Financing China's Health System

FINANCING CHINA'S HEALTH SYSTEM:

Systems of finance:

China's health care finance system consists of three formal systems and an informal component. Gongfei yiliao or Government Employee Health Insurance, provides coverage for government workers at all political divisional levels (central, provincial, county, township, and village), including officials of labor unions, youth's and women's leagues, the staff of cultural, educational, health and research institutes and students at approved colleges and universities. The government is solely responsible for the financing of this system. In 1992, 30 million people were covered by the gongfei yiliao system. Health services are mainly provided by public hospitals, but larger organizations with more than 200 employees usually set up their own clinics. The beneficiaries of gongfei yiliao are required to seek health services at appointed hospitals of the organization, and the charge for the services is reimbursed by the gongfei yiliao based on the government fee schedule.

Finance in health care system

China has 3 formal systems and an informal component.

Government Employee Health Insurance: This provides health coverage for all governmental workers in different divisional levels.

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The laobao yiliao, or Labor Health Insurance, is a system under which employees in state and collective enterprises and their immediate family members are entitled to full (for the employees themselves) or partial (for immediate family members) benefits. Government mandates that the state enterprises with more than 100 employees must provide laobao yiliao.11 Payment is made mainly out of "welfare funds" of enterprises, a portion of which are designated for medical services. Most large enterprises with more than 1000 employees organize their own hospitals (inside hospitals) and most medium size enterprises (200-1000 employees) have their own clinics for providing free outpatient services to their employees.

The third formal system of medical care finance is the rural cooperative medical system (RCMS). This system was first conceived during the 1950's through initiatives of communes and brigades in rural areas and is funded by yearly contributions paid by participants and subsidies from collective welfare funds. The accomplishments of this system were internationally regarded as an unprecedented feat in the creation of a nationwide medical system which effectively met the basic health care needs of the general population, including the widespread use of what is now called preventative medicine, while simultaneously taking major steps toward the eradication of major infectious diseases. By the mid 1970's it was estimated that over 95% of the rural population had a collective medical system administered by their brigade with their own village health clinic.12 However, a significant number of these RCMS's were dismantled as part of the economic liberalization that began in 1979. Thus, oOne of the largest and first groups to lose public health coverage under economic liberalization has been agricultural direct producers. The dismantling of the commune system and the concomitant expansion first of self-exploitation in farming and more recently of capitalist agriculture dramatically reduced the number of individuals employed within state-controlled enterprises in rural China. This structural change in the balance between "public" and "private" sectors allowed the Chinese authorities to sharply reduce public sector spending on rural health care provision, shifting the burden to the direct producers themselves.

The Chinese government has recognized the potential disastrous effects this new condition could inflict upon rural inhabitants and is presently attempting to create policy to alleviate this without having to dramatically increase the allocation of public funds for such a purpose. In fact, as late as December 24, 1996, the China Daily reported that at the First National Conference on Health, 5 government bodies --the State Planning Commission, the Ministry of Civil Affairs, the Ministry of Finance, the Ministry of Health, and the Ministry of Agriculture-- jointly urged local governments to support the creation of cooperative medical systems in rural areas, much like those that existed prior to the 80's, but funded in ways that do not require significant financial contributions from the national government.

The informal component of health care financing is that component for which there is no institutional