VZCZCXRO5338
RR RUEHCN RUEHVC
DE RUEHGH #0273/01 1730605
ZNR UUUUU ZZH
R 220605Z JUN 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 8063
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAUSA/DEPT OF HHS WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8710

UNCLAS SECTION 01 OF 04 SHANGHAI 000273 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR FOR STRATFORD 
HHS PASS FDA FOR LUMPKIN 
HHS ALSO FOR OGHA 
COMMERCE FOR MAC AND MAS 
TREASURY FOR OAISA DOHNER, HAARSAGER, WINSHIP 
NSC FOR LOI 
STATE FOR EAP/CM: HABJAN; OES/PCI: ROSE, AND OES/IHB 
 
E.O. 12958: N/A 
TAGS: ECON SOCI EFIN TBIO CH
SUBJECT: CHINA'S HEALTHCARE REFORM/REBALANCING: THE SHANGHAI 
PERSPECTIVE 
 
REF: BEIJING 1097 
 
SHANGHAI 00000273  001.2 OF 004 
 
 
¶1.  (SBU) SUMMARY: China released its national roadmap for 
healthcare reform on April 6, which calls for universal 
healthcare coverage by 2020 and large investments in key areas. 
Provinces and municipalities (who will bear a large amount of 
the implementation costs) are now formulating their own 
protocols to implement the roadmap set by the central 
government.  Shanghai Government officials, academics, policy 
advisors, and physicians say that the city has already realized 
many of the targets set in the national roadmap, but must 
continue to upgrade services and providing overall public health 
coverage in the event of a public health emergency.  Experts 
believe that Shanghai needs to focus on medical resource 
adjustment and integration.  Health reform must also seek to 
balance marketization and nationalization, and experts are 
divided on which path is more appropriate.  Insurance experts 
believe that the proposed reforms will have minimal impact on 
the city's comprehensive insurance system.  Some doctors are not 
very optimistic about the health reform, believing that the 
government will continue to emphasize a reduction in cost to 
patients rather than consider issues faced by medical 
professionals.  END SUMMARY. 
 
BACKGROUND: NATIONAL PLAN RELEASED, SHANGHAI MOVES TO IMPLEMENT 
--------------------------------------------- 
 
¶2.  (U) As reported in reftel, China released its national 
roadmap for healthcare reform on April 6.  This long-awaited, 
mammoth undertaking has gone through several comment phases and 
numerous drafts.  The plan calls for universal healthcare 
coverage by 2020.  Initial phases will involve large investment 
(RMB 850 billion or USD 124 billion) in five key areas: 1) basic 
healthcare insurance, 2) a national essential medicines program, 
3) improvement of the rural health care service network, 4) 
elimination of the gap between urban and rural healthcare, and 
5) continuation of public hospital pilot projects.  This 
healthcare plain is being touted widely by officials and the 
media, and provinces and municipalities (who will bear a large 
amount of the implementation costs) are now formulating their 
own protocols to implement the roadmap set by the central 
government. 
 
¶3.  (U) The Shanghai Development and Reform Commission and the 
Shanghai Health Bureau (SHB) have organized a consortium 
including Fudan University, Shanghai Jiao Tong University, the 
Shanghai Academy of Social Sciences, and the SHB Policy Research 
Section to develop a "Health System Reform Protocol" for the 
city.  Shanghai is one of China's most economically prosperous 
and progressive cities and many issues faced by the majority of 
other parts of the country are not challenges for the city. 
However, ensuring adequate healthcare for this densely populated 
megalopolis is still a monumental undertaking.   Post has met 
with SHB officials, academics, policy advisors, and physicians 
to gauge the Shanghai perspective on overall healthcare 
reform/rebalancing and the challenges faced by the city. 
 
SHANGHAI'S HEALTH CHALLENGES 
---------------------------- 
 
¶4.  (SBU) SHB Director XU Jianguang told the Consul General that 
Shanghai has already realized many of the targets set in the 
national roadmap, but will continue to improve its system by 
upgrading and providing better quality services to Shanghai 
residents.  Xu stressed that Shanghai's biggest challenge is not 
providing routine medical care, but rather, providing overall 
public health coverage in the event of a public health 
emergency.  Shanghai's population is around 20 million, with 
approximately one fifth being migrants from all over China. 
This floating population, not formally registered in Shanghai, 
poses a particular challenge, noted Xu. 
 
