Non-evidence-based policy: How effective is China's new cooperative medical scheme in reducing medical impoverishment?☆
Introduction
Protecting their populations from impoverishment associated with medical expenses is a goal shared by many nations (World Health Organization, 2000). In recent years, many lower to middle income countries, including Kenya, Ghana, Colombia, Mexico, Thailand, Vietnam, various former Soviet Union countries, India (Ministry of Health and Family Welfare, 2005) and China (Yip & Hsiao, 2008), have looked to insurance and other forms of risk pooling as means to achieve this goal. Given limited funding and the goal of protecting households from medical impoverishment, the conventional wisdom has been to provide insurance against “catastrophic” inpatient expenses, under the rationale that most households can typically afford the expenses incurred by minor illnesses (Gertler and Gruber, 2002, Gertler and Solon, 1999, Morduch, 2003). However, whether this is the most effective approach depends on the distribution of health risks within the population. Indeed, there is increasing empirical evidence that household spending on ambulatory services and drugs, rather than hospitalization, is the primary contributor to medical impoverishment (van Doorslaer et al., 2005, Knaul et al., 2005, Wagstaff and van Doorslaer, 2003). Using China as an example, this paper empirically examines the consequences of designing an insurance benefit package without first examining the disease profile and health expenditure pattern of its population.
In 2003, the Chinese government initiated the New Cooperative Medical System (NCMS), a government-run voluntary insurance program, with government subsidies targeting the poorer Western and Central regions (Central Committee of CPC, 2002). One of the primary goals of NCMS is to prevent its rural residents from being impoverished by medical expenses. China has left the details of the program to local governments, who have to decide which services NCMS should cover to meet the goal of reduced medical impoverishment. This paper provides an evidence-based examination of two distinct models. We conducted a static simulation exercise to assess the effectiveness of the predominant model of NCMS—a medical savings account (MSA) coupled with high-deductible hospital insurance—in reducing medical impoverishment, and compared this model to an alternative model, Rural Mutual Health Care (RMHC), which covered ambulatory care, drugs and hospital services with no deductible (first dollar coverage) but a lower ceiling. Through this analysis, we also demonstrate that when policies are not based on evidence, their effectiveness will be limited. Our analysis focuses on the Western and Central regions, where approximately 500 million rural Chinese live and where impoverishment due to medical spending is most acute.
In the next section, we provide a brief overview of China's rural health care system and the latest policy developments. We then describe the design of the most common model of NCMS in the Western and Central regions and contrast it with RMHC. Next, we discuss the data and method of analysis, followed by the results and discussion.
Section snippets
China's rural health care and policy developments
When China reformed its rural economy in 1979, the communes—around which rural medical insurance had been organized—disappeared. Without its financial and organizational backbone, the rural health system collapsed as well, leaving over 90% of the rural population uninsured. Village doctors became private practitioners with little government oversight, earning their income from patients on a fee-for-service basis. Furthermore, like all transitional economies, China experienced a drastic
Benefit designs of NCMS and a social experiment—Rural Mutual Health Care
With a total contribution of 30 RMB, what services should NCMS cover if the policy objective is reducing medical impoverishment? This is a challenge given that health expenditure per person in the Western and Central regions of China averages about 150–180 RMB. We here describe both the most commonly found model of NCMS in the Western and Central regions of China, and an alternative model which the authors designed and implemented.
Analysis and data
In this section, we describe the method and data for assessing the relative impact of the various MSA/Catastrophic and RMHC benefit packages, as laid out in Table 2, on reducing medical impoverishment.
Results
Table 3 shows the effects of medical spending on impoverishment. Under the poverty line of US$1.08 per person per day, 7.31% of individuals were impoverished due to medical expenses, increasing the poverty rate from 29.61% to 36.92%. Medical expenses increase the average poverty gap from 6.61% to 14.06% and the positive poverty gap from 22.3% to 38.09%. In other words, the incomes of those below the poverty line are 22% below the poverty line before payment for medical expenses. After payment,
Discussion
Using China as an example, this paper demonstrates that an insurance scheme that ignores the disease profile and health expenditure pattern of the population can have only limited effectiveness in protecting the population from medical impoverishment. Our analysis shows that with almost the same premium as the MSA/Catastrophic, the RMHC model, which covers ambulatory services, drugs and inpatient services without a deductible (but with higher coinsurance rates and lower maximum caps), is more
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Cited by (0)
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We thank Andrew Fraker and Bradley Chen for their excellent and able research assistance.