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Five Key Tasks in Healthcare Reform in China

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Five Key Health Care Reforms in China (2009-2011)


The Chinese government officially promulgated its health care reform plan (Opinions on Deepening Health Care Reform) on March 17, 2009. The plan sets the direction, provides the framework, and sets forth the long-term goals for Chinese health care reform. In addition, the plan specifies five central level reform priorities for 2009 to 2011.


The five key reforms significantly affect policies and strategies across a number of areas, including the establishment of the medical insurance system, drug supply assurance, medical service and drug pricing mechanisms, grassroots level health care facility construction, public medical institution reform, medical and health financing mechanisms, health workforce capacity-building, medical and health management system, and other important areas. Advancing these five key reforms will help reverse the for-profit mode of public hospitals; enable significant numbers of urban and rural populations to access medical insurance and quality public health services; effectively resolve the predominant problems in the current health industry; and lay a solid foundation for achieving the long-term goals of the medical and health care system reform. Preliminary estimates for 2009 to 2011 suggest that 850 billion RMB will be invested by various levels of governments in implementing these reforms, among which 331.8 RMB will be allocated by the central government.


Key Reform Task 1: Accelerate the Construction of the Basic Medical Insurance System

1. Expand the coverage of basic medical insurance. In three years, the basic medical insurance for urban employees, basic medical insurance for urban residents, and new rural cooperative medical scheme will cover 90% of all urban and rural populations.

2. Enhance basic medical insurance level. The fund pooling standards and insurance level for urban residents' medical insurance and new rural cooperative medical scheme will be steadily improved. Financial departments at various levels will raise the subsidy to 120 RMB per person per year for the above two types of medical insurance.

3. Regulate basic medical insurance fund management. The annual balance and accumulated balance of medical insurance fund for urban employees and non-employees will be under proper control. For the fund raised through new rural cooperative medical scheme, the annual balance rate should be less than 15%, and the accumulated balance shall not exceed 25% of the fund pooled that year. A basic medical insurance risk adjustment fund system shall be established. Regular reports will be issued to the public about the income and expenses of the fund. Fund-pooling shall be raised to a higher level, aiming to primarily realize fundraising at municipal (prefecture) level by 2011 of the two medical insurance systems for urban population.

4. Improve urban and rural medical aid system. The medical aid system will increase the effective use of aid funds, and simplify the approval procedures for issuing relief funds and financial aid to households that are entitled to subsistence allowances and households enjoying five guarantees (i.e., childless and infirm old persons who are guaranteed food, clothing, medical care, housing and burial expenses). These improvements will enable the above-mentioned population to participate in medical insurance for urban residents or the new rural cooperative medical insurance scheme. It will also steadily increase the subsidy to reduce out-of-pocket medical payments for households in economic difficulties.

5. Raise the level of basic medical insurance management services. To control costs and promote a more rational system for paying medicines, health services, and medical materials, localities are encouraged to explore and establish negotiation mechanisms and reform in payment terms between medical insurance agencies and service-providers. Basic medical insurance management systems covering urban and rural areas shall be explored and established as well as gradual integration of management resources for basic medical insurance agencies. On the premise of sound fund safety and effective supervision, the government shall play a leading role in purchasing medical insurance services and exploring mechanisms for entrusting qualified commercial insurance agencies to manage various medical insurance services.


Key reform task 2: Preliminarily establish national essential drug system

1. Establish the mechanism for selection, revision and management of national essential medicines list. The systems for the selection and management of national essential medicines shall be formulated. The essential medicines list (EML) will be revised and updated regularly. The national essential medicines list will be promulgated within 2009.

2. Initially establish essential drug supply system. The role of market mechanisms shall be brought to full play in order to compel drug manufacturers and distributors to merge and reorganize. This will enable a unified distribution network and achieve scaled operation. The system for licensed pharmacists will be improved. Provincial level people’s government will designate agencies to conduct purchases via public bidding, and entrust the companies with successful bids to distribute drugs in a unified manner. The reserve stocks for essential medicines will be improved. Drug quality supervision will be strengthened by regular quality sampling checks and the results will be published. The government is responsible for setting retail guiding prices for essential medicines. Government-directed grassroots level medical and health institutions shall follow the principle of zero-profit essential medicines sales.

