China promises to improve public hospitals

The Associated Press
Wednesday, March 9, 2011; 5:36 AM

BEIJING -- Top Chinese officials promised Wednesday to improve public hospitals and cut their dependence on drug sales for income - a major driver of high health care costs.

Public health care in China has been underfunded for years, and the high cost and poor access of health services are among the public's biggest complaints. In 2009, China announced it would pour $124 billion into reforming the system over three years to provide basic medical coverage and insurance for all of its 1.3 billion people.

Experts have warned, however, that large injections of public funds will be wasted if underlying problems such as the chronic reliance on revenue from drug sales are not solved. World Bank research shows that more than 40 percent of total health spending goes to purchasing medicines in China, a disproportionately high amount compared to other countries.

"I think that no matter what kind of hospital, you should rely on medical technology and improved services to gain income," Sun Zhigang, deputy director of the National Development and Reform Commission, told a news conference on the sidelines of the annual meeting of China's legislature.

This year, officials are focusing on reforms that would improve access to medical care, with plans announced this week to build more county hospitals, reduce prices of some common drugs and increase state insurance subsidies.

The government says the reforms are part of a promised national economic overhaul that will encourage greater domestic consumption instead of relying on exports for economic growth. Many Chinese put a significant portion of their earnings into a rainy day fund for health care instead of spending it.

The State Council, China's Cabinet, announced Monday that the central government would fund the construction of more than 300 county hospitals, while state media said the maximum retail prices of some commonly used antibiotics and other drugs will be reduced by an average of 21 percent. That is expected to save Chinese patients $1.5 billion.

The central government plans to spend 172 billion yuan ($26 billion) this year on health care, an increase of 16.3 percent from the previous year, the Finance Ministry said Saturday. That includes increasing annual government subsidies for insurance premiums to 200 yuan ($30) per person from 120 yuan ($18).

Although the reforms have already increased insurance coverage in rural areas and improved primary health services at the village level, the government's efforts to fix problems at profit-driven state hospitals have been criticized as insufficient.

Many Chinese health experts say the government should spend even more on health, pointing out that its budget for health care last year amounted to just 1.2 percent of the gross domestic product, compared to the nearly 4 percent allotted for education.

"Spending on health should be higher than education," said Guo Shuqin, director of a hospital in Hebei province's Baoding city and a National People's Congress representative. She said her 1,500-bed facility is so overcrowded that patients often have to sleep in corridors while they wait for wards to free up.

Other experts warn that Chinese patients are not seeing significant savings in their medical bills, despite the government's multibillion-dollar injection into the system, because public hospitals continue to rely on profits from selling drugs and expensive treatments for income.

John Langenbrunner, a health economist at the World Bank in China, said medical costs continue to escalate because doctors and hospitals are paid for each appointment or procedure - a system known as "fee-for-service" - which encourages them to over prescribe tests and treatments.

"You can argue that the government's been very successful with their health reform by providing insurance," Langenbrunner said. "But then you could also argue it hasn't worked as effectively as it should because people are facing issues of financial protection and still paying out of pocket expenses."

The government's spending on health last year jumped nearly 20 percent from 2009 - sharply outpacing economic growth of 10.3 percent, which could make it unsustainable in the long term, Langenbrunner said.

© 2011 The Associated Press