Posted By Damjan DeNoble

Eastday.com interviewed Professor Li Ling, and provided a transcript titled The key incentive for China’s health care system is to protect people’s health, not make money. Prof. Li Ling is a a principal author of the 850 billion  yuan health reform proposal announced by China last month.

The whole interview is worth reading, and seems to be taken verbatim from Professor Li Ling.  I just want to comment on a few things of note in the interview, and I will try to deduce my observations as conservatively as possible  - (there will be no Chris Devonshire Ellis sized gaffes from this blogger!).

1.)

Prof. Ling cites the incentive structure for Chinese doctor’s as the primary challenge of health care reform.

A: Talk to me a little bit about what you think would be the most important area that money should be spent on.

L: Public hospital. Public hospital is the key area in the whole health care system, because in China, public hospital played a leading role in the deliver system, and also we know, in the health care sector, finance and insurance is only paid money. You need people to provide service for you, if the provider has the wrong incentive, people cannot get the service they need.

A: How do you go about providing the right incentive for the providers?

L: For the provider, they should have the same interest as the patient to use the minimum cost to get the best satisfaction for the patients. But right now, obviously, in our system, the incentive is distorted. So people complain, it’s hard to see the doctor, the cost is very expensive to see the doctor. Because currently, our public hospital, they need make money to keep running. So back to your question, to make the right incentive, the doctor should get what they have to be paid decent salary, a nice job, a nice social status. Then they should use the minimum cost to provide service to ensure people’s health.

It is encouraging for a Chinese decision maker of Prof. Li Ling’s profile to make such a frank assessment of  counter productive practices in the health care system. To help you read between the lines, Prof. Li  says, in essence, ‘today’s  system is incentivized for Doctor’s to charge patients private ‘red envelope’ fees on top of official fees for care, and also to provide treatment/procedures that patients do not need, all with the end goal of making more money.  We recognize there is not much that can be done about this until we pay doctor’s salaries that are in line with the complexity of work they do. ”

Right now,  a lot of doctors are held back by hospital hierarchies which dictate that senior doctors recieve a high portion of  red envelope payments.  Therefore, most of the private clinics one does see are opened by doctors in the late stages of their careers.  If we start seeing changes in doctors’ salaries and, therefore, better public perception of doctors among the Chinese public at large due to improved service, expect the number of private clinics to sky rocket as more doctors start realizing the business power of good service.  More importantly, if younger doctors are able to get into the private health care game earlier due to these salary changes (more money saved earlier),  China should start seeing a lot of health innovation. Old doctors depend on prestige for business.  Young doctors are going to need to depend a lot more on marketing and innovative business strategies.

2.)

Private health insurance and third party administration is on the government’s agenda, but creating a social safety net takes priority, and the Chinese are not willing to rush it.

L: As government spends more money in the health care sector, the patients right now pay around 50% of cost. In the long run, this will be adjusted. Maybe at the end, the patients’cost will be 20% or 30%. They would release the burden and could also release the tension between doctor and patient.

There is not much more information to go on here, but coupled with her statement that the government plans to cover 80% of the population with health insurance in the next three years , health insurers should have some indication as to when the MoH and the China Insurance Regulatory Commission are going to start thinking about how to  really integrate private health insurance into China –  at the fastest, in 3 years, after they figure out how to structure a system which covers 80% of 1.3 billion Chinese people.

3.)

China imagines its insurance regulatory body to be like NHS systems in Australia, Canada, and the UK.  China recognizes the runaway costs of a Medicare type system.  For China a Medicare type system is not realistic, because if universal health coverage is to be sustainable, the costs need to be capped and contained within a definite budget.  Private health providers can pretty much forget about cashing in on China government money – it looks like the MoH is ready to set the standards of care and cost. ;

A: We’ve talked a lot about problems that are in the system, is it a good idea maybe to have a third party supervising the system, the doctors, the patients, however the thing is, to put it on a daily basis?

L: Look at the worldwide health care model, the health care system that could provide universal coverage, one is social insurance, or government insurance plan like Germany, like Canada, the other one is like the national health service system, like British, they have this kind of system. I think which system China should adopt, maybe we need to look at the current situation. Currently in China the insurance coverage rate is very low, and to have the social insurance, the government insurance, I think the precondition is, we should have urbanization, industrialization, the population will have the formal job should be the majority. Otherwise, currently China, you have 20% or 30% people to cover the total population, it’s impossible. So now, no matter the CMS, the rural insurance, or the residential, city residents insurance, needs government invest a lot. For many, it’s the government buying insurance for them. But in the long run, we should say, this model is unsustainable. The cost is huge. Then the other is look at China currently, we have a huge public hospital, in terms of beds, 95% of public hospital. We have this system, so I always support we need to use our existing condition, to establish a low cost deliver system they we could provide the service to the people at the cost they can afford. That’s a kind of health security.

4.)

The economic downturn is actually an incentive for health reform, because it  encourages social harmony [read: social stability].  Also, if people are more secure about what happens to them when they are sick, they are liable to spend more, thus keeping the wheels of the economy moving.

A: I’ve heard some of the economics say there’s concern because of the economic slowdown the way it is, that health care could again get lost in the shuffle.

L: It could be, but maybe it’s also an opportunity, because we all know Chinese people saves a lot, one of the reasons is they don’t have security, they have to save money to ensure the future risk, like health, actually they don’t know how much they should save, they just save every penny they have. If you can provide the health security for the people, they can spend the money, and this could increase domestic demand. So, in other hand, this is the right opportunity for China’s health care reform.

Earlier in the interview Prof. Li Ling explicitly states that health reform goes a long way towards creating social harmony.  And, let me just be the first to point out the irony of a social health care advocate in the country of China, praising  a strong nationalized health care program for its ability to keep a capitalist economy moving. Meanwhile, in the United States there is a significant chunk of the population who cannot seem to grasp the concept of secure people spending more.

The take away message of this interview is that China is planning to take its time in implementing these 850 billion yuan health reforms.  It sees health as a key aspect of national security and economic prosperity.  If we are to take Prof. Li Ling’s interview as representativeve of the Chinese MoH approach to its its health reform plan, we could further conclude that  Health policy officials are taking ques from health delivery models across the world and, for what its worth, don’t seem to find much of value in the American health delivery model (apart from, obviously, medical training and the standards of health delivery in America’s best practice institutions).  What this means for foreign companies is hard to say, but foreign private health insurers have a lot of work to do, and foreign run health providers in China seem to be in the clear for providing pricey health care to expats for some time to come as the arrival of third party administrative organizations is still far off on the horizon.

But, the news is not all bad, as a stronger health system in china should catalyze innovation in China’s health industry and add a lot of value to the rest of the health care world.