Harvard Public Health Review: Summer Fall 2006

Harvard Public Health Review
Summer Fall 2006

HSPH Report: China and India

The Long Road Back

Restoring health care for China's peasant farmers

The plane from Boston to Beijing takes a wearying 20 hours. Then, Harvard School of Public Health (HSPH) Professor William Hsiao boards a three-hour flight west to Guizhou or Shaanxi province in the hinterlands, far from the glittering coastal cities like Shanghai, whose towering skyscrapers are icons of China's soaring economy.

The final leg of the 70-year-old health economist's journey takes him by train or car, bumping over potholed roads, past donkey carts and fields plowed by water buffalo, to villages where peasant families share mud brick dwellings with pigs and chickens. In rural areas like this throughout the interior, more than 500 million peasant farmers--close to one-third of the population--eke out a harsh existence. It is a life made bleaker by the collapse more than two decades ago of China's publicly financed rural health system, once the envy of the developing world.

Deputy Mayor Ze-hui Yang of Guiyang City, Guizhou's capital, repeats an oft-heard mantra to sum up farmers' plight: "You bear minor illnesses; you endure major ones until the Devil takes you."

At an age when many are retiring, Hsiao, the K.T. Li Professor of Economics in HSPH's Department of Health Policy and Management, travels four times a year to the country of his birth. Since 2002 he has been heading a social experiment he designed to provide a low-cost health insurance scheme for those left behind in the "new China." Hsiao's model scheme, Rural Mutual Health Care (RMHC), is being tested among 60,000 peasants. If it is successful, China may replicate it to cover millions more. "Every three months I go for three weeks," Hsiao says, "one week in each province, living in the villages to get an understanding of the situation on the ground; then I spend a few days in Beijing to brief policy makers about our progress."

Hsiao--who helped design Taiwan's single-payer universal health coverage system and has aided Cyprus, Colombia, South Africa, Sweden, and Uganda with system reforms--has been teaching and advising China on health-system issues for more than 20 years. With UNICEF funding, he documented the plight of China's peasant farmers in the aftermath of economic reforms introduced in 1980 when, in adopting an unfettered market economy, the government abandoned funding for rural health care. Hsiao, who was among the first to raise warning flags about the perilous situation, worked closely with Chinese academics to set up centers in a dozen universities to school the next generation in health economics, management, and policy analysis

The travel is tiring, Hsiao admits, "but when you believe in something, you put your money where your mouth is." For Hsiao, that's not just a metaphor. When promised funding for year two of the RMHC research project fell through, he took out a $300,000 mortgage on his Cambridge home as a stopgap. It was a step few would consider, but Hsiao took an eminently practical view. "I could either take out the mortgage and spend my time making the experiment work, or spend the time writing grant proposals," he explains. "It was my choice."

Fortunately, he adds, HSPH's Winnie Yip, associate professor of international health policy and economics, and a dozen graduate students donate time to the research. Hsiao has also won grants and philanthropic support--"$50,000 here, $100,000 there." With gifts from the Tai Foundation, Dr. Felix Yip, Kimball Chen, WHO/Beijing, the Harvard Club of Silicon Valley, and others, he has raised more than $1 million to subsidize peasants' premiums and pay a research staff in China.

A SCHEME THAT WORKS
Hsiao's RMHC experiment enrolls peasants in a voluntary prepaid insurance plan covering preventive, primary, and catastrophic care. The plan is financed by low individual premiums (U.S. $2 a year) combined with a subsidy (U.S. $2.50 a year) which, in the experiment, is paid out of Hsiao's research funds (in the future, the Chinese government would pay). Although RMHC requires co-payments, it guarantees access to care and reforms the delivery system.

To address inefficiencies and spotty quality, the scheme empowers peasants to hire village doctors, and to purchase pharmaceuticals through a competitive bidding system that roots out a major problem: counterfeit drugs. A management committee can inspect health facilities and monitor the quality of care.

So far, with some adjustments after the first, money-losing year, the RMHC scheme looks promising. Speaking through a translator in June, Mayor Ze-hui Yang of Guiyang City said that 95 percent of farmers report high levels of satisfaction. Utilization is up; the over-prescription of drugs and under-use of services have declined; and the number of families impoverished by medical expenses has dropped, Yang said.

"Our plan is a lot different from others being tested by local governments," says HSPH doctoral student Shufang Zhang. "We cover both primary and hospital services, while most other experiments cover hospitalization only. We require doctors to be more efficient and compete for contracts. They are paid salaries for providing primary care; they can't earn more income by over-prescribing drugs. They're also required to keep medical records and treatment responses"--novel for rural China. Moreover, she adds, the peasants control the scheme; they are "self-governing."

