The recent healthcare reform pilot in Shenmu county, Shanxi province, has attracted much interest within China and among China observers. The pilot health insurance program was announced by Shenmu officials on the first of March 2009. The county is the most prosperous of Shanxi province with total government revenue of 7.1 billion Yuan and as such is seen as an appropriate location to experiment with and gradually introduce healthcare reforms.
[…]Of the 380,000 people resident in the county, individuals holding a valid local Hukou registration and officially participating in the Cooperative Medical System are covered by the new policy. The policy consists of a card system through which government subsidies are used for medical costs. Each individual is given a card with a 100 Yuan yearly allowance for outpatient medical care. For inpatient treatment, a hierarchical co-pay system was introduced, facilitating medical care at different institutions in rural and urban areas. For treatment in township medical facilities, the government will reimburse individuals any amount over 200 Yuan per-visit. For county level hospital inpatient treatment the government will reimburse individuals for any amount over 400 Yuan per-visit, and for treatment in out of county hospitals, the government will reimburse patients any amount over 3,000 Yuan. The yearly limit on the reimbursement individuals may receive is 300,000 Yuan.
[…]The continuation of market led price incentives for healthcare providers marks an important omission in the current Shenmu initiative. Under the Shenmu initiative, healthcare providers still receive commission on drug sales and referral to expensive treatment. Future development in this reform needs to alters this relations and establish an incentive structure that encourages doctors to be cost conscious, and to seek the most cost effective remedies. While modern medical care most probably cannot use price caps as in the Mao era, changing the incentive structure, for example to resemble the capitation scheme in the universal healthcare system of England, is an important area of reform that has yet to be addressed.
Despite omissions, the Shenmu pilot initiative has already enabled many patients to obtain medical care and it does mark a potentially meaningful change in healthcare policy. Since the inception of the initiative individuals have flocked to village, township, and city medical facilities. On the 22nd of May county officials reporting on the status of the initiative after its first two months of operation reported that in March and April the number of inpatients reached its pinnacle of 30% more patients than the same time the year before. During this time and government subsidies reached 9.6 million Yuan in March, and 12.7 million in April.