China’s De-Socialized Medicine

STR/AFP/Getty Images Under pressure: China has historically struggled to provide healthcare to people in rural areas.

The United States and China have more in common than their paramount importance in the global economy. The citizens of both countries share the same basic complaint: bad healthcare. As the White House prepares to roll out its plan to overhaul the United States’ woefully inadequate health insurance system, it may be instructive to look across the Pacific, where an even more ambitious effort is underway to give access to healthcare to the millions left behind by China’s rapid economic growth.

Today, more than 200 million Chinese lack health insurance. Soaring medical fees, lack of access to high-quality medical services, the widening rural-urban gap, and poor doctor-patient relationships have all sparked public outcry. So after years of incremental change, the Chinese government recently announced a $124 billion, three-year overhaul of its healthcare system that aims to provide safe, effective, convenient and affordable health services to all of the country’s 1.3 billion people by 2020.

The government’s move to spend more on healthcare today is critical. With a population discontented over its healthcare system coupled with a global economic downturn, Beijing is understandably nervous about social unrest. But while the scale of the new effort is unprecedented, the problem is hardly new.

After the founding of the People’s Republic in 1949, the party faced a daunting challenge. With a total population of 540 million, there were only around 40,000 physicians trained in Western medicine, the vast majority of whom lived in cities. Unfortunately 80 percent of the population lived in rural areas, and party leaders, including Mao Zedong, recognized that improving the health of farmers was crucial to increasing agricultural production and achieving the Great Leap Forward. The party launched a massive public health campaign sending out trained workers to the countryside to treat rural peasants.

The launch of the Cultural Revolution brought healthcare to the forefront, with Chairman Mao making a famous healthcare speech in 1965 in which he declared the need to put the stress on rural areas in health and medical work. His government created a national healthcare policy called the cooperative medical system (CMS), a three-tiered system that included barefoot doctors, commune health centers, and county hospitals, and provided free healthcare to 90 percent of the population. Barefoot doctors were young peasants who received three tosix months of medical training and provided free basic healthcare including first aid, immunizations against common diseases like measles, health education, and hygiene.

Mao, of course, got many things wrong. But he got a few things right. The American Medical Association found that the CMS program reduced infant mortality from 250 to 40 deaths per 1000 births, doubled life expectancy, and drastically reduced the prevalence of infectious diseases.

As China moved toward a market-oriented economic system in the early 1980s, the central government provided less and less financial support for the CMS, transferring the cost and responsibility of healthcare to local governments. Urban and rural workers suddenly lost the cradle-to-grave social safety net they enjoyed during the days of the planned economy. Millions essentially became uninsured overnight.

China’s Ministry of Health reports that government funding of healthcare dropped to 20.3 percent in 2007 from 36.2 percent in 1980. With local governments strapped for cash, doctors at state-run hospitals were granted permission by the central government to generate revenue by charging for medical services. This fee-for-service system continues today as many hospitals are forced to generate income to cover costs through prescribing extremely profitable (and mostly unnecessary) drugs and treatments.

As a result, the healthcare gap between rural and urban areas has continued to widen. In 2000, roughly two thirds of the population lived in rural areas, but rural health expenditures accounted for only 22.5 percent of total national health spending. According to the Ministry of Health, between 1985 and 2005, the annual disposable income of citizens increased 20-fold, while the amount they spent on healthcare increased 133 times. Many Chinese now simply forego treatment because they can’t afford it.

David Wood, a ChinaCare Group health consultant in Beijing and former senior manager at a U.S.-based hospital told me: There is no safety net in China. … If you don’t have money, you just don’t get treatment. He cited estimates that 70 to 80 percent of healthcare dollars come out of patients’ pockets.

The government began trying to rectify the situation in 1998 by implementing a mandated employer insurance program under which workers at private companies and state-owned enterprises had to contribute a portion of their paycheck for health insurance (totaling up to 10 percent of worker’s annual wages). A program was launched in 2002 providing $2.50 a year for basic insurance for the rural population, who then contributed $1.25 of their own money to the account. Unfortunately, these programs were not as successful as hoped, and a much bigger and wider reform was needed.

China’s new plan is far more ambitious. First, it aims to increase the percentage of the rural and urban populations covered by the basic medical insurance system or a new rural cooperative medical system to at least 90 percent by 2011. Second, the medicine supply system will be streamlined so that public hospitals and clinics are supplied with essential drugs at prices regulated by the government. Third, in the next three years, 5,000 clinics will be built in rural townships, plus 2,000 county hospitals and 2,400 urban community clinics. Additional training will be given to 1.37 million village doctors and 160,000 community doctors. Public hospital doctors will have to work for one year at rural hospitals before they are considered for promotion.

The new spending represents a fundamental shift in attitude on the part of Chinese leaders. With healthcare becoming the public’s top concern, Beijing has learned that privatization can negatively impact the health of citizens and that government involvement is essential. In addition to relieving citizens’ financial burden, the reform plan aims to create thousands of jobs, decrease unemployment, increase consumer spending and business investment, and reduce the incentive for the millions of rural Chinese who migrate to cities every year, overwhelming the public welfare system.

China’s health reform plan is complex and will be challenging to implement. First, China will require stronger and much more stringent administrative and legal regulations than those currently in place. These reforms will also require a strict ethic of professionalism where doctors protect the interests of their patients and provide high-quality care, rather than the frequent abuses that took place under the fee-for-service system.

These wide and sweeping health reforms will have profound implications for hundreds of millions of Chinese and could have global impact as well. If the world’s most populous country can get this right, it will be a monumental achievement. And healthcare reformers elsewhere, including the United States, may soon be looking to steal a page or two from China’s book.