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Tbb I Das > N V 0A1 O AA a H IH Public Disclosure Authorized Bot- Nei Public Disclosure Authorized .G ' ~' S Qaam T E Public Disclosure Authorized tbb I daS > N V 0a1 O AA A H IH Public Disclosure Authorized bot- nei Public Disclosure Authorized .g_' ~' s qAAM T e Public Disclosure Authorized * ~ V' - Ev_ ~ -; -- 7 - Public Disclosure Authorized _y46 t f C H I N A 2 0 2 0 FINANCING HEALTH C,ARE C H I N A 2 0 2 0 S E R I F S China 2020: Development Challenges in the New Century Clear Water, Blue Skies: China's Environment in the New Century At China's Table: Food Security Options Financing Health Care: Issues and Options for China Sharing Rising Incomes: Disparities in China Old Age Security: Pension Reform in China China Engaged: Integration with the Global Economy T H E W O R L D B A N K W A S H I N G T O N D . C. FINANCING HEALTH CARE I S S U E S A ND O P T I O N S F O R C H I N A m T H E W O R L D B A N K =511 W A S H I N G T 0 N D . C Copyright © 1997 The International Bank for Reconstruction and Development/THEWORLD BANK 1818 H Street. N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing September 1997 The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissemina- tion of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to copy portions for classroom use is granted through the Copyright Clearance Center, Inc., Suite 910, 222 Rosewood Drive, Danvers, Massachusetts 01923, U.S.A. Cover photograph by Erica Lansner/Black Star. Cover insets (from left to right) by Vince Streano/Aristock, Inc.; Claus Meyer/Black Star; Serge Attal/Gamma Liaison; Dennis Cox/China Stock; Joe Carini/Pacific Stock; Dennis Cox/China Stock. ISBN: 0-8213-4048-4 Contents Acknowledgments vii Overview 1 Problems in health sector performance 2 Recommendations 4 Implications for public finance 9 Chapter1 Assessingthe Performance of China'sHealth CareSystem 11 Health status-progress and problems 12 Nonhealth indicators of the health care system's performance 13 Conclusion 16 Chapter2 Health Servicesand Their Financing 17 The three tiers of the rural health delivery system 18 Sources of health spending 19 Uses of health spending 19 Fiscal barriers to bigger and more equitable health budgets 22 Who gets health services-and how do they pay for them? 23 Chapter3 StrengtheningPublic Health Programs 27 The weakening structure and finance of public health programs 28 Immunizations-improve coordination and funding 29 Tuberculosis control-expand and subsidize the new program 29 Antitobacco efforts-a two-pronged approach 30 Conclusion 32 v Chapter4 Meetingthe Needsof the Poor 35 Health problems of the poor 36 The role of government spending in health care for the poor 37 Chapter5 ReformingPricing and Planning 41 Ending price distortions in the health sector 42 Reallocatinggovernment spending 44 Improving planning and coordination 44 Chapter6 Optionsfor EfficientRisk Pooling in RuralAreas 47 The rural cooperative medical system, 1960-83 49 China's recent experienceswith community financing 49 A new policy direction for financingrural health care 51 What would it take to make community financingwork? 52 Chapter7 Optionsfor EfficientRisk Pooling in UrbanAreas 55 Experiments in reforming the urban health insurance systems 56 Options for broadening urban risk pooling 60 Chapter8 Recommendationsand Implications for PublicFinance 63 Priorities for government health spending 64 Finding funds for increased public spending on health 67 Glossary 69 Annex 73 References 77 This reportuses Hong Kong when referringto the Hong Kong SpecialAdministrative Region, People's Republic of China. vi Financing Health Care: Issues and Options for China Acknowledgments his study was prepared by the World Bank at the request of the government of the People's Republic of China, which is considering policies to improve the equity and efficiencyof health services.It is the third World Bank policy study of China's health sec- tor. The series began with a general study entitled China: The Health Sector (1984), followed by China:Long-Term Issues and Options in the Health Transition (1992a). This report looks in greater detail at the impact of China's move toward a market economy on the financing and organization of health care and recommends a number of steps China can take to reform health care financing. Research for this report was carried out jointly by the Chinese government and World Bank staff. Work in China proceeded under the direction of Liu Peilong, direc- tor of the Foreign Loan Office of the Ministry of Health. Two World Bank task managers in the Human Development Department managed the project: William vii P. McGreevey, from