Health Care System and Reimbursements Issues in China Lu Ye School of Public Health Fudan University

1. Country Profiles

Population: billion Crude birth rate: per 1000 (2003) Crude mortality rate: 6.40 per 1000 (2003) Natural growth rate: 6.01 per 1000(2003) Life expectancy at birth: 71.2 years (2001) Infant mortality rate: 28.4 per 1000(2000) China Health Profiles

Number of Hospitals: 17,764 Number of Health Centers: 45,204 Number of Beds:2.95 million Number of Health Professionals: 5.27 million Number of Beds per 1000 population: 2.34 Number of Doctors per 1000 population: 1.48 Number of Nurses per 1000 population: 1.00 Doctor/Nurse Ratio: 1:0.48 Health Resources (2003)

2. Health Care Finance

Health Expenditures as a % of Gross Domestic Product in China % Year

Trend of Health Expenditures Billion ( ￥ ) ￥ Year

Comparison of Annual Growth Rate Between HE & GDP Year %

Composition of Health Financing Sources Government financing Quasi-government - Enterprises health financing -Health insurance scheme financing Individuals Social financing

Cause of Issues in Health Financing China’s health care provision and financing system transited from a central planned economy to a market based economy There is a tendency shifting mainly government & community funded to one based on user charges It has resulted many complications : cost escalation, inequity & inefficiency

Underlying Reasons for Cost Escalation Rational reasons are increasing aging population, changing disease pattern Irrational reasons are: -- Inadequate government financing -- Distorted pricing system -- Unreasonable reimbursement system (FFS) for providers

Composition of Health Financing Sources in China ( ) %

The Complications of High Private Payment Inadequate insurance and risk-pooling coverage High disease burden for the poor Declining access of medical care and preventive services People complain the high prices of medial services and use more self-medication

Lack of Fund to Support Public Health in China (1999)

New Efforts Made by Chinese Central Government One of the striving targets is to increase the health quality of whole nation Government’s responsibility is to provide public health services Central government spent 6.5 billion to build up CDC institutions and blood collection centers in the Western provinces in China in 2002

3. Health Insurance in China

Insurance Patterns Social Medical Insurance in Urban Employee(1998) -Personal account+ Social pooling fund New Cooperative Medical System in Rural

Social Medical Insurance Contributions From Different Sources 4% 2% 6% Payroll Tax Paid by employees Paid by employers Basic medical insurance Supplementary Medical insurance

Basic Scheme of Urban Medical Insurance 2% by Employee 30% 70% Social Pooling Fund Personal Medical Savings Account 6% of average annual salary of employee paid by employer 3.8% 4.2%

Basic Scheme of Urban Medical Insurance 2% by Employee 30% 70% Pooling Fund Additional Medical Insurance Personal Account <34 years old: RMB years old: RMB years old to retire: RMB 378 Retire up to 74 years old: RMB 769, 4% SAAS Above 75 years old: RMB 866, 4.5% SAAS *SAAS: Shanghai average annual salary, 1999 SAAS is RMB14,000, 2002 SAAS is RMB 18,000 10% of SAAS by Employer 2% of SAAS by Employer

Outpatient Reimbursement Scheme Additional medical insurance: Payment % varies by age Self-payment Personal medical saving account Additional medical insurance Use until draw out Cash up to additional medical insurance start level Reimbursement ratio: Born before 1955: 70% Born from 1956 to 1965: 60% Born after 1966: 50% Employment after 2001: self-payment Employee: RMB 1,400, 10% SHH average annual salary Retiree: RMB 280, retire before Dec, 2000 RMB 700, retire after Dec, 2000

Inpatient Reimbursement Scheme Pooling Fund Self- payment Additional medical insurance Retired before 2000 Co-payment 92% by pooling fund, 8% by self-payment. Base line Retire before Dec, 2000: RMB 700 Retire after Dec, 2000: RMB % SAAS RMB 1,400 Working people & retire after % co-payment Co-payment 85% by pooling fund, 15% self-payment. 80% co-payment Top line: 4 x SAAS

Coverage of Urban Medical Insurance Year Million

Hospital reimbursements majority hospitals owned by State hospital revenues come from: -Government reimbursements(10%) -market(90%) -Health insurance scheme -User charge Using the drug price difference b/w the wholesale and retail as part of hospital revenue for the subsidy The legal price difference is 15% for the generic and chemical drugs and 20% for traditional drugs. 85% of drugs dispensed/distributed by hospitals

Composition of Hospital Revenues (2003) billion 注：其他指上级补 助收入和其他收入。

Policy Changes in Drug Price Setting Manufacturing cost markup at a fixed rate (5%) (before 1996) Pricing based on average market cost of various drug categories (since 1998) Highest retail price set by SDRC (since 1999) Bulk procurement through price bidding (since 2001) Market price approach for out-of-formulary Individual drug price setting for patent or some off-patent drugs with public hearing (on needed basis)

Drug Price Setting Under Planning Economy in China Manufacturing Cost Ex-factory Price Wholesale Price Retail Price

Role of Government in Price Control Define National reimbursement drug list Setting the highest retail price of all drugs in national basic medical insurance’s reimbursement list, including prescription drug and over-the- counter drug Bulk procurement through price bidding, then, adjust retail price generally three months later Originator drug is allowed to be priced separately