Healthcare Reform in China: Design by Committee

Publication: China Brief Volume: 7 Issue: 14

Since the disassembly of its comprehensive pre-1979 healthcare system, China has sought to shape and reshape the national healthcare system in an attempt to keep pace with rapid social and economic reforms. While reforms have been ongoing for over 10 years, an overhaul of the healthcare system appears to be in the works with vibrant public debate regarding which international healthcare models to emulate. The government has formed several ad hoc government coordinating committees to review options and offer informed recommendations to senior leaders on different aspects of the healthcare system. Despite senior leaders stating their concerns and setting lofty targets in a “five-year health plan,” reforms have been slow in coming. Commentators have indicated that up to 18 different government departments and offices have responsibility and investments in the healthcare system, causing protracted negotiations and heated debates behind closed doors over an outcome that will undoubtedly favor certain stakeholders at the expense of others.

A key healthcare reform “small group” was created in 2006 to establish the direction for healthcare reform strategy and coordinate research and deliberation about various healthcare reform options [1]. Under the leadership of co-chairs Minister Ma Kai of the National Development and Reform Commission (NDRC) and Minister Gao Qiang of the Ministry of Health (MOH), the group formally received seven healthcare reform proposals in late May during the latest stage of China’s quest to develop a functioning and equitable healthcare system [2]. While neither the content of the proposals nor membership of the group tasked to review them has been made public, various media sources have reported broad details of the proposals and mentioned key members of the small group. The complete membership of the group is not officially confirmed (with some media sources placing membership at 11 and others at 14 departments), though it is instructive to review which agencies are reportedly members and the implications their membership might have for the composition and character of China’s future healthcare system (People’s Daily, September 19, 2006).

A “Small Group” is Formed

The formation of the government group to review healthcare reforms constitutes the most recent development in a reform process that has been evolving since the early 1990s. In 1994, the State Council piloted a pooled urban medical insurance system in Jiangsu and Jiangxi provinces, ultimately scaling up the “basic medical insurance system” for urban employees in 1998. The outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, however, revealed major vulnerabilities in the public health and medical system. In response, the State Council Development Research Center, an office under the State Council, collaborated with the World Health Organization to compile a report on the progress of China’s medical and health system reforms, ultimately concluding in 2005 that China’s medical reforms were “basically, unsuccessful.” Recognizing that the cost of care was skyrocketing and the majority of the population was not able to access the system, Minister of Health Gao Qiang publicly apologized for the failures of the system, admitting that “getting healthcare is hard, seeing a doctor is expensive” (kan bing nan, kan bing gui) (Zhongguo Qingnian Bao, February 19, 2006).

In September 2006, various newspapers reported that the State Council had formed a “Health Care System Reform Coordinating Small Group” (yiliao tizhi gaige xietiao xiaozu) under the leadership of the MOH and the National Development and Reform Commission (NDRC) [3]. While this is not the first small group that has been formed to address various aspects of healthcare reform, this group appears to possess the broadest mandate to establish the “guiding principles” that would define the shape and direction of China’s future healthcare reforms.

Interviews with multiple sources in Beijing suggest that as of June 2007 there are at least 16 members of the small group [4]. It is important to bear in mind that an official list of members has not been published and that various sources have reported slightly different membership rosters. Media reports initially stated that 11 departments were involved, but later reports place the number at 14, indicating that several organizations had likely joined the group after its inception, undoubtedly hoping to influence the outcome of the healthcare debate.

Key Departments Reportedly Members of the Healthcare Reform Small Group

1. National Development and Reform Commission (co-chair)

The NDRC is the “super ministry” that determines economic and social policies and generates the guiding five-year plan and associated budgets. In the healthcare reform development process, it functions as an “honest broker,” able to make difficult decisions (including the most contentious choices about where to allocate resources and where to reduce funding and authority). It is not an implementing agency nor does it depend upon other organs of the State Council for its authority. For these reasons, it can pursue the project’s goals without concern for its own status and budget. Having no “turf” to protect, it can ride herd on agencies that are more interested in protecting their own interests than establishing a functioning healthcare system.

