China debates medical reform, privatization
By Yan Hua

HONG KONG - China is debating how far and how fast to reform its medical and health-care system, once considered a pillar of socialist society that provided adequate health care to all at no cost. That clearly doesn't work and the issue now appears to be privatization, commercialization and profit, though the government is not expected completely to bow out of what is considered a strategic sector of economy and society.

One well-respected newspaper, Jinbao in Shenzhen, says there are two clear choices for hospitals: go commercial or go private. It's not so simple, and there's a political tug-of-war about reform.
While private Chinese investment is expected, it is not known whether China will yet open its health-care system, considered a strategic sector, to foreign investors. If it does, expect droves of foreign investors who know that China's 1.3 billion people, especially the 800 million-plus poor in the countryside, need decent health care and urban dwellers need better health care.

At this stage, only Chinese capital, both government and private, is invested in institutional health care, though big foreign drug manufacturers increasingly are entering into joint ventures with their counterparts in mainland China. Certainly some privatization already is taking place, since the government has realized that the socialist model is deficient today. The differences among leaders now concern the pace and extent of privatization and reduction of government financial input and supervision.

In other countries, including neighboring India, the health care developments in China are being watched with interest and a view to future opportunities.

"This is just the kind of opportunity that Indians should grab said Prathap C Reddy, chairman of Apollo Hospitals Enterprises Ltd, on the possibility of China opening up its health sector.

"China is ahead of India in many things but behind us in healthcare," he told Asia Times Online, from Chennai. "This is where India can step in. We need to build the trust between the two nations so that there is a cross balance between the two nations. Indians must go where there are opportunities, as is being considered under the World Trade Organization [regulations on China's opening up to foreign competition.] "China is going about things the right way, letting people, investments and services flow where they are needed."

The Apollo Hospitals Enterprises Ltd or the Apollo group has over 35 hospitals in South Asia, including in neighboring Bangladesh, Dubai, India and Nepal. It is considered one of Asia's largest health care groups.

China's medical and health-care system is lagging far behind in its overall economic reform and far behind the nation's general economic renovation and opening up to foreign investors. This lack of progress has invited vehement criticism from Vice Premier and Health Minister Wu Yi, who says reform must mean better access and better care for the needy, but should not mean unfettered commercialization and privatization.

Which way the system reform should go has become a bone of contention: while the previous health authorities wanted to expedite overall privatization and make hospitals paying commercial enterprises, Madame Wu insists on the dominance of governmental investment in public hospitals - the backbone of the current medical care system - in order to benefit the majority of public hospital patients, who are poor.

Recently, Song Ruilin, a senior official at the Legislative Affairs Office under the State Council, China's cabinet, outlined how far commercialization reform can go. "Governmental funding will gradually be reduced in public hospitals. But in both state-owned medical institutions and public hospitals, the government should hold at least 51% of the shares," Song said.

Signs the state would control at least 51%
Though Song is not an official of the Ministry of Health (MOH), he is a respected and authoritative observer of the medical-care system and has helped frame health-care laws. Some observers believe he was speaking on behalf of Premier Wen Jiabao as well as Vice Premier Wu Yi, both of whom strongly oppose complete privatization of public hospitals, and suggesting a ceiling for private investment, 49%. In contrast, the previous leadership of the heath-care system, including former health minister Zhang Wenkang and State Councilor Chen Zhili, sought sweeping privatization.

Since early this year, the MOH has been drafting directives for further reform of the urban medical-care system (the countryside where most people live is another, related issue), recommending establishment of three categories of hospitals, some already in existence. The draft envisages:

1) Non-commercial state-owned hospitals, funded solely by the government, implementing government assignments and eligible for preferential tax treatment,

2) Quasi-private hospitals, primarily funded by non-governmental investors, with earnings mainly used to improve facilities and reward investors moderately.These institutions actually are profit-making, since private investors can legally pocket a portion of the profits, though there are certain restrictions and the operations theoretically are still monitored by the government.

3) For-profit, self-pricing hospitals (with prices presumably set by the market), funded by non-governmental investors and subject to regular tax laws.