¶5.  (SBU) Shanghai has established a comprehensive public health 
service network to provide care to residents, but Xu said that 
it is "very fragile" if overstrained by a widespread disease 
outbreak.  His concerns are further amplified by the health 
challenges posed by Shanghai's hosting of World Expo 2010.  70 
million people are expected to visit Shanghai between May and 
October next year, through Shanghai's damp spring and hot 
summer, which can pose challenges, especially with food safety, 
 
SHANGHAI 00000273  002.2 OF 004 
 
 
noted Xu. 
 
RESOURCE INTEGRATION: LARGE HOSPITALS V. COMMUNITY CENTERS 
---------------------------------------- 
 
¶6.  (SBU) Xu said a main focus of Shanghai's health reform will 
be medical resource adjustment and integration.  People's 
complaints about the "difficulty in seeing a doctor and the high 
cost of seeing a doctor -- kan bing nan kan bing gui" -- are 
most reflected in larger, Class Three hospitals in Shanghai. 
Actually to see a doctor in a community health service center in 
Shanghai is very easy, said Xu.  (NOTE: Shanghai instituted a 
tiered hospital system in the early nineties with Class Three 
(municipal-level) hospitals having the highest level and 
complexity of care (as certified by the municipal government) 
and Class Two (district-level) and Class One (community-level) 
providing more limited services as health service centers and 
health stations.  Shanghai has 227 community health service 
centers (Class One), among which, 113 located downtown and 114 
are located in the suburbs.  Additionally, from 2006 to 2008, 
Shanghai established 1000 standardized village health units in 
the outskirts of the municipality.  On average, each health 
service center and its attached health stations covers a 
population from 100,000 to 150,000.  END NOTE)  Despite the 
numerous health service centers and health stations, Xu 
underscored that people still prefer to go to Class Three 
hospitals even for routine ailments, believing that the highest 
caliber doctors are concentrated in the bigger "higher-level" 
hospitals.  Xu admitted that doctors working in larger Class 
Three hospitals likely "develop expertise quicker than those in 
community level units," but believed that doctors in other Class 
Two and One hospitals had more than adequate skills to treat 
most common medical issues.  Xu said SHB is working to encourage 
doctors to work in the community health service centers and 
stations.  It is also considering establishing a consortium to 
facilitate resource integration and sharing among the different 
classes of hospitals and service centers.  Additionally, 
Shanghai will invest RMB 1 billion (USD 147 million to build 
eight additional Class Three hospitals around Shanghai with a 
capacity of 5,000 beds by 2012, bring up the total number of 
Class Three hospitals to 40. 
 
MARKETIZATION OR NATIONALIZATION? 
--------------------------------- 
 
¶7.  (SBU) Fudan University Health Development Strategy Research 
Center Director HAO Mo has participated in the formulation of 
both national and Shanghai health plans developed over the 
years.  Hao said over the past thirty years, China has placed 
more emphasis on traditional economic growth than developing the 
service industries such as healthcare.  As a result, many 
service sectors, like healthcare, have had to seek their own 
solutions for funding and investment.  The health sector, 
according to Hao, has utilized many such market-based methods. 
He said that Shanghai's (and the national) health reform plan 
seeks to balance marketization and nationalization.  Since the 
1990s, the Shanghai government has retained total budgetary 
control over medical expenses with great success, said Hao.  He 
noted that over the years, the Shanghai's medical expenses have 
increased in parallel with Shanghai's GDP growth,  while during 
the same period the average medical expenses for China have 
increased at a much higher rate than the national GDP growth 
rate.  While Hao believes that government control of the 
healthcare system has benefited Shanghai, he believes that the 
city's successful practices would not work for all parts of 
China, especially those without a strong regulatory environment. 
 On the national protocol, Hao said that to be truly effective, 
the central government should remain focused on short-term, 
focused targets in order to make the fastest progress.  As it 
stands now, the national plan is extremely broad-based, with few 
specifics on actual implementation. 
 
¶8.  (SBU) Shanghai Academy of Social Science Researcher LIANG 
Zhongtang had similar sentiments about the need to balance 
marketization and nationalization in heath reform.  While he 
noted (like Hao) that some of Shanghai's controls on medical 
expenses have benefited the city, Liang (unlike Hao) believes 
that the government should release more power to the market 
which could more efficiently and effectively allocate resources. 
 
SHANGHAI 00000273  003.2 OF 004 
 
 
 Unfortunately, the trend in the current round of healthcare 
reform seems to be more government control, said Liang. 
 
