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China's Health Care Reform
2011/01/17

(2011.01.17)

Dr. Koestlin,

Ladies and Gentlemen,

I'm glad to be invited by Dr. Koestlin to attend this Political Forum of Bayer Group's senior managers' meeting.

As one of the world's leading enterprises in the field of health care, nutrition and high-tech materials, Bayer's link with China dates back to 1882, when the company first began selling dyes on the Chinese market. During the last 129 years, Bayer's investment in China has grown steadily. Bayer has played an important role in promoting medical and technological development in China. Bayer has become a key partner in China's economic and social development. Meanwhile, China has become Bayer's single largest market in Asia.

Today, I would like to introduce a subject that you might be very interested in: China's health care reform. Three key words will be included, namely: Achievements, Problems and Prospects.

1. Achievements

For thousands of years, the Chinese people have dreamed and made unremitting efforts in order to realize the goal of "all sick people can receive medical treatment". Since the founding of the new China, especially through the last 30 years of reform and opening up, China has made two significant achievements in health care services.

First is that the health service system has developed rapidly, and the health conditions of urban and rural Chinese improved continuously.

When the PRC was established, medical equipment in China was both rudimentary and scarce, and medicine and medical care were not available to most of the Chinese. In 1949, the average life expectancy in China was only 35. Now it's 73, way above the average 63 of developing countries and quite close to the average of 75 of developed countries. There were only 100 thousand medical personnel in whole country with only 2 hospital beds for every 10 thousand people. Now, there are 289 thousand health care facilities, 6 million medical personnel, 3 hospital beds for every thousand Chinese. The maternal mortality rate (dropped from 15 thousand per million to 319 per million;) and the infant mortality rate (declined from 200 thousandths to 13.8 thousandths) are among the lowest of developing countries.

Second is that the gradually improving medical insurance system in the country has covered most of the Chinese.

More than 1.2 billion urban and rural Chinese have been covered by basic health insurance. Over 90% of the population has enjoyed the benefits.

In Chinese cities, residents with jobs are covered by urban workers' health insurance while those unemployed enjoy the urban residents' health insurance . By the end of 2008, people covered by the two types of insurances has reached 318 million, accounting for 52.2% of the total urban population. In addition, there are two types of people, first urban civil servants and retired workers who enjoy free medical care. Second others have voluntarily participated in commercial health insurance. Free medical care and commercial health insurance together cover further 10% of the total urban population.

In Chinese rural areas, people are advised to participate in Rural Cooperative Medical Care System on a voluntary basis. From 2003, both the central and local government provided 10 yuan respectively each year for every participant in this system, while the participant contributed further 10 yuan. The 30 yuan makes up the basic medical insurance of a year. Currently, the per capita level funding increased from 30 to 150 yuan each year with 120 yuan coming from the government. This new Rural Cooperative Medical Care System has covered most of the rural population in China. The participation rate is 95% with over 835 million people. The maximum reimbursement for medical treatment cost has increased to the amount that is 6 times of the local per capita annual net income, thus, significantly reducing the medical expenditure burden on farmers.

2. Problems

Despite the huge achievements in China's health care system, Chinese people are still facing a dilemma that "medical treatment is both difficult and expensive". There are too many patients in large hospitals in big cities. It is inconvenient to have medical treatment in remote rural areas. Some patients are overburdened with excessively high medical expense. Some even can't afford medical treatment. So why is medical treatment so difficult and expensive in China?

(1) Insufficient government investment

China, with 20% of the world's population, has a health expenditure that accounts for only 3% of world's total. The Chinese government contributed only 24.7% of the country's total in 2009. This is not only far below the average of 75% in developed countries, but also below the average of 55% of developing countries. Under such circumstances, 56% of China's health care cost is bore by individuals. According to my knowledge, German individuals only have to bear 10%.

(2) Uneven distribution of health care resource

70% of health care resources in China is in large cities, 80% of which are in big hospitals. While the big hospitals have overdeveloped with equipment and personnel, primary hospitals and medical centers in urban and rural communities are suffering serious shortage of good medical equipment and qualified general practitioners. The consequence is that people don't trust primary hospitals and keep flocking into big hospitals in large cities.

(3) Low coverage of health insurance

There are still over 100 million people in China not covered by health or medical insurance of any kind. Even those with health insurance have heavy burdens. With urbanization process, there are as many as 10 million rural residents entering the Chinese cities every year. It is a stern challenge to the Chinese Government's resolution and wisdom as how to cover laid-off workers, unemployed, minimum substance allowances receivers and migrant workers all with health insurance.

