211 Workshop on Intergenerational Economics Beijing, China, September 13 th, 211 China s Social Transition and Healthcare Reform Under Demographic Change Ling Li National School of Development, Peking University I. China s Social Transition High economic growth rate 9.8% annual GDP growth rate during 1978 28 Second largest economy in the world since 21 (only because of population size: >1.3 billion) Emerging and long term challenges for China s development Economic sustainability: Aging, Human capital investment Social stability: public order disturbance Other challenges: Urbanization, Globalization 1
China s Third Development Transition 1 st (1949 1952): Socialist transformation 2 nd (Since 1978): Market reform 3 rd (Since 23; especially with the current twelfth fiveyear plan ) Balance economic development and social development Improve people's lives and happiness Largest Population, with Rapid Aging Age Structure of China's Population, 1995-25 14 12 1 Population (1 thousand) 8 6 4 2 Year -4 5--9 1--14 15--19 2--24 25-29 3-34 35-39 4-44 45-49 5-54 Age group 55-59 6-64 65-69 7-74 75-79 8-84 85-89 9+ 24 22 25 1995 Sources:NBS, China (projected from Census 2, assuming TFR=1.65 ) 4 2
China s Lifecycle Deficit (LCD) Life Cycle Deficit = Consumption Labor Income Normalized to average labor income of 3 49 year olds.6 Increasing higher education Shorter working life with higher peak income Increasing support for the elderly.4.2 Age.2 2.4 21 23 6 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 39 37 years.6.8 1995 LCD 22 LCD Lifecycle Deficit Changing in China and Some Asian Countries 1995 22 Cutting Ages Working Life Cutting Ages Working Life Lifecycle Deficit it 21 6 39 23 6 37 2 Public Transfer 23 59 36 23 56 33 3 Family Transfer 26 67 41 26 63 37 4 - Intra Household 26 7 44 26 67 41 3 The working life was getting shorter as in some other Asian NTA countries, but it was still longer than in these other countries. Lifecycle Deficit Cutting ages Working Life Lifecycle Deficit Cutting ages Working Life Japan 24 26 6 34 Thailand 1996 25 59 34 S. Korea 2 24 56 32 Thailand 24 26 58 32 U.S. 23 26 59 33 Philippines 99 27 6 33 India 1999 27 63 36 Indonesia 99 28 59 31 India 24 27 59 32 Indonesia 5 29 58 29 Source: Data from NTA website 3
Selected Recent Social Reforms and Policies 211 Pilot project for Pension Insurance for Urban Residents 21 National education reform and development of long term planning programs 29 Health Care Reform Plan 29 New Rural Pension Insurance System 28 Housing Security Project for Low Income 27 Pilot project for Medical Insurance for Urban Residents 27 Two exemptions and one supplement" in rural compulsory education 23 New Rural Cooperative Medicare System 1994 1998 Basic Pension Insurance for Urban Employees Basic Medical Insurance System for Urban Employees 1986 Compulsory Education Old Age Support Systems in China and Some Other Asian Economies Old-age (65+) Reallocation System, Selected Economies Philippines 1999 1 Family support is still a mainliving source of the elderly. Asset-based (%) 25 5 75 Thailand 1996 S. Korea 2 Taiwan 1998 China 1995 25 US 2 Public transfers (%) 5 Japan 24 China 22 75 Japan 1999 1 But China is moving quickly to a so called modern market economy with Increasing public transfers (with broader social welfare. 1 75 5 25 Family Transfers (%) Source: data from NTA website 4
II. China s Healthcare Reform 1 st Transition: During the period from 195 to 1978, China had many achievements in health sector to be proud of rapid and large reductions in mortality rate, despite China s low income per capita at that time create a low cost, wide coverage primary health care system 2 nd Transition: After 3 years of economic reform, China s healthcare system has not improved as well as its economy did. Instead, it has deteriorated in many aspects Accessibility and affordability are both decreased Patients, providers and government are all unsatisfied Kan Bing Gui, Kan Bing Nan ( 看病贵 看病难 ) 1 5
