Overview of China’s health care coverage

China has made significant strides toward providing universal health care coverage to its citizens. At the turn of the century, only one in every five Chinese had some form of health care coverage. A little over a decade later, nearly 95 percent of the population – around 1.25 billion people – was covered. While China does not have universal coverage, it has a lower uninsured rate than the United States, where almost 9 percent of people are without coverage.

China’s centralized health care system has undergone several transitions, including the introduction of “barefoot doctors” in the 1960s. Largely composed of peasants that received short but intensive medical training, these doctors traveled throughout rural China and provided virtually free basic medical services to much of the country’s population. Care provided by the barefoot doctors contributed to a significant rise in life expectancy and a drop in the infant mortality rate.

During the economic reforms of the late 1970s and 1980s, barefoot doctors were abandoned in favor of a market-based health care system. The new system was stymied by financial constraints and ultimately resulted in declining health coverage and widespread public frustration. The 2003 Severe Acute Respiratory Syndrome Virus (SARS) outbreak further exposed the weaknesses of the existing system and galvanized Beijing to initiate much-needed health care reforms.

HAQ Index for BRICS Countries Country 1990 2000 2016 China 42.6 53.3 79.9 Brazil 46.5 55.3 63.8 Russia 63.1 62.5 75.1 India 24.7 28 41.2 South Africa 40.1 40.9 49.7 Source: Institute for Health Metrics and Evaluation (IHME)

Reforms began in earnest in 2006, when then-President Hu Jintao declared his vision “for everyone to enjoy basic health care services.” Three years later, health care coverage had greatly expanded as reforms were launched nationwide in accordance with the Guidelines for Deepening the Reform of the Healthcare System. While these reforms have significantly improved access to quality health care, systemic issues continue to plague health care in China.

The outbreak of the novel coronavirus in 2019-2020 exposed additional shortcomings in China’s health care system. Hospitals in Wuhan, the epicenter of the outbreak, were quickly overwhelmed with cases. China was forced to build emergency hospitals to handle the flood of patients, and will likely need to consider making significant changes to its healthcare system to better prepare the country for future crises. China is not alone in this regard. In the wake of the coronavirus pandemic, many countries around the world will need to upgrade their capacity to prevent and manage future large-scale outbreaks.

Currently, there are three public health insurance options available to Chinese citizens. Two of the plans – the Urban Employee Basic Medical Insurance and the Urban Resident Basic Medical Insurance – cover urban dwellers. A third scheme, the New Cooperative Medical Service, applies to rural residents.

Affordability of China’s health care systems

The existing public plans available to Chinese only reimburse a portion of medical fees, which often leaves individuals saddled with a significant amount of out-of-pocket (OOP) payments. High OOP expenses have been shown to financially stress households, which can result in impoverishment and negatively affect health outcomes.

Roughly 29 percent of health care expenses in China were paid by individuals in 2018. A combination of government funding (28 percent), as well as public and private insurance (44 percent), covers the rest. Although the proportion of OOP fees in China has declined since the early 2000s, when they made up 60 percent of total health care expenses, it is still higher than those paid by some of China’s wealthy neighbors. For example, individuals in Japan paid only 12.8 percent of the health care fees in 2018. OOP costs are also generally lower among developed European economies. In Germany and France, citizens paid only 12.3 and 9.3 percent, respectively.

Out-of-Pocket Cost in Selected Countries (2018) Country Share of Health Spending (%) United States 10.6 Japan 12.8 China 35.9 Russia 40.5 India 65.1 Source: OECD

One of the most significant drivers of China’s high OOP expenditure is rooted in how Chinese hospitals turn a profit. Traditionally, public hospitals would charge patients for the number of services provided and the amount of prescriptions given. Until 2017, hospitals were also allowed to supplement their revenues by selling drugs with a mark-up of up to 15 percent. As a result of this system, patients were often charged with fees for unnecessary services and prescriptions. By 2015, spending on prescriptions reached 40 percent of total health expenditure in China, significantly higher than the OECD average of 20 percent.

