Is China’s health care meeting the needs of its people?

Is China’s health care meeting the needs of its people?
Is China’s health care meeting the needs of its people?
Is China’s health care meeting the needs of its people? Top

    Overview of China’s health care coverage

    China has made significant strides toward providing universal health care coverage to its citizens. At the turn of the century, only one in every five Chinese had some form of health care coverage. A little over a decade later, nearly 95 percent of the population – around 1.25 billion people – was covered. While China does not have universal coverage, it has a lower uninsured rate than the United States, where almost 9 percent of people are without coverage.

    China’s centralized health care system has undergone several transitions, including the introduction of “barefoot doctors” in the 1960s. Largely composed of peasants that received short but intensive medical training, these doctors traveled throughout rural China and provided virtually free basic medical services to much of the country’s population. Care provided by the barefoot doctors contributed to a significant rise in life expectancy and a drop in the infant mortality rate.

    During the economic reforms of the late 1970s and 1980s, barefoot doctors were abandoned in favor of a market-based health care system. The new system was stymied by financial constraints and ultimately resulted in declining health coverage and widespread public frustration. The 2003 Severe Acute Respiratory Syndrome Virus (SARS) outbreak further exposed the weaknesses of the existing system and galvanized Beijing to initiate much-needed health care reforms.

    HAQ Index for BRICS Countries
    Country 1990 2000 2016
    China 42.6 53.3 79.9
    Brazil 46.5 55.3 63.8
    Russia 63.1 62.5 75.1
    India 24.7 28 41.2
    South Africa 40.1 40.9 49.7
    Source: Institute for Health Metrics and Evaluation (IHME)

    Reforms began in earnest in 2006, when then-President Hu Jintao declared his vision “for everyone to enjoy basic health care services.” Three years later, health care coverage had greatly expanded as reforms were launched nationwide in accordance with the Guidelines for Deepening the Reform of the Healthcare System.

    Currently, there are three public health insurance options available to Chinese citizens. Two of the plans – the Urban Employee Basic Medical Insurance (UEBMI) and the Urban Resident Basic Medical Insurance (URBMI) – cover urban dwellers. A third scheme, the New Cooperative Medical Service (NCMS), applies to rural residents.


    Affordability of China’s health care systems

    The existing public plans available to Chinese only reimburse a portion of medical fees, which often leaves individuals saddled with a significant amount of out-of-pocket (OOP) payments. High OOP expenses have been shown to financially stress households, which can result in impoverishment and negatively affect health outcomes.

    Roughly 29 percent of health care expenses in China are paid by individuals. A combination of government funding (30 percent), as well as public and private insurance (41 percent), covers the rest. Although the proportion of OOP fees in China has declined since the early 2000s, when they made up 60 percent of total health care expenses, it is still higher than those paid by some of China’s wealthy neighbors. For example, individuals in Japan paid only 12.9 percent of the health care fees in 2015. OOP costs are also generally lower among developed European economies. In Germany and France, citizens paid only 12.7 and 9.8 percent, respectively.

    Out-of-Pocket Cost in Selected Countries (2015)
    Country % of Health Spending
    United States 11.1
    Japan 13
    China 32.4
    Russia 38.7
    India 65.1
    Source: OECD

    One of the most significant drivers of China’s high OOP expenditure is rooted in how Chinese hospitals turn a profit. Traditionally, public hospitals would charge patients for the number of services provided and the amount of prescriptions given. Until 2017, hospitals were also allowed to supplement their revenues by selling drugs with a mark-up of up to 15 percent. As a result of this system, patients were often charged with fees for unnecessary services and prescriptions. By 2015, spending on prescriptions reached 40 percent of total health expenditure in China, significantly higher than the OECD average of 20 percent.

    The costs carried by Chinese citizens vary considerably. A 2014 study conducted in the urban and rural communities in Suzhou revealed that residents under the rural plan were only reimbursed for 57 percent of their medical fees – far less than the roughly 70 percent reimbursement rate granted under China’s urban health care plans. This structural economic barrier has contributed to growing inequality and unbalanced health outcomes. For instance, residents of Beijing enjoyed an average life expectancy of 80 years in 2010 – 8 years more than in Xinjiang and 12 years more than in Tibet.

    Burdensome health care expenses have been a leading factor in the growing inequality between China’s rich and poor. Between 2005 and 2015, household expenditures on health care contributed to a widening of China’s poverty gap at a rate greater than that of Thailand and South Africa. As a result, some have leaned on medical loans to repay hospital bills. By comparison, nations with world-class health care systems, such as Taiwan, often provide generous support to the underprivileged. Taiwan exempts all co-payments and co-insurance for lower income patients, as well as for those suffering from certain catastrophic illnesses.

