Financing Healthcare in China: Challenges and Reforms

In 2003, 60% of China's total health expenditures were born by the out-of-pocket payments, while government spending only accounted for 17% of the total health spending. Lack of well organized financing has not only led to “medical impoverishment”, but also a weakened public health system, with global implications. Since 1990s, China has carried out some reform initiatives, culminating in the creation of the National Coordinating Commission on Health System Reforms in September 2006. Based on extensive literature review and in-depth dada analysis of the 3 National Health Services Surveys conducted in 1993, 1998, and 2003 and claims data from the Chinese Ministry of Labor and Social Security, this paper provides a comprehensive assessment of the major problems of and policy options for reforming China's healthcare financing system. Modifying analytical frameworks developed by the WHO and World Bank, we established measurement of changes in China's healthcare financing system in: a. socioeconomic inequality in financial access to healthcare, b. efficiency of healthcare provision linked to different financing and payment methods. We also assessed their relative feasibility and impacts of two major approaches to establish universal access to a basic health benefit package in China: a. an integrated approach, where the government plays a dominant role in both financing and provision of primary care services to all, b. an insurance approach, where every citizen would be covered by various insurance schemes, while consumers are allowed to choose providers. Global lessons that can be drawn from the Chinese experiences are also discussed.