A History of Rural Healthcare in the PRC
By: David Shou
"By 2013, China had achieved an astonishing 99% rural healthcare coverage."
"If the problem of cost inflation and efficiency are not addressed, then much of the new money injected into the NCMS will be funneled into incomes for providers."
Last month, the U.S. Centers for Disease Control and Prevention reported that in the first quarter of 2014 the number of uninsured Americans fell from 44.8 million to 41 million people, or approximately 13.1% of the population. Supporters of the Affordable Care Act have lauded these figures as evidence that current legislation has extended coverage to millions of Americans who were previously uninsured.
Over the past decade, China has also been experimenting with healthcare reform aimed at extending coverage, especially for its most vulnerable rural populations. Both countries have reformed their health systems by employing similar mechanisms: extending insurance to lower out-of-pocket expenses, emphasizing primary care and prevention, and reforming payment and delivery systems. In 2013, Xinhua News Agency, the state press, reported that China had achieved an astonishing 99% rural healthcare coverage under the New Cooperative Medical Scheme.
In 1949, China was a predominantly rural nation that had an undeveloped healthcare delivery system. Few medical professionals practiced Western medicine, and the vast majority of peasants in the countryside only had access to traditional Chinese medicine. In response to the population’s medical needs, the Chinese government established a new system of public insurance to provide health care services.
Rural individuals were covered by the Commune-based Cooperative Medical Scheme (CMS), a three-tiered healthcare system. The first tier consisted of barefoot doctors who were trained in basic hygiene and traditional Chinese medicine. The second tier included township health centers with small outpatient clinics staffed by hired medical professionals. County hospitals formed the third tier and were reserved for the most seriously ill patients. Although the standards of care were minimal, an emphasis on improved hygiene and access to basic medication drastically improved health outcomes. Life expectancy increased from 36 in 1949 to 65.5 in 1980.
The CMS was funded by commune incomes and covered all individuals living inside the commune. Under the communal system, residents transferred all ownership in exchange for social services, including schools, nurseries, and health care. The CMS concentrated its risk pooling in village communes that averaged a population of 10,000 to 20,000 families. Communes paid the salaries of village health workers and patients paid for their own drugs and some small treatment costs. By the 1970s, approximately 90% of the rural population was covered by the CMS.
In the 1980s, market reforms led to decollectivization of agriculture and resulted in a decreased desire by rural populations to support the collective welfare system. In addition, government involvement in public health service decreased, leaving the CMS with insufficient funding. By the late 1980s, only 5% of villages still had access to the scheme. As government subsidies decreased, physicians and hospitals developed other revenue-generating mechanisms to cover their costs. Hospitals recommended unnecessary but expensive diagnostic tests and medications to keep departments financially solvent. Many barefoot doctors entered private practice, operating on a fee-for-service basis. Out-of-pocket spending as a share of total health spending increased from 20% in 1978 to almost 60% in 2001. Rising costs compounded with the dissolution of the CMS made medical care beyond the reach of most rural populations.
As the failings of the healthcare system became more apparent, the central government recognized the need to overhaul the CMS. In 2003, it announced direct budgetary support for the New Cooperative Medical Scheme (NCMS) with matching contributions from local governments and individual households. The NCMS focuses on reducing the financial risks of catastrophic illness and improving access to healthcare for rural populations. It is a voluntary health insurance program with household-based enrollment. Two thirds of its funding originates from central and local governments, while the remaining third comes from participant contributions. Risk pooling is now at the county level instead of the commune level and typically covers between 200,000 and 300,000 individuals. While the CMS focused on basic preventive interventions, the NCMS focuses on reducing the cost of inpatient care.
Although rural coverage has increased under the NCMS, several problems persist. The program remains severely underfunded despite renewed commitments by the central government and rising minimum individual contributions. Although all counties are required to cover inpatient costs, many poorer counties do not have the revenue to cover outpatient costs. The scheme continues dualistic public policies that favor urban over rural areas. Reimbursement rates remain low, and the procedure for being reimbursed is both complicated and time consuming. Co-payments remain high because of low ceilings and high deductibles. Despite increased medical insurance coverage in rural areas, healthcare utilization for the poorest 10% of China’s rural population has not increased, as out-of-pocket expenses remain prohibitively high.
Xinhua’s reported 99% rural health insurance coverage rate indicates that China has achieved its stated goal of providing wider coverage. However, limited financing and high co-payments mean that coverage will need to be deepened in order to provide affordable healthcare for its 1.3 billion citizens. These challenges extend beyond offering coverage to the uninsured, but also to reducing waste and inefficiencies in health care delivery. Vested interests within the medical sector continue to support policies that maximize profits. If the problems of cost inflation and inefficiency are not addressed, then much of the new money injected into the NCMS will be funneled into incomes for providers.
China’s use of outside experts and solicitation of public comment reflects its willingness to incorporate measures of transparency and international expertise into its reform process. China is implementing healthcare reform during a period of great economic growth and is willing to commit significant government funding to its reforms, providing the necessary flexibility to experiment with innovative solutions to tackle its multi-tiered health problem.
"Market reforms led to decollectivization and resulted in a decreased desire by rural populations to support the collective welfare system."
"Risk pooling is now at the county level instead of the commune level."
David is a Duke graduate and a current NIH Academy Fellow at the National Institutes of Health.