Although the Health Ministry was taken over by Vice Premier Wu Yi since the severe acute respiratory syndrome (SARS) outbreak last year when the old leadership was discredited, many bureaucrats still seem to be adhering to the route of complete commercialization/privatization proposed by Chen. Last November, Wu Mingjiang, a high-ranking official in the ministry, proclaimed that the government would only patronize some public hospitals, including first-rate comprehensive hospitals, infirmaries affiliated to medical colleges, hospitals offering basic treatment, maternity hospitals, contagious disease hospitals, mental homes, blood banks, first-aid stations and some regional clinics. Public hospitals for the poor were not mentioned. At a symposium in June, Wu Mingjiang's statement - about limited but still significant government involvement - was reaffirmed by the MOH.

In the past Chen lent enormous support to Wu Mingjiang's proposal, which has raised considerable public concerns. Some worry about declining service quality and rising costs in those non-for-profit hospitals, once market-oriented reform is fully carried out. These concerns are justified in view of hospitals' refusal to treat patients unable to pay medical fees; stories about patients turned away for lack of money or insurance already have flooded newspapers over the past few years, when only a few commercial measures have been introduced to the health-care system.

Two choices: Go commercial, or go non-profit
Newspaper Jinbao carried a commentary on the health-care reform. It claimed there are now only two choices for hospitals: either go "commercial" or go "non-profit".

Commercialization allows hospitals to wean themselves from non-lucrative assignments and concentrate all their resources on improving service quality, the newspaper said. On the other hand, non-profit hospitals, dependent on state funds, provide services to the poor and eliminate money-related malpractices and even corruption, becoming real "people's hospitals" in official Chinese parlance. The article further proposed that to guarantee prompt and necessary treatment for those unable to pay high medical expenses, commercial hospitals help their non-profit counterparts to treat poor patients and then collect the fees from the authorities.

Naturally, many Chinese pledge support for the state-funded charity-oriented reform initiated by Health Minister Wu Yi. Some even suggest abolishing the MOH, transferring its functions to professional medical associations and the social security establishment - and then placing state-owned hospitals under supervision of the social security department - distinct from the Social Security Administration in the United States and other countries.

Minister Wu does get some support from within her Health Ministry. Deng Guang, a senior researcher on health-care policies, asserted in public that the Chinese government should ensure the needy receive basic and affordable services from public hospitals. Therefore, he said, grassroots-level medical institutions, instead of integrated and advanced ones, should remain public and state-owned and do their duty to improve public health.

The minister herself reportedly has denounced the current health-care system on a few occasions. During a national meeting on health-care services in rural areas held last December, she declared that state medical funds for rural areas were far from enough. The limited service network and insufficient numbers of qualified professionals had greatly undermined the health of many farmers, who are often threatened by endemic or contagious diseases, she said. Worse still, their illnesses even forced some back into destitution, which in turn has offset Beijing's poverty-relief efforts and even slowed economic development in the backward countryside.

Madame Wu, the vice premier in charge of the health-care sector, was only named health minister in late April of 2003, a result of the power struggles in Beijing, some observers say. Her predecessor Zhang WenKang, the personal physician and confidant of former president Jiang Zemin, was then under enormous pressure for his deliberate cover-up of the spread of the deadly SARS epidemic in China. Though under the patronage of the former president, Zhang nonetheless was booted out by President Hu Jintao, Jiang Zemin's successor. Hu consequently installed Wu in this position while concurrently maintaining her title as the vice premier, a precedent since the founding of the People's Republic of China.

With close links with Jiang Zemin, Chen is usually considered an element of the pro-Jiang camp. In the 1980s, she and the former president were both in the top echelon of the Shanghai administration. So it seems to outsiders that Health Minister Wu Yi's firm opposition to the rapid commercialization of health services is a slap in Chen's face and a rebuff to Jiang, who is the nation's commander-in-chief, as chairman of the Communist Party's powerful Central Military Commission.

The reform struggle continues. The Communist Party Congress in September may result in realignments that clarify the possibilities of health-care reform and open the door to more privatization.

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