3. Establish priority selection and rational use of essential medicines system. All retail drugstores and health institutions shall provide and sell national essential medicines. Starting from 2009, all government-directed grassroots level medical and health institutions shall provide and use essential medicines and other medical institutions must use essential medicines in accordance with regulations. Health administrative departments will draw up clinical guidelines for using essential medicines and essential drugs formularies. Patients are allowed to purchase medicines in retail drugstores with a prescription. All of the essential medicines will be incorporated into the basic medical insurance drug reimbursement system, with a much higher reimbursement percentage for essential compared with non-essential medicines.


Key reform task 3: Improve grassroots level medical and health care service system

1. Step up the construction of grassroots level health institutions. The construction of the rural three-tier medical and health service network shall be completed. County-level hospitals’ leading role shall be brought into full play. The central government will lay support the construction of 2000 county-level hospitals (including Traditional Chinese Medicine hospitals) within three years, enabling every county to have at least one standard county-level hospital. Construction standards for township hospitals and community health service centers will be improved. In 2009, 29,000 township hospitals will be built under central government support and plan; 5,000 key township hospitals will be renovated or expanded, which amounts to 1 to 3 hospitals for each county. More support will be provided for the construction of village clinics in remote regions, with the aim to equip each administrative village with a clinic in 3 years. During the same period, 3,700 urban community health service centers and 11,000 community health service stations will be reconstructed. The central government will be supporting the construction of 2,400 urban community health service centers. Regions with surplus public hospital resources shall restructure their health resources to intensify grassroots level health institutions. As for the public health services provided by grassroots health organizations sponsored by social capital (non-governmental capital), the government will compensate them by means of purchasing their service. For basic medical services provided by private sector, health insurance contracts with fixed agencies and other methods will be employed to compensate them through basic medical insurance funds channels. Qualified practitioners are encouraged to open clinics or be involved in private practice.

2. Strengthen the cadre of grassroots level health workforce. Plans will be formulated and implemented for training general practitioners for free and recruiting licensed doctors for rural areas. Over three years, 360,000, 160,000 and 1.37 million health workers will be trained for township hospitals, urban community health service organizations and rural village clinics, respectively. The urban-rural hospital support system will be improved. Every class-3 (first class) city hospital must establish long-term cooperative relations with 3 county-level hospitals, inclusive of qualified township hospitals. The “10,000 doctors supporting rural health project” will continue to be implemented. Doctors who work in county hospitals can raise their professional skills by pursuing further studies in large urban hospitals and by participating in standardized training programs for resident doctors.

The policy of urban hospitals and disease control organizations will be strictly implemented, whereby doctors will provide service for no less than one year in the countryside before they acquire senior qualifications. Medical college graduates are encouraged to work at grassroots level medical institutions. Starting from 2009, medical college graduates who volunteer to work in township hospitals in central and west regions for more than three years will receive tuition reimbursement and have their student loans forgiven.

3. Reform grassroots level medical and health institution compensation mechanisms. The operational cost of grassroots level medical and health institutions is compensated via service charges and government subsidies. The medical service prices of grassroots level medical and health institutions will be set after the deduction of government subsidies. Since zero-profit drug sales are promoted, medicine sales revenue shall not be a compensation channel for grassroots level medical and health institutions, and no drug discounts shall be allowed. Management measures such as separating revenue and expenditure for grassroots level medical and health institutions will be explored. The government will also issue reasonable subsidies to rural doctors who undertake public health services.

4. Transform the operational mechanisms for grassroots level medical and health institutions. Grassroots level medical and health institutions shall adopt appropriate technology, suitable equipment, and essential medicines. In addition, they will vigorously promote Chinese traditional medicines (inclusive of ethnic medicines) in their efforts to provide safe, effective and low-cost services to urban and rural populations. Township hospitals shall shift service modes and organize health workers to provide mobile medical service in rural areas. In urban communities, health service centers and stations should offer door-to-door and quality services to patients with mobility difficulties. Encourage localities to formulate graded diagnostic and treatment standards, conduct pilot programs of community gatekeeper system and establish dual referral system between grassroots level medical and health institutions and upper level hospitals. System for appointment of posts shall be employed at overall level to establish flexible human resource management systems. In addition, the income distribution system will be improved, by establishing performance based evaluation and incentive systems based on service quality, quantity, and job responsibilities.


Key Reform Task 4: Steadily promote universal access to basic public health services

1.       Basic public health services cover urban and rural populations.Basic public health service programs will be drawn up and service content defined. From 2009 onward, health archives will be established nationwide for all residents and put under regulated management. Regular health check will be carried out for elderly people above 65 years, in addition to growth monitoring for infants under 3 years, prenatal and postnatal visits. Moreover, disease prevention and control guidance will be provided for populations suffering from hypertension, diabetes, mental disorders, HIV/AIDS and TB. Health knowledge will be popularized. The central television health channel has been launched in 2009, and both central and local media shall promote greater health knowledge and education.

