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Global Health Policy Blog


For decades, primary health care in China has been practically forgotten. Most people in China today seek care directly at hospitals rather than local village clinics. With hospitals overwhelmed by patients for even minor conditions, doctors provide low quality care. But a new Health Economics study provides hope that it is possible to shift utilization from hospitals back down to village clinics – and back to the people.

But first, some background. The tale of the ebbs and flows of China’s health care have been recounted, with seemingly perfect hindsight. In the 20th century, despite its poverty, China began achieving rapid health improvements, in part due to its effective Cooperative Medical System established in the 1950s, a public system which provided primary care and public health services to the people.

Yet in the 1980s the country underwent an experiment of national proportions. What follows is a story of great disruption. The very system that had helped to achieve these health gains was dismantled. Central government spending on health plummeted. Overnight, to earn a living, doctors had to sell profitable services, rather than services which improve health. The entire population became effectively uninsured. Out-of-pocket health care expenses bloomed from 20% in 1978 to 58% in 2002, reversing the health financing transition. Many people were impoverished due to out-of-pocket health care expenses. If one was so unlucky as to be hospitalized, it could cost twice one’s annual income.

Fast forward to the year 2009: China unveiled a health-care reform plan, to spend US$ 125 billion in 3 years by expanding health insurance coverage. Perhaps seeing the dangers of large-scale experimentation without sufficient piloting, the country permitted thoughtful experimentation in healthcare to generate more knowledge.

One key part of this plan was the experimental New Cooperative Medical Scheme (NCMS) that began in 2003, which grew to cover as much as 90% of the rural population by 2008. Yet even this approach was not perfect, because it skewed healthcare seeking heavily in favor of inpatient care. Meanwhile, doctors at village clinics (which had been dismantled in the 1980s wave of privatization) still suffered. Many of them went on to work as migrant laborers in urban areas, because primary health care just didn't pay.

So in 2009, the province of Ningxia in cooperation with professors in the UK and US, led by Winnie Yip (Oxford), embarked on an experiment to reform the healthcare system by introducing several policy changes at the same time. Of course, disentangling which policy caused what improvement is a challenge.

The policy consists of two main levers. The first lever improves the insurance benefit package for those seeking care at lower levels (village and township) – “the demand side”. The second lever changes the way doctors at these lower levels are paid, to a system based on both patient enrolment (capitation) and performance in terms of patient satisfaction and antibiotic prescription rates (pay-for-performance) – together “the supply side”.

They find a significant increase in the use of outpatient care at village clinics, driven mainly by the expanded benefit package rather than how the doctors were paid. While the total number of outpatient care visits stayed the same, the new benefit package increased visits to village clinics and decreased visits to provincial hospitals, suggesting substitution between the two sources of care. There was, however, no decrease in the rate of hospitalization.

This is just the beginning of the story of how China’s health system is reorienting back to the people. Stay tuned.

Victoria Fan is a research fellow and health economist at the Center for Global Development. Tim Powell-Jackson is a lecturer in health economics at the London School of Hygiene & Tropical Medicine. Winnie Yip is a professor of health policy and economics at the Blavatnik School of Government at the University of Oxford. You can follow Victoria Fan on Twitter at @FanVictoria.

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