COMMENTARY

Factors Contributing to High Costs and Inequality in China’s Health Care System
Houli Wang, MD Tengda Xu, MD Jin Xu, MD Along with this progress has come an increasing burden of medical expense and difficulty with access to medical services.8 The present public health system cannot provide effective primary health care services to the population.9 Lowincome families find it difficult if not impossible to afford the expensive medical costs. Prior to the 1985 reforms, the patient-physician relationship was generally considered strong and trusting, but since 1985, this relationship appears to be under increasing strain.10 The high cost of health care, health care inequality, and the tension in the patient-physician relationship are due to multiple factors. First, the allocation of health care resources between urban and rural China is uneven. The population of China reached 1.3 billion at the end of 2005 and accounted for 22% of the world’s population, while its total health care expenditures account for only 2% of the total medical expenditures of the world. 11 About 800 million individuals live in rural areas, but 80% of the medical institutions are concentrated in cities. Furthermore, high-quality medical resources tend to be congregated in large-capacity hospitals.12 This uneven distribution of medical resources has worsened significantly during the last 2 decades. In the 1970s, approximately 3.5 million medical personnel were working in rural areas but this has declined to about 500 000 in the last decade. 13 Patients in rural areas have a difficult time receiving timely medical assessment and care, leading to more advanced disease at diagnosis and subsequent higher medical care costs.9 A second major factor is that government investment in the health care sector has been inadequate during the past 2 decades. National Health Accounts data show that total health expenditure has increased more than 40-fold over 2 decades14 to US $91.8 billion in 2005, accounting for 5.55% of China’s GDP.12 However, while governmental investment in the health care sector has increased annually, its share of total health expenditure has declined from 36% in 1980 to 17% in 2004.6 The government’s underfunding of the public health system has had
Author Affiliations: Department of Emergency Medicine, Peking Union Medical College Hospital, Chinese Academy of Medical Sciences, Peking Union Medical College, Beijing, PR China. Corresponding Author: Houli Wang, MD, Department of Emergency Medicine, Peking Union Medical College Hospital, Chinese Academy of Medical Sciences, Peking Union Medical College, Beijing, 100730, PR China (houli_wang@yahoo .com).

HINA, THE LARGEST DEVELOPING COUNTRY IN THE world, has experienced great economic development in recent years. Since reform and the opening-up policy were implemented in 1978, the national economy has grown at an average rate of 9.6% each year, and in 2005 China’s gross domestic product (GDP) per capita reached US $1698.1 Along with economic development have come social challenges. The gap between rich and poor has widened. In 2005, China’s Gini coefficient, an indicator of income distribution difference, was estimated2 at more than 0.48 (for comparison, the US Gini coefficient was 0.45 in 2004).3 Although the proportion of the population with incomes below the poverty level has decreased dramatically over the past 3 decades, about 21.5 million individuals are absolutely poor (annual income US $85) and another 35.5 million are underprivileged (annual income US $85-$115) in China.4 More than half of the poor reside in remote western counties.4 One result of economic inequality is wide disparity in access to many social programs, especially in the health care system. The first widespread health care reforms in China began in 1985, and since that time a market-driven economy has operated in the health care sector. During the past 2 decades, China has made great strides in improving the health status of its population.5 In 1978, there were 1.08 physicians and 1.93 hospital beds per thousand population compared with 1.51 and 2.57 in 2005, respectively.6 In 2004, the neonatal death rate was 1.54%, the maternal mortality rate was 48.3 per 100 000, and the life expectancy at birth was 71.8 years.6 In developed nations, these figures are on the order of 0.5% (neonatal death rate), 20 per 100 000 (maternal mortality rate), and approximately 80 years (life expectancy). 2 According to the World Health Organization (WHO), “Overall, people in China are living longer and healthier lives. . . . The disease profile resembles that of the developed countries: 85%-90% of deaths are due to noncommunicable diseases and injuries.”7
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COMMENTARY

a major influence on the prevention and treatment of epidemics and common illness, making it difficult for individuals, especially the poor living in remote rural areas, to access primary health care.9 A third factor is the government’s weak supervision and administration of the health care sector over the last 2 decades. The central and local governments have offered limited financial support to hospitals. Approximately 94% of hospital revenue comes from patients’ medical care expenditures.13 In addition to increasing investment in infrastructure, hospitals have strived to introduce modern technologies and new drugs from developed countries. However, because there are no legislative or official administrative rules or regulations to guarantee physicians’ performance, some physicians have ordered repeated unnecessary examinations and prescribed potentially unneeded and expensive drugs. 15 Medical costs often exceed the economic capability of low-income families. In addition, the relatively high prices of drugs, including many common and essential drugs, have also increased patients’ economic burden for health care. In the United States, the Food and Drug Administration approved 148 new drugs in 2004, while an astoundingly high number of “new” drugs (approximately 10 000) were registered in China during the same period by the State Food and Drug Administration, a system that remains lax. 1 6 Although the Chinese government attempts to control drug prices by administrative means, drug prices remain high. As a result of the approval of potentially ineffective and dangerous medications, poor and relatively uneducated individuals may be more susceptible than their urban counterparts to exploitation by charlatans and also improperly treated by inadequately trained health care practitioners.15 Fourth, the majority of the Chinese population is not effectively covered by any form of health care insurance system. The Labor and Social Security Administrations of central and local government agencies are the mainstay in the provision of health insurance. According to the 2003 census, 45% of residents in urban and 80% in rural areas were not covered by this public system.17 Government officials, civil servants, and those working in stateowned companies are usually enrolled in the public health care insurance system but few of the absolutely poor, especially those in remote rural areas, are brought into this system. At the same time, the commercial health insurance market is quite underdeveloped, and in 2006, represented only 6.7% of China’s total commercial insurance business.18 Among the 5 performance indicators cited in the World Health Report 2000, China’s health system ranked 144 among 191 WHO member countries.19 Highlighted in the report was the lack of fairness in financial contributions to the health system. From 1980 to 2004, household payments for medi©2007 American Medical Association. All rights reserved.