2. Ministry of Health (co-chair)

At the center of China’s healthcare system since it was founded in 1949, the MOH is tasked with managing a healthcare system that can provide universal access to basic health services and ensure that public health is maintained through preventative health programs and anti-epidemic networks. Focusing on health management and service operations, the MOH oversees hospitals and clinics that form the core of any system. The ministry, however, is lightly staffed and has faced challenges in establishing effective oversight of a freewheeling market system plagued by corruption and counterfeit products. The ministry has also had an uneasy relationship with other government bureaus that have overlapping jurisdiction in regulatory areas, such as with the State Food and Drug Administration (SFDA). One of the ministry’s main objectives is to ensure that hospitals and clinics are adequately funded, either from user-fees or government grants.

3. The Ministry of Finance (caiwubu)

The Ministry of Finance (MOF) is responsible for producing annual budgets and monitoring financial management performance in accordance with the five-year plan. The MOF determines the budgets of government departments and controls the finances of state-owned enterprises.

4. The Ministry of Labor and Social Security (laodong baozhang bu)

The Ministry of Labor and Social Security (MOLSS) is responsible for the management of state medical insurance systems. The MOLSS would play an important role in public insurance schemes that serve the unemployed and laborers who are not covered by private or other insurance programs. MOLSS also establishes a list of “essential drugs” and prices that qualify for insurance reimbursement. MOLSS will undoubtedly seek to contain costs and minimize “profits” earned by service providers.

5. State Commission Office for Public Sector Reform (zhongyang jigou bianzhi weiyuanhui bangongshi)

This office is responsible for overseeing the administrative management system and supervising institutional reforms at national and provincial levels [5]. It has oversight responsibilities for government departments at national and local levels and establishes the division of labor between state council-level ministries and provincial bureaus. It performs audits of other government departments and, most importantly, sets staff-limits for government offices, making it a very influential actor in any reform process.

6. The Ministry of Education (jiaoyubu)

The Ministry of Education has oversight for medical schools, many of which play an important policy-advisory role as well as provide medical services in university-run hospitals and regulate the licensing of medical professionals.

7. Ministry of Civil Affairs (minzhengbu)

The Ministry of Civil Affairs is responsible for maintaining a social safety net for the poor, which includes ensuring access to healthcare in rural areas. Though social security funding is inconsistent outside of urban areas, any attempt to increase healthcare access for peasants, the unemployed and the poor through a Chinese-style Medicaid program would be the purview of the Ministry of Civil Affairs. It is currently unclear how rural medical financing programs run by Civil Affairs bureaus might be integrated with other systems or what role the Ministry of Civil Affairs might play in any expansion or reform of the Rural Cooperative Medical Scheme currently implemented by the Ministry of Health.

8. The Ministry of Personnel (renshibu)

The Ministry of Personnel manages the recruitment and careers of civil servants and workers with advanced educational degrees, including those in the healthcare sector. The Ministry of Personnel plays a leading role in reform exercises in all sectors, particularly where downsizing or reorganization of the bureaucracy results in significant shifts in personnel.

9. The State Population and Family Planning Commission (renkoujishengwei)

The State Population and Family Planning Commission (SPFPC) is responsible for the reproductive health of women, including the oversight of birth control medication. The commission also oversees local clinics within its system. Due to its robust network of service providers, reaching all the way to the village level, SPFPC advocates for a greater role in the health system, particularly as a provider of preventative health services at the community level.

10. Legislative Affairs Office of the State Council (guowuyuan fazhi bangongshi)

The Legislative Affairs Office will be responsible for drafting the rules established by the small group. The office is primarily responsible for coordinating between the various ministries and departments and “narrowing discrepancies and disputes” [6]. Senior officials in this office also take stands on certain policy issues, such as voicing expectations about limiting foreign ownership in healthcare facilities and ensuring that hospitals remain under state control.

11. State Council Development Research Center (guowuyuan fazhan yanjiu zhongxin)

The State Council Development Research Center authored the seminal 2005 report that declared healthcare reform to be “basically, unsuccessful.” The “DRC” is the government’s top policy “think tank” that studies strategic and long-term issues concerning economic and social development and makes recommendations to the Premier and the State Council.