The costs carried by Chinese citizens vary considerably. A 2014 study conducted in the urban and rural communities in Suzhou revealed that residents under the rural plan were only reimbursed for 57 percent of their medical fees – far less than the roughly 70 percent reimbursement rate granted under China’s urban health care plans.

This structural economic barrier has contributed to growing inequality. Citizens insured under the Urban Employee Basic Medical Insurance utilize health care services at a higher rate than their rural counterparts. This has contributed to unbalanced health outcomes between urban and rural populations. For instance, residents of Beijing enjoyed an average life expectancy of 80 years in 2010 – 8 years more than in Xinjiang and 12 years more than in Tibet.

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Burdensome health care expenses have been a leading factor in the growing inequality between China’s rich and poor. Between 2005 and 2015, household expenditures on health care contributed to a widening of China’s poverty gap at a rate greater than that of Thailand and South Africa. As a result, some have leaned on medical loans to repay hospital bills. By comparison, nations with world-class health care systems, such as Taiwan, often provide generous support to the underprivileged. Taiwan exempts all co-payments and co-insurance for lower income patients, as well as for those suffering from certain catastrophic illnesses.

Wealthier Chinese are increasingly turning to private insurance, which provides better coverage with lower co-payments than public insurance. Accordingly, the private insurance market in China has witnessed rapid growth. Between just 2014 and 2015, the market size jumped from $220 billion to $349 billion. By 2020, the industry is expected to balloon to $730 billion.

Pharmaceutical Spending for Selected Countries (2017) Country Pharmaceutical Spending ($ billions) United States 467 China 123 Japan 85 Germany 45 France 33 Source: L.E.K Consulting

Beijing is looking for ways to curb OOP costs. As part of Healthy China 2030, Beijing has laid out plans to reduce OOP payments from 30 percent of total health care expenditure in 2016 to 25 percent by 2030. Chinese authorities have also recently undertaken initiatives to directly negotiate certain drug prices with international pharmaceutical companies. In addition to instructing public hospitals to end the practice of drug price mark-ups in 2017, China’s State Council announced that public hospitals will become nonprofits by 2020.

Efforts to alleviate OOP payments could experience setbacks, however, as some local governments are already struggling to foot the bill for existing health care plans. In 2016, public insurance plans in 108 out of 225 municipalities (the majority of which are in less-developed regions) were in deficit. This is largely a symptom of rising health care costs. Between 2000 and 2015, annual per capita health care expenditure in China grew from $130 to $762 — a 6-fold increase. Comparatively, health care costs in the US and Denmark only doubled over the same period.

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To better manage public expenditure, Beijing is looking to implement a new system where government health insurance provides only a fixed amount of reimbursement to hospitals per disease. This scheme, known as diagnosis-related groups, could discourage unnecessary services and cap fees. Although this payment structure is widely used in nations such as the US and Japan, the benefits of this structure have not yet been proven in China. The system has been piloted in select hospitals in Beijing and a handful of southern cities since 2017, and the government announced it would expand the pilot to 30 cities in 2020.

Accessing health care in China

In addition to insurance coverage, adequate health care facilities and personnel are equally necessary to ensure positive health outcomes. To that end, Beijing has made significant headway in leveraging its economic growth toward expanding the availability of medical care.

Hospitals are the main channel through which Chinese citizens receive health care, and hospital-based resources have expanded accordingly. The number of hospital beds per 1,000 residents more than doubled from 1.5 in 1970 to 4.3 by 2017. While this ratio surpasses that of the US (2.8 beds) and Canada (2.5 beds), it is significantly lower than the OECD average of 4.7 beds per 1,000 residents. By comparison, Japan and Korea boast some of the highest ratios in the world, at 13.1 and 12.3 beds per 1,000 people, respectively.

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China has also devoted resources toward specific health sectors, such as pre- and postnatal care. The percentage of pregnant women receiving prenatal care in China increased from 69.7 percent in 1992 to 96.2 percent in 2015. This far outstrips the global average of 84.6 percent. Almost 100 percent of births in China were attended by skilled medical personnel, whereas the global average stood at just 80 percent in 2014. Expecting Chinese mothers also receive a maternity leave of 98 days — the same amount of time granted in Japan and Germany.

