1. Tatyana Makarova, Jian Wang, Baorong Yu, Bart Smet
EU-China Social Security Reform Co-Operation Project
EPOS Health Management
July 13, 2009
7 Health Congress, iHEA, Beijing
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2. Presentation outlinePresentation outline
o Brief overview of Qingdao
o Objectives and policy context of the pilot
o Pilot scope and main dimensions
o Pilot progress and first results
o Challenges and next steps
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3. About QingdaoAbout Qingdao
o Coastal City in Shandong
Province
o City with special status
(special economic zone)
o 7,579,900 population (2007)
o Developed diversified
economy
o Mixed urban and rural
population - 7 districts and
5 counties
o Well developed health
service network and
sufficient health workforce
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4. Health service delivery capacityHealth service delivery capacity
139 8
93
10
6
20
13
1621
889
hospital
sanitarium
health center
maternal and children health
faciliti
special disease prevention and
treatment institution
center for disease prevention
and control
health monitoring and
supervision organization
clinic
community health station
Total 2,834 health institutions in Qingdao (2006) with
number of hospital beds, licensed physicians
and registered nurses per 1,000 pop-n higher than
average in the province and nationally
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5. Health insurance in Qingdao:Health insurance in Qingdao:
pre-pilot overviewpre-pilot overview
o Health insurance oriented towards hospital-based care
o Primary health care (PHC) out of benefits package
o Underdeveloped primary health care
o Weak referral system: patients report directly to
hospitals regardless of their condition
o Issues with timeliness of disease prevention, detection
and management
o Patients tend to trust only hospital based physicians
o Recurrent underutilization of insurance funds
o Fragmentation of funds - limited practice of pooling
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6. Innovations in Qingdao (1)Innovations in Qingdao (1)
o Expanding health insurance benefits by inclusion of
cost-effective outpatient services – transition from
“disease insurance” to “health insurance”
o Such strategy embraces two key policies: restructuring of
health services delivery system to emphasize ambulatory
primary care and community orientation and
strengthening health insurance towards its universality
and better financial protection
o Qingdao became one of pioneers in incorporating
services of community health centers (CHCs) into
public insurance benefits for urban citizens and
migrant workers.
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7. Innovations in Qingdao (2)Innovations in Qingdao (2)
o CHC is a core type of primary health care delivery
organizations in China that render outpatient and
inpatient services
o Provide health education, preventive and curative
care, maternal and child care, rehabilitation
o Some affiliated with hospitals
o Covering CHC services by insurance is a multiple goal
strategy of Qingdao that aim at:
1. restructuring health services consumption among
insured towards cost-effective health care choices,
2. introducing referral system for efficient patient flows and
service utilization, and
3. improving utilization of individual savings accounts
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8. Policy context (1)Policy context (1)
o February 2006: enacted by the State Council
“Regulation on Urban Community Health Service
Institution Management” and “Guiding Opinions on
the Pilot Urban Resident Cooperative Medical
Insurance” specified:
1. “Effects of services at urban community level should
be fully availed;
2. Functions and scope of services at urban community
level should be incorporated, enhanced and
broadened;
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9. Policy context (2)Policy context (2)
3. Health services of community level should be utilized
efficiently;
4. Qualified health service facilities of community level
should be included in insurance contracting system;
5. Cost recovery for community service providers from
health insurance funds should be reasonably
increased”.
Qingdao promptly followed up with the adoptionQingdao promptly followed up with the adoption
of these policy directions and piloting theirof these policy directions and piloting their
implementation strategyimplementation strategy
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10. Pilot scope and dimensions
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11. 11
MainMain milestones in pilot evolutionmilestones in pilot evolution
1. January 2006: a pilot to cover costly outpatient services of
community health centers (CHC) by insurance for urban
employed
2. May 2006: a pilot to cover home care for elderly and
“inpatient home-based care” of CHC by insurance
3. January 2007: a pilot to establish community-based family
physician model with gate-keeping function and new
referral system
4. October 2007: pilot to enroll elderly and disabled through
better pooling of funds
5. January 2009, a pilot to establish outpatient pooling fund
in 4 urban districts

