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Making Access to Healthcare More Equitable: What China Could (or Shouldn’t) Learn from Lebanon

April 19, 2012

by Fiorenzo Conte

Between 1952 and 1982 China achieved dramatic improvements in health: under-five mortality rates dropped from 200 to 34 per 1000 live births and life expectancy surged from 35 to 65. After 1982 health indicators stalled or receded despite impressive rates of economic growth. The reason being that the Chinese government dismantled the health system without putting anything in its place. The initiative was left to the private sector and the result was the emergence of a two-tier health system and of tremendous health inequality between the rural and urban areas. To tackle these challenges the Chinese government initiated  a series of reforms in the early 2000s with the goal of making access to healthcare more affordable and as consequence more equitable. A special number of The Lancet (see here and here) reviews what worked and what didn’t and what remains to be done. A look at how Lebanon, a country which faced a similar health landscape in the early 90s, tackled some of these remaining issues can provide lessons to be replicated and mistakes to be avoided.

Reforms in China

The main achievement of the Chinese reform is the dramatic improvement of insurance coverage from 29.7% in 2003 to 95.7% in 2011. However areas of concerns remain:

Health financial protection is far from being truly universal: in fact only 50% of the expenses are reimbursed by the MoH while the rest is left to be paid by the household. When this relatively low reimbursement rate is combined with the fact that 13% of the household experiences catastrophic health events it turns out that a significant number of household is still vulnerable to income shocks caused by health calamities.

Worryingly, the money saved by the household thanks to the increased health insurance coverage have been offset by a spiraling of the cost of health services: as a result health expenses as share of total household expenditure have continued to rise since the inception of the new 2009 reform. A constant rapid increase of out-of-pocket expenditures accounts for this trend. And this is linked to the way hospitals are expected to cover their operational costs.

While the financing system of primary-level facilities is increasingly supported by the central government, secondary and tertiary level facilities are left to cover the bulk of their operational costs through user fees. Naturally, this system created an incentive towards overmedication and overtreatment which shifted the burden of the cost from the provider to the service users.

Lessons from Lebanon

The challenges that China is facing in terms of universal and equitable coverage and reduction in costs are problems common to any country. The comparison with a country such as Lebanon is useful because after-civil war Lebanon had a very similar healthcare landscape: absence of the public sector and reliance on expensive private healthcare.  As a result the main problem faced was similar: a high entry financial barrier to healthcare with a steady rise of household out-of-pocket expenditures. So how did Lebanon tackle this problem?

How do you decrease households’ health expenditures? In 1998 households in Lebanon were bearing the cost of 60% of the health expenditures countrywide. In 2005 the share went down to 44%. The key action contributing to this decrease was a significant increase of public health funding:  the government paid in lieu of its citizens. The first lesson is therefore that public financing of healthcare does, on average, reduce the burden borne by the citizens. But how should the government spend its money? The lion share of households’ expenditure in Lebanon went towards out-patient care, mainly pharmaceuticals. The government and MoH identified the most feasible way to address this bottleneck: covering ambulatory services (dental services, diagnostics tests) was not feasible as it could introduce a perverse incentive to oversupply. What was needed was an alternative to for-profit-outpatient facilities for poor people. A Primary Health Care networks was thus created and scaled up.

The second lesson is therefore to understand what are the health goods households are spending their money on and from there derive how the government should step in to alleviate the burden.

More public funding to ensure universal and equitable coverage? In Lebanon more than 50% of the population is not covered by any public or private agency. The uninsured are covered by the MOPH who serves the role of insurer of last resort: it reimburses contracted hospitals for 85% of their bill and it dispenses expenses drugs for chronic diseases free-of-charge directly to the uninsured citizens.

These higher reimbursements rates and free drugs for chronic diseases could at first glance be seen as a sufficient step to make access to healthcare equitable. Yet such claim would be mistaken. When one looks at who is benefiting from the MOPH, one finds out that 87% of the ministry budget is spent on 5% of the population that undergoes expensive operations such as open-heart surgery or renal dialysis. The third lesson is therefore that more public funding does not by itself ensure more equitable access to health services. The principle that “everybody is covered, but not everything is covered” offers for this reason a more feasible blueprint to increase equity of access.

Containing costs. When in 1990 the MOPH prioritized the coverage of health expenses for the uninsured, hospitalization rates spiked: the more services the hospitals could prescribe to the patients the more money they would get by the MOPH. The same perverse incentives to over-prescription which are present today in China were in place in Lebanon. MOPH was successful to a certain extent in eliminating such incentives by imposing a closer control mechanism  for private hospitals and upgrading public hospital services. The control of the roots of high cost for healthcare lies however to a certain extent beyond the country control: For instance, the introduction of generic drugs is hindered by TRIPs legislation.

In sum, as China struggles to render the access to healthcare more equitable, some lessons from Lebanon can provide useful insights:

1.  Public financing of healthcare does reduce the burden borne by the citizens.

2. Understanding what are the health goods households are spending their money on is key to prioritize the areas where the government should step in to alleviate the burden.

3. Public funding does not by itself ensure more equitable access to health services. The principle that “everybody is covered, but not everything is covered” offers for this reason a more feasible blueprint to increase equity of access.

4. The roots of high cost for healthcare might lie outside the domestic arena. For this reason international fora must be addressed if health costs are to be effectively contained.

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