Health reform and out-of-pocket payments: lessons from China

Abstract

China's ongoing new health reform aims to reduce individual out-of-pocket (OOP) payments for healthcare services. The aim of this article is to analyse the impact of this reform and to draw policy implications. Data are retrieved from the relevant government publications. Polynomial regression models are used to predict future health expenditures. An extensive sensitivity analysis is conducted to investigate the ratios of OOP payments to the total health expenditures (THEs) and to the disposable personal income (DPI) for 2009-11 under different scenarios of cost projections and personal income distributions. Both quantitative and qualitative analyses are carried out to draw conclusions. The ratios of OOP payments to THE and DPI vary significantly across scenarios tested. Only if all committed government investments and social health expenditure are realized can China's new health reform reduce both ratios and achieve its target goals. In particular, the ratio of OOP payments to DPI can also be significantly reduced by improving income distribution. Due to the complicated interplay among different cost components in health expenditures, these two ratios may not change in the same direction, indicating that both need to be examined when evaluating the reform. The new health reform in China aims to alleviate the high OOP payments for healthcare services, but it has not yet been able to reduce both OOP-to-THE and OOP-to-DPI ratios simultaneously. Major reasons include (1) inability of local governments to fulfil their responsible investments due to health finance decentralization and uneven economic development in China and (2) a serious cost inflation in health expenditures coupled with a low level of income distribution. It is suggested that the central government should bear more financial responsibility and assist local governments to fully invest, and should improve individual incomes, in particular for the poor.