Health Care System Transition 3 rd Transition: Increasing government role in health sector: universal basic healthcare insurance. But Hot debate: subsidize supply side or demand side? Bismarck or Beveridge? Big challenge: Rising health care expenditure /cost. One System: Reform Background Health Care Reform Goals Goals Basic Health Security for All Healthcare System Drug & Equipment Financing Health Personnel Medical care Public Health Management & Regulation 6
Five Priorities of Health Reform Action Plan in 29 211 1. Expend basic medical insurance system 2. Establish National Essential Medicine system 3. Strengthen the healthcare delivery system at grassroots 4. Promote equitable access to essential packageof public healthcare services 5. Public hospital reform pilot Challenges: Cost Control Structure of Total Health Expenditure : 1978-21 7. 6. 5. The GHE decreased dsince the late 198s and 59.97 has returned to increase since the early 2s ( SARS in 23). 16. 14. 12. 4. 3. 2. 1. 38.7 15.69 Market reform in health sector: 1985 SARS, New govt. (NCMS): 23 1. 8. 6. 4. 2... 1978 198 1982 1984 1986 1988 199 1992 1994 1996 1998 2 22 24 26 28 21 Out of pocket Social Health Exp. Government Health Exp. THE (2 constant price) Source: Abstract of China Total Health Expenditure 211 7
III. Health Care Under Demographic Change 1.4 1.2 Rich: US, Japan, Sweden, Finland Poor: India, Indonesia, Philippines, Kenya Consumption increase with economic development is mainly due to health consumption increase. Ratio to av yl(3-49) 1.8.6 Developed Countries.4.2 Developing Countries 1 4 7 1 13 16 19 22 25 28 31 34 37 4 43 46 49 52 55 58 61 64 67 7 73 76 79 82 85 88 91 Age (+1) Source:Andrew Mason (28) 15 Increasing Health Expenditure for the Elderly (Japan, 24) 5 45 4 35 日本居民消费的年龄分布 (24) Thousand yen 3 25 2 15 1 5 5 1 15 2 25 3 35 4 45 5 55 6 65 7 75 8 85 9 Age Education (private) Education (public) Health (private) Health (public) Others (private) Others (public) Durable (private) Housing (private) Other Social Program (public) Capital (public) Source: Ogawa 21 16 8
Increasing Health Expenditure for the Elderly (U.S., 23) 4 Dollars (US, 2) 2 Public Edu Private Edu Private Durables Public Health Private Health Private Other Public Other 1 2 3 4 5 6 7 8 9 Age 17 Source: NTA database 12 Increasing Health Expenditure for the Elderly, China 1 8 6 4 2 2 6+ 65+ 75+ 6+ 65+ 75+ 1995 1995 1995 22 22 22 Labor Income Asset Private Transfers Other Public Transfers Pension Benefits Health (Public) Old Age Support tsystem 1995 1995 1995 22 22 22 6+ 65+ 75+ 6+ 65+ 75+ Health (Public) 2.29 3.15 4.1 8.81 11.4 13.7 Pension Benefits 18.3 17.1 7.86 3 31.2 24.6 Other Public Transfers -2.32 -.31 3.52-2.46.19 3.43 Private Transfers 11.5 23.1 51.5 8.98 13.5 33.3 Asset 8.8 5.1-9.66 16.1 18.4 5.23 Labor Income 62.2 51.8 42.7 38.5 25.3 19.8 9
Increasing Health Expenditure for the Elderly (China, 1995 22 29) 35 Per Capita Health Expenditure in 2 constant prices 2 constant prices Yuan in 3 25 2 15 1 5 29 22 1995 4 5 14 15 24 25 34 35 44 45 54 55 64 65 74 75+ Note: 1995 and 22 data was estimated from China Household Income Project Survey CHIPs 1995 and 22. 29 data was estimated from Chinese Family Panel Studies, CFPS 21. Demographic Effect and Transition Effect in Developing Countries Demographic effect (DE) How much will demographic change affect the burdens on families and public support systems, such as pensions and health care financing, assuming the current level of transfers for each age group? Transition effect (TE) How will social transitions such as disease pattern, reform of social security systems, such as pensions and health care change the level of transfers for each age group? The case of health care reform In developed countries with a mature society, the effects of demographic change may be dominant. How about developing countries? 1
