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Shifting demography and economics create new health needs in China
For the first time in modern history, China’s health leaders are not grappling with an exploding population. Rather, they are dealing with its aftershock.
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A generation ago, China’s health care system was regarded by other developing nations as a global model for efficiency. Leaders of nations in Latin America and Southeast Asia frequently looked to the People’s Republic in the hopes they could emulate the programs with which China attained such a high level of success in the 1970s and 1980s. Despite the impressive gains of the past 20 years, however, recent studies by the Chinese Ministry of Health and the World Bank suggest that major health indicators are beginning to slip as the cost of health care increases and budgets are cut.
The convergence of an aging population, economic pressure to control health costs and spending, and the growing popularity of private care for some patients is changing medicine in China. Experts suggest that the world’s most populous nation may benefit from adopting new health care strategies that would complement China’s ongoing transition to a market-based economy and forestall what some see as an impending national health crisis.
Accomplishment begets challenge
China’s health care goals of the 1970s and 1980s were twofold. First, the health ministry devised and implemented vaccination, prenatal and neonatal care programs that successfully lowered the nation’s infant and maternal mortality rates while increasing life expectancy for the average Chinese by about 14 years, to age 69. Second, the nation adopted strict birth control policies designed to stem growth in its billion-plus population.
The World Bank notes that China is now completing its demographic transition from high fertility and mortality rates to low ones. By encouraging the widespread introduction of immunizations and the practice of having trained medical personnel attend births, China achieved many of its health goals, and at relatively low cost. Ironically, solving some health problems caused others.
Immunization from common but deadly communicable diseases led to longer lives, while strict birth control policies decreased the growth rate. The result has been a greater number of older Chinese than ever before, and with this aging population, comes increased demand for health services.
Demographic, economic shift
Economic policies that have allowed for marked increases in the standard of living for many Chinese also has changed the way the government views health care. Its desire to position Chinese business to compete on the global level led to reductions in health spending as cash was redirected into economic stimulus packages that encouraged foreign investment. Leaders assumed that decreases in health subsidies would be compensated for by increased private sector health spending.
Indeed the private sector did begin to spend more on health and medicine, but those increases have largely been limited to wealthier city dwellers. Those who can afford it are spending more on better, private care, but unfortunately, those who cannot are paying more for lower quality services.
A recent report on health care in China by the World Bank details a growing disparity between the health care available to the rich compared with that available to the poor. Despite an increase in real government health spending, the percentage of spending as part of the nation’s growing gross national product has decreased from 0.77% to 0.45% over the past 10 years, according to the World Bank. (By comparison, the United States spends about 14% on health care.)
Compared with other Asian economies of similar size, the Chinese government’s health care contribution is lower than those of Bangladesh or Bhutan. China actually ranks lowest among similarly sized economies.
The World Bank notes that decreased health spending, particularly in the rural segment of the population, can be attributed to the elimination of the collective farm — once a cornerstone of the socialist state. With the de-collectivization came the disappearance of the rural health center, and a subsequent decrease in rural health indicators.
Once free, now costly
Patients who previously sought free care at the local clinics now must either pay for care in private facilities, pay an increased user fee at the few public centers still open, or go without health care services. When combined with the ancillary costs of seeking care (lost wages, transportation costs, etc.) once-affordable public health care is becoming increasingly difficult for the poor to obtain, and has led to a growing disparity in both access and quality between China’s rich and poor.
According to World Bank statistics, members of China’s poorest quintile visited inpatient health centers 2.9 times annually in 1980 and on average, sought outpatient treatment 3.7 times per year during the same period. Thirteen years later, after the close of the collective farms, people in the poorest quintile of China’s population were visiting inpatient centers 1.8 times annually, while the number of outpatient visits declined to 2.8 visits annually. By comparison, the number of annual visits to inpatient or outpatient facilities by the nation’s richest quintile remained virtually unchanged over the same period.
Under-utilization
In 1993, China’s National Health Survey (NHS) revealed that there are three major reasons why the poor are under-utilizing health services. On a positive note, the survey found that China’s efforts to improve health standards since the 1970s have paid off. There are, indeed, fewer people who need care, but probably not so many that their numbers would warrant the marked decline in usage in the poorest segment. Respondents consistently reported that higher costs and lower quality were among the main reasons they visited health centers less frequently than they had in the past.
The average out-of-pocket costs per visit to public health services varies widely across the population, but the survey revealed that the poor are paying proportionately more than the rich per visit. The wealthiest households, notes the World Bank, pay larger absolute amounts as a proportion to what the Bank described as “non-food” total household spending, but the poorest households spend about 1.5 times more on medical care as a percentage of their total annual income. Furthermore, drugs and medicines proportionately consume about three times more in the poorest household than in the richest.
These statistics jibe with broader trends. Economists note that government’s creation of “capitalism with a Chinese face” is allowing China’s rich to grow richer, while the poor become poorer.
Perceived lack of quality
Chinese officials were aware that disparity in income and health spending between the rich and the poor might be a contributing factor to the low utilization among the poor. That poor Chinese perceive a lack of quality in the system came as something of a surprise, however. Liberalization of policies governing the sale of western-style pharmaceuticals (traditional or herbal medicines also are very popular in China) and the emergence of a large private sector health care network permitted users, particularly the rich, to move away from the public sector, and take their user fees with them. Wealthier Chinese can afford private care, and high-quality private health insurance. With decreased user fees, the government was left with less capital to reinvest in the system, and with less money, health facilities are able to acquire fewer pieces of new equipment and fewer drugs. Lower consumer confidence suggests this is a trend that the poorest patients seem to be aware of.