June 1994 to February 1996, and An advisory group has been helpful throughout in Helen Saxenian, from March 1996 to August 1997. The defining the principal issues and approaches in this report was written by Helen Saxenian, together with study. This group consists of William Hsiao; K. T. Li, William Hsiao, Dean T. Jamison, William P. McGreevey, professor of health economics at Harvard University; and Winnie Yip. Work at the World Bank was carried Hu Shanlian of Shanghai Medical University and out under the direction initially of Vinay Bhargava, deputy director, Health Economics Institute, Beijing; chief, Human Resource Division, China and Mongolia Dean T. Jamison, director, Center for Pacific Rim Department, followed by Joseph Goldberg, chief, Rural Studies, University of California at Los Angeles; and and Social Development Division. Jagadish Upadhyay, Wei Ying, Beijing Medical University and director, health group manager, and Janet Hohnen, public health Health Economics Institute. specialist, managed the work on behalf of the division. Peer reviewers in the World Bank include Willy de Nicholas Hope, director, China and Mongolia Geyndt, Charles Griffin, Jeffrey Hammer, Emmanuel Department, guided the preparation work. Richard Jimenez, and Nicholas Prescott. Members of the World Newfarmer, lead economist in the department, and Bank's Health Group in the Human Development Michael Walton, chief economist, East Asia and Pacific Department provided valuable comments, including Region, helped set the overall context for the report. Howard Barnum, Denis Broun, Philip Musgrove, Mary William P. McGreevey and Helen Saxenian worked Young, and George Schieber. Richard Bumgarner, under the general direction of Richard Feachem, senior Yuanli Liu, and Richard Peto also provided valuable adviser, Human Development Department. World Bank input. staff in Beijing, including Pieter Bottelier, resident mis- Bank staff visited the provinces of Shanxi and sion director, Ramgopal Agarwala, Kathy Ogawa, and Jiangsu in October 1994, and Sichuan, Hebei, Jiangxi, Zhao Hongwen, also provided assistance. and Guizhou in April 1995. Bank staff members and China's minister of health, Chen Minzhang, guided consultants who joined these missions and contributed the early report preparation in October 1994. Ministry to the report include John S. Akin, Harry E. Cross, of Health staff, including Liu Xinming, deputy director, Jeffrey Hammer, Winnie Yip, and Zhou Ji An. Helene Planning and Finance Department, Cai Renhua, direc- Genest and Paul Hutchinson provided valuable assis- tor, Legal Affairs Department, Liu Yingli and Liu tance to the mission work. An initial draft of this report Junguo of the Foreign Loan Office, and Fei Zhao Hui, was discussed with the Chinese government in October now of the Ministry of Finance, provided considerable 1995. Follow-up work on national health accounts was help during field visits. Mme. Sun, Ministry of Finance, done during a December 1995 mission. The full report and Ying Li, State Council, reviewed many phases of was discussed with Chinese government officials in a the study's work and provided advice throughout. workshop on 22-24 April 1996 and this version incor- The study draws extensively on fifteen background porates their comments, as well as further written com- papers prepared between November 1994 and ments received through July 1997. September 1995 by leading specialists in China's health An earlier version of this report was edited by economics and finance. A list of the papers and their Madelyn Ross. Mylene Domingo prepared the manu- authors appears before the bibliography. script with the help of Susan Sebastian, Akosua A related study of China's national health accounts was Hudgens, Yvette Atkins, and Euna Osbourne. Jillian partially funded by the World Bank and a special grant Cohen, Ellen Lukens, and other Health Group staff from the Canadian government. Contributors to that helped in checking sources and manuscript review. study include Peter Berman of Harvard University, Gilles The book was edited by Alison Strong, designed by Fortin of the Canadian Institute for Health Information, Kim Bieler, and laid out by Glenn McGrath and Damon Vernon Hicks of Health Economics Consulting Services in lacovelli of the American Writing Division of Halifax, Nova Scotia, and J. Brad Schwartz. Communications Development Incorporated. viii Financing Health Care: Issues and Options for China Overview efore 1949 China's population was among the ;0a_ least healthy in the world. Its poor health was both a consequence and a cause of the nation's poor eco- nomic performance.
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