--- Li Ling, professor of economics at Peking University

Chinese Premier Wen Jiabao reiterated the medical reform plan in his government report during this year's NPC opening ceremony. The plan includes an 850 billion Yuan to be budgeted by 2010 to provide universal coverage of basic health care to the country's total population. The Sate Council passed this long-awaited plan in January 2009. Details of the plan are scheduled for official release after the conclusion of the Two Sessions. How long it will take to implement the new health care plan? How much will the long-waited reform change?

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Professor Li Ling is Deputy Director of the China Center for Economics Research at Peking University. She serves as a senior advisor for China's Ministry of Health and consultant for Health Care Reform, World Bank. She drafted the Peking University health reform proposal among the 10 government solicited from universities and industry players. She is a strong advocate for the government- led health care model.

New healthcare reform proposal

A: A part of the program is to spend, I believe, 800 billion over the next 3 years on 5 specific priorities. Can you talk to us a little bit about those priorities?

L: Health care system, it’s consisted of the financing system, the deliver system and the management and regulation system. So these 5 parts, actually it’s part of the systems. So for example, the first part is the insurance, that’s the finance system. So the government targeted at the next 3 years. They will cover, are expected to cover up to 80% of the population, for both urban and rural population. And the second part is community based health service system that would ensure people can get the basic medical health care. The third part is the equal access to the public health service; the government will invest more to ensure the people can get the public health service. And also for the equal access, both for the rural population and urban population, this is quite a breakthrough, because in China, we never have this kind of target. The government is targeted at next year, will be 50 Yuan per capita for public health.

A: Is that the largest portion of the money going to one area?

L: No, I don’t think this will be the largest portion. We don’t have the detailed plan; we don’t know how they divide this 850 billion Yuan. The forth part is called the basic drug system, or essential drug system. It is to make sure people can get the needed and reliable drug. The fifth one is the pilot reform of the public hospital. Next the key part of the deliver system.

A: Talk to me a little bit about what you think would be the most important area that money should be spent on.

L: Public hospital. Public hospital is the key area in the whole health care system, because in China, public hospital played a leading role in the deliver system, and also we know, in the health care sector, finance and insurance is only paid money. You need people to provide service for you, if the provider has the wrong incentive, people cannot get the service they need.

A: How do you go about providing the right incentive for the providers?

L: For the provider, they should have the same interest as the patient to use the minimum cost to get the best satisfaction for the patients. But right now, obviously, in our system, the incentive is distorted. So people complain, it’s hard to see the doctor, the cost is very expensive to see the doctor. Because currently, our public hospital, they need make money to keep running. So back to your question, to make the right incentive, the doctor should get what they have to be paid decent salary, a nice job, a nice social status. Then they should use the minimum cost to provide service to ensure people’s health.

A: Why has it gone this long without health care being more of an important focus?

L: At each development stage, the target and goal is different. In the past 30 years, obviously, our priority is economic development. So I didn’t think the government put the health at the top priority. The government funding is decreasing, especially the local government. The merit for their job performance is the GDP growth rate. So they really didn’t pay attention to the health sector.

A: Well some economist would argue you can’t have economic growth without health care growth, what do you think?

L: Actually health is the key input for the economic growth; also it’s the key output, because all the environment, the final purpose is people’s happiness. Without health, you don’t have happy life. I think now the government realizes this. I think 2003 SARS is a turning point for China’s health care.

Feasibility

Inequality in the distribution of medical resources is one main reason seeing a doctor has become so difficult. Statistics show 80% of China’s overall medical resources are concentrated in urban areas, 1/3 of which are targeted in the tertiary hospitals. Patients’ painstaking effort to see a doctor combined with medical doctors’ heavy workload often lead to tense patient-doctor relations.

A: Let’s talk about the patient-doctor relationship, lot of tension between the two of them. Is that something that this plan can help solve?

L: Just looking at Wen Jiabao, our Premiere’s report, I think the second sentence said that they need initiate the doctors’ incentives. Let doctors satisfy their jobs. Just as I mentioned, right now we have a lot of misleading about the doctors. They always think doctor is making money and they provide the wrong drug, over-provide the drug to the patients. In this plan, public hospital reform, the pilot program, they first need to give the doctor a decent social status. Their salary should be paid well. Maybe the public should realize that the doctor’s job is different from restaurants’ servants. Maybe you pay the money, you go to see doctor, but at end you spend the money and the disease is untreatable. It could happen and always happen in the hospital. The tension between doctors and patient, I don’t think it’s the problem between these two players. The problem is rooted at the whole system.

