Nearly three years ago China's State Council unveiled its plan to extend healthcare to every Chinese citizen by 2020. The ambitious plan was launched at a time when universal health coverage was building momentum globally. In June 2009 US President Barack Obama outlined his plan for a universal healthcare system in the US, vowing to "give every American quality healthcare". Indeed, most emerging economies have either officially implemented or unveiled blueprints toward universal healthcare. India, for example, also aims to have universal care by 2020.

Unlike these countries, China's pursuit of that aim has been driven by two important developments. First, an annual growth of 20-30 percent in government revenue (which outstrips GDP and income growth) has enabled (if not obliged) the government to invest in the country's long neglected healthcare sector. Second, the government hoped to use universal healthcare to boost domestic consumer spending, which has long been suppressed in large part because of the absence of a well-developed social safety net.

Can the goal be achieved by 2020? By the end of 2011 the government should have pumped 1.3 trillion yuan ($173 billion; 133 billion euros) into the health sector. Thanks to the revved-up government commitment, more than 95 percent of Chinese people are already covered by some kind of basic health insurance. Provided the government sustains its commitment to healthcare, it should be relatively easy for China to achieve near universal health insurance coverage by the end of this year.

But this is far from sufficient for achieving universal healthcare. According to the World Health Organization, universal coverage of healthcare occurs when "everyone in the population has access to appropriate promotive, preventive, curative and rehabilitative healthcare when they need it and at an affordable cost". By focusing on equity of access and equity in financing, a universal healthcare package thus entails a fundamental set of solutions to the problems of access (kan bing nan) and affordability (kan bing gui).

On access the concern is not the lack of health resources but the way these resources are distributed. Thailand, which introduced universal coverage as early as 2001 and managed to sustain the program despite several administration turnovers, has a much lower number of physicians and hospital beds per 1,000 people than does China, where a disproportionate amount of healthcare resources have traditionally been concentrated in larger hospitals, particularly those in urban areas. The urban-rural gap can be exacerbated by rapid urbanization, which is expected to sustain the demand for more and better urban healthcare.

The challenge is even greater when it comes to the issue of affordability. The national rate of health insurance coverage is very high, yet the benefits remain very limited. By the end of 2010 nearly 36 percent of total health spending in China was borne by out-of-pocket spending. The percentage is still much higher than that in 1978 (21 percent). The Ministry of Health recently announced its plan to reduce the share of out-of-pocket payments to 30 percent by 2015. Fulfilling this goal would be a milestone toward effective coverage, given the out-of-pocket share in most countries with universal health coverage is lower than 30 percent. The share in Thailand, for example, was 26.8 percent in 2007.

Bringing down the out-of-pocket share by 6 percentage points in five years is not an easy job, but it can be done. During 2008 and 2010, for example, the out-of-pocket share fell 4 percentage points, from 40 percent to 36 percent. What is needed is sustained massive government funding of the program. While the government has pledged more health funding in coming years, it is premised on a continuous, robust revenue increase at the local level - after all, local governments shoulder most public health financing.

This is unlikely to happen. For one thing, revenues from land sales constitute a vital source of funding for local governments. Yet, during the first 11 months of last year local government revenue from land sales fell 30 percent compared with the same period the year before. The depressing land sales have already seriously constrained the government's ability to finance healthcare in coming years.

Moreover, even if the government successfully reduces the out-of-pocket share to 30 percent, people will still find it difficult to afford healthcare if the cost continues to rise more quickly than their net income. In one of the richest counties of East China, for instance, a farmer covered by health insurance still has to pay about 12,000 yuan for a stomach-cancer surgery - the equivalent of the county's annual per capita net income. In the absence of fundamental changes in public hospitals' financing and management structures, strong revenue-making motives of public hospitals are guaranteed to drive up healthcare costs in China.

Rapid population ageing and the growing burden of chronic non-communicable diseases will further raise the cost of healthcare. It is estimated that between 2000 and 2025 the number of patients in China will rise nearly 70 percent, admissions to hospital more than 43 percent, and overall medical spending more than 50 percent. The galloping healthcare cost will not only cause affordability problems, but also constrain the government ability to sustain the universal healthcare program.

So what needs to be done? To ensure equal access to quality health services it is important to have health resources redistributed toward the majority of the population. This involves upgrading rural and community-level healthcare institutions and redesigning the health coverage schemes to encourage people to seek basic care in those institutions.

But it is imperative to reform the public hospitals, which account for 70 percent of hospitals in China. Strengthening the public nature of government hospitals does not justify the latter's open-end request for substantial government funding. The guiding principle of any healthcare reform should be to maximize the benefit of the end users of the health providers' services. This would mean reorienting government funding from the supply side (hospitals) to the demand side (patients) to reduce out-of-pocket spending, especially for those who cannot afford quality healthcare.

Meanwhile, in order to provide more incentives for local governments to invest in healthcare, the criteria used to promote local government officials should be redesigned: instead of having their performance measured based on GDP, they should be evaluated according to their ability of enforcing public order for the betterment of the general welfare of the residents in their jurisdictions.

It is also time to jump start the stalled public hospital reform. Ownership and operation of public hospitals should be separated so that health administrative departments act only as rule makers and regulators while public hospitals become independent corporate actors that can decide how to finance and deliver healthcare services in an effective and efficient manner.

Equally important, the government should adopt a more proactive approach to addressing non-communicable chronic diseases and their risk factors. Given that population ageing exacerbates the burden of chronic diseases, China should consider significantly relaxing its one-child policy, especially in cities. Doing so would also help maintain China's future competitiveness by lowering the ratio of people of retirement age to people of working age.

The author is a senior fellow for global health at the US Council on Foreign Relations and an associate professor at the John C. Whitehead School of Diplomacy and International Relations, Seton Hall University. The views expressed in the article do not necessarily reflect those of China Daily.

(China Daily 01/13/2012 page8)