Wednesday, August 26, 2009

11 am


MoH_Tom Frist.jpg

             Met this morning with the Minister of Health. The last time I was at the ministry we met just down the hall from the minister's office.  That was in 2003, and SARS had struck just the month before.  Allegedly the Chinese government has hidden the problem from its people and the world, but as the outbreak grew, the news exploded, and no longer could the government contain the news.  I was openly critical that day in our public meeting, representing the U.S. and world opinion.  Though my remarks had nothing directly to do with what was about to occur, the minister just hours later was summarily fired, a sign of recognition that China would officially change its secretive policy of minimizing the ongoing impact of SARS.  And the epidemic rapidly spread throughout China, Asia, and Canada, paralyzing travel and tourism, killing hundreds, and greatly diminishing economic growth for the next year of Asia and Canada.

             That was just 6 years ago.  Wow, things have changed.  Today, the Minister met with me, my son Bryan, brother Tom and Chuck Elcan and Henry Zhou.  Though one of the main purposes of the meeting was to discuss how we as a government and we in the U.S. private sector could work with the Chinese government and their private sector to address the health challenges the Chinese people are experiencing today, I in particular wanted to get a full understanding of what China was doing in their major domestic reform efforts announced in April.

             Before outlining what I learned, I should point out that being a doctor in China is not very remunerative.   In a web-poll conducted by, 75 percent of the 2,183 doctors surveyed earned an annual salary of less than 40,000 Yuan ($5,883).  These data and much of the content of the discussion below were gleaned from my conversation with Elizabeth F. Yuan, R.Ph. who is the Health and Human Services attaché to the Embassy.  Her discussion at the U.S. embassy yesterday combined with the discussion today with the Minister of Health are the background for the following summary of health reform in China as it stands today.

             China's blueprint for healthcare reform was released on April 6 and has been heavily promoted by the official Chinese media.  My interviews and interactions over the past two days with health experts in Beijing, visiting infectious disease hospitals and doctors, talking last night to local Chinese businessmen, interviewing our ambassador and health experts a the embassy agave me a tremendous opportunity to leave behind for a few days all of the reform discussions in the U.S. and to see how another emerging country is approaching health care reform on a massive scale.  I wrote this today, but over then next several days of discussions I may well modify these observations.

              The overall scheme aims for universal healthcare coverage by 2020.  In the initial 2009-2011 phase, China intends to invest $124 billion in five broad reform areas: 1) basic healthcare insurance, 2) a national essential medicines program, 3) improvement of the rural health care service network, 4) elimination of the gap between urban and rural healthcare, 5) and continuation of public hospital pilot projects.

             The 5 areas parallel much of what we have and are attempting to do in the U.S.  We are shooting in the U.S. for universal coverage overnight (and won't get true universal coverage for another 5-10 years, I predict).  We in the U.S. did the national drug program (2) when I was Majority Leader. And in our major health bills like the bill we passed in 2003 and the Obama bill which will pass in November, there will be a number of significant pilot or experimental projects which importantly will allow some determination of what works and what does not before a proposal is adopted nationally (too risky - I am a big believer in these pilot projects!).

             One of the things we are seeing in the U.S. is reform from Washington being dictated at the federal level, but in the end (as feared by many governors) much of the cost of universal care and reform will fall to the states.  Governors ask, where is the money going to come from (for example the potential doubling of Medicaid under the Obama plan is funded more than 50% by the states - but where are they going to get it? - obviously taxes will have to go up on everyone).  Similarly in China about 60% of the proposed reform spending will be paid for by the provinces, though their reform is mandated by the central government and communist party.  How are the poor provinces going to come up with the money?   Thus, will the ambitious reform really ever take place?  The parallels with what is happening in the US with a paternalistic government mandating huge spending at a time of recession and an obvious inability to pay for it are striking.

            The following is only for the policy wonks and much too much detail for the average reader.  But I love this stuff (and it leads to greater understanding of overall health reform globally and domestically):

            The key features of the announced plan include the following:

`           1.   Government support for the construction of 2,000 county-level hospitals and thousands of urban community clinics;

            2.   Training sessions for village and township medical clinics and urban community medical centers. Specifically, China hopes to train 360,000 health care professionals for township health centers (this seems like an impossible goal to me but at least they are shooting for the sky.  And what I am finding on the ground is not an absence of facilities or even pretty good equipment but an absence of trained human healthcare capital (i.e., people).

            3.   160,000 for urban community health institutions in three years;

            4.   Coverage of 90 percent of rural and urban residents with basic medical insurance by 2011.  By 2010, subsidies to the Urban Residents' basic medical insurance (URBMI) and the New Rural Cooperative Medical Scheme (NCRMS) will be increased to RMB 120 (US$17.60) per person per year.  The maximum amount payable by the Urban Employees' Basic Medical Insurance (UEBMI) and URBMI will be increased to six times the annual average salary of local employees and disposable income of urban residents.  The maximum amount of the NRCMS will be increased to over six times per-capita net income of local farmers. (The importance of the expansion of the social insurance program is much more important that what I initially thought.  Why?  Because the Chinese people, today without much in the way of social insurance, keep saving knowing that someday they will need it for health;  this excessive savings means that they don't spend today, which is clearly needed not just in times like today but in all cases of growing economies).

            5.  A list of national essential medicines was released in August 2009.    It consists of 205 chemical and biological drugs and 102 traditional Chinese medicines.  This is a big deal because supposedly the Chinese people will have success to these in the public hospitals (98% of hospitals are public).

            6.  Increasing government regulation of medical services and prescribing practices to avoid over-prescription to fund hospital operations.  ((This was also surprising to me.  About 50% of hospital budgets come from the charges associated with excessive prescribing of medicines.  Hospitals literally operate on the profits they receive from the medicines they prescribe and dispense.  That is all over the country.  My obvious question was, "If you close this source of hospital revenue, what will replace it?  How will these hospitals stay open?)) The Implementation Plan includes wording to increase public disclosure of hospital budget, expenditure, and revenue management information.

            7.  The Government's plan calls for continued pilot projects to reform public hospitals.  In the key area of hospital funding, which underlies the problem of relying on drug sales and expensive diagnostic techniques, the plan calls for gradual changes to service charges, drug sales, and fiscal subsidies.  The goal is to make service charges and fiscal subsidies the primary channels for funding public hospitals.

            I can't wait until the business and medicine course I teach at Vanderbilt begins this year because I want them to look at the following argument and see what they think on the relationship among this plan, rural consumption, and rebalancing: In the official media, Chinese academics argue that increased healthcare expenditures under the plan will help reduce precautionary savings, thus increasing domestic consumption, helping to rebalance the economy to rely less on exports and investment.  Official media reports that the plan will help reverse the trend in who bears the burden of medical costs, in which the share of personal spending on medical services has doubled from 21.2 percent in 1980 to 45.2 percent in 2007, while Chinese Government funding has dropped from 36.2 percent in 1980 to 20.3 percent.  (Note: This data is based on official records.  Because many doctors and hospital fees are paid covertly in 'red envelopes' (gratuities) directly by the patient, the proportion of private medical expenditures are likely even greater.  In my discussions with a broad range of people I estimate that private out-of-pocket medical spending is probably 60% of all spending.

             Again, I want to thank Elizabeth F. Yuan at the American Embassy for explaining so much of this to me yesterday after I met with Ambassador Jon Huntsman  Our embassies do a remarkable job.  I also wish to thank the Minster of health in china who so generously gave of his morning today.  I have much more to learn.