# **Equity and public governance in health system reform: Challenges and opportunities for China**

# **1. Introduction**

In early 2009, China’s Ministry of Health (MoH) announced a comprehensive set of health system reforms (HSR) designed to rectify the widely acknowledged and increasing inequity that characterized China’s health services. (1) China’s HSR started formally in 2006, after President Hu Jintao demanded universal access to quality basic healthcare and better health outcomes for the Chinese people, followed by an open apology for problems of affordability and accessibility to the health sector by then Vice Premier Madam Wu Yi. The State Council established a 16ministry leading group for, and opened an unprecedented public debate on the issues and proposals for HSR, with wide participation of citizens as well as the domestic and international expert community. The reforms aim to provide “safe, effective, convenient and affordable” healthcare to all urban and rural residents through five main pillars: strengthening public health functions and services, enhancing primary care delivery, establishing universal basic health security (insurance), ensuring the safety of and access to essential medicines, and optimizing the management of public hospitals. (2) Inequity in China’s health sector has been driven by the comparatively low level of government funding, averaging only 0.7-0.9% of gross domestic products (GDP) compared to about 2% in comparable middle-income countries. Out of pocket spending as a proportion of total health expenditure before the reforms was around 60%. (3) Recognizing that China’s HSR required an increased financing commitment, in March 2009 Premier Wen Jiabao announced at the 11<sup>th</sup> National People’s Congress an RMB 850 billion allocation (2.8% of 2008 GDP) to support HSR during 2009 - 2011 (4), and government expenditure on health increased to 1.4% of GDP in 2009. (5) This is still low compared to government expenditure on education (3.5% of GDP in 2008) (6), but brings China closer to a WHO estimate that government spending on health of 1.5-2.0% of GDP could guarantee primary health care (public health and a modest package of essential clinical care) for all in China. (7) The announcement of the priorities for and content of the reforms by national government, along with the expectation of their implementation at all administrative levels, has placed a great burden on provincial and sub-provincial health authorities. Moreover, ensuring that the concomitant injection of new fiscal resources contributes effectively to the accomplishment of HSR objectives is a challenge, since about 90 percent of public resources for health care (as well as other public services) is generally allocated at the provincial and sub-provincial levels. (8) Promoting allocative and operational efficiency in public expenditure at these levels is a particular challenge that has yet to receive appropriate attention nation-wide.

In this paper, we explore whether the government’s actual expenditure on health across levels support China’s HSR objectives. We analyze the available national, provincial and sub-provincial statistics to explore recent trends in relation to equity in certain key health outcomes and public 2