1
Somya Datta, Research Analyst
Healthcare Industry
Economic Research Analytics
12 February, 2008
•Somya Datta, Research Analyst
•Economic Research and Analytics Division,
•Healthcare Industry,
•October 30, 2008
Chinese Healthcare System in Transition – Opportunity or
Challenge for the Healthcare Industry
• © 2008 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
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Focus Points
�Healthcare System
�Health Insurance System
�Healthcare Financing and Expenditure
�Health Condition and Epidemiology of Diseases
�Demographic Profile
�Health Information System
�Key Healthcare Issues
�Health Reform
�Health Reform Movement
�Health Reform and Impact on Chinese Healthcare Industry
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China - Evolution of Present Healthcare System
1998- Basic Health Insurance Scheme for Urban Employees (integration of LIC and
GIS)
2002 -New Cooperative Medical Scheme (NCMS)
1952 - Urban Health Insurance – GIS and LIS
1940 - Rural Co-operative Medical System (CMS)
Central government's health care funding fell over the years.
Additionally, household health expenditure increased.
EVOLUTION OF URBAN HEALTHCARE SYSTEM
EVOLUTION OF RURAL HEALTHCARE SYSTEM
CHANGING PHASE IN HEALTHCARE FINANCING
LIS & GIS system collapsed as insurance became a burden for enterprises.
Workers in newly emerging informal sectors were left uninsured as GIS and LIS covered formal public sector employees.
CMS financed through worker contribution into welfare funds.
During economic reforms of early 1980s, cooperative health insurance system was abolished.
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China - Healthcare System
Health Services
Government Private Sector
Provide Majority of Health Funding
Provide Majority of Health Infrastructure
Urban Healthcare System
•New Basic Medical Insurance System (BIS) for urban employees , co-funded by employer and employee
•Launch of pilot projects to cover urban residents even outside workforce by 2010
Rural Healthcare System
•New Co-operative Medical Health Insurance system co-funded by government and rural population
•By end of 2007, NCMS covered 86 percent of ruralpopulation and targeted is 100% by end of 2010
HEALTHCARE SYSTEM
URBAN AND RURAL HEALTHCARE SYSTEM
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China - Healthcare Financing
Government
Contribution40 Yuan=$5.2
10 Yuan= $1.2
Contribution from Insured Individual
6% of Wage/Salary
2% of Wage/Salary
Personal Medical Savings Account
Pooled Social Funds
70%
30%
•Employer Contribution rate – 2% of average per capita disposable income
•Insurance project would cover 50 to 60% of total cost of insured
•Initial participation on free will
•Local government likely to set different contribution rate for adults and children
•Premiums paid by households, instead of individuals
•Project to mainly cover expenses for hospitalization and major illnesses
•Government subsidy - 40 Yuan ($5.2) annually per person and extra subsidies to low-income families and disabled
•Farmers can get reimbursement up to 30% of medical expenses
RURAL CO-OPERATIVE MEDICAL INSURANCE PLAN
URBAN BASIC MEDICAL INSURANCE PLAN
IndividualsGovernment Enterprises
HEALTHCARE FINANCING
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China - Healthcare Delivery System
70% employer
contribution
Public Health Services
30% employer contribution +
Employee contribution
Personal Contribution +Enterprise Contribution
New Rural Co-operative Medical System
Inpatient and
Outpatient expenses
Public Fiscal Budget
Urban Comprehensive Medical Care System
Social Funds
Personal Medical Saving
Account
Urban Citizens
Basic medical care
Taxes Health Expense
HEALTHCARE DELIVERY SYSTEM
Rural Citizens
Government
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Health Expenditure (China) 1965-2007
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
1965 1975 1985 1995 2000 2005 2007
Government Expenditure Out of Pocket Social Security Expenditure
China - Healthcare Expenditure
Government Resuming Healthcare
Responsibility
Government- 1.98% of GDP
Out of Pocket – 0.32% of GDP
Other Private – 2.20% of GDP