    Wealthier Chinese are increasingly turning to private insurance, which provides better coverage with lower co-payments than public insurance. Accordingly, the private insurance market in China has witnessed rapid growth. Between just 2014 and 2015, the market size jumped from $220 billion to $349 billion. By 2020, the industry is expected to balloon to $730 billion.

    Beijing is looking for ways to curb OOP costs. As part of Healthy China 2030, Beijing has laid out plans to reduce OOP payments from 30 percent of total health care expenditure in 2016 to 25 percent by 2030. Chinese authorities have also recently undertaken initiatives to directly negotiate certain drug prices with international pharmaceutical companies. In addition to instructing public hospitals to end the practice of drug price mark-ups in 2017, China’s State Council announced that public hospitals will become nonprofits by 2020.

    Efforts to alleviate OOP payments could experience setbacks, however, as some local governments are already struggling to foot the bill for existing health care plans. In 2016, public insurance plans in 108 out of 225 municipalities (the majority of which are in less-developed regions) were in deficit. This is largely a symptom of rising health care costs. Between 2000 and 2015, annual per capita health care expenditure in China grew from $130 to $762 — a 6-fold increase.  Comparatively, health care costs in the US and Denmark only doubled over the same period.

    To better manage public expenditure, Beijing is looking to implement a new system where government health insurance provides only a fixed amount of reimbursement to hospitals per disease. This scheme, known as diagnosis-related groups, could discourage unnecessary services and cap fees. Although this payment structure is widely used in nations such as the US and Japan, the benefits of this structure have not yet been proven in China. As of 2017, it has been piloted in select hospitals in Beijing and a handful of southern cities.


    Accessing health care in China

    In addition to insurance coverage, adequate health care facilities and personnel are equally necessary to ensure positive health outcomes. To that end, Beijing has successfully leveraged its economic growth toward expanding the availability of medical care.

    Hospitals are the main channel through which Chinese citizens receive health care, and hospital-based resources have expanded accordingly. The number of hospital beds per 1,000 residents more than doubled from 1.5 in 1970 to 3.8 by 2015. While this ratio surpasses that of the US (2.8 beds) and Canada (2.5 beds), it is significantly lower than the OECD average of 4.7 beds per 1,000 residents. By comparison, Japan and Korea boast some of the highest ratios in the world, at 13.1 and 12 beds per 1,000 people, respectively.

    China has also devoted resources toward specific health sectors, such as pre- and postnatal care. The percentage of pregnant women receiving prenatal care in China increased from 69.7 percent in 1992 to 96.2 percent in 2015. This far outstrips the global average of 84.6 percent. Almost 100 percent of births in China were attended by skilled medical personnel, whereas the global average stood at just 78 percent in 2013. Expecting Chinese mothers also receive a maternity leave of 98 days — the same amount of time granted in Japan and Germany.

    China's Rising Pre- and Postnatal Care
    Year Births Attended
    by Skilled Health Staff (%)
    Pregnant Women
    Receiving Prenatal Care (%)
    1992 84.1 69.7
    2000 96.6 89.4
    2008 99.1 91
    2015 99.9 96.2
    Source:World Bank

    Aside from maternal care, China has also expanded its capacity in non-western medicine. The number of hospitals specializing in Traditional Chinese Medicine (TCM) increased from 447 in 1978 to 3,462 in 2016.  TCM may be primed to become a more integral component of China’s health care landscape; a 2016 white paper touted it as “an important component of economic and social development.”

    Health care personnel in China have experienced similar levels of growth.  The number of physicians grew from 1.18 per 1,000 inhabitants in 1980 to 3.6 in 2015. This is higher than the physician-to-population ratio in the US (2.6) and Taiwan (1.7), but less than in Germany (4.2).

    Yet, due to stark pay differences between general practitioners (GP) and hospital-based specialists, as well as patients’ preference for the latter, many newly-trained physicians become specialists. This has left China with a shortage of general practitioners. There were only 189,000 general practitioners in China in 2015, accounting for only 6.2 percent of all Chinese physicians. As a result, 650 million Chinese were left without access to a GP in 2017.

    Financing for China’s health care institutions partially depends on local government funding, which contributes to an uneven distribution of health care resources between richer urban centers and less-developed rural villages. For instance, the number of village health clinics increased by only 10 percent from 2005 to 2016, whereas the number of hospitals grew by 56 percent over the same period.

    This disparity has had cascading effects on health outcomes. The mortality rate for many major diseases is higher in rural areas than in urban areas. The mortality rate for heart disease was 151 per 100,000 people in rural areas in 2016, compared to only 139 per 100,000 people in urban centers. Notably, the mortality rate for heart disease in both rural and urban China was still lower than that of the US, which stood at 166 per 100,000 people.

