Too successful?

Why Beijing’s scheme may be almost bust

Too successful?

This may hurt...

The phrase ‘victim of its own success’ seems appropriate for what’s currently happening in Beijing’s healthcare system.

The capital city – which has seen its population surge in recent years to 19 million – was selected to trailblaze a new scheme in January, when the municipality switched to ‘real time medical treatment’.

Behind the slogan was something a little more prosaic – a new approach that saw citizens issued with swipe cards. These could be used at the hospital to reimburse expenses immediately (at least, those which patients were covered for).

This sensible, convenient scheme has had one major drawback: it’s bankrupting the city’s medical insurance fund.

In the first six months of the year Beijing’s healthcare expenditure rose 40% over the same period in 2010. A doctor at Peking University People’s Hospital told Century Weekly that swipecards have played havoc with cost controls. In the previous system the hospital would only get reimbursed by the state’s medical insurance scheme at year end. Given the uncertainty as to whether claims would be honoured, doctors sought to avoid costs escalating. But the swipe cards eliminated that element of uncertainty by allowing for instant settlement of bills. This has led to rising claim levels, with hospitals more willing to recommend costlier procedures than before.

Likewise, by removing some of the delay in being reimbursed, patient numbers have risen too. Beijing Municipal Human Resources and Social Security deputy inspector Zhang Dafa revealed on a state website that the number of people receiving medical care in the capital had gone up by 70% year-on-year.

“If it increases at this rate without control, the medical insurance fund will face a risk of cost overruns [i.e. deficits],” says Zhang. According to the China Statistical Yearbook, Beijing’s Medical Insurance Fund had an income of Rmb29.8 billion last year, spending Rmb28 billion. It went into the red in the first six months, eating into the fund’s aggregate surplus of Rmb19.59 billion.

So in July draconian new measures were announced: top Beijing hospitals were told that spending growth for the year would be pegged back to 18%. That means that the largesse of the first six months has had to be replaced by controls designed to limit spending, with a focus on ‘reasonable medical care’.

What does that mean for patients? A radiologist with one of Bejing’s biggest hospitals explained to Century Weekly that one new rule specifies that only three different parts of a patient’s body can be examined per day.

“If a patient has an abdominal examination or a check for pleural effusion in the morning, and in the afternoon needs a check on blood vessels in the neck and lower limbs, then one of the examinations must occur the next day.”

Beijing’s financing problem points to a wider, nationwide dilemma. Last year the aggregate combined surplus of the state’s medical insurance fund was Rmb77 billion, with a cumulative surplus banked of Rmb504.7 billion. But as costs rise – perhaps as more swipecards get introduced in other cities – that too will likely move closer to deficit.

Another major worry for the existing system is China’s greying population. Since the retired don’t pay into the medical insurance pool, the older the patient demographic the worse it is for the finances of the fund.

All this tends to suggest more money will be required, and inevitably much of it from the central government. In most places that would suggest higher income taxes. In China, an alternative approach is being followed: policymakers have been pushing for a greater share of dividends from state-owned firms. One example: this year they upped the percentage of profits that must be paid out by SOEs in the resources sector to 15%. If payouts increase still further, it’s likely to be to finance health reforms.

So as we reach the 30th month of the reform process, the record looks mixed. Well-intentioned changes have not always gone to plan and hospitals continue to struggle to meet patient demand. But many rural residents would probably concur that things are better than they were five years ago.

While it is too early to judge the reforms, it’s clear that public confidence in the healthcare system is still hesitant, too. That will change if hospital management improves and resources are allocated more efficiently. But for accountability to improve, the various bureaucracies overseeing healthcare delivery will need to be streamlined. For some observers that is the great unsolved dilemma of the whole process.

The goals remain ambitious: within five years the government wants patients to be spending less of their own money on healthcare expenses (the aim is to get their contribution down to below 30% of the bill). Health spending, as a result, is going to rise dramatically. Espicom Business Intelligence forecasts Chinese health expenditure will rise from an estimated $277 billion this year to $593 billion in 2016.

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