Who Pays for Health Care in China? The Case of Heilongjiang Province

Background: Health spending by the Chinese government has declined and traditional social health insurance collapsed after economic reforms in the early 1980s; accordingly, the low-income population is exposed to potentially significant healthcare costs. Financing an equitable healthcare system represents a major policy objective in China's current healthcare reform efforts. The current research presents an examination of the distribution of healthcare financing in a north-eastern Chinese province to compare equity status between urban and rural areas at two different times. Methods: To analyze the progressivity of healthcare financing in terms of ability-to-pay, the Kakwani index was used to assess four healthcare financing channels: general taxes, social and commercial health insurance, and out-of-pocket payments. Two rounds of surveys were conducted in 2003 (11,572 individuals in 3841 households) and 2008 (15,817 individuals in 5530 households). Household socioeconomic status, healthcare payment, and utilization information were recorded using household interviews. Results: China's healthcare financing equity is unsound. Kakwani indices for general taxation were -0.0212 (urban) and -0.0297 (rural) in 2002, and -0.0097 (urban) and -0.0112 (rural) in 2007. Social health insurance coverage has expanded, however different financing distributions were found with respect to urban (0.0969 in 2002 vs. 0.0984 in 2007) and rural (0.0283 in 2002 vs. -0.3119 in 2007) areas. While progressivity of out-of-pocket payments decreased in both areas, the equity of financing was found to have improved among poorer respondents. Conclusions: Overall, China's healthcare financing distribution is unequal. Given the inequity of general taxes, decreasing the proportion of indirect taxes would considerably improve healthcare financing equity. Financial contribution mechanisms to social health insurance are equally significant to coverage extension. The use of flat rate contributions for healthcare funding places a disproportionate pressure upon the poor. Out-of-pocket payments have become equitable, but progressivity has decreased.