Chinas Security and Healthcare Systems - Term Paper Example

Health Economics Introduction During the 1960s the population of China was close to half a billion, and thirty six out of every hundred were under the age of fifteen years. Illiteracy was common, and the majority of the population resided in rural areas. Over the course of fifty years, China acquired a relatively stable demographic outlook. Today almost half of the population inhabitant of urban areas and over ninety percent of the people are literate. The percentage of dependents under the age of fifteen has reduced to seventeen percent. The per capita income has risen to $ 7000, which was a few hundred dollars back in the 1960s (Eggleston, 2012). From 1952 to 1982, the growth of the Chinese health care system during this phase of thirty years was exceptional (Bloom & Xingyuan, 1997; Eggleston, 2010; Liu et al., 1999). Even though the per capita expenditure awarded by this system was as low as five dollars, but considering the limited number of available hospitals and health facilities, it appears to be a job well done. Over this period the average life expectancy grew from 38 years to 65; moreover, the infant mortality rate dropped down from 250 in 1000 to 40/1000. The improvement in the health care system increased the level of expectations among the people. Until Mao’s regime, the rural population was catered by cooperative medical schemes run by agricultural communes, while urbanites were treated through Labor Insurance System or the Government Insurance System . The economic reforms of the 1980s in China reduced the involvement of Central Government in health care system, and it transferred the load on to the provincial government (Ho, 1995; Hsiao, 1984; Hsiao, 1995). The shift of financial and administrative authority to the local provincial bodies paved the way for substantial inequalities between under-developed rural areas and the economic hubs of coastal regions. This is because the finance was dependent on the local taxation. The dual plan track was a failure, yet it was inevitable, considering the transformation of the Chinese economy into an open market economy. The access to cooperative medical schemes was 61 percent in rural areas, but after the 1980s reforms it dropped down to less than 5 percent (Liu & Wang, 1991). The Labor Insurance System and the Cooperative Medical Schemes only contributed to fewer than ten percent of rural population’s health budget in 1993. Health insurance was not common among the rural population; almost 80% of the rural population did not have any health insurance until 1998 (Liu, 2004). Such circumstances made the need of health reforms imperative (Hu et al., 2008; Liu, 2002; Liu, 2004). The start of the new millennium brought along several changes in the healthcare system of China. The Medical Financial Assistance or MFA was established in 2002, it was initially introduced for the protection of rural population against severe illness, but it was also applicable in urban areas. The MFA was administered by the Ministry of Civil Affairs; it provides cash to poor household in order to obtain medical services (Hougaard et al., 2011). The very next year, the New Rural Cooperative Medical Scheme (NCMS or NRCMS) was introduced at county level. It covered a larger risk pool, and it was established to pay for inpatient expenses. NCMS was launched by Ministry of Health. After a gap of four years, the Urban Resident’s Basic Medical Insurance was launched in seventy nine different cities (Hougaard et al., 2011). The reforms introduced by the Chinese government in 2009 were aimed to strengthen five particular areas. They included expansion of insurance coverage; increasing government spending in public health; developing primary care facilities at community levels in the urban areas, and township health centers in the rural areas; reformation of pharmaceutical market; and pilot test public hospital reforms. The efforts related to the healthcare system in China, over the last decade have brought around 98 percent of total population under medical insurance, further it has also resulted in the decrease of basic drugs’ prices by around 30%. Moreover, there is a drastic drop in the out of pocket payment for health care services from 60% of total costs in 2001 to 35% of total cost in 2011 (Xiaoqing. Lu et al., 2012). Stakeholders and their responsibilities in Chinese healthcare system Before discussing the role of various administrative units in China’s health care system, it is important to consider the various stakeholders in the system and their duties. The Ministry of finance is responsible for supporting government health budget (Hougaard et al., 2011). The Ministry of Health and SFDA is involved in RCMS, public hospital reforms, drug procurement and utilization, quality supervision of drugs and food, and public health service (Hougaard et al., 2011). The Ministry of Civil Affairs works for poverty alleviation and providing medical aid for the poor. The distribution of drug and medical devices is controlled by the Ministry of Commerce. The Ministry of Human Resource and Social Security administers UEMI, URMI, reimbursement and payment system (Hougaard et al., 2011). Evaluation of the healthcare reforms and price setting is managed by the National Development and Reform Commission. All these ministries and commission join together to form the State Council Healthcare Reform Leadership Committee. The governance of healthcare system is based on five tier government i.e. central, provincial, city, county and township. The distribution of powers and responsibilities give Chinese healthcare system a decentralized outlook (Hougaard et al., 2011). Medical security system The medical security system in China is multi-layered. The primary most is Safety Net, which deals with rural and urban social medical assistance system. It is followed by the Basic Medical Insurance systems. They include Basic urban employee’s medical insurance system (UBEIS); Basic urban resident medical insurance system (UBRIS) and New-type rural medical cooperative medical system (NRCMS). Last one is a supplementary layer or Supplementary system that includes Civil servant subsidies; Enterprise supplementary insurance; Special target population insurance; and Commercial medical insurance. The number of beneficiaries for URMI and UEMI was 416 million, while NCRMS covered 835 million people, thus raising the total to 1.25 billion insured individuals (Hougaard et al., 2011). China’s Healthcare System While providing health services, the healthcare system of China divides the whole population into two major groups, they are U- group and R- group. All the residents of urban areas come under U- group, while R-group is for rural population. The U- group is catered by Urban Employee’s Basic Medical Insurance (UEMI) and Urban Resident’s Basic Medical Insurance (URMI). While rural population is managed through New Cooperative Medical Scheme, which is based on voluntary participation at a household level (Hougaard et al., 2011). The urbanites are further divided into three subgroups that are subgroup A; subgroup B; and subgroup C. People coming under subgroup A are government officials and staff members, public organizations, non-governmental organizations, and research institutions. The regulation of subgroup A is administered by Public Health Administration Act of 1988 (Hougaard et al., 2011). The second subgroup i.e. subgroup B, is composed of staff in all types of enterprises in urban areas. While subgroup C includes unemployed, children and elderly population residing in urban areas, this group is covered by URMI. The contribution of these subgroups towards total population is not exactly known, however, subgroup A is five percent, subgroup B is thirteen percent and subgroup C is thirty two percent (Hougaard et al., 2011). The ministries involved in managing these subgroups are as follows: the Ministry of Organization and the China Labour Union are responsible for subgroup A; while subgroup B and C are managed by the Ministry of Labour and Social Security (Hougaard et al., 2011; Liu et al., 2007; Tang et al., 2008). The health expenses for subgroup “A” are completely covered by the insurance, however, there have been attempts from the side of the Chinese Government to transform the package following the footsteps of subgroup B (Hougaard et al., 2011; Wang et al., 2007; Yip & Hsiao, 2008). The subgroup B was primarily designed as an employer based insurance scheme. According to this setup the individual is supposed to submit two percent of his gross income into his personal account, while employer pays six percent of individual’s gross income, of which 30% is allocated to the individual’s account, and remaining seventy percent goes to the social pooling. This policy has had some drawbacks, because it does not cater an unskilled employee of a private enterprise. For subgroup C voluntary participation is employed, the individuals or their households have to get themselves registered with local cities governments. Moreover they have to pay the premium initially to get registered, and this allows them to attain basic health services. Similar to subgroup C, the inhabitants of the rural areas are covered by voluntary insurance schemes that are managed by provincial and local government (Hougaard et al., 2011; Tangcharoensathien et al., 2011 ; Yip & William, 2009). China’s healthcare system and financial outlook There are three main parties who finance the healthcare system in China. They are Government, private enterprise and individuals. Government pays mainly from the taxes that it collects and through user fees. Further, a collection is made by local governments when it offers health care initiatives. The revenue generated through taxation mainly comprises of income tax, turnover tax, and sales tax on enterprise (Hougaard et al., 2011; Meng et al., 2012; Zhang et al., 2010). These enterprises include state owned, collectively owned, and private companies. The third party is composed of individuals who receive healthcare services, until 2002 most of the payment was made out of pocket i.e. up to 65%, but in year 2011 it drop down to 35%. Thus one can see a positive change in social scheme as bearing most of the burden (Hougaard et al., 2011; Hsiao, 2007). The expenditure on budget has been on the rise since 1980s; however, due to rapid economic growth of the country, the current portion of GDP that is allocated to healthcare system is 5.1%., which is quiet stable for the last twenty odd years. There is clear contrast in allocation of budgets while considering rural versus urban health facilities. Individuals who are covered by Urban Employee’s Basic Medical Insurance belong to the civil services cadre and public institution personnel (Hougaard et al., 2011; Liu, 2004; Wang et al., 2007). The expenses in the case of civil servants’ healthcare are primarily covered by taxation, and they are registered as total government expenses. While public institution personnel are covered by institution themselves and hence registered as social health expenditure. Individuals who are covered by Urban Resident’s Basic Health Insurance are mostly unemployed, elderly, school going children, unregistered employees and poor people. In this case there is a private account that is established through voluntary registration and a social plan to which employers transact the money (Hougaard et al., 2011; Liu & Rao., 2006). Individuals are to pay 2% of their gross income, while employers contribute 6% of individual’s gross income. 30% of which goes to personal account and the remaining is added to social pool. Meanwhile, the healthcare cost for rural areas is covered with New Cooperative Medical schemes. It also depends on voluntary registration by the individuals. The main contributors in this medical scheme are Central Government, Provincial Government, Local Government, and individuals. The contribution of each of the payer is variable, this due the demographic and economic outlook of a province. In rich coastline areas the contribution of provincial taxes is greater than in offshore provinces (Blumenthal & Hsiao, 2005). Access to health services in China Reforms of 2009 have made the access more equitable to public health services. The state is responsible for providing forty one basic public health services in a range of ten categories, including prevention inoculation, healthcare for pregnant, healthcare for elderly, health care for hypertension patients and diabetes type 2 patients, healthcare records, health education, health care supervision, managing infectious diseases and public health emergencies. The state has also been involved in improving the lifestyle of people living in suburbs and rural areas. Over 70% of the rural population has the access to clean tap water for domestic purposes; moreover, proper sanitation is available to nearly seventy percent of the population. Despite these improvements in the healthcare provision by Chinese Government. There have been a lot of loop holes in the recent modifications. As a result of recent reforms in China’s healthcare system, the percentage of health insured population has risen close to 98 percent of the total population. This includes a large number of individuals who never had insurance prior to these reforms. Insurance did not increase the number of hospitals or delivery system, thus this creating a question of accessibility and quality of delivery. This has also raised a question of funding, because everyone is now looking to get the best health treatment available. The burden on major health centers in cities and counties is increasing, due to the expanded health insurance system (Warburton, 2009). Efficiency and equity Despite the reforms of 2009, China’s government has been unable to establish efficiency in its healthcare system. The number of doctors per 10,000 of the population is less than 15, and most of them are posted in the urban health centers. Further, patients