12. China Insurance Regulatory Commission (baoxian jiandu guanli weiyuanhui)

Established in 1998, the China Insurance Regulatory Commission is a ministerial-level body that operates directly under the State Council, supervising and managing the insurance market. Private health insurance is a relatively recent phenomenon in China; the first pilot policies were introduced in 2004. To date, private health insurance coverage is very limited and has reportedly met with serious challenges, with claims often outstripping premiums. The commission is tasked with promoting and integrating private insurance with government-led medical insurance programs currently being developed (China Daily, March 16).

13. State Food and Drug Administration (shipin yaopin jianguan ju)

Recently rocked by scandal with the conviction and subsequent execution of its founding director, the State Food and Drug Administration (SFDA) has struggled to define its role in the health care sector, particularly in the shadow of more powerful bureaus, such as the Ministry of Health, which has overlapping jurisdiction over many issues. Clarifying its roles, responsibilities and jurisdiction in a reformed system is critical.

14. The State Traditional Chinese Medicine Administration (zhongyiyao ju)

With over 2,500 Traditional Chinese Medicine (TCM) hospitals, any reforms will have to incorporate this extensive branch of the medical system. The administration is tasked with overseeing TCM practitioners, research and development activities and promoting this facet of Chinese heritage. The administration’s role in the small group is undoubtedly to ensure that TCM continues to be an integral part of any reformed health system and that TCM compounds and practices are recognized on insurance reimbursement lists. The administration is under the authority of the Ministry of Health, but it operates independently. Traditionally, the director of the Traditional Medicine Administration concurrently holds the post of vice-minister of the Ministry of Health.

15. State-owned Assets Supervision and Administration Commission of the State Council (guowuyuan guoyou zichan jiandu guanli weiyuanhui)

The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) is the “owner” of public companies in China, tasked with overseeing and strengthening the management, reform and value of state-owned enterprises. Ostensibly, the SASAC will seek to ensure that the interests of state-owned hospitals, pharmaceutical, insurance and equipment manufacturing companies are in a position to benefit in any future system. SASAC can be presumed to weigh in heavily on any decisions regarding privatization or public-private partnerships, and they are also likely to play a role in strengthening corporate management practices, including transparency and accountability of the government-owned companies involved in the healthcare system.

16. All-China Federation of Trade Unions (zhonghua quanguo zonggong hui)

The All-China Federation of Trade Unions plays a key role in the healthcare reform debate, representing the overall work force, including workers and their employers, who contribute to health insurance schemes. The federation also represents the interests of healthcare workers and suppliers to the industry who will undoubtedly be affected by reforms.

Parties Unrepresented in the Small Group

Several organizations have a stake in the healthcare system and are reportedly not associated with the small group responsible for reviewing healthcare reform proposals. Their apparent lack of representation on this committee is not necessarily surprising and potentially points to efforts to streamline debate and focus on government-led service delivery over other concerns. It does not mean, however, that they do not play a role in the healthcare system. Nor, does it suggest that they will not have other means to ensure that their interests are considered. For example, the Ministry of Commerce (MOC) is not consistently mentioned as a key participant. This might indicate that foreign companies should not expect to have a meaningful role in healthcare financing or service provision, since the MOC is largely concerned with foreign commerce, including the international trade of equipment and pharmaceuticals. The Ministry of Science and Technology is responsible for state laboratories and funding new pharmaceutical product development, so it is unclear why they are not featured more prominently in the debate. The Chinese Centers for Disease Control operate clinics throughout the country and provide preventative medical and anti-epidemic services, though it is likely that their role is represented in the small group by the Ministry of Health.

While the government has stated its expectation that “the market” and private sector funding will play an important role in a reformed healthcare sector, its representatives do not have a formal place in the “small group” (China Daily, March 22). Key domestic industry associations, such as the China OTC Association, China Insurance Association, China Pharmaceutical Commerce Association, Chinese Hospital Association and others only play a consultative role in the process.

The General Logistics Department of the People’s Liberation Army is not openly involved in the healthcare debate, indicating that the military hospital system will likely continue to operate outside of the oversight of civilian authorities, despite the fact that military hospitals are highly commercialized and serve civilian patients. In addition, many government bureaus operate hospitals for their direct employees and dependents, including public security, railway, power, land reclamation and mining bureaus. These hospitals, like most military hospitals, also provide services to civilian customers and will be affected by a restructured healthcare system.