Aside from maternal care, China has also expanded its capacity in non-western medicine. The number of hospitals specializing in Traditional Chinese Medicine (TCM) increased from 447 in 1978 to 3,977 in 2018. TCM may be primed to become a more integral component of China’s health care landscape; a 2016 white paper touted it as “an important component of economic and social development.”

Paid maternity leave in China typically ranges from 3 to 6 months. Learn more about women’s health and other gender issues in China. Explore More

Health care personnel in China have experienced similar levels of growth. The number of physicians grew from 0.71 per 1,000 inhabitants in 1980 to 2.01 in 2017. This is lower than the physician-to-population ratio in Germany (4.25) and the US (2.61), but is on par with Turkey (1.87).

Yet, due to stark pay differences between general practitioners and hospital-based specialists, as well as patients’ preference for the latter, many newly-trained physicians become specialists. This has left China with a shortage of general practitioners. There were only 189,000 general practitioners in China in 2015, accounting for only 6.2 percent of all Chinese physicians. This amounts to roughly one general practitioner per 7,200 people, which is significantly below the World Health Organization’s recommendation of one general practitioner per 1,500 to 2,000 people. As a result, 650 million Chinese were left without access to a general practitioner in 2017.

China’s Rising Pre- and Postnatal Care Year Births Attended

by Skilled Health Staff (%) Pregnant Women

Receiving Prenatal Care (%) 1992 84.1 69.7 2000 96.6 89.4 2008 99.1 91 2015 99.9 96.2 Source:World Bank

There are reports of hospital-based specialists being forced to see as many as 200 patients a day, which not only exacerbates wait times, but has also led to the rise of a black market for appointment bookings. Scalpers have exploited this shortage by illegally selling their appointment slots at a price 10 to 20 times higher than the original booking fee. As a point of comparison, a 2013 survey by the American Academy of Family Physicians revealed that US physicians typically see under 20 patients per day.

Beijing is working to increase the number of general practitioners. As of 2018, there were only 1.5 qualified generalists per 10,000 people, but the government is taking strides to raise this number to 2-3 generalists per 10,000 people by 2020. This number is set to increase to 5 generalists per 10,000 people by 2030. In a move to reduce the current reliance on hospitals, China is also looking to increase the number of family doctors, who can provide health care services to patients in facilities outside of hospitals.

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Financing for China’s health care institutions partially depends on local government funding, which contributes to an uneven distribution of health care resources between richer urban centers and less-developed rural villages. For instance, the number of village health clinics increased by only 21 percent from 2003 to 2019, whereas the number of hospitals grew by 91 percent over the same period.

This disparity has had cascading effects on health outcomes. The mortality rate for many major diseases is higher in rural areas than in urban areas. The mortality rate for heart disease was 162 per 100,000 people in rural areas in 2018, compared to only 146 per 100,000 people in urban centers. Notably, the mortality rate for heart disease in both rural and urban China was still lower than that of the US, which stood at 166 per 100,000 people.

Crude Mortality Rate of Major Diseases per 100,000 People (2018) Disease Urban Rural Infectious Diseases 5.96 7.26 Malignant Tumor 163.18 158.61 Mental Disorders 2.96 2.81 Heart Disease 146.34 162.12 Stroke 128.88 160.19 External Causes of Injury and Diseases 35.63 51.48 Source:China Statistical Yearbook

China’s disabled population faces challenges when seeking appropriate care, and the availability of health care services for disabled persons can differ dramatically at the provincial level. The inland province of Guizhou, for instance, does not explicitly stipulate full reimbursement of all rehabilitation service fees for disabled children under six, a health care benefit that is guaranteed in the more developed coastal province of Jiangsu.