It seems that a combination of potentially destructive elements converged on the public system simultaneously. Rich people abandoned it in favor of private care just around the same time the government was forced to cut spending. The double whammy of lost user fees and decreased government subsidies combined to drive down quality.
Factual basis
Survey findings bear out this trend. The NHS learned that the probability of being treated by a qualified physician is less than 20% at a public health center. In comparison, the chance of being treated by a qualified medical physician at a private facility was greater than 60%. This is not to say that all staff at public centers are unqualified; trained nurses can handle many medical problems. The statistics do, however, point to an alarming shortage of medical physicians at public facilities, mostly in rural areas, compared with an oversupply of medical physicians in private, mostly urban facilities.
Additionally, the NHS survey revealed that in absolute terms, China is spending more and getting less improvement in health indicators than it had in the mid-1980s. In the 1980s, maximum incremental improvements came with minimal public health expenditure, whereas today, for example, a 93% increase in public spending to fight infant mortality only decreased the infant mortality rate by 4.1% since 1980 in the poorest segment of the population. In the richest segment, however, public spending to fight infant mortality has increased only 58% since 1980, but has reduced mortality rates by almost 33%. Exact reasons for the differences are not clear, but experts suggest that greater upper quintile dependence on private care, combined with decreased efficiency in facilities to treat the poor, is to blame.
Fixing the system
The World Bank recommends that China adopt a twofold health strategy. First, the government should adopt programs that would address and resolve current health problems. Second, the government must prepare itself to address future problems.
China’s main goal in solving current health problems should be to provide access to better and more affordable health services to the poor, the World Bank says. A basic health package, which includes essential preventative care, should be combined with a minimal clinical care package. The World Bank estimates that these services could be delivered for $10 per year per person, with increases to $60 per year by 2020.
By comparison, China would be spending far less than many of its neighbors if it were to adopt such a program. Similar health benefit packages in South Korea, Turkey, Costa Rica and South Africa vary from $20 per capita annually to $350. The World Bank claims that by restructuring the nation’s user fee program in such a way that the rich would make a larger contribution than the poor, may give the government at least some of the money it needs to develop these basic packages.
To meet these needs, the World Bank contends that China must increase its annual health care budget. The Bank argues that while short-term increases in spending will test the resolve of budget-makers, long-term benefits to the nation’s workforce would be tremendous.
To shore up the system, the government also must re-deploy medical personnel to the rural areas where they are needed most. Currently, China’s urban areas are saturated with trained medical personnel, while in rural areas there are only a handful of trained personnel.
Combined, these efforts could raise the quality of health care throughout China, the World Bank says. Higher quality would increase utilization — especially among the poor — and health indicators could be improved.
Preparing for the future
China’s current urban health system is somewhat underdeveloped. Based on employment, it covers only about 14% of the population and dependents are not covered under the plan.
The aging population has increased the number of claims annually, and because they promise to increase more in the future, work to improve urban health care now could prevent a major health crisis in the future. The World Bank recommends a four-point reform plan designed to enhance coverage and contain costs:
Management of the urban health insurance plan should be centralized. This would create larger risk pools and provide economies of scale. Additionally, it would give local governments greater bargaining power for negotiating contracts on capitation payments. Implementation of such a plan might be difficult, however, because it would involve an intricate complication of a number of government agencies and departments.
Urban insurance plans could be broadened, first by including the dependents and beneficiaries of the insured on the policies. Such a plan might require a public/private partnership, but private companies have been reluctant to enter such an agreement because of the risks. The government is now considering an alternative program that would require hospitals to reinvest unused capitation payments into specially designed trust funds. The option, according to the World Bank, would gradually eliminate 50% of the government’s current health care contribution and would free up resources that could be used to provide services to the rural poor and the uninsured.
Redesigned package
A redesigned basic benefits package would decrease the number of sick people, and lessen the demand for expensive acute care in the future. A sound program of vaccinations, neonatal care and preventative checkups would be fully reimbursed in a World Bank proposal. The costs of more expensive clinical care could be absorbed with a co-payment system that would not force China to spend money it does not have.
Lastly, the World Bank recommends that China adopt policies that would create broader, possibly privatized insurance programs that would eliminate the gaps in coverage. With the creation of large-scale private insurance programs, there would be the need to adopt legislation that would prevent insurance companies from dropping seriously ill patients or those with pre-existing medical conditions, the World Bank notes.
Report Card: China
Population 1.2 billion Gross domestic product (GDP) US $630 billion* Percentage of GDP spent on health care <1% Percentage of urban population with health insurance 14% Number of ophthalmologists 22,000 Patient-to-ophthalmologist ratio 60,000 to 1 Number of people waiting for cataract surgery 5 to 6 million Annual number of cataract surgeries performed 300,000 to 400,000 Number of phaco machines in country 1,000 Percentage of procedures performed with phaco 10% Annual number of refractive procedures 200,000 *1997, Source: The Economist
For Your Information:
- To obtain a copy of the World Bank’s report on Chinese health care, contact the World Bank, 1818 H St. NW, Washington, DC 20433 U.S.A.; +(001) 202-458-1275; fax: +(001) 202-522-1778.