Rural health prepayment schemes in China: towards a more active role for government

A large majority of China's rural population were members of health prepayment schemes in the 1970's. Most of these schemes collapsed during the transition to a market economy. Some localities subsequently reestablished schemes. In early 1997 a new government policy identified health prepayment as a major potential source of rural health finance. This paper draws on the experience of existing schemes to explore how government can support implementation of this policy. The decision to support the establishment of health prepayment schemes is part of the government's effort to establish new sources of finance for social services. It believes that individuals are more likely to accept voluntary contributions to a prepayment scheme than tax increases. The voluntary nature of the contributions limits the possibilities for risk-sharing and redistribution between rich and poor. This underlines the need for the government to fund a substantial share of health expenditure out of general revenues, particularly in poor localities. The paper notes that many successful prepayment schemes depend on close supervision by local political leaders. It argues that the national programme will have to translate these measures into a regulatory system which defines the responsibilities of scheme management bodies and local governments. A number of prepayment schemes have collapsed because members did not feel they got value for money. Local health bureaux will have to cooperate with prepayment schemes to ensure that health facilities provide good quality services at a reasonable cost. Users' representatives can also monitor performance. The paper concludes that government needs to clarify the relationship between health prepayment schemes and other actors in rural localities in order to increase the chance that schemes will become a major source rural health finance.