Chinese Health Care Reform: The Good and the Bad

Health usually follows wealth, but that has not been the case in China, according to William Hsiao, K.T. Li Professor of Economics in the Department of Health Policy and Management, pictured at left. China's booming economy is bringing rapid improvements to its citizens' standard of living, but improvements in health have stagnated, he told an audience on February 20 in Kresge G-3.

Yuanli Liu, director of the School's China Initiative, introduced Hsiao's talk, "Chinese Health Care Reform: The Good and the Bad." The talk was the first in a monthly series of seminars on the School's work in China. He described Hsiao's extensive experience in Chinese health sector reform, which includes having developed a model for providing low-cost health insurance to China's rural population that is currently being tested in two provinces.

In China today, health care costs are spiraling out of reach for the average citizen, and the system is mired in waste and inefficiency, Hsiao said. These problems began in the 1980s, when government-funded health care, with its strong emphasis on public health, was dismantled in favor of a blended system that is more profit-driven. Although some insurance is available, patients now pay much more out-of-pocket for medical services. The transition has been particularly hard on poor, rural Chinese. For example, these individuals paid an average of 83 percent of their monthly income in 2003 for a doctor's visit, Hsiao said. And because doctors are paid according to the drugs and tests they administer, patients may receive unnecessary treatments.

In response, the Chinese government is acting to address aspects of these problems, Hsiao noted. Health care spending has been significantly increased in four areas: public assistance for the poor; prevention and primary care; community health centers; and a subsidized shallow insurance plan that will cover nearly everyone. The government will also allow private insurers to offer supplemental plans.

Many issues remain unresolved, however, in the ongoing efforts of health care reform. Hsiao questioned the motivation of many health officials, hospital directors, and doctors. He is concerned that funding earmarked for badly needed public health improvements may be captured by doctors and hospitals for higher salaries and earnings. He predicted that hospital directors will continue to prioritize expensive high-tech machinery and specialists over basic patient care. And he noted that patients need to be persuaded to seek primary care services for minor illnesses from community health centers, rather than tie up hospitals.

To learn more about Hsiao's efforts to help China provide low-cost health insurance to residents, read "The Long Road Back" published in the Harvard Public Health Review.

The next talk in the China Health and Healthcare Seminar Series will take place on Friday, March 21, in Kresge 502. Liu will deliver "A Critical Review of China's Health System Performance."

—Amy Roeder. Photo by Suzanne Camarata.