Source: www.asiaecon.org |

Chinese Healthcare Changes, Challenges

CHINA HAS become a popular market for healthcare providers. The demand for quality care and insurance coverage has grown as the country has become more affluent. The healthcare sector as a whole has expanded 16 percent over the past several years, and the market for pharmaceuticals alone has grown about…

CHINA HAS become a popular market
for healthcare providers. The
demand for quality care and insurance
coverage has grown as the country
has become more affluent. The healthcare
sector as a whole has expanded 16 percent
over the past several years, and the
market for pharmaceuticals alone has
grown about 11 percent per year.1 The
healthcare system seems to be at a crossroads
as the country attempts to transition
from a command economy to a marketbased
system. Beijing has substantially
reduced state-provided healthcare, and
the reduction has led to a gap between
the demand for and supply of care. The
private sector needs to expand to meet
the needs left unaddressed by the government.

The overall need for healthcare has been
related to changes in the Chinese standard
of living. The Chinese are living
longer and so there has been more need
for long-term care. There has also been a
rise in the number of chronic illnesses like
diabetes, heart disease, and cancer.
These trends are partly attributed to the
adoption of Western consumption patterns.
Personal preferences have changed
as well, and most Chinese now want better
quality healthcare.

By the same token, China’s medical coverage
has shrunk considerably due to recent
state reforms. The government has
scaled back subsidies for healthcare expenses
as part of the general effort to reform
the economy and enhance efficiency.
These reforms have led to a gap in healthcare
coverage, and the rural poor have
been especially hard-hit. During the
1980s, the central government devolved
responsibility for healthcare to the local
level. Local care was to be funded through
tax revenue and so favored the wealthy
coastal regions.2

FOR MANY rural Chinese, cost has
become the principal deterrent to
medical care. The rural Chinese
are 65 percent less likely to have medical
coverage than urban residents, and outof-
pocket healthcare expenses for the rural
residents can total upwards of 10 percent
of annual income.3 Many Chinese
therefore no longer have adequate access
to medical services.

The lack of coverage and unequal access
to care present serious problems for Beijing.
Riots have erupted over the rising
costs of basic healthcare. General support
for the government depends largely on the
ability to deliver economic growth and improvements
in the standard of living. Failure
to address the poor provision of
healthcare can therefore lead to further
unrest and undermine overall support for
the government. Furthermore, the prospect
of an AIDS, SARS, or bird flu epidemic
makes the need for reliable healthcare
all the more urgent.

MANY CHINESE no longer seek
professional treatment because
of the expense. Instead they
rely on self-care which would have grave
consequences in the event of an epidemic.
The private sector can help compensate
for the reduction in subsidized
healthcare although the necessary steps
have not been taken.

Several healthcare companies have recently
expanded their operations to reach
China’s market. AstraZeneca has invested
heavily in China and plans to set up a research
and development center in the
country. Other providers like ChinaLife
and Goodhealth Worldwide have together
launched the first comprehensive healthcare
plan for the country. Also, Parkway,
a Singaporean healthcare group, plans to
open a multimillion dollar surgical center
to help promote awareness of Singapore’s
quality healthcare.

Most of these ventures have been geared
toward the wealthy and Chinese expatriates.
The focus on the wealthy could exacerbate
tensions between the government
and rural areas and encourage the
perception that development has not been
fairly distributed throughout the country.
These tensions would weaken popular support
for government programs, and political instability
could hurt prospects for future growth.
More attention should therefore be given to
less affluent sectors of the Chinese society.

The best prospects for healthcare growth seem
to be among second- and third-tier cities. Rural
living standards are expected to progress
dramatically. This means rural Chinese may
soon demand healthcare comparable to that
found in first-tier cities like Beijing and
Shanghai. The United States government has
embarked on a program to help China address
rural healthcare and integrate traditional Chinese
care with Western-style medicine. The
private sector has yet to address the rural and
less developed areas.

ULTIMATELY THERE are several
challenges ahead for expanding
China’s healthcare system that cannot
be addressed through the private sector alone.
Corruption has become common among hospitals,
especially in drug prescriptions. Hospitals
receive about 40 percent of their revenue from
prescription sales. Beijing needs to revamp the
incentive structure for doctors and create a
more transparent healthcare system. Furthermore,
government regulations restrict substantial
foreign investment in the healthcare industry.
The perverse effects of the current healthcare
system are also a major hurdle.

There seems to be an overprovision of
unneeded services and an underprovision
of more needed treatments.
Locally provided healthcare has also been seen
as sub-par to hospital care, and many Chinese
prefer to go to regional hospitals after visiting
local clinics. The result has been a redundant
and inefficient system. These reforms must be
made at the government level before private
investment can have an appreciable effect.

Source: www.asiaecon.org |