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The healthcare reform in China refers to the previous and ongoing healthcare system transition in modern China. China's government, specifically the National Health and Family Planning Commission (formerly the Ministry of Health), plays a leading role in these reforms. Reforms focus on establishing public medical insurance systems and enhancing public healthcare providers, the main component in China's healthcare system. In urban and rural areas, three government medical insurance system, Urban Residents Basic Medical Insurance, Urban Employee Basic Medical Insurance and New Rural Co-operative Medical Scheme cover almost everyone. Various public healthcare facilities, including county or city hospitals, community health centers, township health centers, were founded to serve diverse needs. Current and future reforms are outlined in Healthy China 2030.

Changes in Health Insurance Systems

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Rural Co-operative Medical Scheme (1950-1980s)

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After 1949, the Chinese Communist Party (CCP) took control of China, and the Ministry of Health effectively controlled China's health care system and policies.[1] Under the Chinese government, the country's officials, rather than local governments, largely determined access to health care. Rural areas saw the biggest need for healthcare reform, and the Rural Co-operative Medical Scheme (RCMS) was established as a three-tier system for rural healthcare access. The RCMS functioned on a pre-payment plan that consisted of individual income contribution, a village collective welfare Fund, and subsidies from higher government.[2]

The first tier consisted of barefoot doctors, who were trained in basic hygiene and traditional Chinese medicine.[3] The system of barefoot doctors was the easiest form of healthcare access, especially in rural areas. Township health centers were the second tier of the RCMS, consisting of small, outpatient clinics that primarily hired medical professionals that were subsidized by the Chinese government. Together with barefoot doctors, township health centers were utilized for most common illnesses. The third tier of the CMS, county hospitals, was for the most seriously ill patients. They were primarily funded by the government but also collaborated with local systems for resources (equipment, physicians, etc.).[2]Public health campaigns to improve environmental and hygienic conditions were also implemented, especially in urban areas.[3]

The RCMS has significantly improved life expectancy and simultaneously decreased the prevalence of certain diseases. For example, life expectancy has almost doubled (from 35 to 69 years), and infant mortality has been slashed from 250 deaths to 40 deaths for every 1000 live births. Also, the malaria rate has dropped from 5.55% of the entire Chinese population to 0.3% of the population. The increase in health has been from both the central and local government and community efforts to increase good health. Campaigns sought to prevent diseases and halt the spread of agents of disease like mosquitoes causing malaria. Attempts to raise public awareness of health were especially emphasized.

Due to Mao Zedong's support, the RCMS saw its rapidest expansion during Cultural Revolution, reaching a peak of covering 85% of the total population in 1976. However, as a result of agricultural sector reform and end of People's Commune in the 1980s, the RCMS lost its economic and organizational basis. Therefore, RCMS collapsed, with only 9.6% coverage in 1984.[4] [5]

New Rural Co-operative Medical Scheme (2002-present)

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As the old RCMS ended, the need for affordable healthcare became urgent in rural China. The New Rural Co-operative Medical Care Scheme (NRCMS[6]) was established in to overhaul the healthcare system, particularly intended to make it more affordable for the rural poor. [7] The NRCMS was initially outlined in Decisions on the strengthening of the rural health system issued in 2002 by CCP Central Committee, the highest decision-making authority in China. Pilots started in 2003, followed by fast expansion.[8] By 2008, more than 90% of total population was enrolled in RCMS. [9]In 2016, China's government decided to merge NRCMS with Urban Residents Basic Medical Scheme (URBMS) to create a universal basic medical scheme. [10]

NRCMS is a voluntary insurance scheme subsidized by local and central government. NRCMS differs from RCMS in the following perspectives: Administration and risk-pooling is set at county level, much higher than NRCMS's village level. Funds of NRCMS are provided by local and central government (for poorer regions) together, which contrasts with the old RCMS that was almost completely funded by the Chinese government and extended universally across all parts of China.[11] NRCMS covers expense in all level public healthcare facilities, though the rate varies by regions and by type of facilities, while RCMS provided access to the barefoot doctors only.[12]

