What We Can Learn from China's Moves on Universal Health Care

China is following the lead of other nations (including, ironically, Taiwan) in establishing a system of universal health care by 2011.  The details on the policy are somewhat sketchy, but it involves a major financial commitment from the government -- $128 billion -- to extend health insurance coverage to 90% of the population and overhaul the public hospital season.

My first question on reading the news was, “Why doesn’t China already have universal health care?”  Honestly, can’t a communist country get a little socialized medicine around here?  It turns out that the pro-market reforms of the 1980s abandoned the previous model where the government covered health care service for each household.  In its place, they erected a system that entirely shifted the costs onto individuals and providers.  No insurance coverage – you pay up front, full cost, often out of your savings.  The hospitals get little public funding, so they charge very high prices and yet are perennially cash-strapped.   Hm, so you put all of the costs onto the individuals (presumably offering them greater “choice” in the process), withdraw social safety net funding almost entirely, and the system basically falls apart?  China has clearly outdone us in a market-driven “race to the bottom” health care system.

It’s tempting to think of this development in terms of the burgeoning U.S.-China economic rivalry.  After all, we’re constantly told, the Chinese are a major competitor to the U.S.  Because of all of the focus on Detroit in the past two months, we know exactly how much Japan’s universal health care system gives their car companies a tremendous competitive advantage over ours.  A 2008 report for the New America Foundation found that in the manufacturing sector, U.S. employer health costs averages $2.38 per worker per hour, compared to the foreign trade-weighted average of $0.96 for our competitors around the world.  There’s no doubt that we’re at a disadvantage to countries who aggressively control health care costs and who achieve universal coverage (as the two often go hand-in-hand) and China joining the club should cause concern about how long we remain competitive if we don’t get serious about our own health care costs.

But that’s probably overstating it, at least for the moment.  China’s health care problems aren’t yet related to high cost.  They’re instead related to terrible access problems that are even worse than ours.  China is currently ranked 144 among nations in the World Health Organization’s ranking (finally, a reason to bring up the WHO rankings where the upshot isn’t “Why is the U.S. so low?”) and there are huge disparities between the cities – where the state of the art hospitals have been built – and the countryside, where 60% of the populace lives, but only 25% of the medical resources are.  China's current system is so bad that we'd need to see a tremendous amount of improvements before we’d see the differential in our trade balance.

Far more interesting are the motives for the move – as a means of bumping up consumer confidence in the wake of the economic downturn.  Keep in mind that “bad times” in China meant that the economy only grew 6.8% in the fourth quarter, this is largely seen as a move to bolster confidence.  Forbes quotes Hong Kong-based Tai Fook Research analyst Paul Lee:   "It's not a bad idea for the government to provide health insurance for the population, so people don't have to save as much money for the rainy days. They feel that they are taken care of. So they'd be more willing to spend the money and stimulate the economy.”

Ultimately, has made the realization that they just can’t continue to grow in this climate without taking care of their health care system.  We’re making similar moves in the U.S., but this should really light a fire under us.  If China can realize that join the universal health care club is critical to their economic interests, why can’t we?

(Photo credit:  interplast on Flickr.)