China puts healthcare cart before the horse

By Iain Mills BEIJING - As some Chinese observers were slightly too keen to point out, United States President Barack Obama's recent travails in pushing healthcare reform through congress highlighted the difficulties associated with reaching consensus on health issues. However, a recent Organization for Economic Cooperation and Development (OECD) working paper and discussions arising from late-March's London School of Economics Asia Forum in Beijing, along with a slew of alarming new disease statistics, have laid bare the enormous scale of China's own healthcare challenges. With healthcare strategists facing a hugely different set of risks and resource allocation choices in the 21st century, China's stated ambition of evolving a fully functioning healthcare system

by 2020 is dependent not only on massive funding increases and widespread reforms, but also profound changes in the wider alignment of the political economy. Failure to effect fundamental change in this area could lead to healthcare becoming one of the most damaging and expensive strategic oversights of communist rule. In recent years, many ordinary Chinese people increasingly complain that health, housing and education have become three mountains (unbearable burdens) on their back. This highlights the problem of healthcare as a potential source of social unrest.

Before the beginning of reform and opening in 1978, healthcare was the responsibility of the danwei (work unit), however as danwei coverage declined, so individuals increasingly shouldered the costs. By the 1990s, China's healthcare system was in crisis and, with only 10% of the population entitled to benefits, it ranked 188th out of 191 countries in a World Health Organization (WHO) equality report. Subsequent government attempts to develop an employee-employer co-funded insurance scheme were of limited success, and by 2005 had achieved only 40% coverage. The government's response was to increase healthcare spending by 87% over the next two years - a monumental rise and to outline plans for a national healthcare system by 2020. Further spending hikes and regulatory changes have followed, particularly as part of last year's economic stimulus plan. Spending in 2010 is up another 8.7%, with about 4.5% of gross domestic product (GDP) allocated to healthcare, half of which comes from the private sector. It is clear that this is not an insignificant increase, but, to put this figure in perspective, average healthcare expenditure of countries in the European Union is 9% of GDP, while in the US it is nearer to 16%. The Chinese system is also weighed down by excessive bureaucracy and inefficiency. For example, hospitals still operate under soft budget constraints similar to those of state-owned enterprises in the 1980s: those with high operating deficits are given large subsidies, while profitable hospitals receive no funds, thereby locking inefficiencies into the system. At the recent LSE Asia Forum on healthcare in China, discussions revolved around issues such as improving efficiency, defining the correct role for the private sector and how to increase the number of rural clinics and diversify care facilities in urban areas, where hospitals are struggling to cope with burgeoning populations. However, all these issues - despite their importance - risk being rendered largely irrelevant by more fundamental problems. If

China is to be successful in developing a national healthcare system, reform needs to go beyond merely improving access and standards of care. Rather, deep-rooted cultural and political factors are at the heart of the healthcare challenges China faces in the decades to come. To understand these challenges, it is necessary to look at patterns of disease in China over the past three decades. Firstly, in terms of treatment outcomes, due to improving standards of basic care, the country has nearly eliminated death by infectious diseases, with mortality rates for these types of conditions falling from 7,000 per 100,000 of the population in 1970 to under 300 per 100,000 in 2008. Traditional killers such as malaria and typhoid are now effectively under control in all but the most remote areas. In addition, life expectancy has reached 65, a key threshold in terms of maximizing workforce productivity, and closing in on the OECD average of 72. However, while infectious diseases data is encouraging, in terms of chronic conditions - long-term, hard-to-treat diseases such as cancer, diabetes and heart disease - the outlook is far less positive. Nearly 20% of Chinese adults now suffer from hypertension, a condition associated with a low-nutrition, highsalt diet that significantly increases the likelihood of stroke, heart disease and other sequelae. The incidence of cancer - particularly lung, liver and stomach cancer - is rising at around 30% per decade, and figures released last week show that China now has 92 million diabetics (7% of the population; nearer to 10% in many urban areas). From this brief overview, it is possible to see two very different pictures of China's healthcare development. On the one hand, basic treatment has improved and communicable diseases have been controlled; however, on the other, China has struggled to respond to the advent of a new type of healthcare threat - social diseases. Social diseases are transmitted not by physical contamination, but by changes in the way we live. Throughout the developing world, the incidence of conditions such as diabetes, hypertension and lung cancer have sky-rocketed as processed