Demographic Effect and Transition Effect on Health Expenditure from 1995 to 22 uan, 2 constant prices 1 million yu 7 6 5 4 3 2 Estimated with linear average annual growth rate from1995 to 22 1995 22 1995 21 (2 constant prices) TE (annual growth rate:11.9%) DE (base year: 1995) Projected HE since 22 only with DE Projected HE since 1995 with linear TE growth and DE 1 Projected HE since 1995 only with DE 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 yuan, 2 constant prices Projected Demographic Effect and Transition Effect on Total Health Expenditure (THE) 45 4 35 3 25 2 1995 22 Projected HE since 22 only with DE Projected HE since 22 with linear TE growth and DE Projected HE since 1995 with linear TE growth and DE Real THE 1 million 15 1 5 1995 22 Projected TE (annual TE growth:11.9%) Projected DE (base year: 22) 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 219 22 11
yuan, 2 constant prices 1 million Projected Demographic Effect and Transition Effect on Total Health Expenditure (THE) 45 4 35 3 25 2 15 1 1995 22 Projected HE since 22 only with DE Projected HE since 22 with linear TE growth and DE Projected HE since 1995 with linear TE growth and DE Real THE (2 constant prices) The projection show good agreement with the real THE from 1995 to 29. 29 Projected TE (annual TE growth:11.9%) 5 1995 22 Projected DE (base year: 22) 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 219 22 yuan, 2 constant prices 1 million Projected Demographic Effect and Transition Effect on Total Health Expenditure (THE) 45 4 35 3 25 2 15 1 5 1995 Projected HE since 22 only with DE 1995 22 Projected HE since 22 with linear TE growth and DE Projected HE since 1995 with linear TE growth and DE Real THE It seems the TE is much bigger! Will it actually happen? 22 29 12.1% of projected GDP done by CASS 22 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 219 22 TE DE 12
Health Care System and Health Expenditure What will induce the fast growth of health expenditures? 1. Disease pattern transition 2. Health care system transition What has happened to other countries and regions with Bismarckian social health insurance systems? Health Demand Under Demographic Change 5. 2 week prevalence rate ( ) 45. 4. 35. 3. 25. 2. 15. 1993 1998 23 28 1. 5.. 4 5 14 15 24 25 34 35 44 45 54 55 64 65+ Source: National Service Survey 26 13
Social Health Insurance Coverage in China Basic Medical Insurance System for Urban Employees Medical Insurance for Urban Residents (Million people) 1999 21 23 24 25 26 27 28 2.653 72.859 19.17 124.36 137.829 157.318 18.23 199.956 42.911 118.26 Rural 8 179 41 726 815 Cooperative Medicare System By the end of 21, 1.26 billion people in China have been covered by at least one social health insurance program. Source: China Labor Statistic Yearbook 1999, China Health Statistic Yearbook 29. Per Capita Health Expenditure in NHI system, Japan 1984 24 25 2 15 1 5 Faster increase for the elderly since 1984 to 1999 1984 1989 1994 1999 24 24a 7 14 21 28 35 42 49 56 63 7 77 84 Note: Long term care introduced in early 2s included in 24a. Source: Cited from Andrew Mason s presentation 14
Per Capita Health Expenditure in NHI system, Taiwan Province 1995 23 1. Unit 9. 8. 7. 6. 5. 4. 3. Faster increase for the elderly since 1995 1995 1997 1999 21 23 2. 1.. 3 6 9 121518212427333363942454851545766366697275788184879 Source: data from NTA website Health Expenditure relative to Age Group 5 64 in OECD Countries Source: Fang and Gavazza (27) Note : NHS system: Norway, Spain, Sweden, United Kingdom; NHI system: Austria, Germany, Japan, Australia, Canada; Business Insurance: United State. 3 15
Conclusions Increasing higher education, with no increase in retirement age, so shorter working life; increasing support for elderly; resulting in increasing total Life cycle deficit. China is moving quickly to a so called modern market economy with Increasing public transfers (with broader social welfare. China is carrying on a comprehensive health reform with the goal of universal primary heath care for all. Fast health expenditure increasing is a big challenge facing China. As in a developing country, demographic effect and transition effect are both important for the social security systems such as health care system. Thanks! 16