Health System in People’s Republic of China (PRC): Reforms, Transformation and Challenges

Abstract:

This paper studies the development of the Chinese health system over the past several decades given its political, social and economic context. The objective of conducting this review is to draw lessons for health system strengthening, access and equity for countries who are following the path to universal health care. The health services in China have gone through several phases of reforms – in financing, provisioning and governance – and the paper outlines the salient features of these reforms and their impact in terms of access, utilisation and equity through a systems framework. It then looks at the achievements and challenges that still exist and highlights the lessons that would be imperative for other lower-middle and upper-middle income countries. This paper traces the development of the Chinese health system from the Mao era (1950-1980) to the present. In the Mao years, health of the population was central to the development process and health outcomes significantly improved due to universal access to food, preventive and promotive services and basic medical care. The focus was on rural development and communes were central to the process of social and economic development. China moved from a socialist economy to a “market economy with socialist characteristics” (market socialism) in 1978. This dramatic shift led to dismantling of the collectives and subsequent breakdown of health services which were managed by the collectives. The central government subsidies to health services came down dramatically and the responsibility of generating funds for health services transferred to local governments and public health facilities. The public health facilities started behaving like commercial enterprises in order to survive. This saw an increase in out-of-pocket (OOP) expenditure that reached a peak of 61 percent in 2001. The public discontentment followed by the SARS epidemic of 2003 put the Communist Party of China (CPC) on the backfoot and they introduced a series of reforms in financing in early 2000s–this included launching insurance schemes (for rural residents, urban employees and urban residents). These reforms were still unable to improve access due to shallow coverage and benefits as well as the lack of focus on supply-side issues. The 2009 reforms thereafter, were a watershed in terms of course corrections. Since 2009, reforms have been undertaken to universalise insurance coverage with considerable increase in contribution from the government; strengthen primary care services (including preventive services) and to create a referral system; develop an essential medicine list; make public hospitals more efficient; and give more space to private sector investments in provisioning and financing. The outcomes have resulted in reduced OOP and significant improvements in some key health indicators but despite these progressive reforms and reduced OOP, the Chinese health system faces challenges of access, equity and high costs. This paper tries to unravel the complex health system that has emerged over the years and lessons that can be drawn from the Chinese experience.