LITTLE IMPACT ON SHANGHAI'S MEDICAL INSURANCE SYSTEM 
--------------------------------------------- 
 
¶9.  (SBU) Provinces and municipalities have different insurance 
schemes, which complicates any uniformed reform.  GONG Bo from 
the Shanghai Medical Insurance Bureau said that the impact of 
the proposed health reform on Shanghai's medical insurance will 
likely be minimal since Shanghai has already established an 
insurance system which covers the majority of Shanghai's 
population (those with shanghai household registries, e.g. 
non-migrants).  For migrants, Gong said that more than 3.8 
million have partaken of the comprehensive or synthesis 
insurance program (an employer-sponsored comprehensive program 
that bundles health insurance for serious illnesses, pension, 
unemployment, etc. with more limited coverage than that provided 
to Shanghai residents).  Currently, medical insurance for people 
who are registered Shanghai residents is classified into four 
complex subcategories based on area of residence and work unit 
status. Gong said that while not part of the healthcare reform, 
Shanghai will likely integrate the subcategories into one 
comprehensive classification. 
 
EXPECTATIONS LOW AMONG SOME DOCTORS 
----------------------------------- 
 
¶10.  (SBU) Doctors from a district-level (Class II) hospital are 
not very optimistic about the health reform.  Dr. ZHAO Liyu, 
Chief of the medical office and Dr. CHEN Xu, Chief of Neurology 
at Shanghai Number Eight People's Hospital said because of the 
public perception that doctors are scarce and expensive, , most 
believe that doctors and hospitals are high income earners.  In 
actuality, most Class Two hospitals incur losses, not profits, 
said Zhao and Chen, which can be attributed to "policy losses" 
caused by government regulations over many aspects of hospital 
management.  As an example, they said the fee for routine doctor 
check-ups has remained stagnant for many years while at the same 
time the amount of revenue a hospital can derive from medicines 
it prescribes has decreased as a result of government policies 
aimed at keeping patient costs low, essentially a double whammy. 
 As for doctors earning a "healthy" salary, they noted their 
overnight shift differential has had very little increase over 
the years -- currently RMB 30 (USD 4.40) per night.  Both said 
that doctors and nurses must be more committed to public health 
and wellbeing since they cannot earn the lofty incomes that 
western doctors receive.  For the healthcare reform, both Zhao 
and Chen believed that the government would continue to 
emphasize a reduction in cost to patients rather than consider 
issues faced by medical professionals. 
 
PUBLIC HEALTH EMERGENCY COMMAND CENTER: ADDRESSING THE WEAKNESS 
--------------------------------------------- --------- 
 
¶11.  (U) In an attempt to address Shanghai's challenge of 
providing overall public health coverage in the event of a 
public health emergency, Shanghai formally announced the 
establishment of the Shanghai Public Health Emergency Command 
Center (SPHEC) in early February.  The center is not only a 
crisis response command center, but will also aid in the 
day-to-day monitoring of Shanghai's health and hygiene 
situation.  Over the past three years, Shanghai has invested RMB 
100 million (USD 15 million) in the SPHEC, including an Emergent 
Public Health Incident Information System (EPHIIS) program that 
targets and tracks 78 types of public health diseases.  SPHEC is 
set in Shanghai Center of Disease Control, with a backup center 
in the Health Bureau.  SHB Director Xu said the EPHIIS program 
was first tested in April 2008 during the hand-foot-and-mouth 
disease outbreak.  During the September 2008 melamine scandal 
affecting dairy products, the EPHIIS program enabled a quick 
response from healthcare officials, including the rapid 
screening of 100,000 children.  EPHIIS and the SPHEC are 
connected with information command centers of other related 
municipal agencies. 
 
COMMENT 
------- 
 
 
SHANGHAI 00000273  004.2 OF 004 
 
 
¶12.  (SBU) National healthcare reform is a tremendous 
undertaking given the divergent systems and conditions in all 
parts of the country.  Large, prosperous cities like Shanghai 
have already met or exceeded the level of many national targets 
for coverage, hospital facilities, number of healthcare 
professionals, etc., but that still leave much to be done in 
improving the quality of service to city residents as well as 
balancing the resource demands on the various levels of 
hospitals.  Shanghai residents, traditionally with more exposure 
to foreign practices and information, continue to lack 
confidence in the healthcare system's ability to provide the 
highest quality of care at the most affordable cost.  Until that 
confidence can be increased (or a balance in resources and 
expertise achieved), Class Three hospital waiting rooms will 
continue to be packed by residents seeking routine treatments. 
Adequate care for migrants also must be factored in to any 
effective reform. 
CAMP