12. Categories of insured coveredCategories of insured covered
o Beneficiaries include such groups among insured as:
o Urban employees, including retired
o Urban residents
o Elderly
o Disabled
o Children
o Students
o Migrant workers
o Thus, over time all enrolled into basic medical
insurance and urban insurance schemes became
eligible, and in addition migrants covered by new
cooperative medical scheme
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13. 13
Gradual expansion of scope of CHC services for
insured:
o The Pilot started with coverage of:
1. Outpatient services for costly diseases (diseases
that formerly were typically treated in hospitals) - a
list of 18 chronic diseases
o Later added:
2. Post hospitalization home-based care
3. Ordinary (common) outpatient care
4. Elderly & family medical care
Innovations in benefitsInnovations in benefits package (1)package (1)

14. Innovations in benefitsInnovations in benefits package (2)package (2)
Gradual expansion of benefits (continued):
5. Introduction of health examination (check) for
contracted households and establishment of family
health record
6. Health education for insured
7. Medical intervention mechanism for prevention,
detection and management of chronic diseases like
diabetes, hypertension, etc.
o Counseling to change unhealthy behaviors and lifestyle
o Follow up for patient with chronic diseases and
complications
5. Rehabilitation
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15. 15
New contractingNew contracting
Introduction of contracting with CHCs:
1. Contracts between CHC and Insurance Center:
Designated Community Health Centers should
contract with Municipal Center for Health Insurance
(MCHI) for provision of specified services to the
insured
o CHC fills out application form for every qualified
patient, and applies to the MCHI for approval
1. Contracts between PHC physician and insured:
patients select one CHC and a physician within it
o Annual contracts with renewal or change of choice

16. Patient’s choice and gate-keepingPatient’s choice and gate-keeping
o Insured choose a primary care provider – family
doctor for the whole family
o CHCs lists qualified physicians for selection
o Maximum of contracted insured per FD ≤ 2,000, among
which retired, elderly and disabled ≤ 500.
o By late 2008 80,308 insured signed contracts with FDs
within 132 CHCs, among them:
o 59,648 employees,
o 20,660 urban non working residents (among them elderly and
disabled - 18,408)
o FDs are first points of service with gate-keeping and
care coordination functions
o Lack of qualified FDs presents a challenge
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17. New referral systemNew referral system
o Old referral system between hospitals of three levels
replaced by a new system:
o Between ambulatory care in CHC and inpatient care in
referral hospitals
o All referrals for enrolled patients should be
administered by FDs
o New is a two way system:
o Referrals from CHC to referral hospitals
o Referrals from hospitals to CHC for continuation of
care (ambulatory observations, routine disease
management, rehabilitation and home-based care)
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18. Incentives for patients to obeyIncentives for patients to obey
enrollment with CHCs/FDs and referralsenrollment with CHCs/FDs and referrals
o No coverage for services in other than chosen
CHC
o Coverage of referrals for inpatient care:
o For the elderly, severely disabled, and non-employed:
o no FD’s referral - no insurance reimbursement
o For insured urban employees: no FD’s referral – covered,
but favorable reimbursement policy does not apply
o For emergencies, referral process should be finalized by
FD within 7 days since the hospitalization, otherwise –
no reimbursement
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19. New financial mechanism:New financial mechanism:
individual savings accounts (ISA)individual savings accounts (ISA)
o Contributions to ISA from two sources:
o from employees - direct contribution to ISA
o from employers - part goes into ISA depending (vary by
age and status of insured: 2.3% - 3.5% of annual payroll
and 5% of pension for retired)
o ISA – a bank account; funds can be consumed for only
designated benefits, such as pharmaceuticals,
inpatient copayments, now used for CHCs services
o Historically ISA funds were underutilized, now they
are partially pooled for financing CHC services
o Do to pooling expansion of benefits did not require any
increase in insurance premiums
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20. New financial mechanism:New financial mechanism:
funds poolingfunds pooling
o Funds pooling for outpatient care for insured:
o For retired: pooling of 10 RMB from ISA, other 20 RMB
collected from the social pooling fund (SPF) per member
o For per currently employed - 8 RMB from ISA and 10
RMB from Social Pooling Fund (SPF)
o For urban residents, 10 RMB from SPF for the elderly,
disabled and non-employed (no ISA exist for them)
o Family pooling of ISA:
o Once contracts with FD signed for the whole family, ISA
can be shared among family members
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21. Incentives for patientsIncentives for patients
to consume CHC servicesto consume CHC services
o While coverage deepens, patients receive financial
incentives to comply with gate keeping & referral
rules:
o Direct user charges replaced by insurance
reimbursement
o Lower deductibles: discounted or zero deductibles
o E.g. deductibles for inpatient care are half size for patients
referred from contracted CHCs
o Lower co-payment rate: discounted or zero co-
payments
o Co-payment rate is reduced if medical expenses are above
deductible, but less than 20,000RMB
o Higher patient reimbursement rates for comparable
services in CHCs than in hospitals 21

