Healthcare in rural China

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1 Student Research Projects/Outputs No.045 Healthcare in rural China Anna Malet MBA 2010 China Europe International Business School 699, Hong feng Road Pudong, Shanghai People s Republic of China

2 Healthcare in rural China BMT Scholarship Professor: Hellmut Schutte Scholar: Anna Malet MBA 10 2

3 Index Introduction... 4 Medical reforms since the founding of the People s Republic Post Current healthcare system in rural China... 6 Spanish healthcare system and comparative analysis with the Chinese system... 8 What Chinese healthcare system can learn from the Spanish system What Spanish healthcare system can learn from the Chinese system Conclusions Bibliography Exhibits Exhibit 1: Urban and rural insurances in China Exhibit 2: Comparison on URMBI coverage in different regions Exhibit 3: Main Health indicators and per capita healthcare expenditure China Spain Exhibit 4: People using improved water and sanitation China Spain

4 Introduction China affluence has grown dramatically since mid-1980 s; per capital income has increased many times and life expectancy has almost doubled in the past 60 years 1. Nonetheless, the gap between urban and rural areas has lead to tremendous socioeconomic disparities. Moreover, Chinese healthcare is also under tension whether increase the quality or spread scarce medical resources over the vast country. The present report digs into the healthcare system in China, with a special focus in rural areas. I also introduce Spanish healthcare system, to finally see what Chinese Government could learn from the Spanish healthcare system and vice versa. Medical reforms since the founding of the People s Republic After the founding of the People s Republic of China, Chinese Government played a key role in healthcare, covering more than 90% of medical expenses and owing all major hospitals and pharmaceutical firms. In urban areas, Government offered the Government Insurance Scheme (GIS) and the Labor Insurance Scheme (LIS) aimed to cover 100% of employees and 50% in their dependants. In rural areas 2, the Rural Collective Health System was organized in three tier system: 1 A child born in China in the 1950s could expect to live for 46 years, the life expectancy of one born in 2010 is over 73 years. Information extracted from 2 Approx. 80% of population lived in rural areas. Information extracted from: Wang, Jianmao. Chinese Economy. Lecture notes. 4

5 1. Barefoot doctors: They had received minimal basic medical and paramedical training and covered the lack of real doctors that rural china had, although the average was just two doctors for each 1000 habitants Township health centers: These centers had about 10 to 30 beds and were serving 10,000 to 30,000 people each 4. The most qualified members of the staff where assistant doctors. 3. County hospitals: These hospitals were serving 200,000 to 600,000 people each and were staffed by senior doctors. Post 1980 In early 1980 continuing deficiencies in human-waste treatment were the cause of major health hazards in rural areas, such as tuberculosis, hepatitis and dysentery 5. According to 1982 census data, in rural areas life expectancy was about four years lower than cities 6. With the advance of the reform system, the traditional public health system became incompatible with the new market economy. The lack of financial resources in the cooperatives led to a decrease of barefoot doctors and many cooperative medical programs collapsed. Doctors at state-owned hospitals were forced to generate income in order for the hospitals to survive in the new market economy, leading to an increase of the prices patients had to face. Between 1989 and 1995, the Government conducted experiments in different cities trying to implement ways to improve the healthcare system in China; nonetheless, any of them 3 Information extracted from Wikipedia: Healthcare reform in the People's Republic of China. See Bibliography for more information. 4 Ídem 5 China is one of 22 high burden countries for tuberculosis, with the prevalence for all forms of the disease estimated at 138 per people in Information extracted from World Healthcare Organization: China. More info, see Bibliography. 6 Ídem 5

