This presentation was given at the International Health Economics Association (iHEA) World Congress in Milan, in July 2015. It includes results and policy implications from the RESYST Purchasing Study conducted in China.

1. A critical analysis of purchasing
mechanism in China’s Rural Health
Insurance Scheme
Professor Qingyue Meng
China Center for Health Development Studies, Peking University
iHEA, Milan; 15 July, 2015

2. China Rural Health Financing Scheme
(NCMS)
Meng and Xu, WHO Bull, 2014
• Government-
financed (80%
of total fund);
• Covering all
rural
population;
• County is a unit
of fund pooling
• Covering both
outpatient and
inpatient care

3. Overview of the key actors
Citizens
(The rural population
covered by NCMS)
Ensure NCMS to be
well organized and
operated
according to the
government policies
Decide NCMS benefit
packages considering
the requirements from
government
Decide NCMS benefit
packages considering the
needs of he NCMS insured
Ensure needs and
preferences of insured are
reflected
Purchasers
(County NCMS Office)
Providers
(Hospitals, township
health centers, village
clinics)
Decide contractual
arrangements and payment
system
Deliver appropriate health
care services
Government
(at national, provincial,
and county levels)

4. Overview of findings
Relatively stronger area
•Establish clear frameworks for purchaser(s) and providers (P-G)
•Ensure adequate resources mobilised to meet service entitlements (P-G)
•Ensure accountability of purchaser(s) (P-G)
•Establish service agreements/contracts, guidelines(P-P)
•Secure information on services provided (P-P)
•Monitor provider performance and act on poor performance (P-P)
•Assess the service needs, preferences and values of the population and use
to specify service entitlements/benefits (P-C)
•Publicly report on use of resources and other measures of performance (P-C)
Relatively weaker areas
•Develop formularies (of generic drugs, surgical supplies, prostheses etc.) and
standard treatment (P-P)
•Design, implement and modify provider payment methods to encourage
efficiency and service quality (P-P)

5. Purchaser - Government relationship
Ideal Design Practice
Clear policy and
regulatory frameworks
for purchasers and
providers to operate
Central government designs the
overall framework of NCMS
policies and regulations; local
governments develop
implementation plans
1. Guidelines for NCMS
Management System and
Regulations issued by the
central government
2. Operational plans at
provincial and county level
governments
Mechanisms for making
resources available to
purchase needed
services
1. Transfer payment mechanisms
at both national and provincial
governments for low-income
areas; and
2. Specific subsidies for
supporting enrollment and co-
payment of the poor
1.NCMS fund in poor counties
come from transfer payments
2. Medical Assistance Fund
(MAF) is available for
supporting the poor
Mechanisms to ensure
the accountability of
purchasers to
government
NCMS purchasers are fully
financed by the government
budget
NCMS office staffed 5-10
people is established in each
county with regular budget from
government

6. Purchaser - Provider relationship
Ideal Design Practice
Take active decisions
on which providers to
purchase services from
(quality, equity)
Criteria available at county
NCMS offices for selecting and
contracting health providers
Due to the monopolistic positions
of county general hospital in a
county and township health centers
in a town, the stated criteria are
usually not used
By means of gate
keeping and referral,
provider payment
methods, use of
essential drug lists and
standard treatment
guidelines
1. Community health providers
as the gatekeepers
2. Adopt alternative payments
methods
3. Support implementation of
clinical pathways
1. Gatekeeping and referral systems
are not effective
2. Many pilots of payment systems,
few are successful
3. Clinical pathways for selected
health conditions are developed,
but not well implemented
Monitor provider
performance (quality
of care)
1. NCMS monitoring expert
panels at county level
2. NCMS Information
Management System
1. Quality monitoring by medical
panels is not well operated
2. NCMS IMS has technically well
developed

7. Purchaser - Citizen relationship
Ideal Design Practice
Actively engage with
citizens on their health
needs, preferences,
values, and update this
information regularly
1. Needs assessments by surveys,
analysis of secondary data, and
interviews with community
people
2. Individual-base health
information system
1. Better in early stage of NCMS
(2003-2005)
2. The application of system varies
by counties
Develop and update
service entitlements
reflecting health needs
of the population and
protecting against
financial catastrophe
Update benefit package annually
according to fund availability
with considerations of health
needs, cost-effectiveness of the
services, and extent of financial
protection
The benefit package is updated
annually, but some principles of
were not well followed
Report publicly on
purchaser performance
to promote
transparency and
accountability
1. NCMS fund income and
expenditure needs to be
publically announced regularly
2. Updated NCMS benefit
packages needs to be publicly
announced
Internet, local news paper, local TV
program, and posters are widely
used for the public reporting

8. NCMS performance
Year Henan Qinghai
Xixian Yiyang Hualong Huangzhong
2009 51.9 55.1 57.7 58.50
2010 57.6 55.1 59.0 59.2
2011 59.5 51.0 54.7 54.6
2012 48.0 39.9 38.9 44.0
2013 49.1 49.2 40.3 38.3
The NCMS copayment rates in study counties (%)
“NCMS has become one of the most important strategies the government
can do in rural area to improve access and increase financial protection. A
good framework for addressing the three relationships are very helpful.”
– A county health director
“How to deal with the providers, NCMS insured, and government NCMS is a
key for success of the NCMS. We have done a lot, but still many things need to
be done. Strategic purchasing is a useful concept for us to improve our work.”
– A county NCMS Officer

9. Factors contributing to strategic purchasing
• Political context:
Strong political support to NCMS and top government priority in rural
health system
• Resources:
Resources available for capacity building and regular operation of the
NCMS offices (purchasers)
• Incentives:
Government would show achievements in establishing a financial
protection system; NCMS offices have incentives to keep fund balance,
keep the high population coverage, and attain public satisfactions.
• Information:
Overall development of information system provides good foundation
for linking the parties
• Accountability:
Accountabilities and responsibilities of each of the relevant government
authorities, NCMS offices, and providers are clearly defined and
regulated.

10. Factors undermining strategic purchasing
• Institutional arrangements:
Fragmented schemes (NCMS risk pool in 2800+ rural
counties; separation of rural and urban health insurance
schemes); monopolistic positions of health providers
• Incentives:
Lack of incentives for NCMS offices to improve quality of
care; pricing policies based on fee-items are not supportive to
payment system reform
• Monitoring:
Indicators related to strategic purchasing need to be added in to
the NCMS monitoring system
• Accountability:
Accountabilities of government and NCMS Offices are not
clearly defined

11. Conclusions
• Strategic purchasing mechanisms would support NCMS
to be operated more efficiently and equitably
• Active use of strategic purchasing in NCMS can be
enhanced by increasing awareness of the significance and
key elements in the strategic purchasing
• To consolidate the NCMS and urban health insurance
schemes at system, to improve incentives for purchasers
to pay attention to health care quality by adding quality
indicator in monitoring, and to change the current fee-for-
service pricing policies to alternatives ones, are the major
areas for improving the performance of NCMS
purchasing

12. www.wpro.who.int/asia_pacific_observatory
http://resyst.lshtm.ac.uk
@RESYSTresearch
The research is a collaboration between RESYST and the Asia
Pacific Observatory on Health Systems and Policies.
RESYST is funded by UK aid from the UK Department
for International Development (DFID). However, the
views expressed do not necessarily reflect the
Department’s official policies.
More information: http://resyst.lshtm.ac.uk/research-projects/
multi-country-purchasing-study
Major researchers in this study is Fu Peipei and Wang Haipeng
from Shaodong University