22. 22
o “Capitation” for common outpatient care is used to set a
budget ceiling, but not as a payment method
o Per capita ceilings established by type of services and insured
o Mainly FFS payments – rates competitive with hospital rates
for comparable services; per diem for home based care
o Multiple deducible and co-payment schedules
o Patients have pay 100 % service fee OOP and wait for
further reimbursement
o Transactions from Insurance Center to CHC, and then from
CHCs to patients
Payments for CHC servicesPayments for CHC services

23. PricingPricing andand paymentpayment system:system:
example on costly outpatient casesexample on costly outpatient cases
CHC Level I
hospital
Level II
hospital
Level III
hospital
Deductible 300 RMB 500 RMB 670 RMB 840 RMB
Copayment for expenses
below 5,000 RMB
8% 12% 14% 16%
Copayment for expenses
5,000RMB to 10,000 RMB
8% 10% 12% 14%
Copayment for expenses
10,000 to 20,000 RMB
8% 10% 10% 10%
Copayment for expenses
above 20,000RMB-ceiling
8% 5% 5% 5%
Reimbursement rate for
expenses over the ceiling
70% 50% 50% 50%
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Pricing and payment system for outpatient care for costly (“catastrophic cost”)
conditions brings incentives to make shifts towards CHCs and lower level hospitals

24. Drug benefits andDrug benefits and paymentpayment systemsystem
o The MCHI adopts essential drug list and medical
service list for common sickness, chronic disease and
frequently occurred sickness
o Co-payment rate reduced to 10% from 20% and above for
some drugs (list A) for those receiving costly outpatient
services and care for elderly
o Those whose with co-payment rate for some drugs of
10% (list B), no co-payment to be charged
o However, only about 120 drugs are available within CHCs
as centralized supply is insufficient – hence patients are
reluctant to buy them from CHCs and go to pharmacies.
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25. 25
o Issues of access to care and affordability of OOP
payments:
o Insured patients have to pay OOP first and get
reimbursed by CHCs one year later or when medical
expenses accumulate 3,000 RMB (~$440)
o Relatively high co-payment rates, e.g.:
o For family medical care: 4% - for retired, 8% - for
currently employed, 30% - for others;
o For care for elderly: 4% - for retired and 30% - others;
o For common outpatient services: 50% for retired and
currently employed and 30% for elder, severely disable
and non-employed.
o Over engineered payment mechanism: too many
payment policies, rules, methods and schedules
PricingPricing andand paymentpayment system:system:
issuesissues

26. Pilot progress and first results
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27. 27
Main developments (1)Main developments (1)
o Gradual expansion of the number of CHCs contracted
for provision of services for insured:
o Between January 2006 and by late 2008, the number of
contracted CHCs increased from 41 to 181, from 4 to 7
city districts.
o Growing number of CHCs staffed with FDs:
o From initial 22 to 165 plus
o Increasing number of FDs engaged in contacts with
health insurance through patient enrollment
o More than 30% of PHC physicians are FDs
o Patients respond to new incentives:
o Numbers of enrolled with CHCs and reporting to CHC
for services grow steadily