cal costs increased from 21.6% to 53.6% of the total health expenditure.6 An overreliance on household payments to finance health care operating costs has led to even greater inequalities in access to health services, since more individuals cannot afford to pay the cost of their most basic medical bills. Some low-income families have become absolutely poor due to the expense of a single catastrophic illness in the family. To ensure the fundamental rights of the poor to receive adequate health care, the government must establish a more broad and reasonable health care insurance system. As is the case in much of the rest of the world, the aged proportion of China’s population is increasing. The population older than 65 years included 100.4 million persons, or 7.69% of China’s total population, in 2005 and is expected to increase at an annual rate of 3.28% during the next 14 years to peak in the 2030s.20 With this increased aged population, total health care needs and expenditures will increase as well. China’s proportion of GDP allocated to health care, currently about 5.55%, is likely to increase steadily to become closer to that of developed countries, most of which have comparable rates of 8% to 11%, up to nearly 16% in the United States.11 Improving the health care system will require the Chinese government to take more responsibility for health care equality among its citizens. China’s decision makers face a difficult challenge balancing the differential financial contribution of the government against the disproportionate amount the poor and middle-class nongovernment employees pay for health care. This cannot be achieved easily by simply increasing investment in the public health system. As most poor individuals are not covered by the public insurance system and they cannot afford commercial insurance, the public health care insurance system should be modified to include the majority of its population, especially the poor. Middleand higher-income individuals should be encouraged to purchase commercial insurance. The contribution of the Chinese government cannot replace the responsibility of each household to bear some of its medical costs. While commercial insurance companies can and should play an important role in providing more equal health care services in the future, policies and financial incentives are needed to promote the development of health care insurance companies and private hospitals to broaden China’s medical resources. This will require time, dedication, and fiscal discipline in all sectors, but if China can build a prosperous market of private health care services and commercial health insurance, the government’s burden should be alleviated, and more government resources can be used to ensure that all the poor in China may benefit from the fundamental human right of health care.
Financial Disclosures: None reported. (Reprinted) JAMA, October 24/31, 2007—Vol 298, No. 16 1929

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REFERENCES 1. China Labour Statistical Yearbook 2006. Beijing: Dept of Population and Employment Statistics, National Bureau of Statistics & Dept of Planning and Finance, Ministry of Labour and Social Security of China, China Statistics Press; 2006:5. 2. Human Development Report 2006: Beyond Scarcity: Power, Poverty and the Global Water Crisis. New York, NY: United Nations Development Programme; 2006:283-287, 301-304, 315-318, 335. 3. The World Factbook: United States. US Central Intelligence Agency Web site. https://www.cia.gov/library/publications/the-world-factbook/geos/us .html#Econ. Updated September 20, 2007. Accessed September 27, 2007. 4. Statistics Communique on the 2006 National Economy and Social Development of China. Beijing: National Bureau of Statistics of China; 2007. 5. China: Health, Poverty and Economic Development. Beijing: Office of the World Health Organization Representative in China & Social Development Dept of China State Council Development Research Center; 2006:4-7, 25-26. 6. China Social Statistical Yearbook 2006. Beijing: Dept of Population and Employment Statistics, National Bureau of Statistics of China, China Statistics Press; 2006:214, 219, 238. 7. Western Pacific Country Health Information Profiles, 2006 Revision. Manila, Philippines: World Health Organization Regional Office for the Western Pacific; 2006:47. 8. Yu DZh. Perfecting the medical security system: the fundamental solution to the issue of inadequate and overly expensive medical services. Chin J Hosp Admin. 2006;22(2):73-76. 9. Wang XD. Government’s responsibility in solving the problem of high healthcare costs. Chin J Hosp Admin. 2006;22(1):20-22. 10. Song H, Song LT, Huang T, Chen WM. Multidimentional reflections on the current situation of the physician-patient relationship. Chin J Hosp Admin. 2003; 19(9):517-519. 11. National health accounts. World Health Organization Web site. http://www .who.int/nha/country/. Accessed September 5, 2007. 12. National Health Statistics Yearbook 2006. Beijing: Dept of Statistics, Ministry of Health of the People’s Republic of China, Chinese Academy of Medical Sciences & Peking Union Medical College Press; 2006:19, 53, 59-65, 85. 13. Wu XL, Rao KQ. The brief development status of health resources in China since 1980s. Chin Health Econ. 2001;20(11):38-41. 14. A Health Situation Assessment of the People’s Republic of China. Beijing: United Nations Health Partners Group in China; 2005:37, 42-43. 15. Yu DZh. Analysis of the increment of China’s healthcare expenditures. Chin Health Econ. 2005;24(3):5-7. 16. Li HJ, Wan J. “Tens of thousands of new drugs” challenging the new drug approval system in China. Med Ind Inform. 2006;3(10):82-83. 17. Kang YJ, Zhang HB, Xu Ch Q. Causes of the current rise in medical expenses and counter measures. Chin J Hosp Admin. 2005;21(4):220-223. 18. China Insurance Regulatory Commission. Statistical information 2007. http: //www.circ.gov.cn/Portal0/InfoModule_443/41881.htm. Accessed September 27, 2007. 19. The World Health Report 2000–Health Systems: Improving Performance. Geneva, Switzerland: World Health Organization; 2000:152-155. 20. China Population Statistics Yearbook 2006. Beijing: Dept of Population and Employment Statistics, National Bureau of Statistics of China, China Statistics Press; 2006:3.

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