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Trying to cure China’s healthcare system

July 8, 2010

Rebalancing its traded basket of goods, one of the five major sectors that India hopes to boost in China is pharmaceuticals. Rich in research and development, India realises that this is a high growth area especially with China’s nation-wide healthcare reform firmly in place since 2009.

China was fourth from the bottom on the 2006 list of World Health Organization member countries in terms of granting its citizens equal access to and financing healthcare. This is said to change as the country plots it way to becoming the world’s second largest economy.

According to the healthcare reform plan, the basic system will have three main parts: medical insurance for urban workers, basic medical insurance for the urban unemployed and a new type of rural cooperative medical care system. To improve the system whollistically, Beijing has created better finances, training and infrastructure facilities. In 2009, the Chinese government announced plans to provide RMB 850 billion between 2009 and 2011 to build 29,000 new municipal and 2,000 county-level hospitals, upgrade existing healthcare centres, invest in infrastructure and a new drug programme listing all refundable drugs. By 2011, over 90 percent of the population is to be covered by health insurance schemes and each citizen participating is to receive RMB 120 of insurance subsidy per year. The government also plans to increase the number of medical graduates, since low qualification of medical staff is among the main challenges facing healthcare facilities.

In boosting government spending on healthcare, China hopes to improve healthcare facilities nationwide, not only in urban areas. As a result, the government has a long-term view on reforming the sector. China plans to reduce dependance on savings and raising household consumption thereby boosting domestic demand. Studies show that a 1 percent of GDP increase in government expenditure equally distributed between pension, healthcare and education would result in a permanent 1.25 percent of GDP increase in the household consumption ratio. Part of this additional disposable income Beijing hopes will filter back into the healthcare system creating an upward spiral. According to a recent Deutsch Bank report, early outcomes of recent reforms have already revealed an improved quality of life, a significant increase in insurance coverage and a drastic decline in infant mortality from 37 children per 1000 births in 1990 to 18 in 2008.

Nonetheless, for now China’s healthcare system seems to be complex and dogged by financial problems. As hospitals currently receive 90 percent of their funds from drug prescription, patients are often prescribed certain drugs that mint the hospitals rather than cure the patient. Local governments that compete for higher GDP growth rates are also reluctant to direct resources to a sector not immediately producing GDP growth or boosting employment. Further, even though reforms address the lack of medical staff, there are not yet enough incentives to work in rural areas, as better pay, lifestyle and career prospects in urban areas attract young doctors.


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