Financing and Organization of China's Health Care

By Hu, Teh-wei | Bulletin of the World Health Organization, July 2004 | Go to article overview
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Financing and Organization of China's Health Care


Hu, Teh-wei, Bulletin of the World Health Organization


The development of a health-care system depends on a country's economic, political, social and cultural background. Because of Chinas transformation over the last 20 years from a socialist economy to a market economy, Chinas health-care services have been converted from social and public goods to market goods without government planning or intervention. Liu's article (1) in this issue clearly describes the transformation and its consequences for both urban and rural health-care systems. Differences in economic growth and in financing, organization and resources between urban and rural regions have made China a country with two health-care systems. The urban system has more resources and is better organized, but is faced with major financing and organization issues and concerns about cost-containment, whereas the rural system lacks resources and is not well organized, and difficulty of access causes concern.

Liu correctly points out that two key control points in health-care reform are organization and financing: they are interrelated and require coordination for health-care services to function efficiently and equitably. In China, however, the financing and administration of health services are segmented: the Ministry of Labour and Social Security is responsible for the urban health insurance sector, the Ministry of Health for the rural sector, and the Ministry of Civic Affairs for poor urban and rural households. The Ministry of Health is therefore in a weak position to lead the necessary reform of the health-care system at the central government level.

In towns, decentralized health insurance organizations manage health-care financing for at least half the population, and this structure can be built on to expand and reinforce the financing and delivery of health services at the local level. In rural areas, however, such facilities are lacking. Numerous rural health insurance experiments were launched to restore the cooperative medical system of the early 1960s, with support from UNICEF, WHO, the World Bank and other international organizations. Virtually none of these systems was sustained after the experiments ended, for several reasons:

* Insufficient support from the local or central government meant that farmers were essentially self-insured on a voluntary basis, resulting in financial hardship;

* The central government prohibits imposing additional taxes on farmers. Local officials were worried that insurance premiums could be interpreted as an additional tax;

* Low insurance premiums resulted in limited benefit coverage, in terms of low reimbursement rates (20-30%) for both outpatient and inpatient services;

* The services of village doctors and township hospitals are inferior in quality to those received in county or urban hospitals, so farmers preferred to travel to urban areas;

* Farmers were distrustful of the local government insurance fund management and worried that their insurance premiums might be diverted to other uses.

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