As a result, farmers' out-of-pocket costs are dropping. Says Hsiao: "Before, farmers were spending U.S. $18 or so a year on medical care out of about $220 of per capita income. Now, costs are $12 or $13, and farmers pay only 60 percent of that, with RMHC's subsidy. The Chinese government has announced it will offer a $5 subsidy to farmers who join a scheme like RMHC and pay a $2 premium. That means farmers' out-of-pocket costs could fall to $5 or $6 a year."
Mayor Yang conducted her own assessment of RMHC and was so impressed that, in January of 2006, she extended the plan to 1.7 million people. "I begged her to delay it," says Hsiao. "I told her: 'You're making a mistake-we are still refining the scheme.' But she said, 'The farmers have benefited so much. The people want it. Do you want me to withhold it from them?' "

According to Yang, the health care picture has "drastically changed for the better." Care at township health centers has increased by 98 percent, and "the experiment has helped farmers seek care on time, which helps prevent minor illnesses from becoming major ones." About 92 percent of insured households and 64 percent of individuals have received compensation, the mayor notes, adding, "I am confident this model is sustainable. The key is to guarantee primary care services, improve the skills of village doctors, and ensure the security of insurance funds."
The chief "drawback," Yang notes, is that "strong administration and management capacity is required ... some parts of China may not have the capacity to operate the scheme." (For a detailed synopsis of her comments, translated by Zhang, visit www.hsph.harvard.edu/phcf/.)
Emphasizing lessons learned, Mayor Yang said: "It is important to involve farmers in the management of the insurance scheme. Farmers, as the premium contributors and beneficiaries, should be involved in monitoring the price and quality of health care, including the attitudes of physicians."

ONE MILLION BAREFOOT DOCTORS
The new China reflects a drastic shift in the government's priorities. In the late 1950s, under Mao Zedong's Communist regime, "China built a rural health system considered quite unique for a very low-income country," Hsiao says. The government employed more than one million "barefoot doctors," often farmers themselves, who had at most a year of training beyond junior high school. Using some modern drugs as well as traditional remedies--acupuncture, for example--they treated common illnesses. For more complicated cases, the government set up free clinics in townships, as well as hospitals in each county.

Mao's emphasis on public health enabled China to curb rampant diseases, from polio and smallpox to diarrhea and schistosomiasis. The barefoot doctors dug millions of latrines to make water supplies safer, taught people to prepare foods hygienically, and administered vaccines. Between 1952 and 1985, China's average life expectancy rose from 35 to 68 years. Infant mortality plummeted from 200 deaths per 1,000 live births to 40.

'COWBOY CAPITALISM'
But it was goodbye to all that when, in the wake of Mao's death in 1976, Deng Xiaoping dismantled the socialistic, centrally planned economic and health systems Mao had erected. Intent on creating jobs, building wealth, and opening China to global markets, Deng's regime moved in the early 1980s to what Hsiao calls "cowboy capitalism." The Maoist agricultural collectives, which had set aside welfare funds for health care, were disbanded, Hsiao says, "and China did not put anything in their place."

"The proverbial saying that a rising economic tide lifts all boats certainly did not apply to China's health sector," he says, pointing to today's widening health disparities.

In the process of privatization, rural China's barefoot doctors, clinics, and hospitals became profit-seeking entrepreneurs. Misguidedly, the government held down the price of most services, yet allowed profits on drugs and costly high-tech tests. Barefoot doctors were now "drug-peddlers," Hsiao says, boosting their income by over-prescribing and by dispensing counterfeit drugs purchased at urban markets. Intravenous infusions of antibiotics and steroids were prescribed for almost anyone with a mild infection.
Except for immunizations, primary and preventive care virtually disappeared."There are no more free clinics and barefoot doctors serving the people with heart and soul," lamented a 2003 editorial in the Shanghai Star.

Peasants came to fear what the Chinese call da bing--"big sickness." Health catastrophes like cancer, stroke, and heart disease could destroy lives and bankrupt families. News stories told of poor people forced to leave the hospital or discontinue cancer drugs for their children. Meanwhile, in affluent urban centers like Beijing and Shanghai, ultra-modern hospitals and practices offered hi-tech, Western-style medicine, including breast enlargement and eyelid reshaping.

A NEW BEGINNING
In 2003, China's leaders began to reinvest in rural health care, launching a New Cooperative Medical Service that pays subsidies but does not specify a coverage scheme. "They're recognizing that it's economically disadvantageous to have people shoving money under their mattresses in case they get sick," says David Blumenthal, director of the Health Policy Institute at Partners HealthCare System, and co-author with Hsiao of a commentary in the New England Journal of Medicine in 2005 on China's health care conundrum.

So far, Hsiao says, most plans emphasize reimbursement for hospital care. Yet according to his data, less than 4 percent of farmers actually seek and receive benefits from these catastrophic plans.

Of Hsiao's research, Blumenthal says, "Bill, to his great credit, has spent a great deal of time and energy steeping himself in the culture of rural Chinese life. No one is better qualified to think about how to come up with an alternative to the current situation in the countryside."
"But," Blumenthal adds, "even he would admit that it's a huge and daunting problem."

Richard Saltus has written about science, medicine, and public health for the Associated Press, the Boston Globe, the San Francisco Examiner, and the New York Times.