A: Definitely. It’s kind of funny that you said like waiter and restaurant. Realistically, doctors everyday see hundreds of patients. They work tirelessly long hours and unfortunately they take the brunt of the health care system from a lot of patients.

L: As government spends more money in the health care sector, the patients right now pay around 50% of cost. In the long run, this will be adjusted. Maybe at the end, the patients’ cost will be 20% or 30%. They would release the burden and could also release the tension between doctor and patient.

A: Talking a little bit more about the number of doctors and the number of patients per capita, is there a way to increase the number of positions in China so that the way isn’t so long, it’s not so expensive, and like you said, some of the tension goes away?

L: Right now, if you are using per 1000 people’s doctor, per 1000 people’s hospital beds, China is on average of world standard, so in this way, the total resource actually is enough, but now the problem is the structure problem. Because like in Shanghai, patients can freely choose the hospital, so no matter serious diseases or just a flu, a cold, they probably go to the best hospital. And the community has center or clinic, no one wants to go there. So maybe in the future, the new system need to have, make sure people can go to the community center then refer to the upper level hospitals. So we can use our resources, use them more efficiently.

A: What needs to be done to change that?

L: I think one thing is you need to improve the quality of community health care center. Second the insurance policy and the pricing policy could guide people to do that. Third I think the information system can help people to rely on this system, because otherwise, people say, if I go to community center and if I have some problem, maybe they get trouble. But with the information system, I think this problem can be solved.

A: Is there any provisions in this new plan to talking about information a little bit more, to follow a patient, because I know right now, a patient can see 5 different doctors, and unless they are keeping their own records, they’ll get lost in the shuffle.

L: In China, in one side, it’s hard to see doctors, on the other side, for one sickness, they may go to 5 hospitals, even more then that and do all the check-ups. That’s the problem because no one take care, there’s no system has responsibility for their health. So they just do this by themselves. I think this is part of reform’s plan is they will have the national wide electronic health record.

A: How long will it take to implement?

L: Given the capability of Chinese government, if they are determined to do that, it could be quick. After SARS, within 1 year, we established CDC system, that’s the best in the world.

A: That’s fast.

The State Council initiated the first heath care reform proposal in 1997. It’s specifically targeted at the problems of rising medical cost, inefficient and inequitable health resource distribution and the low coverage of the "social health security system". But it was not effectively implemented in practice.

A: I’ve heard some of the economics say there’s concern because of the economic slowdown the way it is, that health care could again get lost in the shuffle.

L: It could be, but maybe it’s also an opportunity, because we all know Chinese people saves a lot, one of the reasons is they don’t have security, they have to save money to ensure the future risk, like health, actually they don’t know how much they should save, they just save every penny they have. If you can provide the health security for the people, they can spend the money, and this could increase domestic demand. So, in other hand, this is the right opportunity for China’s health care reform.

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For years, authorities have taken measures to reduce the medicine costs. In 2007, prices on 726 different drugs were reduced to a total of 10 billion Yuan. But hospitals’ fixed operational costs made it hard to further reduce the price of drugs. Some economists raise the concept of market-led health care system, saying encouraging competition can help hospitals cover their costs and keep patients’ bill down. However, Li Ling thinks the government-led model would be most beneficial.

A: We’ve talked a lot about problems that are in the system, is it a good idea maybe to have a third party supervising the system, the doctors, the patients, however the thing is, to put it on a daily basis?

L: Look at the worldwide health care model, the health care system that could provide universal coverage, one is social insurance, or government insurance plan like Germany, like Canada, the other one is like the national health service system, like British, they have this kind of system. I think which system China should adopt, maybe we need to look at the current situation. Currently in China the insurance coverage rate is very low, and to have the social insurance, the government insurance, I think the precondition is, we should have urbanization, industrialization, the population will have the formal job should be the majority. Otherwise, currently China, you have 20% or 30% people to cover the total population, it’s impossible. So now, no matter the CMS, the rural insurance, or the residential, city residents insurance, needs government invest a lot. For many, it’s the government buying insurance for them. But in the long run, we should say, this model is unsustainable. The cost is huge. Then the other is look at China currently, we have a huge public hospital, in terms of beds, 95% of public hospital. We have this system, so I always support we need to use our existing condition, to establish a low cost deliver system they we could provide the service to the people at the cost they can afford. That’s a kind of health security.

