William C. Hsiao

Early appraisal of China's huge and complex health-care reforms

Chinas 3 year, CN¥850 billion (US

The Chinese Health System At A Crossroads

125 billion) reform plan, launched in 2009, marked the first phase towards achieving comprehensive universal health coverage by 2020. The governments undertaking of systemic reform and its affirmation of its role in financing health care together with priorities for prevention, primary care, and redistribution of finance and human resources to poor regions are positive developments. Accomplishing nearly universal insurance coverage in such a short time is commendable. However, transformation of money and insurance coverage into cost-effective services is difficult when delivery of health care is hindered by waste, inefficiencies, poor quality of services, and scarcity and maldistribution of the qualified workforce. China must reform its incentive structures for providers, improve governance of public hospitals, and institute a stronger regulatory system, but these changes have been slowed by opposition from stakeholders and lack of implementation capacity. The pace of reform should be moderated to allow service providers to develop absorptive capacity. Independent, outcome-based monitoring and evaluation by a third-party are essential for mid-course correction of the plans and to make officials and providers accountable.

Equity in health and health care: the Chinese experience

The Chinese government has committed to increasing government funding for health care by directing 1-1.5 percent of its gross domestic product to universal basic health care. However, China is at a loss as to how to transform its new money into efficient and effective health care. This paper critically examines the various options currently under heated debate in China. We argue that unless China tackles the root cause of unaffordable health care--rapid cost inflation caused by an irrational and wasteful health care delivery system--much of the new money is likely to be captured by providers as higher income and profits.

Realignment of incentives for health-care providers in China

This paper examines the changes in equality of health and health care in China during its transition from a command economy to market economy. Data from three national surveys in 1985, 1986, and 1993 are combined with complementary studies and analysis of major underlying economic and health care factors to compare changes in health status of urban and rural Chinese during the period of economic transition. Empirical evidence suggests a widening gap in health status between urban and rural residents in the transitional period, correlated with increasing gaps in income and health care utilization. These trends are associated with changes in health care financing and organization, including dramatic reduction of insurance cover for the rural population and relaxed public health. The Chinese experience demonstrates that health development does not automatically follow economic growth. China moves toward the 21st century with increasing inequality plaguing the health component of its social safety net system.

Non-evidence-based policy: How effective is China's new cooperative medical scheme in reducing medical impoverishment? ☆

Inappropriate incentives as part of Chinas fee-for-service payment system have resulted in rapid cost increase, inefficiencies, poor quality, unaffordable health care, and an erosion of medical ethics. To reverse these outcomes, a strategy of experimentation to realign incentives for providers with the social goals of improvement in quality and efficiency has been initiated in China. This Review shows how lessons that have been learned from international experiences have been improved further in China by realignment of the incentives for providers towards prevention and primary care, and incorporation of a treatment protocol for hospital services. Although many experiments are new, preliminary evidence suggests a potential to produce savings in costs. However, because these experiments have not been scientifically assessed in China, evidence of their effects on quality and health outcome is largely missing. Although a reform of the providers payment can be an effective short-term strategy, professional ethics need to be re-established and incentives changed to alter the profit motives of Chinese hospitals and physicians alike. When hospitals are given incentives to achieve maximum profit, incentives for hospitals and physicians must be separated.

Effectiveness of community health financing in meeting the cost of illness

In recent years, many lower to middle income countries have looked to insurance as a means to protect their populations from medical impoverishment. In 2003, the Chinese government initiated the New Cooperative Medical System (NCMS), a government-run voluntary insurance program for its rural population. The prevailing model of NCMS combines medical savings accounts with high-deductible catastrophic hospital insurance (MSA/Catastrophic). To assess the effectiveness of this approach in reducing medical impoverishment, we used household survey data from 2006 linked to claims records of health expenditures to simulate the effect of MSA/Catastrophic on reducing the share of individuals falling below the poverty line (headcount), and the amount by which household resources fall short of the poverty line (poverty gap) due to medical expenses. We compared the effects of MSA/Catastrophic to Rural Mutual Health Care (RMHC), an experimental model that provides first dollar coverage for primary care, hospital services and drugs with a similar premium but a lower ceiling. Our results show that RMHC is more effective at reducing medical impoverishment than NCMS. Under the internationally accepted poverty line of US

Lessons from the East — China's Rapidly Evolving Health Care System

1.08 per person per day, the MSA/Catastrophic models would reduce the poverty headcount by 3.5-3.9% and the average poverty gap by 11.8-16.4%, compared with reductions of 6.1-6.8% and 15-18.5% under the RMHC model. The primary reason for this is that NCMS does not address a major cause of medical impoverishment: expensive outpatient services for chronic conditions. As such, health policymakers need first to examine the disease profile and health expenditure pattern of a population before they can direct resources to where they will be most effective. As chronic diseases impose a growing share of the burden on the population in developing countries, it is not necessarily true that insurance coverage focusing on expensive hospital care alone is the most effective at providing financial risk protection.

Harnessing the privatisation of China's fragmented health-care delivery

How to finance and provide health care for the more than 1.3 billion rural poor and informal sector workers in low- and middle-income countries is one of the greatest challenges facing the international development community. This article presents the main findings from an extensive survey of the literature of community financing arrangements, and selected experiences from the Asia and Africa regions. Most community financing schemes have evolved in the context of severe economic constraints, political instability, and lack of good governance. Micro-level household data analysis indicates that community financing improves access by rural and informal sector workers to needed heath care and provides them with some financial protection against the cost of illness. Macro-level cross-country analysis gives empirical support to the hypothesis that risk-sharing in health financing matters in terms of its impact on both the level and distribution of health, financial fairness and responsiveness indicators. The background research done for this article points to five key policies available to governments to improve the effectiveness and sustainability of existing community financing schemes. This includes: (a) increased and well-targeted subsidies to pay for the premiums of low-income populations; (b) insurance to protect against expenditure fluctuations and re-insurance to enlarge the effective size of small risk pools; (c) effective prevention and case management techniques to limit expenditure fluctuations; (d) technical support to strengthen the management capacity of local schemes; and (e) establishment and strengthening of links with the formal financing and provider networks.

Global action on health systems: a proposal for the Toyako G8 summit

At first glance, China might seem unlikely to offer useful health care lessons to other countries. But China has undertaken a series of remarkable health system experiments that are instructive at many levels; a key lesson concerns the value of medical professionalism.

The cost escalation of social health insurance plans in China: Its implication for public policy

Summary Although Chinas 2009 health-care reform has made impressive progress in expansion of insurance coverage, much work remains to improve its wasteful health-care delivery. Particularly, the Chinese health-care system faces substantial challenges in its transformation from a profit-driven public hospital-centred system to an integrated primary care-based delivery system that is cost effective and of better quality to respond to the changing population needs. An additional challenge is the governments latest strategy to promote private investment for hospitals. In this Review, we discuss how Chinas health-care system would perform if hospital privatisation combined with hospital-centred fragmented delivery were to prevail—population health outcomes would suffer; health-care expenditures would escalate, with patients bearing increasing costs; and a two-tiered system would emerge in which access and quality of care are decided by ability to pay. We then propose an alternative pathway that includes the reform of public hospitals to pursue the public interest and be more accountable, with public hospitals as the benchmarks against which private hospitals would have to compete, with performance-based purchasing, and with population-based capitation payment to catalyse coordinated care. Any decision to further expand the for-profit private hospital market should not be made without objective assessment of its effect on Chinas health-policy goals.