Conclusions

Healthcare reform in China has been a work in progress for years, and the recent effort to establish a new framework that improves access, affordability and quality has yet to produce meaningful results. The issue is as complex as the stakes are high, necessitating the involvement of many government departments in the process. There are challenges, however, that will need to be overcome if the process is to ultimately produce an implementable proposal that can become a functioning and affordable healthcare system. The current system has inefficiencies and biases (such as over-investment in urban rather than rural systems and over reliance on drug sales to generate revenue) that cannot be carried into a new system if it is to succeed. Corruption is a continual, systemic issue that must be more effectively addressed in order for the government to enjoy a return on the promised increased investment in healthcare.

Transparency is lacking in both the healthcare system and the reform process and will have to be improved. For instance, many hospitals lack computerized information systems that facilitate auditing and compliance, and hospitals further protect their information as “commercial secrets,” enabling them to avoid oversight. While there is significant public debate regarding healthcare reform and many public events featuring government speakers presenting their organization’s views, the policymaking process is neither inclusive nor transparent. The membership of the “Health Care System Reform Coordinating Small Group” is not officially acknowledged (even as it receives “proposals” from Chinese as well as foreign organizations), nor is the deliberative process transparent, despite significant public interest and private sector resources that would inform the debate. Chinese experts have argued that the healthcare reform model should include private financing and an active role for the private sector, even though the process is committed to producing a “government-led” model. If the government determines that the private sector will play a significant role in a future healthcare system—a likely possibility—then greater involvement of private stakeholders, such as insurance companies, pharmaceutical companies and civil society, will be necessary to generate effective outcomes.

If the senior leadership is truly committed to reforming the system and creating an equitable and affordable medical system that can deliver appropriate-quality care to its citizens, a strong and sustained senior-level political leadership and greater transparency is needed. The most senior leaders will have to make challenging decisions (and maybe break a rice bowl or two) if the reforms are to be effective. Too frequently, a “design by committee” process protects vested interests and produces compromises that maintain bureaucratic harmony, rather than affecting sweeping transformations that will create a new system out of the current “basically, unsuccessful” one.

Notes

1. “Small groups”, also referred to as “leading small groups,” are ad hoc coordinating committees formed to build consensus on issues where there are multiple stakeholders affected by the particular issue and often when there is no clear division of responsibility or authority. “Small groups” normally perform a coordinating role and provide a structured forum for members to interact, particularly when issues are contentious and a consensus cannot be reached by the bureaucracy on its own. Small groups do not actually make policy, but provide recommendations and “guiding principles” that the bureaucracy should follow.

2. Beijing Business News, “11 Departments set up a healthcare reform coordinating small group to balance interests of various groups” [shiyi buweizu jian yigai xietiaoxiaozu tongchou yiliao gaige gefang liyi], September 18, 2006. Available online at: http://news.tom.com/2006-09-18/000N/09021689.html. See also: Southern Weekend, “Medical Reform: Seven medical reform proposals put before the government to compete for consideration” [yigai: qitao yigai fangan guotang zhengfu shichang zhizheng jixu] June 6, 2007. Available online at: http://health.sohu.com/20070608/n250447644.shtml.

3. Note: The Ministry of Health spokesperson has publicly referred to the small group as a “working small group” though media reports have not used this term.

4. Requests were sent to government officials, academics and technical experts in Beijing to provide the complete small group roster. Three lists purporting to be the membership roster were provided to the author, with slight variations between them. Exhaustive search of the NRDC, MOH and State Council web site did not reveal an official document listing the membership of this small group. Media articles listed only 8 out of 11 members.

5. “Brief introduction to the State Commission Office for Public Sector Reform” [zhongyang bianban jianjie]. Available online at: http://www.chinaorg.cn/idx/top/2007-06/06/content_5026988.htm.

6. “The Legislative Affairs Office of the State Council, The People’s Republic of China” accessed at: http://www.chinalaw.gov.cn/jsp/contentpub/browser/contentproe.jsp?contentid=co1865792191.