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Encouragingly, emerging developments from China indicate that major inroads have been made to extending health-care coverage, which will impact positively on global aggregate coverage figures. Recently released figures suggest that Chinese medical insurance programmes have extended coverage from about 190 million individuals (equating to 15 per cent of the population) in 2003 to a staggering 1.13 billion individuals (equating to 85 per cent of the population) in 2008 (see Figure 1 below).

So how has this been achieved?

China operates four different medical care schemes: the Urban Employees’ Medical Insurance (UEMI) programme, which covers all employees in urban areas working in government organizations, enterprises, social groups, and non-profit organizations; the Urban Residents Basic Medical Insurance scheme (URBMI), which covers with government subsidies non-salaried people such as the elderly and the children; the New Rural Cooperative Medical Scheme (NRCMS), which covers on a family basis all rural residents with government subsidies; and tax-financed medical assistance programmes targeted at the needy in both urban and rural areas.

Under UEMI, the contribution rate is paid by the employee and the employer. The employee pays 2 per cent of payroll to an individual account, while the employer pays 6 per cent to the pooling fund. The individual account is used to pay medical expenses of up to 10 per cent of the local average annual wage income. The pooling fund will reimburse the amount from 10 to 400 per cent of the average annual income, according to a schedule. Medical treatment in high-grade hospitals should result in a low percentage of reimbursement, and vice versa. Payment for costs above 400 per cent rests with private insurance schemes or public-run supplementary schemes, if these exist.

In 2008 annual contributions to the URBMI ranged from CNY 150 to 300, with an average of CNY 236 nationwide. Annual contributions to the NRCMS stood at a per capita average of CNY 96.3. Unlike the urban medical insurance scheme, the URBMI and NRCMS mainly cover the costs of treatment for major diseases and hospitalization fees. In these cases, reimbursement rates are much lower, at less than 40 per cent and about 50 per cent, respectively.

The tax-financed medical assistance programmes annual expenditures for 2008 totalled CNY 3.83 billion. In urban areas, the annual expenditures totalled CNY 2.97 billion, including subsidies to support the participation of individuals covered by the URBMI.

Learning from past mistakes

The current remarkable extension of health-care coverage in China belies previous setbacks: the government is in a process of learning from its own policy mistakes of the past. In the planning economic period (1949-1978), governments covered more than 90 per cent of medical expenses for urban residents, while rural residents enjoyed simple but essentially free health care. The rural cooperative medical care scheme, which was financed by co-payment and prepayment coupled with collective subsidies, once covered 90 per cent of the rural population under primary health care and was touted as an excellent model for the developing world. With the market oriented reform and shift towards individual responsibility (1978-2003), the system was unfortunately disrupted together with the grass-roots health-care network, resulting in the drop of coverage ratio to less than 10 per cent of the rural population.

Meanwhile, dependants were no longer covered under the urban medical insurance schemes for salaried workers. Statistics from the Ministry of Health show that personal spending on medical services doubled from 21.2 per cent in 1980 to 45.2 per cent in 2007, while government funding dropped to 20.3 per cent from a high of 36.2 per cent in 1980. Due to inadequate public funding, doctors at state-owned hospitals were compelled to “generate” income for their hospitals through prescribing highly-profitable, sometimes unnecessary, medicines and treatment. In certain areas this could account for 90 per cent of a hospital’s income. Out-of-pocket medical expenses for a significant number of people were often excessively high, and illness-induced poverty posed a grave threat to social equity and stability. The market-oriented health-care reform proved a failure.

A number of lessons can be drawn from these Chinese developments. A key lesson is to restrain from abandoning or reforming any social security system before conducting a thorough and in-depth study and being prepared for and capable of meeting the financial cost of change. Chinese developments also reveal that the marketization of social health-care insurance has its own limits, and the state must maintain an adequate budget input and enforce appropriate regulations to avoid social division and system fragmentation, to enhance portability of social security benefits, and to better coordinate or integrate different schemes.

What has changed?

Two programmes in particular have had a remarkable impact on the massive extension of health-care coverage in China.

At the end of 2008, the New Rural Cooperative Medical Schemes (NRCMS) covered 815 million people or 91.5 per cent of the rural population (see Figure 2 below). The schemes, reinitiated in late-2003, are heavily subsidised with the government paying as much as 80 per cent of the health-care premium.

The URBMI was first piloted in 88 cities in 2007. By 2008 it covered about half of all cities and is expected to cover 80 per cent of the cities by the end of 2009 and all cities in 2010. It is financed by individual contributions together with an average of 36 to 56 per cent of government subsidies (for adults and children, respectively).

Contributing factors behind the rapid extension

Elements in the success of the recent extension of coverage have been attributed, although not confined, to the increasing involvement of academics and social partners in the strategic plans and reforms, the government-managed gradual and sequenced approaches, increasing conditional and unconditional social transfer to the less-developed regions and low-income groups, special coverage extension campaigns, and inclusion of extension quota in the central and local government socio-economic development plans.