6 were successful. At the same time, the government expenditure for health skyrocketed 27.7 times in nominal terms, meanwhile the Government budgetary revenue increased 6.6 times and the GDP 20.7 times 7. In 1999, Chinese Government unveiled a National Health Reform Plan, which aims to ensure by 2020 safe, effective, convenient and affordable for both rural and urban 1.3 billion citizens of China. This reform can be also framed within the China s 12 Five Year Plan ( ), that maintains the goal of the former Five Year Plan to sustain the rapid and steady development of China socialist market economy by achieving a rebalance of the economy to address social and environmental concerns raised by the GDP-oriented development that China have been implementing in last decades. The 12 th Five Year Plan also includes quantitative targets, such as raising life expectancy by one year to 74.5 years average. It also focuses on strengthening the healthcare reform and to support it the government promised RMB 850 billion in incremental spending over the next three years 8. Current healthcare system in rural China In the initial three-year implementation plan ( ), Chinese government created three insurance programs for low-income citizens: Urban Resident Basic Medical Insurance (URBMI) New Rural Cooperative Medical System (NRCMS) Urban Employee Basic Medical Insurance (UEBMI), for those who work in private or SOE s. 7 Information extracted from Wang, Jianmao. Chinese Economy. Lecture notes. 8 China s total healthcare spending in 2008 was 1RMB 453 billion, 4.8% of its GDP, whereas in 1978 it was 3%. Information extracted from McKinsey and Company: China Healthcare reforms and World Healthcare Organization. For more information, see Bibliography. 6

7 In the case of UEBMI, the coverage is more comprehensive since employees contribute with a certain percentage of their annual salary, which can vary depending on the wealth of the region. In Shanghai, employees may contribute as much as 12% 9. In contrast, URBMI and NRCMS are funded by the central and local governments and the individuals through premiums. The level of investment by the local government depends on the wealth of the region; consequently, the coverage of the URBMI and NRCMS can vary greatly among different parts of the country 10. Through these reforms, China is now on its way to achieve the universal health coverage. In 2006, only about 45% of the population had coverage and in 2009 this number reached the 90% 11. In 2010, the percentage of rural population covered in the NRCMS was the 96% of rural population (836 million) 12. Although these improvements are significant, healthcare remains a major expense for most Chinese. Families still have to pay 40% of all health care costs as either premiums or out-of-pocket payments. The lack of effective care system in rural areas due to low government funding, and the inexistence of a gatekeeper system, has led to a lot of people to seek medical care in hospitals located in big cities, which are the ones that provide better equipment and personnel. Consequently, most of these hospitals are overcrowded. The government therefore wants to improve medical care at the grassroots level, by establishing Community Health Centers in urban and rural areas. By the end of 2010, Government announced that 32,700 township health centers, 37,800 urban community health centers and 648,400 village clinics had been built. 9 Idem 10 For more information on URMBI coverage, see Exhibit Information extracted from McKinsey and Company: China Healthcare reforms. More info, see Bibliography. 12 Information extracted from World Healthcare Organization: China. More info, see Bibliography. 7

8 Despite the fact that the Central Government supports the development of a peoplecentred ideology, local governments are still focused on economic development. In China is calculated that there are 27 million people living in rural areas under extreme poverty (earning 55 cents of dollar per day) 13 with no access to basic education, arable land or healthcare. In these areas the major health threats still come from unsafe water, lack of sanitation, undernutrition and pollution, and for these families out-of-pocket medical expense remains prohibitive. This situation is partially caused by the fact that in China public resource allocation is highly decentralized (the four tiers of local government 14 are administering about the 90% of all government spending on health) and local departments are expected to generate significant share of their own operation budgets. Local governments are unable to raise this revenue, especially in resource-poor communities. This situation once again is an incentive for hospitals and doctors to set higher prices in order to generate profit margins that allow local administrations to operate. Spanish healthcare system and comparative analysis with the Chinese system In the Spanish Constitution of 1978 it is recognized that everyone has the right to receive healthcare and public competences should provide that. Following this premise, in 1986 the Spanish parliament approved the General Law of Healthcare which is still ruling in the country. 13 According BBC News the Chinese government has increased the line of poverty to 1 dollar earned per day, and therefore the amount of Chinese classified as poor will increase. Information extracted form asia china The 4 tiers of local government are; Provincial government, Prefecture government, County government and Town government. 8