28. Main developments (2)Main developments (2)
o Chronic disease management:
o By now CHCs have exceeded hospitals in a share of
reimbursed cases of hypertension and diabetes.
o Spending on outpatient care for costly disease cases
served by CHCs was increasing from 27.3 M RMB in
2006 t0 42, 6M RMB in 2008
o Shift in consultations from higher level hospitals – by
the means of gate keeping mechanism
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29. 29
o Up to July, 2008, per capita expenditure on
management of special chronic diseases in
CHCs covered by health insurance accounted
for 2,652.33 RMB – it is 640.5 RMB or 24%
lower than that in hospitals
o Average co-payment accounted for 683.15 RMB
in CHCs , which is 767.59 RMB or ~60+% lower
than that in hospitals.
Cost saving gains and benefitsCost saving gains and benefits
for insured: selected examples (1)for insured: selected examples (1)

30. Cost saving gains and benefitsCost saving gains and benefits
for insured: selected examples (2)for insured: selected examples (2)
o Between January 2006 and July 2008, at least
236,300 visits to hospitals transferred to
community level resulting in almost 61M RMB in
savings
o For a patient with special chronic diseases from 4
to 500 RMB could be saved in CHCs in comparison
to hospitals:
o Only in the first half of 2008, 7.81M RMB of OOP got
saved by insured patients of this category.
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31. Case study on strengthening CHCs
through the pilot process
o The EU-China Social Security Reform Cooperation
Project carried out situation analysis of Qingdao pilot
o Analysis included a survey of eleven CHCs:
o Public - 6; private - 4; enterprise affiliated – 1
o Expansion of insurance benefits in CHCs has been
associated with several positive effects in overall
development of CHCs:
o Increases in serviced patients
o Increases in total revenues
o Expansion and renewal of inputs (e.g. personnel and
equipment)
o Increases in outpatient service volume in CHCs
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32. 32
Findings from 11 CHCs
0
100
200
300
400
500
600
700
1 2 3 4 5 6 7 8 9 10 11
（万/年）
图1- 8 保险纳入前后社区卫生服务中心收入变化
前
后
Annual revenue of 11 CHCs before and after inclusion
of PHC services into health insurance package

33. 33
0
20
40
60
80
100
120
140
160（万）
1 2 3 4 5 6 7 8 9 10 11
图1- 10 保险纳入前后社区卫生服务中心设备变化
前
后
Value of medical equipment before & after
introducing PHC in health insurance package

34. 34
0
50
100
150
200
250
300
350
（人次/ 天）
1 2 3 4 5 6 7 8 9 10 11
图1- 12 保险纳入之后社区卫生服务中心门诊量变化
前
后
Change of outpatient volume before & after
introducing PHC in health insurance package
Service mix of site #1 after inclusion in insurance influenced by renovation

35. Challenges and next steps
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36. Next steps (1)
o Further expansion of population coverage by main
public insurance schemes – expansion in breath and
depth
o Improved mobilization and pooling of revenues:
o Improve administration and level of revenue collection
o Sustain subsidies from budgets of all levels
o Enlarge scale of pooling: plan to cover all through
establishment of outpatient care pool using up to 40-
50% of ISA of employed
o Elevate level of funds po0ling by integrating cross-
county pooling and cross-district into city pooling
(county and districts together), particularly for urban
resident insurance.
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37. Next steps (2)
o Funds allocation and payment system:
o Lower burden of up front payments for patients
o Streamlining and unifying payments
o Introduce capitation as a payment method
o In combination of performance oriented rewards
o Performance - based contracting with CHCs
o Incentives in remuneration of FDs
o Clinical practice development:
o More effective competition with hospitals
o Strengthened referral system
o Better and broader management of chronic diseases
o Guidelines for performing with quality & appropriateness
o Clinical guidelines and standards
o Provider performance monitoring and assessment
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38. Next steps (3)
o Using systems and means to attract patient to CHCs/PHC
and to build population trust:
o Level of financing and input renewals and expansions
o Improvement of drug procurement rules and practices
o Patient enrolment, gate-keeping and referral system
o Publishing results of CHCs performance
o Integration of social and medical services at CHCs
o Direct communication and links with communities
o Strengthening of CHCs information system and interface
with IS of Insurance Center
o Capacity building within CHCs: upgraded clinical skills
and skills in effective management
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39. Thank you
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