(4) Public hospitals that regard economic interest as priority

71% of Chinese hospitals are publicly owned. Due to long time low government investment, the public hospitals are in blind pursuit of economic interests, causing phenomena like "over treatment" and "doctors make living on prescribing medicines". In 2008, one hospital in Shanghai gained 57% of its total income from selling medicines. Patients not only have to bear the cost for medical treatment and medicine, but also have to "make contributions" to doctors' bonus and the purchase of new medical equipment for the hospital. In 2008, 25% of the patients that should be hospitalized were not able to do so due to the excessive hospital charges. Besides, the inflated price of medicines and "more medicine sellers than patients" are important reasons for people not being able to afford the medicines.

3. Prospects

In 2009, China officially launched a new health care system reform. The Government has announced the "New Health Care Reform Plan". The plan stated that during 2009 to 2011, governments at all levels should earmark total of additional 850 billion yuan in their budget to support new health care reform. In the last two years, these measures have achieved remarkable results.

(1) To tackle the problem of "over expensive medical treatment", we have adopted the following measures:

A. Increasing government investment to cover all people

By now, the Chinese Government has invested 50.9 billion yuan and has successfully solved the historical problem of health insurance for over 6 million retired workers from various bankrupted state-owned enterprises. Meanwhile, the Chinese Government has also solved the health insurance problem for over 2 million people who are retired workers from other enterprises and workers from enterprises that are in difficult situations. About 46 million migrant workers have been covered by urban workers' health insurance. University and college students have been covered by health insurance for urban residents. By 2011, the basic health insurance system will be able to cover all the urban and rural residents.

B. Establishing a national essential medicine system to reduce medicine prices

The Chinese Government has identified 307 essential medicines for common and frequently-occurring diseases. Government guidance on prices of these medicines has been published. The government has included all the essential medicines into the health care reimbursement list. Now, 51% of all the government town and community clinics and medical centers have used the medicine price guidance. The prices for the essential medicines have thus dropped by 25% to 50%.

C. Promoting free medical treatments and advocating prevention first

Since 2009, the Chinese Government has offered all the urban and rural residents 9 types of free primary health services. Currently, 36% of urban residents and 24% of rural residents have got health archives; over 39 million people over 65 have enjoyed free physical check-ups; 460 thousand poor cataract patients have been treated with free operations; over 13 million pregnant and maternal women in the countryside have received maternity allowance.

(2) To tackle the problem of "too difficult to receive medical treatment", we have adopted the following measures:

A. To develop primary health service facilities

Over the past two years, the Chinese Government has invested 40 billion yuan in supporting building of 1877 county hospitals, 5169 township clinics, 2382 urban community health service centers and 11250 village clinics in remote areas. Another 13 billion has been invested to purchase equipments for health centers in counties, townships and villages. Meanwhile, 60 thousand general practitioners were trained for the primary health service facilities. The goal is to make primary health service facilities capable of addressing 80% of the total medical practices in big urban hospitals. People won't have to go out of their village to receive medical treatment for minor illness. Even if the sickness is quite serious, they won't have to go beyond their county before being treated properly.

B. To reform public hospitals

Since the beginning of 2010, the Chinese Government has actively established a mechanism of coordinated division of responsibility between public hospitals and primary health service facilities. Primary health service facilities will receive government support to provide efficient medical services and treatment to those with minor ailment so that public hospitals will be able to concentrate on the treatment of difficult and serious diseases. Meanwhile, the government has encouraged individuals and private business to invest in all kinds of health service facilities. Thus, the competition between public and non-public hospitals will be introduced and patients will be provided with more choices.

Ladies and Gentlemen,

850 billion yuan health care investment in 3 years is obviously the most eye-catching part in China's reform plan. With the active support of the central government, the demand for new medical equipment to replace old ones will increase dramatically. Therefore, China's market for new medical equipment is huge and producers of such equipment will be one of those who benefit most from China's current medical reform.

The health care reform is certainly more than just to upgrade medical equipment. Establishing new mechanisms and changing people's way of thinking are of great importance to the reform. The Chinese Government has included all these policies and measures mentioned above in its "Twelfth Five Year Plan" to synchronize health care reform and economic development. This on-going health care reform which affects the vital interest of all the Chinese people will certainly be a long and arduous task and also a world class difficult problem to tackle. Therefore, it is impossible to achieve all the goals at once. But no matter how difficult it is, the Chinese Government is determined to make great efforts to realize the dream for all the Chinese people: "all sick people can receive medical treatment".

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