Using a poverty line measure of $1.08 per day, out-of-pocket health expenditures increased poverty rate in China to 16.2 percent from 13.7 percent
3.7% of GDP
5.6% of GDP
1995 2007
$315
2001 2007
$183
Health Expenditure as % of GDP (China), 1995-2007
Per capita Health Expenditure (China), 2001-2007
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Russia
USA
Mexico
BrazilChina
India
China - Healthcare Expenditure
•China’s Government health expenditure spending low by international standards
•Per capita health expenditure low
INERNATIONAL COMPARISON HEALTHCARE EXPENDITURE
Health Expenditure (Select Countries), 2007
•* Bubble shows per capita health expenditure
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China - Health Condition
•United States ranked 11th
• Russia ranked 29th
Rank Country Nationa l Hea lth Index
1 F in land 0 .655
2 D enm ark 0 .655
3 Sw eden 0 .649
4 N o rw ay 0 .645
5 A u s tra lia 0 .637
13 C h ina 0 .576
Indicators 2001 2008 2010 2015
Total Life
Expectancy
72.5 75.2 75.9 77.5
Birth Rate 13.4 13.7 14.3 13.8
Death Rate 6.9 7.0 7.1 7.3
Population Growth
Rate
0.6 0.63 0.68 0.65
Infant Mortality Rate 28.9 21.2 19.4 15.6
•Between 1987-2007, China made great strides in improving health status of its population
KEY HEALTH INDICATORS
INTERNATIONAL COMPARISON
* Conducted by Chinese Academy of Sciences (CAS)
* Tally uses a Nation Health Index (NHI) combines four branch indexes measuring populations' metabolisms, immunities, nervous systems and behavior
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China - Epidemiology of Diseases
Disease Profile (China), 2008
Others
35%Lower respiratory
infections
3%
Tuberculosis
3%
Self-inflicted
injuries
3%
Perinatal
conditions
3%
Trachea,
bronchus, lung
cancers
4%
Cerebrovascular
Disease
18%
Chronic
obstructive
pulmonary
disease
14%
Ischaemic heart
disease
8%
Stomach cancer
5%Liver cancer
4%
•Since 2003, after SARS major efforts taken to protect people from infectious diseases, including water-borne illnesses
•Investment made to control water pollution in Eleventh Five-Year Plan
• Initiation of first national environmental performance information disclosure program
•Chronic diseases, non-communicable diseases account for 80% deaths
•Cardiovascular diseases, chronic respiratory disease and cancer -leading causes of both death and burden of disease
•Exposure to risk factors is high
•Since 1998, prevalence of water and air pollution linked diseases has risen
RECENT GOVERNMENT INITIATIVES TO IMPROVE HEALTH
A GLANCE AT DISEASE PROFILE OF CHINA
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China - Demographic Profile
* Bubble size represents country's total population
Brazil
ChinaIndia
JapanUS
RussiaEU
•China’s population relatively young by international standards
•However, rapid aging will soon begin in China
•By 2050, 25.0% expected to be above 65 years
•China’s ‘one child policy’ to pose serious economic and social challenges for society from aging
International Comparison- Life Expectancy, Aged Population and Total Population (Select Countries), 2007
Demographic Structure (China), 1995-2020
27.2 20.1 19.1 19.2
66.571.9 71.4 69.0
6.3 8.0 9.5 11.9
0%
20%
40%
60%
80%
100%
1995 2008 2015 2020
(%)
0- 14 years 15- 64 years 65 years and above
D a t a C o l le c t io n M e t h o d s
R e s u l t
C e n s u s A d e q u a t e
V i t a l R e g i s t r a t i o n A d e q u a t e
P o p u l a t i o n b a s e d
s u r v e y s
A d e q u a t e
D i s e a s e S u r v e i l l a n c e A d e q u a t e
A c u t e A d e q u a t e
C h r o n i c - H I V A d e q u a t e
C h r o n i c - T B A d e q u a t e
H e a l t h S e r v i c e S t a t i s t i c s P r e s e n t b u t n o t
A d e q u a t e
H M I S A d e q u a t e
H e a l t h S y s t e m S t a t i s t i c s P r e s e n t b u t n o t
A d e q u a t e
N a t i o n a l H e a l t h
A c c o u n t s
A d e q u a t e
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China - Health Information System
•In 2002, China released the Guidelines for Development of National Health InformationaizationPlanning, 2003-2010, which emphasizes resource sharing, application, market-oriented, safety and reliability and effectiveness issues related to health.