are still bound to pay 30-35% of the price for a treatment; therefore, rich people are at an advantage in China. Thus, the question of efficiency and equity are yet to be answered by the government in China. Probably it will need some more years or even decade, before China could ensure equity in its healthcare system. Opportunity Cost The health centers in the urban areas are far more developed than the rural regions. Further, just under 30% of the rural population does not have the access to clean drinking water. The opportunity cost of developing urban areas and ignoring the rural development may create problem for the Chinese government, because, there are several water borne diseases that are common among the Chinese. Moreover, when people from the rural area have to move to the urban health centers, there are several issues related to it. Thus if the Chinese government wants to revolutionise its healthcare system it will have to improve the quality of healthcare in the rural areas. Explicit and implicit rationing Rationing refers to the allocation of limited source in an adequate manner. Apparently, the structure of the Chinese healthcare system offers implicit rationing. This is because more 98% of the people are covered by health insurance. This provides the margin to the health officials to recommend the treatment on their own. However, there are few areas in healthcare system where explicit rationing is used. A comparison between US healthcare system and China’s healthcare system The setup of United States’ healthcare system is a composite of various health economics models like the Beveridge’s model, the Out of Pocket model, and Bismarck’s model; while China’s healthcare economic model is more similar to that of Out of Pocket model (Drummond, 2005; Jefferson et al., 2000; Morris, 1998). There has been a lot of criticism when US healthcare system is discussed, because the per capita expenditure of healthcare in United States is the highest. Moreover, United States spends almost quarter of its annual budget in healthcare, while China only spends 5.1% of its annual budget in health. The main components of public health insurance in Unites States of America are Medicare, Medicaid, the State Children’s Health Insurance Program and Veteran Administered health insurance (Chua, 2006). In China there are three main packages of health insurance, they are Urban Employee’s Basic Medical Insurance, Urban Residents’ Basic Medical Insurance, and New Cooperative Medical Schemes. The role of Federal Government in maintaining healthcare system in United States is relatively minor as compared to that of State Government. In China, the Central Government is looking more involved into the healthcare system since the recent reforms of 2009 (Le Deu et al., 2012). In United the number of medically uninsured individuals is above fifty million, while in China over 97% of the population has some sort of medical insurance. The reforms of healthcare that are took place almost simultaneously in China and USA gives a totally different outlook. Chinese Government wanted to infuse the budget into public health, while USA was trying to extract, considering the burden of loans. Both sides wanted to decrease out of pocket payment for health services at an individual level, but China wanted it to provide access to its people, while USA wanted to decrease the healthcare services cost. USA is reported to have the most extravagant healthcare system among OECD countries, yet its services are declared as the worst. This is because of the wastage and lack of efficiency in the system. China on the other hand is looking is striving its way through developing nations into a developed country. Maximizing the health insurance coverage was definitely one of main goals of the twelfth five year plan for China, and Chinese Government was successful in implementing this new policy. However, this is only limited to numbers, because there have been several issues regarding supplies and access since the expansion. The overuse of health services is common in both the countries. In America it has always been there, but for recently insured Chinese this is a new leverage. Further, China needs to follow the DRG method for maintenance of hospitals considering the diversity among masses and geography. Overall, the American way of providing health services is still far ahead of what China could achieve. This contrast is still visible in comparing the demographic and health associated statistics. Further, the access to technology in America is well beyond the reach of an average Chinese. Thus both the healthcare systems are undergoing rapid changes. America is