On July 21, Chinese Premier Wen Jiabao visited a local social security agency, a residential community and a community healthcare service center in Beijing. During the visit, Premier Wen Jiabao said that his government is currently examining the plan for the future healthcare reform in China and he expressed that one of the foremost objectives of the Chinese healthcare reform is to maximize the population coverage of the state medical insurance programs.

Premier Wen pointed out that the reform to the Chinese medical insurance system is a critical component of the Chinese healthcare reform plan, and should always follow the principle of public welfare. The ongoing development of community healthcare system and the planned reform to the medical service system, the medical insurance system and the pharmaceutical supply and procurement system must all be in line with the overall plan of the healthcare reform, he added.

Although the central government has been studying a number of healthcare reform proposals from various government-designated local and international organizations, a final conclusion on the future direction of the Chinese healthcare reform is yet to be announced, largely due to disagreements among relevant officials and experts over the future healthcare reform direction.

While everyone involved seems to agree that the government should increase investments for the healthcare sector, the debates are centered on how and where the government should make its increased healthcare investment.

Two distinctively different healthcare financing models emerged during the debate - one model calls for the government funding of all state-owned medical institutions to provide free healthcare to all, while the other model supports government subsidizing of the state medical insurance programs which will contract medical institutions to perform services on the basis of merits and competition.

The first model, supported by former health minister Gao Qiang, was once applauded by many in late 2006. However, the winds are now changing and the second model, which calls for government subsidy of medical insurance programs rather than direct funding of medical institutions, is now gaining popularity. Local press reported that this second model is now supported by most officials and experts who are involved in the healthcare reform planning. 

Two latest signs also indicate the central government's growing inclination towards the second model and local experts believe a final conclusion is in sight.

Firstly the Chinese government decided to launch, on an experimental basis, the urban resident basic medical insurance program which is heavily subsidized by the government and will contract medical institutions to provide services.  Secondly, former health minister Gao Qiang was recently replaced by Chen Zhu, who is known for his support of a market-oriented healthcare system.

These and other signs show the government's strong inclination for the second model, under which state basic medical insurance programs will receive substantial government funding and become the most important buyer and manager of healthcare services in China.

However, local experts say the current urban employee basic medical insurance program has done a poor job so far in buying and managing healthcare services from Chinese medical institutions. 

If the second model is indeed chosen at some point, the government is likely to restructure and consolidate the current state basic medical insurance system, which includes the urban employee basic medical insurance program, the urban resident basic medical insurance program and the rural cooperative medical care, in order to boost the effectiveness of the system.

In a separate development, a recent policy document of the National Reform and Development Commission (NDRC), "Development of the Social Work in the First Half and Policy Suggestions for the Second Half", indicated that the agency has completed an initial draft of the general principles and framework for reform of China's pharmaceutical and healthcare systems.

NDRC stated that it will now hear opinions on the initial draft from all relevant government agencies and interested parties, and following that it will attempt to develop a reform plan for submission to the State Council soon.  Details of the framework developed by the NDRC are not yet available.

Local observers believe that the reform plan is likely to be completed by the end of August for submission, and approved by the State Council and publicized before the end of 2007.

This reform plan is likely to contain only major principles and routes for the healthcare reform, and specific major components of the plan, such as the national essential drug system, healthcare financing and government funding mechanisms, drug and medical service pricing, hospital administration and private investment in the healthcare sector, will be developed gradually.