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
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