The Chinese government is hoping that if the country’s social safety net is stronger, its people will feel secure enough to spend more, which is badly needed to help offset the global demand slump. Beijing wants to expand basic health coverage to most of the population by 2011 and it is willing to spend the billions needed to do so. Leaders are betting that the ambitious program will help stave off social unrest, as the country slows to its weakest pace of growth in seven years.
China’s State Council approved a plan Wednesday to spend 850 billion yuan ($AU124.3 billion) in the next three years to reform the country’s troubled health care system. Measures include expanding health insurance coverage to 90% of the populace and overhauling woefully inadequate public hospitals. People should have more affordable access to better-quality basic medical services by 2011, according to a Web statement. State news agency Xinhua cited “public criticism” of lack of access to health care as prompting the government to act.
“It’s not a bad idea for the government to provide health insurance for the population, so people don’t have to save as much money for the rainy days. They feel that they are taken care of. So they’d be more willing to spend the money and stimulate the economy,” said Hong Kong-based Tai Fook Research analyst Paul Lee. China has an unusually high savings rate, given its rate of its economic growth. Beijing has been trying to boost domestic demand to compensate for the export slump that has caused waves of layoffs in China’s manufacturing heart and slowed the economy to 6.8% growth in the fourth quarter of 2008.
Health care was neglected when Deng Xiaoping launched pro-market reforms in the early 1980s. The government took apart the communist model, which covered most health care for households, and shifted costs onto consumers and hospitals. Many Chinese must pay upfront and out of pocket for services at hospitals, which charge high fees but are still cash-strapped, as local governments divert funding elsewhere.
With various details still unspecified, the government’s plan is to provide annual health subsidies to citizens as well as to implement a system to deliver vital drugs and vaccines. If the government uses China’s insurance companies as a vehicle to expand coverage, it does not necessarily mean they will profit from it, Lee said. Some previous government insurance programs were designed merely to guarantee that insurers do not incur losses, though the downside is that the companies’ capital gets tied up, he added.
The new plan is part of Beijing’s strategy to narrow the stark urban-rural health gap: cities have gleaming hospitals, while some remote villages still rely on “barefoot doctors,” rural residents who have bare-bones medical training to provide basic services to neighbors and nearby communities.
In 2007, the World Health Organization ranked China’s health system as 144th in terms of quality and access, out of 190 countries, below far poorer countries like Haiti.