9 This rule establishes that everyone can receive public healthcare; Spanish and non-spanish, and even illegal emigrants can receive free assistance in Spain. Therefore 100% of the population is covered. The healthcare system in Spain is organized in 3 tiers: Central: The Ministry of Health assigns the healthcare budgets to the different Autonomous Communities (AACC) and common guidelines for every AACC to follow. AACC: Each of Spain's 17 AACC manages the territorial administration of health services through centers, services and establishments. Local: The Health Areas are the unitary management of the healthcare services offered both for urban and rural areas, mainly as primary centers. The expenditure in healthcare in Spain has been increasing over the years, fomented partially for the aging population. In 2011, the expenditure in healthcare has been 9.5% of the GDP, 0.5% more than 2008, maintaining the average of the richest countries in Europe (Italy 9.5%, UK 9.8%, France 11.8% and Germany 11.6%) 15. The public healthcare coexists with the private insurances that some Spanish citizens acquire to avoid long wait times to see a specialized doctor. It is estimated that 13.4 million people in Spain hold private insurances, which are the 29% of the population Information extracted form en Sanidad absorbe ya en Espana el 95 del PIB.html 16 Information extracted from diario/mostrar/41925/de lasanidad publica espanola 9

10 What Chinese healthcare system can learn from the Spanish system According to the World Health Organization (WHO) Spanish healthcare system is one of the best in the globe 17. China is on its way to become a fully developed economy, but to reach that the Government will have to fulfill the main gaps in living standards and healthcare system between rural and urban areas to avoid stagnation and destabilization of the country. Concretely, here are some proposals Chinese healthcare system can learn from the Spanish healthcare system. Progressively increase health expenditure to provide more universal and better facilities for all social classes. Per capita expenditure on healthcare China is far below Spain, being $ 3,000 for Spain and just $ 170 in China in China has also 8 year less of average life expectancy at birth and in general all health indicators are better in Spain 18. The healthcare expenditure per capita is deeply related with the further improvement of these indicators. Reduce the tiers of government from 5 to 3 to increase efficiency: As already said, Chinese government has 5 tiers of government which decreases efficiency of the limited resources. A system of 3 tiers like the Spanish one could still allow regional and local management of the resources, but without leaving to much space for inefficiencies, interest conflicts among the different levels of administration and corruption. Increase quality of water, air and sanitation as risk factors for most of the health threads in rural areas: According WHO, 70% of the deaths among children less than 5 17 Information extracted form 18 For more info on general health indicators and per capita healthcare expenditure, see Exhibit 3. 10

11 years of age in China are attributable to nutritional condition and infectious diseases 19. In Spain, improved water and sanitation are at 100% both for rural and urban areas, meanwhile in China, and despite the improvement over the years, still is at the 80% in improved drinking-water resources, and 50% in sanitation facilities 20. Further investments to improve water and sanitation facilities in rural areas would increase the life quality gap between rural and urban areas and therefore reduce healthcare needs. Distribute good healthcare facilities to second and third tier cities and towns in order to balance further urbanization. In Spain in 2009 the urban population was 77% and in China was 44%. As any other developing economy, China has to allow further moves of rural people into cities in order to seek skilled employment. Nonetheless, the urbanization has to become more distributed along the country to release the oversaturation that healthcare infrastructures are suffering in big cities. The creation of hospitals and other social facilities in secondary cities and townships would attract new rural movers, create employment, and eventually this urban redistribution would help to diminish the disparities in economic development among the regions in China. What Spanish healthcare system can learn from the Chinese system Based on experiences that I have heard and lived in China, I think Spanish healthcare system can learn also form Chinese system in the following ways. Spanish healthcare system is very fragmented and sometimes it can takes months for a patient to reach the final doctor who is going to treat the patient. For urgent cases, this time is less but still it depends on the level of saturation of the urgencies in hospitals. In 19 Besides this, air pollution, water contamination by industrial and municipal waste as well as overuse of chemical fertilizers and pesticides, annually cost China over lives. Information extracted from World Healthcare Organization: China. More info, see Bibliography. 20 For more information on the water and sanitation facilities, see Exhibit 4. 11