Mental health patients experience similar challenges. According to the Chinese National Health and Family Planning Commission, 5.9 million people were registered with severe mental disorders in 2018. In 2015, there were only 24 beds per 100,000 patients in mental hospitals within China. While this is a considerable increase from only 14 beds in 2011 it is still behind the US (30 per 100,000) and far behind South Korea (110 per 100,000). Figures for the US and South Korea are from 2016, while figures for China are from 2015.[/state]

China Health Care Urban and Rural Divide (2018) Resources per 1,000 People Urban Rural National Average Doctors* 4.01 1.82 2.59 Nurses 5.08 1.80 2.94 Medical Technical Personnel 10.91 4.63 6.83 Beds in Medical Institutions 8.70 4.56 6.02 Source:China Statistical Yearbook *Licensed Assistant Doctors. The Statistical Yearbook does not provide per capita figures for Licensed Doctors.

China’s future health care challenges

As the standard of living and life expectancy have risen, new challenges have emerged. In 2019, there were 176 million people aged 65 years and older, making up 12.6 percent of the population. By 2045, that number is expected to reach 26 percent — as high as in present-day Japan. As a result, the incidence of chronic illness and age-related disease has soared.

While care for the elderly has traditionally been provided by family members, the rapidly aging population accompanied by a lower birth rate has rendered this system increasingly impractical, and China has been slow to provide public alternatives. As of 2018, China’s nursing homes only offered 29.1 beds per 1,000 elderly citizens. There were 51 beds per 1,000 elderly citizens in Australia and 44 per 1,000 in the UK in the same year. In addition, China’s nursing homes are often not designed to give optimal elderly care, as few staff receive regular training.

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Diseases associated with aging are also on the rise. In 2017, Alzheimer’s disease was the fifth largest cause of premature death in China, marking an increase from ten years prior when it was the 15th largest cause of premature death. While nearly 1 million Chinese are diagnosed with Alzheimer’s disease every year, twice the rate of the US, there are limited numbers of beds for specialized Alzheimer’s care in China. In 2017, there were only a few hundred beds in all of China. A year later, Shanghai reportedly upgraded nearly 1,200 beds for Alzheimer patients across the city. Still, China is expected to have half of the world’s patients suffering from Alzheimer’s disease by 2050 (45 million people), making Alzheimer’s one of the biggest challenges that the Chinese health system will face in the coming decades.

China must also wrestle with growing challenges from chronic illnesses such as heart disease, cancer, respiratory diseases, and diabetes. Of the 422 million adults with chronic illness globally in 2016, an estimated 129.3 million (31 percent) were Chinese. Due to increased inactivity and growing obesity rates, 30 percent of global adult diabetes cases in 2014 were in China. Cancer rates are also on the rise. In particular, breast cancer diagnoses grew by 3.5 percent per year between 2000 and 2013, compared to a 0.4 percent drop each year over the same period in the US.

China’s population is growing old at a faster rate than almost all other countries. This ongoing demographic shift presents an array of social and economic challenges for China. Learn more about China’s aging population. Explore More

In response to these challenges, China has turned toward technology. Both Tencent and Alibaba have made efforts to invest in digital health platforms, including artificial intelligence (AI)-assisted diagnostic tools and online consultation services. As of 2017, over 38,000 medical facilities in China have WeChat accounts. Additionally, 60 percent of those facilities provide online consultations, with 35 percent supporting the payment of medical bills through WeChat pay. During the outbreak of the novel coronavirus in early 2020, Chinese technology giants – like Alibaba, Baidu, Tencent, and Huawei – launched new AI and cloud-based technologies aimed at tracking and diagnosing cases and finding a vaccine. Other nations have also leaned on IT to enhance health care coverage. Taiwan, for example, uses a cloud-based electronic patient records system, which enables it to track and monitor health care usage and disease outbreaks in near real time.

China is also taking steps to enhance its medical development. As a testament to Beijing’s growing global biomedical manufacturing capabilities, Chinese drug manufacturers received approval from the US Food and Drug Administration (FDA) for 38 generic drugs in 2017, and over 20 new Chinese-made drugs are seeking to gain FDA approval in the next 5 years.

Nonetheless, key limitations persist within the pharmaceutical industry, such as long wait times for domestic drug approval and inconsistent drug coverage in its national reimbursement program. Events like the recent July 2018 vaccine scandal – during which hundreds of thousands of vaccines for Chinese children were found to be faulty – have caused widespread suspicion about the quality of China’s bio-medical products.