Press Interpreter

02/16/06 -- The healthcare burden has already become one of the largest complaints reported by the public -- there is the relentless sound of criticism in our ears. To be fair, all levels of government have not been unconcerned about this issue. Rather, they have been wracking their brains for a solution to the difficult problem of "seeing the doctor is expensive." However, even though the government has tried a lot of solutions, such as, for example, fixing the price of medicine, setting up "fair price hospitals," restructuring the administration of hospitals demanding unreasonable fees, etc., it has always attacked the symptoms of the problem rather than the roots. The problem lies in the fact that these measures all were aimed at the supply side of healthcare services. Effective measures aimed at the demand side, which is determined by the robustness of the medical insurance system, have been few.

In fact, with respect to the problem of the reform of the healthcare system, one of the government's biggest responsibilities ought to be the promotion of the establishment of a universal coverage healthcare guarantee system, a "healthcare guarantee for the entire population," or "people's healthcare guarantee" for short. The importance of doing this lies, first, in the fact that it will greatly promote fairness in the distribution of medical burdens. Second (and even more important and realistic), a people's healthcare guarantee will hold down the rapid rise in medical costs. In other words, a people's healthcare guarantee is clever treatment for the healthcare system's dual problems of "seeing the doctor is expensive " and "seeing the doctor is difficult."

The reasoning for this is clear. For now, let us put aside those cases in which healthcare providers illegally defraud patients by charging sky high prices. The prices are in fact rational in an environment in which sick people can be required to move mountains to raise funds in the short term. If it were the case that the entire population had health insurance, then not only would healthcare costs be apportioned between the healthy and the sick, but also between time periods of healthiness and time periods of illness. As a result, we would avoid the current situation, in which the largest portion of medical costs are borne by the sick while they are sick. If the entire population had health insurance, low-income people would naturally not hesitate to seek health services (especially emergency room services). If the entire population had health insurance, then health insurers would become health service purchasers and representatives of the people. People would no longer find themselves going sick and alone to a clinic, forced to obey doctors' commands. Power over the medical services market would shift from sellers to buyers, preventing medical service providers (whether private or public) from overcharging and from over-prescribing drugs and services.

You could say that when it comes to easing the two conundrums faced by the Chinese healthcare system -- the rise in fees and insufficient fairness -- a robust health insurance system kills two birds with one stone. Without doubt, building a system of health insurance for the entire population is one of the most important preconditions for the realization of a harmonious Chinese society.

One need not waste too many words emphasizing the importance of a people's healthcare guarantee. The real problem is whether or not we are capable of realizing this goal. More than a few decisionmakers often secretly complain when they see the phrase "people's healthcare guarantee" because they worry that public finances cannot bear the burden. As a result, in order to answer the question whether we are capable of realizing the goal of a "people's healthcare guarantee," we must first have information about the present general core healthcare expenditures of China's countryside and cities. At the same time, we need information about the core capacity of the government's public expenditures account. Second, we must make a strategic choice between possible ways of implementing a people's healthcare guarantee system. Because different ways of implementing the system involve different methods of apportioning healthcare costs, the pressure exerted by each possible implementation on public finances is different.

The General Healthcare Expenditures of Chinese Cities and the Chinese Countryside

Unless you're an accountant, lengthy discussion about numbers will give anyone a headache. However, if we take a rough look at some statistics we can understand the whole story. If we want to get a better idea of China's current medical expenditures, we should include the costs in both the towns and the cities. More specifically, China's health care expenditures fit into the following few categories: 1) Personal health care expenditures of those who reside in cities and towns, 2) Public health care expenditures, 3) Basic health insurance of those who live in the cities, 4) Health care costs of those who live on farm cooperatives, 5) Medical compensation paid by businesses of those who live in cities and towns. Because statistics of the last two categories are hard to come by and because they apply to relatively few people, we will not include them in our calculations for the time being. Because the statistics from 2003 are the most complete that we have, we will use this year to compare the total health care expenditures. Speaking overall, people in towns and cities spent 431 billion yuan (about US$54 billion) on health care. During that same year, the total expenditures of the Chinese government totaled 2.5 trillion yuan (about US$308 billion).

