Universal Health Coverage in China

A Health Economic Perspective

David S. Weis

• Publisher: Books on Demand
• Year: 2019
• Print ISBN:
  9783732239580
• Edition: 1
• eBook ISBN:
  9783749473144
• Topic: Business
• Subtopic: Business General
• Index: Business

This study investigates the situation of Universal Health Care (UHC) in China from a health economic perspective. The first chapter introduces the historical background, analyzes the relevance of UHC and sheds light on the current health insurance status. In this chapter a new holistic health insurance theory is proposed that allows the inclusion of preventive medicine. The second chapter introduces the "Definition and concept" consisting of three dimensions: Firstly, the height dimension with the leading question "What proportion of the costs is covered?". Secondly, the depth dimension that is concerned with the question "Which benefits are covered?". This chapter puts a special focus on the important economic role of non-communicable diseases. Thirdly, the breadth dimension which investigates the question "Who is insured?". The third chapter, looking at the first dimension, found a high but shrinking amount of out-of-pocket payments and catastrophic health payments. Comparing the payment and benefit distributions, it found the ability to pay principle and insufficient separation of health service payments from its consumption. The second dimension discovered problems concerning the roles of ministries, financing and the benefit package. Reforming these areas will be necessary to provide people with appropriate health care. The third dimension showed that migrant workers are exposed to more health risks, have less access to health care and a lower health status. The de facto coverage rate for the Chinese population (including migrant workers) was calculated to be 81.19% in 2011 and 82.16% in 2020. The goals of the Chinese Communist Party (90% in 2011 and nearly 100% in 2020) are hence not reached. The study closes with a "Summary and conclusion, a "Boundaries and discussion" and an "Outlook" section.

1 Introduction

1.1 Historical background

It has long been known that social security and health status are closely linked. Already during the Middle Ages, when craftsmen were working independently and self-employed, insurance systems were set up against the consequences of sickness. In the 16^th and 17^th century, it was the guilds that collected a certain contribution from their members to protect the sick from medical payments and loss of income. These supporting networks had come to an end by the 18^th and 19^th century, after the industrial revolution had taken place and workers were no longer organized in guilds but became employed at factories. In this working environment, sickness caused a double hardship for the individual. On the one hand medical services had to be financed and on the other hand wages were terminated. As it was well understood that the event of sickness cannot be predicted for an individual but only for large groups, hundreds of sickness funds were developed in Germany to pool the health risks of their members. Already in 1854, one of the 30 German member states (Prussia) enacted a law that forced low-wage workers to contribute a certain percentage of their income to a health insurance system – an equal sum had to be paid by the employer. This system, where employer and employee pay the same amount to the sickness fund, was taken up again in the 1880s after the German chancellor Bismarck unified the formerly warring German states. After a long lasting political discussion, a bill was finally passed in 1883 that required employers with low income to join one of the numerous sickness funds. Contributions were shared between employers (2/3) and employees (1/3). The benefits included partial wage payment (about 50%) and covered medical care (usually general practitioners and drugs), maternity benefits and funeral costs (Roemer, 1993, p. 91). Although the definition of universal health coverage (UHC)¹ is ambiguous, most scholars see the reforms described above as the first achievement of UHC (e.g. Stuckler et al., 2010).

Norway is said to be the second Nation that implemented UHC (around 1910) (Stuckler et al., 2010, p. 17) and Russia followed in 1937 by joining its system for the working population in cities with its system for the rural population (Roemer, 1993, p. 95) (not shown in Figure 1 below). The first country to cover its entire population thereafter was New Zealand, where the Ministry of Health installed a medical insurance system nearly from scratch in 1939 (Roemer, 1993, p. 95) (also not shown in Figure 1 below). Although neither Russia nor New Zealand are included in Figure 1 below, it can clearly be seen, that only a few countries initiated UHC before the 1950s and the largest share of UHC implementation happened after the Second World War (Stuckler et al., 2010, p. 17; WHO and Lerberghe, 2008, p. 26).

Figure 1: "Year of UHC Legislation and levels of GDP per capita" (Stuckler et al., 2010, p. 17).

In 1948, the United Kingdom installed its National Health Service (MoH UK, 1948), Sweden passed a relevant law in 1946 and put it into practice in 1955 (Glenngård et al., 2005, p. 16), Iceland and Norway followed in 1956,² Denmark in 1960, Finland in 1963 (Kuhnle and Hort, 2004, p. 7) and Belgium in 1969 (Corens, 2007, p. 17). Outside of Europe, Japan was among the earliest countries to reach UHC (1961) (Rodwin, 1994). Canada passed the crucial law in 1968 (Maioni, 1998, p. 135), Australia followed in 1975 (Hilless and Healy, 2001, p. 15), Korea in 1989 (Bärnighausen and Sauerborn, 2002, p. 1568), Taiwan (NHI, 2012) and Israel in 1995 (Woolf, 2011, p. 5). Quite a large number of European countries only reached UHC in the late 1970s or even in recent years. Among them are: Italy in 1978 (Donatitini, 2013, p. 66), Austria in 1978 (Austrian Information, 2012), Portugal in 1979 (Pedro et al., 2011, pp. xv, 15), Greece in 1983 (WHO, 1996, p. 67), Spain in 1986 (Lopez et al., 2004), Switzerland in 1996 (Camenzind, 2013, p. 119), France in 2000 (Durand-Zaleskiki, 2013, p. 45) and the Netherlands in 2006 (Daley et al., 2013).