12 China, healthcare facilities in large cities are concentrated in hospitals making the process much more efficient and short for the patients, who come to the hospital without previous procedures and doctors are able to do all the checks and finish the diagnose quickly. In this sense, Spain could concentrate healthcare facilities in the most populated cities and therefore reduce waiting lists and resources. Chinese healthcare have also a huge potential to improve its quality thanks to the combination of western medicine and the Traditional Chinese Medicine (TCM). The Chinese Ministry of Health promotes the TCM legislation and standardization, as well as innovation in the field 21. In Spain, as well as other western countries, TCM is still not used in public nor private healthcare and poor regulation in this field leads to the creation of paramedical centers that further reduce the recognition of TCM in western healthcare administrations. Spanish doctors could learn from TCM practices in China and how they complement western medicines, as well as foment further regulation of TCM in Spain for both public and private healthcare systems. Conclusions China has lived dramatic changes over the past decades. It has been growing nearly 10% annually and it has lifted out of poverty an estimated 400 million people. In rural areas, living in absolute poverty with an annual per capita net income below 1196 Yuan decreased from being the 31% of the rural population in 1978 to 1.6% in Nonetheless China's population is ageing rapidly. In 2035, it is expected that one in four people will be 60 years or older. That means that the healthcare needs of the population will also increase notably. 21 Information extracted from World Healthcare Organization: China. For more info see Bibliography. 22 Information extracted from World Healthcare Organization: China. For more info see Bibliography. 12

13 Chinese government has worked to improve the gaps that still exist between rural and urban areas but the efforts are still not enough. As I have written in the comparative analysis, China needs to strengthen the government roles in healthcare sector, reduce redundancy in responsibilities and competing interests among the different government roles. Also there is a need to increase quality and number of doctors and nurses in order to fill the gap of the rural areas 23. To do so, more geographical mobility and opportunities to train in other specializations will have to be reinforced. 24. Finally, China governments face a fundamental issue with the funding of the healthcare system. Drug mark-ups and poor government funds in healthcare in some regions, especially rural areas, lead to some health institutions to increase artificially the families healthcare expenditure with expensive drugs. China government wants to eliminate drug markups gradually, however, drug markup still provide more than the 40% of public hospital revenues 25 and government funds allocated in the healthcare reforms are not sufficient to permit this. China can take advantage of partnerships with third institutions to help improve its healthcare system. Its acceptance in the Millennium Development Goals is providing an important organizational framework for donor coordination in the country. As well as this, China government can also take advantage of outsourcing some parts of the administration to increase efficiency or partner private companies that could help manage the public insurance programs. China healthcare system is in a critical moment of transition and despite de fact it has a notable way to go, Chinese government and especially the next generation of leaders will play a determinant role to improve the healthcare standards in rural China. 23 In 2009, 75.7% of health professionals had only technical secondary school diplomas and only 24.3% had bachelor degrees or above. Information extracted from McKinsey and Company: China Healthcare reforms. More info, see Bibliography. 25 Information extracted from McKinsey and Company: China Healthcare reforms. More info, see Bibliography. 13

14 Bibliography Wu, Jinglian, Understanding and Interpreting Chinese Economic Reform. 2 nd edition. World Healthcare Organization: China Wikipedia: Healthcare reform in the People's Republic of China; WHO's ranking of healthcare systems; Sistema Nacional de Salud (España) McKinsey and Company: China Healthcare reforms Wang, Jianmao. Chinese Economy. Lecture notes Sanidad-absorbe-ya-en-Espana-el-95-del-PIB.html 14

15 Exhibits Exhibit 1: Urban and rural insurances in China Source: McKinsey and Company: China Healthcare reforms 15

16 Exhibit 2: Comparison on URMBI coverage in different regions Source: McKinsey and Company: China Healthcare reforms 16

17 Exhibit 3: Main Health indicators and per capita healthcare expenditure. China Spain Source: World Healthcare Organization: China 17

18 Exhibit 4: People using improved water and sanitation. China Spain Source: World Healthcare Organization: China 18

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