specifics to local officials. The result is a series of experiments. While learning by doing is fine, there appears to be little formal evaluation of these trials, which may make it difficult to pinpoint what works, said Langenbrunner of the World Bank. “The challenge for China is to try to evaluate the various kinds of schemes that it is trying and then see which schemes seem to work better and adopt them,” William Hsiao, a China health policy expert at Harvard University, told AP.
[Source: Gillian Wong, AP, Washington Post, November 30, 2009]

Shenmu County in the north is offering free health care for its 390,000 residents. The southwestern metropolis of Chongqing is trying to manage urban and rural insurance programs together to save money. In Ningxia, an inland region in the impoverished west, farmers now pay 30 yuan ($4.40) a year to join a rural cooperative insurance program that allows them to see a village doctor for 30 common illnesses including colds, bronchitis and diarrhea for only one yuan, including medication.

Among the problems with the system, Hsiao, the Harvard expert, told AP is said a lack of coordination means rural clinics are competing with township and county hospitals for patients, while village doctors are quitting because they cannot earn enough under the new policy. [Source: Gillian Wong, AP, Washington Post, November 30, 2009]

“I don't feel like doing this anymore,” said Ji Caixia, a 56-year-old doctor in Lijiajuan, a village of rice and corn farms in northern Ningxia, told AP. “Even the farmers can earn about 80 yuan a day when they do work in the city. I can't earn any money. No one will want to do this work since the money is so little.”

Efforts to Tackle High Drug Prices in China

About 40 percent of China’s healthcare spending is on drugs, a far higher share than in many countries. About a third of healthcare spending falls on individuals. China is slowly overhauling its health care system to address these issues. Reuters reported: “It expanded its national reimbursable drug list (NRDL) in 2017 for the first time since 2009, though it is still dominated by cheaper, essential medicines. It also laid the groundwork to speed up 'orphan' drug approvals” for rare diseases — “key given the huge regulatory backlog — and even clinical trial waivers. But Beijing is also looking to trim a potential healthcare bill of $1 trillion by 2020 and is on a major drive to reduce drug prices — out of kilter with often high-priced specialty treatments for rare diseases that have a limited market. "They need to consider a lot of people's interests, so it's quite tough," said Huang Rufang, director of the Chinese Organization for Rare Disorders. [Source: Jackie Cai and Adam Jourdan, Reuters, May 19, 2017]

In 2013, the government year began a crackdown on medical corruption, targeting foreign drug makers in particular. In 2017, China announced plans to reduce the drug burden on patients and cover more vital drugs under national insurance. Patients taking dugs necessary for their survival — like the leukemia drug Gleevec — which began to be covered now only pay around 20 percent of the listed price. In 2018 China added a bunch of patented drugs from international drug companies to its national health insurance plan, securing massive price reductions in exchange for covering them. [Source: Echo Huang, Quartz, July 5, 2018]

In July 2012, Reuters reported, the ruling Communist Party sought to make treatment more affordable by looking to ban an age-old practice among public hospitals of marking up drugs prices by 15 percent, a practice the government allowed to flourish after it wound back subsidies for public hospitals from the 1950s. The ban applied to 300 county hospitals under a pilot project. But a patients' group and senior Chinese health officials say the measure, even if implemented nationwide, does not make medicines substantially more affordable. Instead, they say Beijing must tackle the far fatter markups enjoyed by drug distributors, a web of middlemen who inflate prices by 40 percent and sometimes by several-fold to levels that are beyond the reach of many ordinary Chinese. This is a "bigger problem", said Liao Xinbo, deputy director general for health in southern Guangdong province. "Nothing is being done to change this," said Liao, who is about to publish his second book taking a critical look at China's healthcare reforms. [Source: Tan Ee Lyn and Hui Li, Reuters, September 16, 2012]

Most major distributors are resistant to changing the current system but not all of them are. Beijing is starting to set floor and ceiling prices for state-subsidized medicines, which they say could help deliver more affordable healthcare. "When both the floor and ceiling prices are controlled, then whoever has a better and more trusted brand will gain," said Jia Zhongxin, chief operating officer for Sihuan Pharmaceutical Holdings Group Ltd, the eighth largest drugmaker and distributor in China by market share.

Obstacles to Tackling High Drug Prices in China

Reuters reported: “Embedded in China's healthcare system are strong vested interests: tens of thousands of drug-makers and distributors supporting workers and their families and local governments that depend on tax revenues from these companies. In China's fragmented healthcare sector, a batch of drugs can go through two, even three layers of distributors before ending up at a hospital. It is not uncommon to have a distributor servicing only one hospital. Each distributor takes a cut and pays doctors and advertisers to promote its sales. [Source: Tan Ee Lyn and Hui Li, Reuters, September 16, 2012]

“Beijing has a blueprint for reforming distribution but healthcare experts say it is bound to face fierce resistance among provincial authorities already worried about tax revenues as economic growth slows down. "There are literally thousands of distributors and they tend to be localized ... China wants to consolidate them. But every time a small company disappears, it is the taxes, jobs that go away," said Franck Le Deu, partner and head of Greater China healthcare at McKinsey & Company in Shanghai. "Therefore, the consolidation process faces resistance."

“In addition, some of the companies involved in the distribution chain are state-owned enterprises, which will resist change, said Li Renbing, a lawyer representing the China Patients' Rights League Project Group. "Can the government cut them out completely? These enterprises have to survive, which is why this middle section (of distributors) is preserved," Li said. Critics also say hospitals can find other ways to increase costs for patients, such as by encouraging tests that may not be necessary, and sophisticated and costly treatment.

Drugmakers Halve Prices to Get on China State Insurance List

In 2020, Drugmakers agreed to cut prices by around 50 percent on average for more than 100 medicines in order to have them included in China's state medical insurance scheme, potentially equated to massive sales for the drug companies and lower cots for patients. Reuters reported: “The National Healthcare Security Administration (NHSA) said that 119 medicines would be added to the National Reimbursement Drugs List (NRDL) with an average price reduction of 50.64 percent.[Source: Reuters, December 28, 2020]

“Ninety-six of them are branded drugs with no generic versions available in the domestic market, according to the statement. They included some key products made by foreign pharmaceutical companies, such as Novartis' blockbuster inflammation drug Cosentyx, and Israeli firm Teva Pharmaceutical's Austedo treatment for Huntington's disease. The list also add more home-grown PD-1 inhibitor products, a fast-growing class of drugs that help the immune system attack cancer by blocking a mechanism tumours use to evade detection.

The drug list became effective from March 2021, NHSA said. Inclusion on the list could potentially boost demand for medicines, as patients could be reimbursed for a significant portion of the costs. The NHSA updates its list annually. Average sales of medicines added in 2019 jumped by nearly 2,000 percent during a nine-month period of 2020, according to a research by ICBC International Research analysts.

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Last updated September 2022