Over the last decade China's enterprise-based medical insurance system has buckled under the weight of its own inefficiencies. Thousands of state companies have been unable to meet their funding obligations at a time when healthcare and medicine costs have skyrocketed.
Corruption has made matters worse, with doctors and hospital administrators using monopolistic drug purchase and distribution practices to collude with pharmaceutical makers in elaborate schemes. Shanghai administrators uncovered 48 unlicensed pharmacies and exposed bribery involving Yn 300rn during the first 10 months of 2000. There have also been reports of healthy residents raiding hospital dispensaries for drugs. which they then on-sell to friends or. the black market.
Vice Premier Li Langing has been blunt about the problem. In a People's Daily comment published in January he wrote that growing corruption was jeopardising social stability by creating substantial burdens at companies that have been unable meet their medical payments.
The government has decided to act. At a national meeting convened last July, Li laid out a State Council-approved framework designed to provide higher quality medical services at a lower cost. Its aim is to wean the country's 389m city and township workers from state-promised cradle-to-grave medical benefits and create a more flexible healthcare system, capitalised by joint contributions from businesses and employees, and driven by market competition.
The head of the labour and social security system, Zhang Zuozi, said China plans to establish a medical insurance system in more than 90 percent of cities by the end of this year, covering 80m workers.
The starting point for the campaign is Shanghai. On January 1 this year, 6.5m city workers and their families began participating in what is arguably the mainland's most far-reaching urban healthcare shake-up since the reform and open policies were launched more than 20 years ago.
There is a fundamental logic in placing the country's leading commercial city at the centre of the reform. Medical outlays by average Shanghai citizens have mushroomed at an annual 46 percent over the last 10 years, inflating healthcare expenditures to about 19 percent of today's total salaries.
Changing demographics
Adding urgency to the government's decision is the city's graying demographics. Today, there are 55 retired individuals for every 100 people working in Shanghai, about twice the national average, explains Shanghai Medical Insurance Bureau director Zhou Haiyang. That ratio is expected to grow, forcing a shrinking base of workers to subsidise increasing numbers of retirees needing more medical attention.
Under the plan, city dwellers for the first time are permitted to choose their doctors, treatment facilities and even the pharmacies where they buy state-approved prescription medicines and over-the-counter products.
Medical insurance is provided through three separate funds which, acting together, are intended to provide an elementary healthcare safety net. They include individual accounts, which are financed by worker contributions representing 2 percent of wages, together with employer top-ups, ranging from 0.5 to 2 percent of salary, depending on the employee's age. These funds are used primarily to pay for outpatient treatment costs and drugs, and emergency hospital expenses.
The city has also created `coordinated accounts,' capitalised entirely by businesses that are required to contribute 10 percent of their payroll, to be used for in-hospital care. For Shanghai's poor and jobless, there is also a separate government-backed public welfare fund.
A centralised computer network, head-quartered at the city's Medical Insurance Bureau, connects Shanghai's hospitals, long-term healthcare facilities and 20 medical insurance management companies. That allows participants to access medical services throughout the city at more than 500 hospitals and clinics.
For retired workers like Xu Rong, little actually changes under the new plan. At Ruijin Hospital, the 52 year-old former cafeteria worker pays for her kidney treatment and drugs using a card that debits a personal account. Previously, she would have billed an account established by her company at the hospital directly.
But younger workers are being asked to make greater contributions. For starters, the percentage of charges paid by individual and coordinated accounts varies, depending on the user's age and the quality of the facility visited, with new workers being asked to shoulder a greater percentage of costs. Moreover, once individual accounts are depleted, users must share a portion of costs, again weighted towards compelling younger and more affluent workers to pay for a greater percentage of their treatment.
For medical expenses that surpass insurance programme ceilings, the government has two solutions: extraordinary subsidies and commercial health insurance. Beijing favours the latter, with vice premier Li advocating that the commercial insurance market should develop hand-in-hand with the reform.
Although Shanghai's answers do seem compelling, it is doubtful they can provide a blueprint for other municipalities facing growing healthcare crises. For starters, Shanghai businesses and their workers are among the most successful in the nation. That has allowed the government to demand total contributions that average 14 percent of worker wages, more than 50 percent above the amount mandated by national guidelines published two years ago.
Shortage of funds for the poor
Programmes to assist the city's poor also remain inadequately capitalised. Although a general medical welfare fund was launched under the reform plan, it has meant little change for Shanghai's most impoverished.
Ms Chai Yingqi, a 35 year-old worker at a district environmental protection bureau office, suffers from acute liver disease that has sidelined her for 10 years on a minimum-wage salary that now amounts to Yn462 a month. Under the new rules, she can receive treatment up to Yn170 during each hospital visit, excluding a Yn10 registration fee per visit that she must pay herself. "I sometimes need to return to the hospital again and again when my illness worsens and I often cannot get the best medicines," she complains.
The city's scheme has also not addressed problems that are set to worsen over time. For example, 2m migrant labourers working in Shanghai more than six months of each year without residency permits are not included. "We haven't figured out how to cover workers from other places," explains Zhou of the medical insurance bureau. "They should be covered by work units in their home cities and townships."
Nor has the government worked out how to settle the issue of unfunded medical liabilities. City employees alone are owed some Yn1bn for contributing money for medical treatment that was supposed to be paid for by their enterprises. Although the government is trying to change that by demanding local businesses make good on individual reimbursements within two years, it has few answers for companies that cannot make their mandatory system contributions.
Li Chao, an administrator at the city's medical insurance bureau, maintains the government would remain flexible, allowing poor or badly performing enterprises to pay when they can. Whether such soft constraints, in the end, actually undermine the entire programme, remains to be seen.
