China's Health Care Crisis

In the 25 years since the introduction of market reforms, China’s leaders have focused single-mindedly on economic development. In that time China has lifted tens of millions of people out of abject poverty, especially in the cities of the rapidly developing coastal region.

But while the economy has been advancing at a blazing clip, the bottom has fallen out of health care. Said one economics professor at Beijing University’s China Center for Economic Research: “the economy is growing, people have more income, but hospital costs are rising faster.”

Sound familiar?

In a curious way, China’s health care troubles are a mirror image of the problems facing the United States – except that the situation in China is much worse. By some accounts about 80 percent of China’s 1.3 billion people do not have access to health insurance of any kind.

Many mistakenly assume that since China is a communist country, it provides everyone with the basic necessities of life, even if they are meager. It may be a dictatorship, people say, but at least they provide free health care. No so. Chinese parents even have to pay to have their children immunized.

During the “planned economy period” – roughly thirty years, 1949-1979 -- workers received health care through state-owned enterprises (SOEs), which were in fact giant welfare machines providing what was then known as the “iron rice bowl.” They are being replaced by private companies, many of which do not provide even basic insurance.

Much the same thing is occurring in the U.S., where the big state-owned enterprises – oops, I mean blue chip corporations – are steadily going bankrupt in an apparent effort to reduce medical and pension costs. The latest to follow this course is the giant auto parts maker, Delphi. General Motors is also desperately working to reduce its health care liabilities.

In Mao Zedong’s time, nine out of ten rural peasants had access to subsidized health care run by “barefoot doctors.” In the two decades since the beginning of market reforms, this arrangement collapsed. Now the vast majority in the countryside and many in the cities have no real health care unless they can pay for it out of their own pockets if they can.

At one time the Chinese government covered 100 percent of health care costs. By 2003 that figure had fallen to around 17 percent. Individual patients pay for the rest. I’m not sure about the figures for the U.S., but I’d guess that the portion of national health care costs covered by government medicare/aid programs is close to 25 percent, maybe higher.

Many top government advisors, economies and even the state-controlled media are openly criticizing the Communist Party for failing to arrest the steady erosion of China’s health services. Paying patients are being gouged by hospitals bent on making profits, while the poor get virtually no care at all.

Health Minister Gao Qiang slammed hospitals in The People’s Daily for putting profits ahead of public interest. “Chinese medical institutions have been over-commercialized, relying on exorbitant charges for their maintenance and development,” Gao said. The goal should be affordable health care for all.

In August the Development Research Center, one of the top government advisory boards, issued a scathing report decrying what it called a “tidal wave of commercialization of the medical service.” It went on to say, “the excessive commercialization and market-oriented health service results in the decreasing availability of health service.”

The study noted that some contagious diseases and epidemics that were controlled during the period of collectivization are returning, while the government has floundered faced with new plagues like AIDS and SARS. At the same time, because general prosperity is increasing, chronic diseases are on the rise: more people are dying of heart disease, cancer and strokes.

Earlier this month a plenum of the Chinese Communist Party adopted the country’s 11th Five-Year Plan (although now mostly a market economy, China, still publishes Five-Year plans just like it did in the old days), which, in general terms, puts the stress on more balanced growth and improving social services.

China’s leaders are well aware that growing income gaps – between east and west, coast and interior, rural and urban, can lead to unrest. China experienced some 74,000 protests or outright riots during 2004. The vast majority involved such things as local corruption, overzealous tax collection and land confiscation for development, but sometimes they involve health care.

Last summer the state-controlled press reported about a farmer suffering from lung cancer and too poor to get care, who set off a bomb in a bus, killing himself and another passenger and wounding 30 other people.

China’s millions have to take care of themselves the old-fashioned way, either by saving or falling back on families for support. The weak social services and lack of a safety net are reasons why Chinese are such prodigious savers.

This is admirable in an abstract way. Yet if the Chinese could divert more of the money they put under the mattress towards consumption, it might help create a bigger internal market, lessening the need to export and drawing more goods from America and other countries.