2. Increase national major public health service projects. Continue to implement tuberculosis, AIDS and other major disease prevention and control programs, national immunization programs, rural women hospital delivery, and other key public health projects. The following projects will be carried out in 2009: inoculation with hepatitis B vaccine for people under 15 years; elimination of coal-burning fluorosis hazards; folic acid supplements for pre-conception and early pregnant women in rural areas to prevent birth defects; cataract operations for poor patients; and rural water and toilet renovation projects, among others.

3. Intensify public health service capacity building. As a priority for improvement are public health programs including mental health, maternal and child health, health inspection, family planning and other professional public health facilities. Prediction, early warning and response capabilities of major diseases and emergent public health events will be strengthened. Great efforts should be directed to promote and apply prevention and healthcare methods and technologies in traditional Chinese medicine. Employment terms for high-risk professions in infectious disease hospitals, plague control organizations, schistosomiasis control organizations and other disease prevention and control institutions shall be improved.

4. Secure public health service funding. Staffing, development, public utilities and operational expenses of specialized public health organizations should be fully covered by government budget. Service revenues shall be submitted to special financial accounts or incorporated into budgetary management. In turn, specialized organizations should provide basic public health services free of charge to both urban and rural residents. Funding to public health services will be increased. The per capita basic health service spending will be no less than 15 RMB in 2009 and no less than 20 RMB by 2011. Central finance will subsidize economically strained areas by transfer payments.


Key Reform Task 5: Advance public hospital pilot reform

1. Carry out reforms of the management systems for public hospitals, including operational and supervision mechanisms. Public hospitals shall hold on to their public welfare nature and social well-being principle, and always put patients first. Various localities will be encouraged to find effective forms of separating government functions from those functions within institutions and separating management from operations. The responsibilities and rights of public hospital owners and administrators will be defined. Hospital legal governance structure will be improved. The personnel system reform will be further advanced, including clearly defined selection and appointment procedures and position specification of a hospital president, improved title evaluation systems for health workers, and job performance salary systems. Standardized resident physician training system will be established. Local health authorities are encouraged to probe into measures and forms of multi-site practice by certified doctors. Quality assurance management of medical services will be intensified. Clinical examination, diagnosis, treatment, drug use and implantable or interventional medical device activities will be regulated. Lastly, the use of essential medicines and appropriate technologies will be prioritized, and mutual recognition of examination results from similar level medical institutions will be implemented.

Public hospital quality supervision and appraisal system will be explored and established, composed of health administrative departments, medical insurance agencies, social appraisal agencies, representatives of the people, and specialists. Hospital budgetary and revenue-expenditure management will be stringently followed, and cost accounting and control strengthened. Public hospitals shall undergo public supervision by implementing an information disclosure system.

2.       Promote reform of compensation mechanism for public hospitals.The current three compensation channels of service charges will be steadily transferred to two channels by eliminating the reliance on income from medicines sales. The government remains responsible for infrastructure, large-scale equipment purchases, key discipline development, and special subsidies for public health services in public hospitals. In addition, preferential investment policies will be directed to traditional Chinese medicine hospitals (including hospitals of ethnic minority medicine), infectious disease hospitals, occupational disease prevention and treatment institutes, psychiatric hospitals, maternal hospitals and children hospitals, etc. The construction scale, standards, and loans to hospitals shall be under close scrutiny. The policy of separating medical service and pharmaceutical incomes will be pushed forward, by steadily reducing the reliance on drug sales in hospitals and allowing no drug discounts. The reduced income or induced losses will be resolved by adding pharmaceutical service fees, adjusting certain technical service charge standards, and increasing government input and other approaches. The pharmaceutical service fee is included in the reimbursement scope for basic medical insurance. Various effective ways shall be explored in terms of separating medical and pharmaceutical incomes. The medical technical service prices can be appropriately raised while reducing drug prices and examination expenses for medical consumables and large-scale equipment. Medical service cost analysis shall be conducted regularly in order to evaluate medical service efficiency.

3. Accelerate the process of encouraging multi-sectors to run medical institutions. Actively and steadily transform some public hospitals into social-sector run medical institutions. Social sectors are encouraged to run not-for-profit hospitals. Preferential taxation polices for not for-profit hospitals will be implemented; in addition, for-profit hospital taxation policies will be improved. The pilot reform of public hospitals starts in 2009, and large-scale implementation will take place in 2011.



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