1.2 Status quo and recent development

Drawing from experiences of these and other countries, low- and middle-income countries like Costa Rica, Mexico, Thailand and Turkey are moving significantly faster towards UHC than industrialized countries did in the past (WHO and Lerberghe, 2008, pp. 25, 26). According to WHO, the way to UHC requests three steps: 1. raising funds, 2. reducing direct payments, 3. improving efficiency and equity. In all three aspects, countries like Brazil, Chile, China, Mexico, Rwanda and Thailand have been attested remarkable progress (WHO, 2010a, p. xi).

For further investigation of today's situation and future development, the international treaties of the WHO and the UN are most useful as they reflect the consensus of all member states. A central document in this context is the World Health Assembly (WHA) document 58.33. It points out how "Sustainable health financing, universal coverage and social health insurance" (WHO, 2005) can best be managed. In this document, UHC is endorsed as a central goal and it is stated that everyone should be able to access health services and not be subject to financial hardship in doing so (WHO, 2014a, pp. vii, x, 2010a, p. x). Furthermore, the WHA document 64.9, "Sustainable health financing structures and universal coverage" (WHO, 2011a), has strengthened the importance of UHC and was one of the major forces in the process of initiating the report, "Making fair choices on the path to universal health coverage" by the "WHO Consultative Group on Equity and Universal Health Coverage" (WHO, 2014a). In addition, the World Health Report 2013, "Research for Universal Health Coverage", emphasized the need for progress towards UHC and pointed out several means to achieve this goal (WHO, 2014a, p. viii, 2013). Further activities – within the 12^th general program of work for the 2014-2019 period and the post–2015 development agenda – have set priority to UHC as a central theme (WHO, 2014a, p. viii). These goals are supported by other UN organizations as can be seen through the adoption of a resolution by the United Nations General Assembly (UN, 2012a, 2012b) which emphasizes the responsibility of governments to increase their efforts to "accelerate the transition towards universal access to affordable and quality health-care services" (WHO, 2014a, p. viii). The documents mentioned above show clearly that UHC enjoys a high priority on the political agenda – not only, but especially regarding health effects.

1.3 Reasons to aim for UHC

Among the reasons to promote UHC are numerous benefits for the individual as well as society. They include an increase of quality of life, economic and social development and peace (Bai and Wu, 2014; Brown et al., 2007; Cheng et al., 2014; Chen and Jin, 2012; Hou et al., 2012; Jung and Liu, 2011; Marten et al., 2014; Moreno-Serra and Smith, 2012; WHO, 2011a, 2010a, 1978). More specifically, benefits can be located in the following five areas: 1. service utilization, 2. affordable access, 3. distributional effects, 4. economic and social development and 5. international law.