    Crude Mortality Rate of Major Diseases per 100,000 People
    Disease Urban Rural
    Infectious Diseases 6.5 7.8
    Malignant Tumor 160.1 155.8
    Mental Disorders 2.7 2.9
    Heart Disease 138.7 151.2
    Stroke 126.4 158.2
    External Causes of Injury and Diseases 37.3 54.5
    Source:China Statistical Yearbook

    China’s disabled population faces challenges when seeking appropriate care, and the availability of health care services for disabled persons can differ dramatically at the provincial level. The inland province of Guizhou, for instance, does not explicitly stipulate full reimbursement of all rehabilitation service fees for disabled children under six, a health care benefit that is guaranteed in the more developed coastal province of Jiangsu.

    Mental health patients experience similar challenges. According to the Chinese National Health and Family Planning Commission, 4.3 million people were registered with severe mental disorders in 2014. In that same year, there were only 17 beds per 100,000 patients in mental hospitals. While this is an improvement from only 14 beds in 2011, it is still behind that of the US (23 per 100,000) and South Korea (113 per 100,000).

    China Health Care Urban and Rural Divide (2016)
    Resources per 1,000 People Urban Rural National Average
    Doctors 3.92 1.59 2.31
    Nurses 4.91 1.49 2.54
    Medical Technical Personnel 10.79 4.04 6.12
    Beds in Medical Institutions 8.41 3.91 5.37
    Source:China Statistical Yearbook

    China’s future health care challenges

    As the standard of living and life expectancy have risen, new challenges have emerged. In 2016, there were 230.8 million people aged 60 years and older, making up 16.7 percent of the population. By 2045, that number is expected to reach 26 percent — as high as in present-day Japan. As a result, the incidence of chronic illness and age-related disease has soared.

    While care for the elderly has traditionally been provided by family members, the rapidly aging population accompanied by a lower birth rate has rendered this system increasingly impractical, and China has been slow to provide public alternatives. As of 2016, China’s nursing homes only offered 32 beds per 1,000 elderly citizens. There were 52 beds per 1,000 elderly citizens in Australia and in France in the same year. In addition, China’s nursing homes are often not designed to give optimal elderly care, as few staff receive regular training.

    Diseases associated with aging are also on the rise. In 2016, Alzheimer’s disease was the 8th largest cause of premature death in China, up from 16th place in 2005. While nearly 1 million Chinese are diagnosed with Alzheimer’s disease every year, twice the rate of the US, China currently has less than 200 beds for specialized Alzheimer’s care. In the US, there are nearly 73,000 specialized beds. China is expected to have half of the world’s patients with Alzheimer’s disease by 2050 (45 million people), making Alzheimer’s one of the biggest challenges that the Chinese health system will face in the coming decades.

    China must also wrestle with growing challenges from chronic illnesses such as heart disease, cancer, respiratory diseases, and diabetes. Of the 422 million adults with chronic illness globally in 2016, an estimated 129.3 million (31 percent) were Chinese. Due to increased inactivity and growing obesity rates, 30 percent of global adult diabetes cases in 2014 were in China. Cancer rates are also on the rise. In particular, breast cancer diagnoses grew by 3.5 percent per year between 2000 and 2013, compared to a 0.4 percent drop each year over the same period in the US.

    FDI

    China’s population is growing old at a faster rate than almost all other countries. This ongoing demographic shift presents an array of social and economic challenges for China. Learn more about China's aging population.

    In response to these challenges, China has turned toward technology. Both Tencent and Alibaba have made efforts to invest in digital health platforms, including Artificial Intelligence-assisted diagnostic tools and online consultation services. As of 2017, over 38,000 medical facilities in China have WeChat accounts. Additionally, 60 percent of those facilities provide online consultations, with 35 percent supporting the payment of medical bills through WeChat pay. Other nations have also leaned on IT to enhance health care coverage. Taiwan, for example, uses a cloud-based electronic patient records system, which enables it to track and monitor health care usage and disease outbreaks in near real time.

    China is also taking steps to enhance its medical development. As a testament to Beijing’s growing global biomedical manufacturing capabilities, Chinese drug manufacturers received approval from the US Food and Drug Administration (FDA) for 38 generic drugs in 2017, and over 20 new Chinese-made drugs are seeking to gain FDA approval in the next 5 years.

    Nonetheless, key limitations persist within the pharmaceutical industry, such as long wait times for domestic drug approval and inconsistent drug coverage in its national reimbursement program.  Events like the recent July 2018 vaccine scandal – during which hundreds of thousands of vaccines for Chinese children were found to be faulty – have caused widespread suspicion about the quality of China’s bio-medical products.