World Health Organization (WHO) summarized the success of NRCMS: NRCMS rapidly expanded, with increasing service bundle. It provided better access to higher quality service, and partly controlled medical costs. Besides, NRCMS is appropriate and convenient for China's enormous number of migrant workers who used to have limited access to healthcare.[8] In 2015, NRCMS spent 293.34 billion yuan (45 billion USD) on 670 million participants and 1.653 billion instances of medical service, with the average of 437.8 yuan (67.25 USD) per capita.[13]

However, there are some difficulties that undermine the scheme's effectiveness in reducing out-of-pocket medical costs. To begin with, the benefit package of NRCMS is mostly limited to catastrophic and inpatient care. While these costs are covered, most outpatient visits requires substantial individual payment. [14]Secondly, the reimbursement rate varies across level of healthcare facilities, increasing the cost of high-level hospital visit. The details of the NRCMS show that patients benefit most from the NRCMS at a local level. If patients go to a small hospital or clinic in their local town, the scheme will cover from 70–80% of their bill, but if they go to a county one, the percentage of the cost being covered falls to about 60%, and if they need specialist help in a large modern city hospital, they have to bear most of the cost themselves, as the scheme would cover only about 30% of the bill.[15] Furthermore, fee-for service in healthcare system provides incentives for healthcare providers to prescribe medicine or perform treatment more than necessary.[16][17] In addition, despite NRCMS reduced actual cost of medical service, patients prefer to purchase more medical service in response to NRCMS, offsetting its effects.[18] Apart from these, those are poor or in poorer regions benefit less from NRCMS, causing inequality.[19]

Urban Employee Basic Medical Insurance (1999-present)

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Before 1978, urban residents are covered by Labor Insurance and Government Insurance which demanded minor out-of-pocket payment. After major economic reforms, cost of healthcare rose rapidly. Besides, many urban employees lost their healthcare insurance due to reforms in state-owned-enterprises. Urban areas, therefore, saw a rising need for access to affordable healthcare. [14] In 1997, CCP Central Committee and China State Council issued a universal healthcare reform guidelines, an important part of which is to establish medical scheme in urban areas.[20] Urban Employee Basic Medical Insurance and Urban Residents Basic Medical Insurance was created to cover healthcare expense for urban working residents and non-working residents respectively.

In 1998, Urban Employee Basic Medical Insurance (UEBMI) was introduced to provide healthcare access to urban working and retired employees in public and private sectors as well. The UEBMI is administrated at municipal level, higher than NRCMS. Funds of UEBMI came from 8% of the employee's wage: 6% are paid by employers and 2% by in employee contribution,[21] yet now these rates varies by time and municipalities. Different from other types of insurance scheme, UEBMI is mandatory. In 2014, roughly 283 million were enrolled in UEBMI, contributing 80.3 billion yuan, 283.74 yuan per capita (12.97 billion USD in total, 45.83 USD per capita), with expenditure at 66.9 billion yuan ,236.4 yuan per capita (10.8 billion USD in total, 38.19 USD per capita).[13]

Urban Residents Basic Medical Insurance (2007-present)

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In 2007, Urban Residents Basic Medical Insurance (URBMI) started to provide healthcare access to urban residents that are not covered by UEBMI: children, students in schools, colleges and universities and other non-working urban residents.[22] URBMI was firstly piloted in 2007, and became nationwide in 2010. In 2015, 376 million urban residents (over 95%[23]) took part in URBMI.

URBMI is a government-subsidized, household-level-voluntary medical insurance, administrated at municipal level. Funds of URBMI mainly rely on individual contributions (245 yuan for adults, 2008 pilot), and partly government contributions (at least 80 yuan per capita). Additional government contributions are given to undeveloped central and western regions and poor or disabled individuals. [14]Researches provided evidence that URBMI helped improve medicare utilization and resident's health conditions, especially for low-income residents[24][25]. Studies also suggested that URBMI was an substantial step towards a universal healthcare system[26].

General Guidelines

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Healthy China 2020

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In October 2009, Chen zhu, head of the Ministry of Health, declared the pursuit of Healthy China 2020, a program to provide universal healthcare access and treatment for all of China by 2020, mostly by revised policies in nutrition, agriculture, food, and social marketing.[27] Much of the program centers on chronic disease prevention and promoting better lifestyle choices and eating habits. It especially targets public awareness for obesity, physical inactivity, and poor dietary choices. Healthy China 2020 focuses the most on urban, populous areas that are heavily influenced by globalization and modernity.[27] Additionally, much of the program is media-run and localized and concentrates on change through the community rather than local laws. Many of the aims of Healthy China 2020 are concentrated to more-urban areas under Western influences. Diet is causing obesity issues, and an influx of modern transportation is negatively affecting urban environments and thus health.

