Despite being a Hong Kong native and a former director of health for the SAR, Chan’s status as the first Chinese national to run a leading UN agency inevitably drew attention. As comments were made about the mainland’s shoddy behavior during SARS (and Hong Kong’s), its poor record on sharing information on bird flu and its struggles to combat the spread of HIV/AIDS, Chan was forced to stress her independence. "I no longer carry my nationality on my sleeve," she said.
What the world hears of China’s healthcare system is bad enough, but the full story is much worse.
The great uninsured
The problem starts with health insurance. Almost 90% of rural and 60% of urban Chinese are not covered, according to the Ministry of Health. For the rest, coverage is largely deficient.
Most policies are the so-called "catastrophic" kind, which pay a predetermined lump sum in the event of hospitalization, regardless of the actual cost. With the average price of a hospital stay climbing 67% to US$525 in the five years through 2003 – about half of the country’s per capita urban disposable income – that cost can be prohibitive.
In some cases, the dire state of domestic facilities means the cure is worse than the ailment. Stories abound of hospital officials who save money by reusing disposable syringes and surgical knives.
It was not always like this. A report issued in 2005 by the China Development Research Center (CDRC), a government advisory body, describes the collapse of the country’s universal health care system and the rise of profit-oriented state-owned hospitals.
The report laid the blame on the switch from a state-funded to a user-pays health system after economic reforms began in 1977. This saw the government’s share of public health spending plummet from almost 100% to about 16% today, compared to about 44% in the US and an average of more than 70% in other advanced industrial countries. Since 1981, the share of health costs met by patients has increased from 23% to 53%.
The government is slowly tackling the issue. Healthcare spending has risen 13% per year since 1990 but still makes up less than 5% of GDP, well below the 8% average in developed economies. The CDRC has said it would cost US$19-25 billion to build a new health system and make health services universally available and affordable.
Beijing has also opened the door to foreign expertise by allowing foreign investors to own up to 70% of joint venture medical facilities, much more than allowed in other sectors.
Considering that China’s healthcare industry is expected to equal that of the US by 2020 in absolute terms, the opportunities are sizeable. But few have jumped in. Of the 290,000 medical institutions in China, only 45 are Sino-foreign joint ventures, mostly small dental, eye or health examination clinics.
But some players are testing the water. NASDAQ-listed Chindex International, which runs a network of United Family Hospitals and Clinics in Beijing and Shanghai, has recently launched a preferred-provider organization (PPO) health plan with FESCO Insurance Brokerage, the insurance brokerage arm of China’s largest human resource service provider.
At US$3,000 per year, it is well beyond the means of most Chinese, but as the first policy of its kind to be targeted at the domestic population, it is no surprise the company is playing it safe.
Ultimately, the entrance of foreign insurers and medical providers can only be beneficial in providing a model for sector reform and backing up government efforts.
If the private sector and the government can meet somewhere in the middle and provide comprehensive health coverage to China’s 1.3 billion people, a Chinese head of the WHO may not seem quite so incongruous. Drastic surgery is required.