Health Care System and

Reimbursements Issues in China

Lu Ye

School of Public Health

Fudan University

1. Country Profiles

Population: 1.259 billionCrude birth rate: 12.41 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: 17,764Number of Health Centers: 45,204Number of Beds:2.95 millionNumber of Health Professionals: 5.27 millionNumber of Beds per 1000 population: 2.34Number of Doctors per 1000 population: 1.48Number of Nurses per 1000 population: 1.00Doctor/Nurse Ratio: 1:0.48

　　　　　　　

Health Resources (2003)

2. Health Care Finance

Health Expenditures as a % of Gross Domestic Product in China

4 4.1 4.13.983.773.694.2

4.294.8 5.1

5.35.16

5.515.62

0

1

2

3

4

5

6

90 91 92 93 94 95 96 97 98 99 0 1 2 3

GDP%

%

Year

Trend of Health Expenditures

0

100

200

300

400

500

600

700

90 91 92 93 94 95 96 97 98 99 0 1 2 3

Heal th Expendi tureHE per capi ta ( )￥

Billion ( ￥ )

658.4

￥ 509.5

Year

Comparison of Annual Growth Rate Between HE & GDP

0

2

4

6

8

10

12

14

16

18

20

91 92 93 94 95 96 97 98 99 0 1 2 3

Growth rate ofHE(%)Growth rate ofGDP(%)

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 (1990-2003)

0

10

20

30

40

50

60

90 91 92 93 94 95 96 97 98 99 0 1 2 3

Government budget Quasi -government Indi vi dual s

%

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)

81%

6%2% 11%

Medi cal servi cesPubl i c Heal thOthersHeal th devel opment

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

Paid by employers

Basic medical insurance

SupplementaryMedical insurance

Basic Scheme of Urban Medical Insurance 2% by Employee

30%

70% Social Pooling Fund

Personal Medical Savings

Account6% of

average annual salary ofemployee 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 23835-44 years old: RMB 308 45 years old to retire: RMB 378 Retire up to 74 years old: RMB 769, 4% SAASAbove 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 byEmployer

2% of SAAS byEmployer

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, 2000RMB 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 Base line

Retire before Dec, 2000: RMB 700

Retire after Dec, 2000:

RMB 1120

10% SAAS

RMB 1,400

Working people & retire after 2000

80% co-payment

Co-payment 85% by pooling fund, 15% self-payment.

80% co-payment

Top line: 4 x SAAS

Coverage of Urban Medical Insurance

0

20

40

60

80

100

120

140

Reti reesEmpl oyees

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)

43%

44%

9%4%

medi cal

drug

governmentsubsi dyothers124.6

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

+ 5%

+ 5%+15% -20%

Manufacturing Cost

Ex-factory Price

Wholesale Price

RetailPrice

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