Healthy China 2030

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In October 2016, after President Xi Jinping and Premier Li Keqiang's relevant theme speech at China National Health and Well-being conference in Beijing[28], China National Health and Family Planning Commission issued the Healthy China 2030 Planning Outline[29], the most recent comprehensive framework on the goals and plans of its healthcare reform.

The strategic theme of Healthy China 2030 is “co-building, sharing and health for all”[30]. The project aims to achieve these key goals by 2030: continuous improve in people's health conditions, raise life expectancy to 79, effective control on main health-endangering factors, substantial improve in health service, notable expansion in health industry, establishment of inclusive health-improving regulatory systems. Specific actions include: enhancing health education in schools, promoting healthy lifestyle, encouraging exercise, enhancing universal healthcare access, improve service quality of healthcare providers, special attention to the elder, women, children and disabled, reforms in health insurance, pharmaceutical and medical instruments systems, etc. [31][32]

Healthcare Provider Reforms

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Changes in Hospitals (2010-present)

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Beijing Haidian Hospital
Haidian Hospital, Beijing

In China, public hospitals are considered most the important health facilities, providing both outpatient and inpatient care. They also bear major teaching, training and research responsibilities. Most hospitals are located in cities.

However, several problems posts challenges to accessible and affordable hospital healthcare. To begin with, prices of medicine are set unreasonably high to make up for low service price. Doctors are also dissatisfied about their income. [33]Secondly, great tension in patient-doctor relationships sometimes causes conflicts or even violence against doctors (yinao). [34]Furthermore, patients are not distributed by seriousness among hospitals and lower health facilities, which leads to over-consumption of high-level medical resources in hospitals. [35]

The aim of hospital reforms is to maintain the social welfare nature of public hospitals and encourage them to perform public service functions, thereby providing accessible and affordable healthcare services for the people.[36] Reforms started as pilot in 2010 in 16 cities. [37]In 2015, a new version of guidelines came out and extra attention is given to county-level hospitals. [38]In 2017, public hospital reforms expanded with focus on eliminating drug price difference between hospital pharmacies and wholesales. [39]

Various studies have shown mixed results on the effectiveness of the results. Case survey found that reforms in compensation systems increased service quantity and quality, but caused drastic drop in management efficiency.[40] Regional evidence showed that total out-of-pocket expenditure actually increased, despite the decrease in inpatient medications. [41] Health staff's job satisfaction increased while exposed to higher pressure and overtime working.[42]

Changes in other Healthcare Providers

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Apart from public hospitals, numerous grass-root public health facilities and private healthcare providers also play their unique role in providing healthcare services. Reforms on grass-root facilities focus on their cooperation and responsibility distribution between hospitals, motivate and compensate grass-level health personnel. [43] Private parties are encouraged to provide medical service and cooperate with public sectors. [44]

Pharmaceutical Reforms

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Essential Drug List (2009-present)

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In 2009, State Council started Essential Drug System (EDS) and published first version of Essential Drug List (EDL) that consists 307 types of drugs. All grass-root healthcare facilities are required to prepare, use and sell listed drugs almost exclusively. Price of drugs are negotiated by regional government and drug producers while they are sold at zero profit at grass-root facilities. Reimbursement rate for ED is set notably higher. EDL is subject to change according to needs and drug development.[45][46]

However, in 2015, State Council changed its regulations to deter local governments from expanding EDL. Analysis pointed out that local governments' power in adding new drugs to their EDL is prone to rent-seeking behaviors and protectionism for local medicine industry. Besides, the new guideline removed the restriction of using unlisted drugs, as this regulation caused in shortage of drugs in grass-root facilities.[47]

Opinions on EDS varies. Mckinsey survey in 2013 found that over 2 thirds top executives from multinational drug companies expected EDS would have negative effect on their business.[48] Studies suggested changes in drug selection process.[49]

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