Issues and challenges

In spite of the achievements to date, China remains plagued with a multitude of problems. These include the fragmentation of health-care schemes, low levels of pooling, a continuing urban/rural social divide, income gaps between different regions and social groups, population ageing, weak health-care facilities at the grass-roots level and especially in rural areas. Other issues include low compensation rates, a lack of reimbursement for outpatient care, and the absence of prevention mechanisms for most people insured under the URBMI and NRCMS programmes.

A new “blueprint” and a three-year action plan

After three years of broad consultation, intense debate and repeated revision, the government announced in early April 2009 the long-awaited Guidelines on Deepening the Reform of Health Care System, a blueprint for health care over the next decade as well as an ambitious three-year CNY 850 billion (equivalent to 124 billion US dollars) action plan to be implemented between 2009-2011, which is on top of the CNY 4 trillion stimulus package.

With the core principle of providing the primary health care as a public service, the blueprint aims to put in place by 2020 a basic health-care system that can provide “safe, effective, convenient, and affordable” health services to all urban and rural residents.

The three-year plan will strive to cover more than 90 per cent of the population under the primary medical insurance programmes (consisting of UEMI, URBMI and NRCMS), introduce the essential medicines system, improve primary health-care facilities, provide equitable access to the basic public health-care services, and conduct pilot reforms of public hospitals.

Under the plan, two thirds of ear-marked government budgets will be used for consumers as premium subsidies (for low-income groups), and one third will be used for (mainly community-level) service providers, especially the rural three-tiered health-care facilities. In 2009, for instance, the central government will finance the construction of 29,000 rural township health-care centres, and support the renovation and expansion of over 5,000 major rural township health-care centres. Within three years, the central government will render full support to the construction of 2,000 county-level hospitals, and ensure that each administrative village will have at least one clinic. Meanwhile in urban areas, 3,700 community health-care centres and 11,000 community health-care stations will be either newly built or renovated, and the central government will finance the construction of 2,400 urban community health-care centres in less-developed regions.

By 2011, the annual ceiling of reimbursement will increase from 3-4 times to 6 times the average wage or resident income, and the hospitalization expense reimbursement rate under UEMI, URBMI and NRCMS will grow from 70 percent, 50 per cent and 38 per cent, respectively, to 75 per cent, 60 per cent, and 50 per cent accordingly. The remaining unacceptable differences in service between urban and rural areas and between different systems and regions are to be reduced gradually in the forthcoming years.

In terms of the two-year CNY 4 trillion economic stimulus programme announced by the government in November 2008, debates at the March 2009 meeting of the Chinese parliament (the National People’s Congress or NPC) resulted in changes of the planned spending structure. Allocations for health, hygiene, education and culture increased from CNY 40 billion before NPC to CNY 150 billion after NPC. Reportedly, the 2009 central budget subsidy for rural and urban medical assistance programmes totals CNY 8 billion, representing a rise of 58.7 per cent over 2008.

International observers will now be keenly watching these developments to see whether China can succeed in creating a universal health-care system for the most populous nation in the world.

Related:

ISSA Country profile: People's Republic of China >>

Sources:

Chinese State Council . 2009. Implementation plan for the recent priorities of the health care system reform  (2009 – 2011) (published by the State Council, Beijing, 7 April). English translation as a reference only available on the Website of the National Development and Reform Commission < http://shs.ndrc.gov.cn/ygjd/ygwj/t20090408_271137.htm> (accessed on 14.09.2009).

CPC; SC . 2009. Opinions of the CPC (the Communist Party of China) Central Committee and the State Council on deepening the health care system reform  (Adopted by the State Council, Beijing, 23 January). English translation as a reference only available on the Website of the National Development and Reform Commission < http://shs.ndrc.gov.cn/ygjd/ygwj/t20090408_271138.htm> (accessed on 14.09.2009).

Fischer, D . 2009. China’s policies for overcoming the crisis: Old reflexes or strategy for a new reform miracle? . (Briefing paper, No. 7). Bonn, German Development Institute. < http://www.die-gdi.de/CMS-Homepage/openwebcms3_e.nsf/(ynDK_contentByKey)/MSIN-7TBJTX/$FILE/BP pour cent 207.2009.pdf > (accessed on 14.09.2009).

Ren Min Wang [The People’s Net] . 2009. Jin Nian Cheng Xiang Di Bao Bu Zhu Chao 600 Yi, Zheng Zhang Jin 7 Cheng  [This Year’s central subsidy for rural and urban minimum livelihood to exceed CNY 60 billion, an increase of 70 per cent] (Posted on 3 July). < http://www.cnss.cn/xwzx/jdxw/200907/t20090703_214186.html> (accessed on 14.09.2009) .

Xinhua News Agency , 2009. China unveils health-care reform guidelines  (Posted on 6 April). < http://www.china.org.cn/government/central_government/2009-04/06/content_17559519.htm> (accessed on 14.09.2009).

Zhu, Y . 2009. Case study on the extension of social security coverage in China . Geneva, International Social Security Association (forthcoming).