food, sedentary lifestyles, tobacco usage and other trappings of modernity have replaced traditional ways of living. As the healthcare critic Richard Gordon puts it, these conditions are not only a clinical, but also a cultural problem ... certain disorders become a core expression of the stresses and tensions of a particular culture or historical period. From a disease management perspective, because social diseases operate in radically different ways to traditional conditions, they require radically different risk evaluation and treatment strategies. Social diseases generally cannot be cured by short-term treatment strategies and may persist for years or decades before death, therefore adding huge amounts to treatment costs. For example, studies suggest that within eight years of diagnosis, over half the healthcare costs for a diabetic are spent on diabetes-related conditions, rather than the disease itself. As treatments become more effective, the longitudinal costs of healthcare will continue to increase. Clearly, social diseases require clinical intervention; however they also call for a range of other strategies that operate at a cultural level, such as changing people's diet, exercise routines, consumption habits and improving education and awareness levels. China has made some progress in these areas - for example, awareness that smoking increased the likelihood of lung cancer doubled in the 1990s; however, 30% of the population continues to smoke, and this figure is growing. In addition to this, a study released last week showed that China has the second-fastest rising obesity rate in the world, with over 25% of the population now overweight. Both tobacco consumption and obesity increase the likelihood of a whole number of resource-intensive medical conditions. If China fails to respond rapidly to these new forms of healthcare threats, they will undoubtedly become an economic and welfare time bomb for the government. Somewhat ironically, the maxims of health awareness and prevention, rather than cure, are more in keeping with the proactive approach that informs traditional Chinese medicine than the responsive strategies which, until recently, prevailed in Chinas Western counterparts. However, while the Chinese

government can justifiably flag up its successes in increasing the number and skill-levels of medical practitioners and controlling conventional killers, this should not obscure the fact that far more deeply embedded structural obstacles exist as it attempts to tackle this new generation of healthcare threats. Take for example the tobacco industry, which is run entirely as a government monopoly. Tobacco taxes have risen in recent years and now account for 7.5% of total government revenues; however the authorities have been reluctant to take the more proactive measures, such as educational programs, necessary to reduce the number of smokers. Indeed, some local authorities still actively encourage officials and residents to smoke local cigarette brands, and it remains nearly impossible to buy smoking cessation aids. A similar situation exists in the salt industry, with foodstuffs produced by government-controlled companies regularly found to have salt contents three to four times above the government's own guidelines. Given the long-term healthcare costs associated with both smoking and a high-salt diet, the perennial problems of vested interests, corruption and poor legal enforcement mean that any responsive healthcare reforms the government does introduce will be akin to bailing water with a teacup as the ship sinks around them. The key feature of social diseases is that treatment strategies require coordinated action in a vastly expanded range of areas and, in political terms, different jurisdictions, and serious doubts must exist over the Chinese government's ability to deliver this. For China to even begin to control its social disease epidemics, there must be substantial improvements to regulatory oversight and the elimination of corruption in a variety of industries, including food production; vested interests in potentially harmful products such as salt and tobacco need to be eradicated; and, pollution levels and workplace safety must be improved. What is more, these efforts must be coordinated with educational programs, which raise disease awareness and encourage a healthy lifestyle. Crucially, these challenges precede any reforms to the healthcare system itself. In light of this, the discussions over funding mechanisms and

treatment facilities are, in some ways, putting the cart before the horse. China's hugely ambitious plan to have a fully functioning national health system within a decade, even with annual spending set to rise 71% by 2014, will be severely prejudiced if it fails to control conditions such as diabetes, hypertension, and environmentally-induced heart and lung diseases. Plus, with the prevalence of these conditions being exacerbated by the current structures of the political economy, it becomes clear that for China to effectively tackle its healthcare time bombs, a sea change in governmental functioning is required. If certain diseases become a core expression of the stresses and tensions of a particular culture or historical period, then what we are seeing in China is a government whose interests are often diametrically opposed to those of its citizens, and whose ability to manage the diverse risks of the 21st century are seriously restricted by a lack of inter-departmental coordination, poor regulatory adherence and corruption. No matter how well funded or well equipped it is, unless these front end issues are addressed, China's national health system will very soon itself be on life support.