National
Household Health
Services Survey
Routine
Health Statistic
Information
System
Disease
Surveillance
System
Maternal & Child
Health Care
Surveillance
System
Health Supervision
Information
System
HEALTH INFORMATION SYSTEM
Assessment Score of HIS Data Collection Methods (Select Countries), 2007
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Severe State of PublicHealthcare System
Uninsured Population
Problem of healthcare
accessibility
Rural Urban Disparity
Critical Diseases and SAR/AIDS
Uneven Distribution of
Health Resources
Rising Healthcare Costs
Underdeveloped Health Insurance
System
Problems in rural cooperative health-
care system
Lack of funds for health care
Severe state of public finance
China - Key Healthcare Issues
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China - Health Reform
Pre-Reform Era: 1949-1978 Post-Reform Era: 1978-2000
• Centrally Planned
• Health care for all
•Reimbursement system
•Urban Health Insurance Plans-GIS and LIS
•Rural Cooperative Medical Scheme (CMS)
•“Face” of healthcare was barefoot doctor
•No private clinics/hospitals
•Merger of GIS and LIS into Basic Urban Employee Health Insurance plan
•Rural co-operative medical scheme launched
•Commercial insurers allowed to enter market
•Decentralization - Healthcare responsibility shifted to local bodies
•Collapse of traditional healthcare system
• Out-of-pocket expenditure increased drastically
• Permission granted for profit hospitals and clinics
New Reform Era: 2000-2012
2005-2012
•Healthcare for all
•Expand health insurance coverage
•Improve healthcare system
•Focus of quality in delivery of health services
2000-2005
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•Increase in disease covered under state plan for immunization and prevention from 7 to 15
• AIDS, tuberculosis, schistosomiasis and other major communicable diseases now treated free of charge
• Improvement in healthcare infrastructure
• Improvement in health indicators and significant drop in infant and maternal mortality rates
• Increase in average life expectancy
•Further progress made in family planning programs, and birthrate remained stable at a low level
China - Government’s Healthcare Achievements (2004-2008)
RECENT HEALTHCARE ACHEIVEMENTS IN CHINA
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China - 11th Five Year Plan (2006-2011)
Shift to Efficient Growth Model
Upgrade and Optimize Industrial Structure
Boost Rural Economy
Efficient Resource Allocation
Balanced Spatial Development
Improve Public Services
Target 1
Target 2
Target 3
Target 4
Target 5
Target 6
MAIN GOALS of 11th FIVE YEAR PLAN
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China - 11th Five Year Health Plan (2006-2011)
Spend more funds on building and upgrading clinics in rural areas
Encouragement to private sector to run non-profit health and medical institutions in counties and villages
Emphasis on introducing new facilities and training local medical staff
Efforts to tighten drug supervision and develop study of China's traditional medicine
Cover all rural residents under cooperative healthcare network by end of 2010
Health authorities to dispatch more doctors from cities to countryside to bridge medical gap
MAIN GOALS of 11th FIVE YEAR HEALTH PLAN
Increase investment in health sector
Government to encourage individuals and non-government organizations to participate in health services
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INITIATIVES TO REFORM HEALTHCARE SYSTEM
China - Government’s Healthcare Goals (2008-2012)
•Government commitment to increase its health funding by 1–1.5 percent of GDP in next couple of years
•Government to double its rural co-operative medical health insurance funding
•Government considering use of public welfare lottery to contribute in healthcare funding
•Proposal for creation of Private Health Account
INITIATIVES TO REFORM HEALTHCARE FINANCING
•Improve family planning programs
•Tighten government control over medical fees in public hospitals
•Encourage private medical institutions
•Entrusting of domestic and overseas organizations to conduct independent research on medical reforms
•Government inviting public opinions on medical reform
•Establish universal basic health care system
• Ensure medical access in both urban and rural areas
•Key areas for investment - public health, rural health, city community health services, basic medical insurance and primary care
•Implement policies and measures to prevent and treat major diseases
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China - Demographic Challenge and Government Policies
Government Initiatives To Meet Elderly Society Challenge
• Implementation of various chronic-disease prevention programs at national level
•Local government agencies training laid-off workers in long-term care
• Provision for geriatric medical training at undergraduate level and set up more geriatric units
•Increase in private and government-sponsored elderly homes
•Community-based long-term elderly care services have started to emerge especially in urban areas
•Government has started to allocate more funds towards elderly care
Other Government Initiatives Supporting Elderly Society
•In 2007, Government spending on social security was $3.3 billion more than the year before.
•Eligible beneficiaries of basic social security plan have increased from 18.6 % of the population in 2000 to 90% in 2008.
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China - Expected Impact of Healthcare Initiatives in China until 2012
Healthcare Initiatives
Efficiency in Service Delivery
Expensive Medical Treatments
Eliminate
corruption
Public Assistance to Poor
Eliminate Over medication by doctors
Basic
Healthcare
for All
Increase inGovernment
Responsibility
Rise in Type of
Diseases
Increased
Insurance
Enrolment
Rural Areas
Increased Insurance Enrolment Urban
Areas
Bridge Rural Urban Disparity
Private
Insurance
Prevention and Primary Care
Urban Healthcare System
Cover even non-employees under insurance plan
Healthcare System Healthcare System
Components Components Ongoing Change Initiative Ongoing Change Initiative
Rural Healthcare Systems
Opportunities Opportunities
Pharmaceuticals, Biotechnology, Drug Discovery and Medical Devices
Companies
Cover all rural citizens by 2010Health Infrastructure, Telemedicine,
Pharmaceuticals, Biotechnology, and Medical Devices Companies
Private HealthInsurance
Healthcare Financing
Healthcare InformationSystems
Encouragement to commercial healthcare insurance
Increased government participationin healthcare financing
Establish e-healthcare system
Pharmaceuticals, Biotechnology, Drug Discovery and Medical Devices
Companies
Healthcare IT Companies
Commercial Health Insurance
China - Health Reform and Opportunities in Health Industry Segments
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China Health Reforms and Opportunities for Healthcare Industry
Long Term Elderly Care Centers
Demand for Medical Devices
Demand for Health
Personnel
Demand for Healthcare
Infrastructure
Demand for Advanced
TechnologiesImproved
Rural Health Services
Demand for Innovative
Drugs
Improved Healthcare Management
2008
2012
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