A: How will they go about doing that?

L: The information system will play a key role. Because the hospital management and oversight, that’s a very difficult job. But right now, given the information system, we could reinstruct the entire system and make different level of hospital connect together. They could, each part do their own job, which level patient goes to where, and also given the entire system’s incentive is to protect people’s health, not make money. So then they will do more job in the prevention. That’s the key thing could provide the health security for the people. Otherwise, when you get sick, you treat them, you know, now the cancer rate in China is quite high, it’s untreatable and unaffordable.

A: Let’s talk a little bit about the differences between the governments led and market-led systems.

L: In the market, we all should say if everybody interacts with the market, the market will have equilibrium. But some people are below that, it’s a lost, some people will lost in the market because they couldn’t afford health care. So the US government pickup the poor and the elder, but we can see that the Medicare program, they have serious problem, because the government has no ability to regulate hospitals. Every hospital uses Medicare medicated program as a money generator.

A: It’s in terms of market-led.

L: Yes, this is market led. In British, the National Health Service system the government has annual budget, they ensure everybody can get health care service; nobody couldn’t get health service because of financial reason. I think in term of social justice and equity, this system is better. Also they could look at resources more efficiently. Like in the British model, they spend more money in prevent care, in the women child care. They are not like the US model, they spend a lot of resources when people over 65, end of the last 10 months, the last 3 months.

A: What about just the shear population in China, is the government led model going to be so much more expensive, maybe the Chinese government can’t handle it in 10 years?

L: No, I don’t think so. It could have this danger, but if we, the worst case is the government pay the money, but the entire system is market organized like the Medicare Medicate in the US, I don’t think the government can control that cost. But like British model, you have the total budget there, we only have this money. And this is easy to control the cost.

Su Qian, a small city in Jiangsu Province, privatized all the city’s 134 public hospitals. After the move, it was believed the hospitals improved services and reduced check-up and medicine costs for patients. However, a research by Liling and her students found patients there did not end up paying less.

L: In China, there are cities tried this but just look at US model and other countries’ model, I don’t think privatized hospital could solve China’s problem. It’s always being a complement for the entire deliver system. But I don’t think you know the private hospital will solve the current, the Chinese people cannot afford health care problems, and on the other hand, the private hospital especially in China now, our regulation system is very week, it’s very hard to regulate them. And most of those private hospitals are full-profit hospital, so they need to make money. In the health care sector, we know there are serious asymmetric information problem, if doctors want to make money, it’s very hard to regulate them. So then you’ll push up the health care cost like what in the US faced.

A: You’ve done quite a bit of travelling in the US and abroad, is there any model you would like to see China follow?

L: I think in the US, the VA hospital model is very good for China to follow. This hospital is a public hospital, and actually 10 years ago, they were facing the same dilemma as the Chinese public hospital. Government didn’t put enough funding and the low cost, low efficiency, poor quality, but after the restructure, I think now the hospital, probably it’s one of the best hospitals worldwide.

A: If you could pick and choose different elements of different health care programs, are there anyone anywhere else that you would say we like the way you do this, we like the way the country does this and let’s take from these suggestions.

L: I think the suggestions China now really learn is the entire system is better than the national health system the British one. But in terms of the management, oversight, and regulation, I think the VA hospital is really good, the future hospital model.

A: Let me get you the overall perception of the plan.

L: It’s a quite good plan. In one hand, we provide universal coverage for the Chinese people for health care. On the other hand, we try to explore the new development pattern. Worldwide, you can see US is the most developed country, but the economy growth itself did not automatically generate the health. Our per capita GDP level is quite low, but maybe we use our system advantage, the traditional Chinese medicine is culture advantage. Probably we can find a way to give people health security.

Changing the healthcare culture in China won't be easy. On top of the challenges the government faces implementing the strategies in the middle of an economic crisis. There are long standing perceptions by patients and doctors which need to be changed. Experts say both sides need to realize the opportunities which could lie in utilizing community based health care.