involved in maintaining its preoccupied position, while China is striving hard for gaining a better position. Therefore, What America needs to do is to curtail its extravagance, while China needs to strengthen its infrastructure, accessibility and supply chain. References Bloom, G., & Xingyuan, G. (1997). Health sector reform: lessons from China. Social Science & Medicine, 45(3), 351-360. Blumenthal, D., & Hsiao, W. (2005). Privatization and its discontents—the evolving Chinese health care system. New England Journal of Medicine,353(11), 1165-1170. Chua, K. P. (2006). Overview of the US health care system. Retrieved June,17, 2007. Drummond, M. F. (2005). Methods for the economic evaluation of health care programmes. 3 Ed. Oxford: Oxford University Press. Eggleston, K. (2010). ‘Kan Bing Nan, Kan Bing Gui’: Challenges for China’s Healthcare System Thirty Years into Reform. Growing Pains: Tensions and Opportunities in China’s Transformation. Stanford, CA: Walter H. Shorenstein Asia-‐Pacific Research Center. Eggleston, K. (2012). Health Care for 1.3 Billion: An Overview of China’s Health System. Ho, L. S. (1995). Market reforms and Chinas health care system. Social Science & Medicine, 41(8), 1065-1072. Hougaard, J. L., Østerdal, L. P., & Yu, Y. (2011). The Chinese healthcare system. Applied health economics and health policy, 9(1), 1-13. Hsiao, W. C. (1984). Transformation of health care in China. New England Journal of Medicine, 310(14), 932-6. Hsiao, W. C. (1995). The Chinese health care system: lessons for other nations. Social science & medicine, 41(8), 1047-1055. Hsiao, W. C. (2007). The political economy of Chinese health reform.Health Economics, Policy and Law, 2(03), 241-249. Hu, S., Tang, S., Liu, Y., Zhao, Y., Escobar, M. L., & de Ferranti, D. (2008). Reform of how health care is paid for in China: challenges and opportunities. The Lancet, 372(9652), 1846-1853. Jefferson, T., Demicheli, V. & Mugford, M. (2000). Elementary economic evaluation in health care. 2 ed. London: BMJ Publishing.. Le Deu, F., Parekh, R., & Dyckerhoff, C. S. (2012). Healthcare in China:“entering unchartered waters”. McKinsey and Company, Sidney. Liu, M., Zhang, Q., Lu, M., Kwon, C. S., & Quan, H. (2007). Rural and urban disparity in health services utilization in China. Medical care, 45(8), 767-774. Liu, X., & Wang, J. (1991). An introduction to Chinas health care system.Journal of public health policy, 104-116. Liu, Y. (2002). Reforming Chinas urban health insurance system. Health Policy, 60(2), 133-150. Liu, Y. (2004). Chinas public health-care system: facing the challenges.Bulletin of the World Health Organization, 82(7), 532-538. Liu, Y. (2004). Development of the rural health insurance system in China.Health Policy and Planning, 19(3), 159-165. Liu, Y., & Rao, K. (2006). Providing health insurance in rural China: from research to policy. Journal of Health Politics, Policy and Law, 31(1), 71-92. Liu, Y., Hsiao, W. C., & Eggleston, K. (1999). Equity in health and health care: the Chinese experience. Social science & medicine, 49(10), 1349-1356. Meng, Q., Xu, L., Zhang, Y., Qian, J., Cai, M., Xin, Y., ... & Barber, S. L. (2012). Trends in access to health services and financial protection in China between 2003 and 2011: a cross-sectional study. The Lancet, 379(9818), 805-814. Morris, S. (1998). Health economics for nurses: An introductory guide. London: Prentice Hall. Tang, S., Meng, Q., Chen, L., Bekedam, H., Evans, T., & Whitehead, M. (2008). Tackling the challenges to health equity in China. The Lancet,372(9648), 1493-1501. Tangcharoensathien, V., Patcharanarumol, W., Ir, P., Aljunid, S. M., Mukti, A. G., Akkhavong, K., ... & Mills, A. (2011). Health-financing reforms in southeast Asia: challenges in achieving universal coverage. The Lancet,377(9768), 863-873. Wang, H., Xu, T., & Xu, J. (2007). Factors contributing to high costs and inequality in Chinas health care system. JAMA, 298(16), 1928-1930. Warburton, R. N., 2009. Improving patient safety: an economic perspective on the role of nurses. Journal of nursing management, 17(2), pp. 223-229. Xiaoqing. Lu, B., Olivia, M. & Molly Claire, S. (2012). Key Issues in Chinas Health Care Reform, s.l.: CSIS. Yip, W., & Hsiao, W. (2009). Chinas health care reform: A tentative assessment. China economic review, 20(4), 613-619. Yip, W., & Hsiao, W. C. (2008). The Chinese health system at a crossroads.Health Affairs, 27(2), 460-468. Zhang, L., Cheng, X., Tolhurst, R., Tang, S., & Liu, X. (2010). How effectively can the New Cooperative Medical Scheme reduce catastrophic health expenditure for the poor and non‐poor in rural China?. Tropical Medicine & International Health, 15(4), 468-475. Read More