A new report by the World Bank presented in Beijing on Thursday commends the government's health reform efforts to date, concurs that its planned further reforms are necessary, and offers ideas for concretizing the broad ideas set out in the recently-issued government's masterplan. The report also uses the experiences of the OECD countries to gaze into China's future: it asks not only what China's health system might look like but also how the country might get there from where it is today.

The report, Reforming China's Rural Health System, begins by setting the context for the recent and planned reforms by examining the symptoms and causes of China's health challenges at the start of the new Millennium. In the 1980s and 1990s improvements in health outcomes were outpaced by China's economic growth. Inequalities emerged. Health care costs rose rapidly, and made health care unaffordable for some. The causes included: the decline of the old commune-based rural health insurance system; the relatively slow growth of government health expenditure; the shift from government finance of health facilities to patients paying out-of-pocket; relative prices that resulted in health providers earning higher margins on drugs and tests; and the high degree of fiscal decentralization, with fiscal transfers reducing but not eliminating geographic inequalities in fiscal capacity.

Reforming China's Rural Health System next looks at the health reforms of the 2000's. It concurs with the government that the reforms were a major step in the right direction. The report goes on to set out ways to address the remaining challenges in the context of the government's ongoing reform efforts. It looks at options for raising further revenues for the new cooperative medical insurance scheme (NRCMS) and the targeting of NRCMS subsidies, exploring possible mechanisms for a tighter link between household and local government contributions on the one hand and income levels on the other. The report explores options for a benefit package that covers outpatient and preventive care, and has smaller deductibles. It discusses how NRCMS might evolve from being a passive bill-payer into a "purchaser" of services, including primary care.

Reforming China's Rural Health System also sets out ideas for reform, at a time when the government has called for sweeping reforms for the years 2009-2011. For example it looks at medium-term reform in service delivery and public health. It discusses options for revising prices and shifting ultimately from fee-for-service to prospective payments. It also discusses the interrelated issues of health facility autonomy and governance. It calls for a balancing of government regional planning with more autonomy and accountability at the facility level under a revised incentive framework. In public health, Reforming China's Rural Health System reaffirms the importance of public finance, and the need for generous central government transfers that limit geographic differences in public health capacities. The report discusses ways of clarifying responsibilities in public health at different levels of government, and across agencies including NRCMS.

"This volume will be immensely useful, not only for informing the ongoing national health reform in China, but also for many other countries around the world struggling with similar issues." said Emanuel Jimenez, Director of Human Development for the World Bank's East Asia and Pacific region.

"Reforming China's Rural Health System, not only breaks new ground analytically but provides an evidence-base for Chinese policymakers in assessing and implementing reforms", said Jack Langenbrunner, Human Development Coordinator of the World Bank's China program. Mr. Langenbrunner continued: "The report comes at an opportune time in the Government-Bank partnership to fund grants to 'flagship counties' in eight provinces to design and implement a series of reforms in financing, delivery, and public health. The report is a tutorial for the student just starting, or a useful guide for the seasoned policymaker leading the effort at any level… The student of health care policy will better understand the missteps of the 'market reforms' of the 1980s and 1990s, but will be heartened by the strides to reestablish a system in this decade which may lead to improved efficiency, better outcomes and financial protection."

The final part of the report looks to the longer-term reform agenda. The reader can align the authors thinking with China's health care reform strategy through 2020. It looks at some of the challenges created by fragmentation across insurance schemes and the reliance on individual contributions. Possible problems based on the experience of OECD countries include inefficiencies in the delivery of care, adverse selection through selective enrollment, underreporting of earnings, and informal work arrangements to avoid mandatory contributions. The report discussed options for narrowing gaps between schemes, for joint management, and for the eventual merger under a single health finance agency, either at the provincial level or national level. Finally, Reforming China's Rural Health System examines different options for a unified financing model, including a tax-financed minimum benefit package (whose generosity might vary geographically), with voluntary contributions to expand benefits above the minimum.

(China Development Gateway July 23, 2009)