China’s National Planning Guideline for the Healthcare Service System 2015-2020: Privatization, Increasing bed volumes and Insurance coverage

In 2015, China had a nominal GDP €9.897 bn, with an economic growth rate of 6.9%.
5.7% of its GDP is spent on healthcare, equivalent to a total of €564 m, or €412 per capita.

China is the most populated country in the world with one of the strongest GDP growth rates internationally; a fascinating dynamic of world-class economic prowess combined with substantial social stratification, and infrastructural and social service challenges.

Healthcare provisions suffer from underfunding and resource deficits, rural underdevelopment, quality standard discrepancies, and hospital capacity shortages.

China’s National Planning Guideline for the Healthcare Service System (2015-2020) is a comprehensive plan with specific objectives and reforms, aimed at ameliorating the shortcomings of its healthcare management and infrastructure by 2020.

This article will highlight the main objectives and outline the reforms of particular interest to foreign investors and medtech enterprises.

Allowing privatization for the integration of public-private sector and to achieve hospital bed targets

For years the private sector has operated separately from the public domain, and was hampered by legal restrictions, e.g. it was forbidden that healthcare professionals worked at more than one site, and private providers had little to no government support to manage their financial sustainability. This made it a challenge to private providers to grow, and made it impossible according to legislature that public and private sector provisions would complement and collaborate with one another to form one wide-reaching healthcare scheme.

From 2014 onwards, the government has approached the healthcare market with a fresh strategic approach, alleviating some of the hurdles to private providers (by allowing multiple-site healthcare employment) and by granting select private facilities with the opportunity to provide socially-insured reimbursed care. In effect, an integration of public and private providers is being facilitated, though gradually, where private providers can help reduce the hospital bed deficit.

The new Planning Guidelines aims for a substantial increase of hospital bed provision:

  • Public sector – an increase of 33.3%
  • Private sector – an increase of 188%
The ambitious target for the private sector can only be achieved by a substantial revision -and institutional support – of the private sector, which the new Guideline addresses by:
  • Allowing private investment capital into all sectors
  • Obligating various levels of authority to support such private investment
  • Allowing land use rights for private enterprise
  • Strategically procuring more services from non-public healthcare providers
  • Including the possibility that public health insurance funds cover private care
  • Further developing multiple site employment to stimulate talent moving across both sectors, particularly into the private sector, where incentives are still at the low end

Enhanced healthcare insurance

“90 percent of the population is covered by healthcare insurance but around 40 percent of healthcare expenditures are OoP.”
-The Healthcare System and Medical Device Market in China: Deep dive Report (Feb, 2015)

According to the TforG China Deep Dive report, a respectable 90% of the population benefits from some form of insurance; however, 40% of overall healthcare expenditures are still financed privately by the patient.

In order for the Chinese population to be able to afford the care services that are in place, the funding scheme will be improved to ensure the sustainable balance of the payer-provider system and to reduce the OoP burden on the patient.

The aim is to pay providers adequately, so they can maintain themselves financially and create opportunities for the facility to improve its capacity, staffing, and infrastructure, which is a central objective of the reforms at hand.

To boost insurance coverage, the Guidelines set forth to:

  • Provide a wider scope of coverage through the state medical insurance scheme
  • Offer more thorough insurance packages, e.g. for critical illnesses
  • Expand the payment schemes in order to include a wider range of medical facilities

Encourage wealthier income groups to purchase voluntary insurance to alleviate the public budget

Interesting to note, as a further means to reduce spending on healthcare and drive down OOP expenditure, the Plan discourages the excessive procurement and application of medical devices. Furthermore, public hospitals are specifically encouraged to procure from local manufacturers.

Further key proposals and plans in the Guideline

Other aspects of the 2015-2020 healthcare plan include:

  • Engaging more with technological and internet-based healthcare solutions
  • Equity of healthcare staff distribution
  • Boosting rural/local level hospital and care provisions
  • Standardization of healthcare professionals’ training
  • Introducing new programs for highly demanded healthcare disciplines, i.e. psychiatry, paediatrics, elderly care
  • Creating more traditional Chinese medicine-based hospitals

Implementing a medical dispute resolution agency, to mediate conflicts arising between patients and providers

Conclusion

Though foreign ownership remains complicated and partially restricted within Chinese healthcare, the new Plan substantially underlines the strategic need for the integration and fostering of the private sector. Pilot programs are currently in place to test the viability and impact of both private as well as foreign-owned healthcare facilities.

If these prove effective and achieve to alleviate some of the current Chinese healthcare deficits, then it is likely that the program will be expanded to allow further privatization and foreign presence in the near future.

Furthermore, the development of insurance packages particular to certain conditions, indicate an interest in finding/creating efficient care paths where costs can be contained and controlled.

The Guidelines as described above are the official plans and intentions of the Chinese government. It will be exciting and interesting to see how the plan is implemented in actuality, and what outcomes are born from these healthcare adjustments in the near future.

For further quantitative and qualitative information on the Chinese healthcare system and the macroeconomic climate, please look into our Business intelligence platform or order the Chinese Healthcare Scan incl. Surgical Procedures Volumes (all specialisms) – product license containing volumes of 984 surgical procedures in 13 specialisms.

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