If universal health care coverage were established then those, who because they lacked insurance, had avoided seeing a doctor and avoided being hospitalized may change their behavior. As a result medical costs might go up. However, with the establishment of universal health care comes a system with greater purchasing power than ever before. As a result, the system would have stronger negotiating power when discussing prices with health care providers. This would lower the cost of medical services. What would actually happen is anyone's guess, but it is not improbable to think that health care costs could remain unchanged after the establishment of universal health care. With that assumption we should should decide what is the best system to live with. How should we apportion the roughly 400 billion yuan of health care costs?

Choosing the Best System of Universal Health Care

There are many types of health care systems. You can find examples through studying history of the many ways mankind has attempted to guarentee health coverage. Seven models are depicted in diagram 1. The first two systems are based on voluntary contributions. In a voluntary system, groups organize to provide health insurance. These groups can either be insurance companies or other for-profit organizations. The other five types involve government intervention. Of the five only one is strictly voluntary; the others require some sort of enforcement by the government.

No matter if you look at it from a health policy point of view or with the practical lessons learned through experience, a health care system that is stictly voluntary will never be able to cover all citizens--such a system will simply not get off the ground. America is the most economically developed country in the world. It is also the only developed country that has not achieved universal health coverage. The reason for this is that America insists on the principal of voluntary health care contributions. The mainstay of America's health care system is private insurance companies. In a system of voluntary health care coverage there will always be people who test their luck and decide not to buy insurance. A similar situation is happening in rural parts of China: there's an ever increasing number of new "health care cooperatives." Many of those who participate in the cooperatives go a year or so without getting sick and then decide the cost wasn't worth it. They then subsequently drop out of the program.

This means that medical coverage cannot come entirely from voluntary contributions (even if the money were handled by private insurance companies). The only solution is for the government to exercise its legal right to enforce a system of universal health coverage. Medical aid for those with low incomes while part of the overall health care system cannot lie at its core. Neither can the system rely on personal accounts. Personal accounts are barely effective in balancing the costs individuals incur while sick with the surplusses while they are healthy. Personal accounts do not address the greater issue of balancing the costs of all those who are sick with the surplusses of all those who are healthy. No matter if you look at apportioning risk or providing for society, personal accounts are not a satisfactory alternative.

Thereofore, in establishing universal health care there are only two main alternatives: The first is the "Public Health Coverage" model in which the government pays for all its citizens' health care costs directly out of the tax revenue it receives. The second is mandatory health insurance. In this system, individuals, work units and the government all pay a certain amount of money to spread the cost of medical care. Any country in the world that has acheived universal health care has employed one of these two methods.

A Public Health Coverage System or a Social Security System?

In the end, is a public health coverage system the best or a social security system the best? Theory provides no clear answer. Nor do the practices of the nations of the world. In fact, each has its advantages and disadvantages. It is difficult to distinguish which is better. Public health coverage does not pay its own way, although many people look to it as an ideal. Its benefits, especially its fairness, go without saying. However, this method's main problem is that almost all funding for it comes from the state, putting comparatively large pressure on the public fisc, which in the end must be shifted onto consumers or businesses.

How much of the state budget would be required to establish a public health coverage system after all? According to the calculations in box diagram 1, even if we assume that the government enacts a high individual contribution rate of 20%, a public health coverage plan would have to spend 344.7 billion yuan (4308.8x80%)to satisfy current public demand for medical services, which is roughly four times previous government health expenditures and 1/8th of all public finances. In fact, current government health expenditures are not entirely devoted to financing visits to the doctor, but include public health expenditures, rural health expenditures, research and development costs for medical technologies, etc. As a result, it is clear that within the limits of current financial resources and of the current system of public finance, a public health coverage plan for everyone is not terribly feasible.

Another choice is for the nation to continue to play the role of insurer. Through adjusting the structure of the system currently in force the nation could achieve health insurance for the entire population. The bulk of our country's present health insurance system consists of basic healthcare for workers in cities and new cooperative healthcare in the countryside. The problem is that, whether in the cities or in the countryside, general health insurance coverage is far from having been achieved. Data from the third national health services investigation show that 65% of urban and rural residents (44.8% of urban residents and 79.0% of rural residents) have absolutely no health insurance of any kind.

[Remaining Text Untranslated]

By Gu Xin

--Translated by Joseph McMullin and Ramsi Woodcock

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