World Bank Offers Ideas for Furthering China's Health Reforms

December 15, 2010

Beijing, December 15, 2010 – The World Bank has recently released five China Health Policy Notes. This series, produced by the World Bank in collaboration with the Government of China, focuses on lessons and experiences from China’s ongoing healthcare reforms. The papers track and analyze the reform process and evaluate early results.  Each paper focuses on a key challenge that is central to the success of the healthcare reforms.  The papers also offer ideas on how the reforms can be refined and improved as the process unfolds over the coming 5 to 10 years. 

“This is for the policymaker and practitioner implementing the new reforms announced by the Government.  It tells them about best practices in China and around the globe”, said Jack Langenbrunner, Human Development Coordinator of the World Bank’s China program.

Hospital reform since the mid-1980s has encouraged growth in the number of hospitals and volume of healthcare services in China. But at the same time, it has had some unintentional consequences such as more expensive and profitmaking services offered by hospitals, chaotic expansion of infrastructure and equipment, imbalanced distribution of hospital facilities in the country, and over-prescription of drugs, causing rising dissatisfaction with hospital services. Fixing the Public Hospital System in China presents approaches to hospital reform adopted by various countries, some successful and others less successful. Given China’s scale and complexity, there is no standard set of recommendations that are appropriate at all levels of the hospital system or in all parts of the country. However, there is a need for more rational, evidence-based provision of services in China’s current circumstances, building up of a cadre of well-trained hospital managers, and development of an information system for policy planning, performance monitoring and accountability, and evaluation.

Health Provider Payment Reforms in China: What International Experience Tells Us reviews the new emergent provider payment system such as case-payment and pay-for-performance and their limitations. Reforms have started but not always complete.  There have been some unintended consequences including an over focus on activities for which performance is measured, but to the negligence of those activities not tied with payment. Implementation must be carefully monitored.  Overall, China should utilize its new payment models to reform its healthcare delivery system which is currently fragmented and hospital-based.

Pharmaceuticals account for over 40 percent of total health expenditure in China, a disproportionately high amount compared to most other countries. Drugs are used and overused in ways that are neither financially nor medically efficient. The main problem lies with the provider payment system through which both hospitals and doctors rely on drug sales for supplemental income. To change the system, A Generic Drug Policy as Cornerstone to Essential Medicines in China notes that revenue from drug sales needs to be replaced by other sources of funding, such as direct subsidies, higher user fees, or higher insurance payments for medical services. In addition to delinking income from drug sales, actions also need to be taken to enforce strict quality standards for generic drugs, address the perception among doctors and patients that generic drugs are not “as good as” brand drugs, and introduce incentives for prescribing and dispensing generics.

Financing, Pricing, and Utilization of Pharmaceuticals in China: The Road to Reform examines those issues highlighted in the title, and how the pharmaceutical system has evolved. China became the ninth largest pharmaceutical market in the world in 2004, and pharmaceutical sales grew at an annual rate of 28% in the mid-2000s. The paper sets out a series of further measures to deepen and strengthen the pharmaceutical reform, including further reforming the national system of essential medicines; expanding manufacture and promoting use of generic drugs; improving drug pricing; adopting a zero-markup policy for drugs; making the public procurement system fairer, more equitable and more transparent; and learning from international experience.

China’s current medical insurance system is a mixed system for the employed and unemployed, as well as for the urban and rural population. Employer/employee contributions, individual contributions, and government subsidies are the major sources of financing for these medical insurance schemes. Health benefits also vary with different level of financing.  The Path to Integrated Insurance System in China discusses reform options and recommendations for China to achieve universal basic medical insurance for its people. For example, it calls for gradual replacement of medical savings accounts with social pooling for outpatient services to enhance coverage and benefits to the low-income groups and urban unemployed. It stresses the need to create greater equity across the existing schemes, with special focus on low-income groups and migrant workers. A step-wise process should be taken to achieve uniform basic benefits for all individuals and families. Family rather than individual should be the basic unit for medical insurance enrollment. The paper also points to the need to pool across thousands of the existing and independently-operating medical insurance funds in the country by establishing a provincial (and perhaps later a national) pooling system of medical insurance funds.

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