November 2011

High Expectations

By Brad Steiner

The healthcare industry in China is going through a massive transition, and struggles to keep up with demand

Sustained investment in healthcare infrastructure has had a dramatic effect on the lives of Chinese citizens. A recent study shows that over the past 15 years infant mortality in China has fallen by 62%, putting the country as a whole on par with Thailand or Venezuela. The study attributed the dramatic improvement to an increase of births taking place in hospitals. While less than half of Chinese births were in hospitals in 1988, by 2008 that number is close to 100%. However, there remains a dramatic difference between urban and rural provision of care, particularly with regards to infant mortality.

But improvement is not without its downside. One of the most common complaints from patients is the high costs of seeing a doctor in a public hospital, and the up-front payment required without wide-spread health insurance. State support for public hospitals has not kept up with the rising costs of expansion.

Access to care

In 2009, the government launched a three-year, US$130 billion effort to improve accessibility and quality of heath services. The plan focused on increasing rural capacity, and included the construction of 31,000 county and township hospitals, and well as 3,700 community health centers.

State-supported health insurance coverage has increased by 300% since 2005, to a reported 94% of the population. Yet this increased coverage has put pressure on an already taxed system. Even if patients have the funds to pay for a hospital visit, there is not always a bed available.

Structural problems with the coverage remain, however, often allowing people to slip through the cracks. Patients are still required to pay up-front fees before receiving treatment, and are often burdened with high deductibles.

In addition, with different coverage plans for rural and urban residents, much of the migrant workforce is unable to receive medical care where they live and work.

Healthcare capacity and quality of service in large cities has grown, but in many rural areas, access to quality healthcare has decreased. At one prestigious hospital in the capital, Beijing Union, over half of the patients seeking treatment are from other provinces. Many patients will seek care from hospitals with a strong reputation, rather than local health centers, even for minor ailments such as a cold or headache.

Large public hospitals have sought to keep pace with increasing demand, but they often suffer from under-investment by the government. Hospitals lost much of their financial support of the state during a privatization process in the 1980s. Since then, institutions have increasingly relied on prescribing expensive medications to remain profitable. Prior to new regulations in 2009, hospitals were allowed to charge a 15% commission on drug sales. While this practice has been banned, it remains to be seen if public funds can make up for the shortfall.

While public hospitals dominate the healthcare market, private specialist facilities are now the fastest growing institution in the sector. With the rise of a new middle-class, demand for healthcare services has not only increased, but so have expectations for the quality of care.

Getting older

At the same time the government tries to quickly catch up with current healthcare needs, there is a looming demographic transition. Chinese people are getting older, and after a generation of the one-child-policy, the proportion of retirees is set to rise.

There are currently 112 million Chinese over the age of 65 and that is projected to be 329 million by 2040, representing 22.6% of the population. It has traditionally been the responsibility of children to care for their aging parents, but several factors have caused a dramatic shift in this behavior, effecting the generational structure of family life in China.

With significant migration to large cities, fewer couples are able to return to their hometown as their parents retire. This transition to urban living involves less living space as well as more women in the workforce.

In addition, the effect of the one-child policy is that care of family members is a burden shared with fewer siblings. Traditionally, children would make room for aging parents in their home, maintaining an extended family model.

To address the housing needs of these retirees, nursing homes and assisted living facilities have grown in popularity. According to a report published earlier this year in the Journal of the American Geriatrics Society, the assisted living industry is booming in China, and represents a dramatic shift in attitudes about family obligation. But supply is lagging behind growth in demand. China has over 40,000 nursing homes, but waiting lists for beds are the norm. Some families wait two years for a place.

It’s no surprise then, that the majority of the nursing homes built in the past five years are privately owned. Private facilities tend to be more expensive than government funded homes, sometimes reflecting a higher level of service. But the industry as a whole remains largely unregulated.

The long-term effects of reforms over the past three years have yet to be seen. The true test will be not how they address the needs of today, but those of an older, more affluent population in the coming decade.