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Reforming China’s Rural Health System
UHI was achieved in 1961, there are 5,000 plans in the social health insurance system; unsurprisingly, there has been a debate recently about the potential benefits of a merger (Ikegami and Campbell 2004). One reason to resist a merger is that separate schemes may provide demonstration effects to one another—a scheme that is consistently more expensive to operate or has consistently poorer treatment outcomes could be investigated by the authorities to remedy those defects, while consistently strong performers could be allowed to generate lessons for others. Competition is another rationale for keeping multiple schemes. Examples where this actually happens can be found in Belgium, Germany, Israel, the Netherlands, and Switzerland. A potential benefit is that competition could help to drive down costs. A potential drawback is that costs could be reduced by selectively taking on clients who were “good” risks and shunning the “bad.” To minimize the cost disparity, governments have established risk-equalization mechanisms whereby schemes with high-risk profiles are compensated by those with lower-risk profiles. Such mechanisms also are used in setups whereby insurers cater to different sections of the population. In some countries, these devices are fairly sophisticated (for example, the Netherlands), while in others (such as Switzerland) they are much less so (van de Ven et al. 2007). A recent study concluded that although the risk-equalization schemes in Belgium, Germany, Israel, the Netherlands, and Switzerland have become more sophisticated, risk selection remains a major problem in all five countries. Indeed, risk selection has become more pronounced despite the increasing sophistication of the schemes (van de Ven et al. 2007). Because of the difficulty of devising a successful policy to minimize risk selection, the merits of competition among health insurers remains hotly debated.
A Dual Agenda for Financing Long-Term Reform China faces a dual long-term challenge for health financing: to narrow the gaps between the various schemes (if not ultimately to unify them), and to shift from a contribution-based system through payroll deductions to a broader financing base involving general revenues. Any financing system should be consistent with the importance of local government in financing of social programs as well as the essential unifying role of central government. That said, China probably will want to allow some limited diversity in coverage, both between the poorer and richer parts of the country and, within each area, among people with differing willingness and ability to pay for health coverage. Full equality of coverage may be