1. Benefits from "service utilization" are gained through the consumption of health services and the possibility to access them. An underlying assumption is that the possibility to access medical services leads to higher health levels of the population. The importance that is given to UHC in this context becomes obvious as universal coverage is "one of the four key pillars of primary health care and services through patient centered care, inclusive leadership and health in all policies" (WHO, 2011a, p. 1). Achieving health is also seen as valuable in itself, especially due to its importance for overall well-being and the capabilities and opportunities that arise from it (WHO, 2014a, p. 2).
2. "Affordable access" refers to the personal financial situation of the health care consumer. A health care system that includes large out-of-pocket payments (OOP) for medical services often suffers from several negative effects: (i) The well-being of people is severely limited. (ii) In case of financial problems, psychological pressure can affect people's health. (iii). Economic opportunities are limited through enforced or anticipated health costs. All of these problems do not only affect the individual patient but also his or her family that might have to support the ill person financially. As affordable access to medical treatments therefore leads to financial protection, it overlaps with the following points "distributional effects" and "economic and social development".
3. "Distributional effects" can be observed, if health-financing systems include a mode for prepayment of health costs and a risk pooling mechanism that disconnects the need for health care from the ability to pay for it. As a result, the individual risk is shared among the population and catastrophic health expenditure ³ and impoverishment of individuals can be avoided (Kieny and Evans, 2013). As low health insurance coverage mostly excludes the poorest people of a society from medical care, UHC can promote a fairer distribution of health and well-being by improving coverage for the underprivileged (WHO, 2014a, p. 2).
4. The "economic and social development" of a country can be affected in a direct as well as in an indirect way. Directly, a higher health status of the population leads to a better working and learning capacity and thereby improves the general economic situation. This aspect can be captured in the statement: "Healthy children are better able to learn and a healthy population facilitates economic growth" (WHO, 2014a, p. 2). Indirectly, a higher level of education empowers people to protect their own health. This includes the use of preventive services before a possible disease manifests. In the case of illness, they might choose the right health service at the right time (Kieny and Evans, 2013, p. 305). Consuming the right services at the right time and consuming preventive care both make health systems more cost-effective and therefore have a positive effect on the economy and the social development opportunities of a nation (Kieny and Evans, 2013, p. 305; WHO, 2014a, p. 2).
5. "International laws" are important in so far as every country has ratified at least one treaty which specifies obligations to meet the right to health. Among those treaties is the Universal Declaration of Human Rights which supports "the enjoyment of the highest attainable standard of physical and mental health" (WHO, 2014a, p. 2) or more specific, in article 25.1, "the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control" (WHO, 2011a, p. 1). Furthermore, a large number of the WHO treaties make a strong statement for the importance of health being a social value, such as the WHO constitution which proclaims that the "enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social condition" (WHO, 2006, p. 1). It is clear that UHC by itself is insufficient to ensure all the aims formulated within these and other international treaties, but reaching UHC in a country is evidently an important part of this strategy. Overall, the international community agrees about providing UHC being one of the core obligations of any government that strives to develop a modern society (WHO and Lerberghe, 2008, p. 25).

As mentioned above, implementing UHC is associated with many positive effects for society. Among them are the just presented five specific points, but also broader benefits such as increase of quality of life, economic and social development as well as peace (Bai and Wu, 2014; Brown et al., 2007; Cheng et al., 2014; Chen and Jin, 2012; Hou et al., 2012; Jung and Liu, 2011; Marten et al., 2014; Moreno-Serra and Smith, 2012; WHO, 2011a, 2010a, 1978). It is hence not surprising that people in most countries rate health as one of their highest priorities, even higher than economic concerns such as employment status, wage levels and cost of living standards (WHO, 2010a, p. ix). Against this background it is most interesting for this study to understand the specific situation in the People's Republic of China before the detailed analysis is undertaken.

1.4 Status quo of health insurance coverage in China

The Chinese health insurance system was established in the 1950s and, at this point, included three different schemes: firstly, the Cooperative Medical Scheme (CMS) for the rural population; secondly, the Labor Insurance System (LIS) for urban employees and their dependents of state-owned enterprises and collectively-owned enterprises; thirdly, the Government Insurance System (GIS) for Government staff, retired government staff and university students. This structure, which offered a somewhat universal coverage, collapsed between 1978 and 1998, when only 12.7% of rural residents and 55.9% of urban citizens still enjoyed health coverage (Liu and Yi, 2004; Meng et al., 2012a, pp. 7–8). In the course of the 2000s this development was targeted by introducing the New Rural Cooperative Medical Scheme (NCMS), the Urban Employee Basic Medical Insurance (UEBMI) and the Urban Resident Basic Medical Insurance (URBMI). As a result, the recent Chinese coverage rate is regarded to be 97.4% for the rural and 90.9% for the urban population (numbers for 2011, compare Figure 2 below) (Meng et al., 2012a).

Figure 2: "Rural and urban health insurance coverage in China, by program, 1993-2011" (Meng et al. 2012a).

In addition to this positive tendency, the relevant Five-Year Plan for this study (2011-2015) marks another important step of the development of the Chinese health care reform. Contrary to the previous Five-Year Plans, this one does not merely emphasize economic growth but also the improvement of overall welfare of society (Casey and Koleski, 2011, p. 2).

Among other sectors of health reform, the development of a comprehensive insurance system is a major task of the 12^th Five-Year Plan. Subordinate to this objective is the achievement of medical insurance for the whole population, the increase of the coverage rate, more financial support for medical expenses as well as the improvement of the payment and the reimbursement system (Dong, 2011, p. 3). For the first time in the history of Chinese Five-Year Plans, the 2011-2015 plan explicitly targets the wellbeing of individuals: It is planned to increase the average life expectancy of the Chinese people by one year between 2011 and the end of 2015 (Casey and Koleski, 2011, p. 4). Overall it can be stated that this Five-Year Plan is aiming towards a fairer income distribution ...

Table of contents

• Notes
• Acknowledgements
• Table of Contents
• Table of Figures
• List of Tables
• List of Abbreviations
• 1. Introduction
• 2. Definition and concept
• 3. The situation in the People's Republic of China
• 4. Summary and conclusion
• 5. Boundaries and discussion
• 6. Outlook
• Bibliography
• Annexes
• Copyright