Children’s Social Welfare in China, 1989–1997: Access to Health Insurance and Education*

Fundamental changes in China’s finance system for social services have decentralized responsibilities for provision to lower levels of government and increased costs to individuals. The more localized, market-oriented approaches to social service provision, together with rising economic inequalities, raise questions about access to social services among China’s children. With a multivariate analysis of three waves of the China Health and Nutrition Survey (1989, 1993 and 1997), this article investigates two dimensions of children’s social welfare: health care, operationalized as access to health insurance, and education, operationalized as enrolment in and progress through school. Three main results emerge. First, analyses do not suggest an across-the-board decline in access to these child welfare services during the period under consideration. Overall, insurance rates, enrolment rates and gradefor-age attainment improved. Secondly, while results underscore the considerable disadvantages in insurance and education experienced by poorer children in each wave of the survey, there is no evidence that household socio-economic disparities systematically widened. Finally, findings suggest that community resources conditioned the provision of social services, and that dimensions of community level of development and capacity to finance public welfare increasingly mattered for some social services. Fundamental changes in China’s finance system for social services have decentralized responsibilities for provision to lower levels of government and increased costs to individuals. The more localized, market-oriented approach to social service provision, together with new economic inequalities, has raised concerns about whether barriers to health care and education for the poor have increased. Medical care costs and school fees have escalated, while many public services and safety nets have collapsed. In a thoughtful assessment of Chinese social welfare reform in the 1980s, Davis warned of greater inequalities in the quality and quantity of schooling between urban and rural residents, and between villages of different income levels. In her appraisal of public health services, she forecast that both urban and rural residents who could not afford to pay for care would suffer because state institutions that provided medical * The authors were supported while conducting this research by a Spencer Research Training Grant awarded to Jennifer Adams and a National Academy of Education Fellowship awarded to Emily Hannum. Additional support came from a Faculty Research Innovation Fund grant from Harvard University Graduate School of Education. An earlier version of this paper was presented at the Columbia University Conference on Education Reform in China (New York, 7 February 2003). 1. Deborah Davis, “Social welfare reform: policies and outcomes,” The China Quarterly, No. 119 (1989), pp. 577–597. © The China Quarterly, 2005 101 Children’s Social Welfare in China, 1989–1997 insurance had disappeared. A decade later, in 1999, Croll’s reappraisal of the far-reaching and complex consequences of social welfare reform emphasized two important trends: the increasing dependence on ability to pay for access to social welfare services, and the rising significance of community-level resources in the provision of social welfare. For China’s children, these trends raise troubling possibilities. In the 1990s, access to preventive health care services for some children may have been inhibited as costs for those services rose in the wake of decentralization. Children in poor families, who lacked the ability to pay for services, and in poor communities, which lacked the ability to generate funds to subsidize care, may have been particularly hard-hit. Similarly, rising fees in education meant that the poorest families, and families in the poorest communities, faced new, potentially prohibitive economic barriers to obtaining compulsory education for their children. Yet, just as market reforms facilitated changes in social welfare services, they also set the stage for dramatic drops in poverty among the Chinese population. Thus, the rising private share of public welfare costs coincided with economic growth that actually increased many families’ capacity to invest in their children’s welfare. The implications for children’s social welfare of rising costs, coupled with new prosperity, have not been empirically investigated. This article traces children’s changing access to social welfare services from 1989 to 1997. For the purpose of these analyses, children’s welfare services are narrowly defined with one indicator of health care access, that is, access to health insurance, and two indicators of educational access, namely enrolment in school and progress through school. Using these indicators, two questions are addressed. First, what was the level of access to welfare services in the late 1980s and 1990s, and did the overall level change? Secondly, to what degree did access hinge on family or community resources, and did these relationships change? We set the stage for the analysis with a portrait of health and education reforms in China. We next provide a brief description of our data, the 1989, 1993 and 1997 waves of the China Health and Nutrition Survey, and methodological approach. We then present our analyses of children’s insurance coverage and educational access. These analyses depict access levels and inequalities for each year, using descriptive figures and multilevel analyses of the links between welfare outcomes and household and community economic resources. We also test for changes in access and inequality over time, using a generalized estimating equation approach. The article concludes with a synthesis of findings and a discussion of 2. Elisabeth Croll, “Social welfare reform: trends and tensions,” The China Quarterly, No. 159 (1999), pp. 684–699. 3. Albert Park, Sangui Wang and Guobao Wu. “Regional poverty targeting in China,” Journal of Public Economics, No. 86 (2002), pp. 123–153. 4. Insurance is a narrow indicator that does not provide information about service utilization or quality. Nevertheless, access differences associated with insurance are one significant element of health stratification in China. Furthermore, identifying the determinants of insurance coverage is increasingly important as health care costs continue to rise. 102 The China Quarterly their implications for understanding the condition of children’s social welfare in China. Children and Welfare Reform in China Many of the challenges in providing public health and education services for children are linked to larger initiatives to reform the government’s fiscal system. Market competition has eroded the profitability of state-owned enterprises, and the government has struggled to establish an effective taxation system to replace the lost revenues previously provided by those enterprises. To provide stronger incentives for local government leaders to generate more revenue and to shed their own expenditure responsibilities, the government at all administrative levels has decentralized expenditure responsibilities as well as claims on revenue. This change has reduced resource transfers from richer to poorer regions, increasing inequities in public spending, and ultimately shifting the burden of social welfare costs to families and communities. Importantly, these policy shifts have coincided with dramatic increases in regional inequality. Inter-provincial income inequality increased markedly from the late 1980s to at least the mid-1990s, and the urban– rural gap in income and living standards remained large, by some estimates wider than anywhere in the developing world. With this broader context in mind, we discuss important changes in the health and education sectors that have emerged in reform-era China. Health. On the eve of market reforms, public health institutions were financed by the government, and public health services were provided to users at little or no cost. By 1975, insurance coverage provided by the government, state enterprises and the rural co-operative medical system had reached close to 90 per cent of the population. This coverage included almost all of the urban population and 85 per cent of the rural 5. Christine Wong, China National Development and Sub-National Finance: A Review of Provincial Expenditures (Washington, DC: World Bank [World Bank Poverty Reduction and Economic Management Unit, East Asia and Pacific Region, Report No. 22951-CHA, 9 April 2002]). 6. Emily Hannum and Albert Park, “Educating China’s rural children in the 21st century,” Harvard China Review, Vol. 3, No. 2 (2002), pp. 8–14. 7. Albert Park, Scott Rozelle, Christine Wong and Changqing Ren, “Distributional consequences of reforming local public finance in China,” The China Quarterly, No. 147 (1996), pp. 751–778. 8. A. Piazza and E.H. Liang, “Reducing absolute poverty in China: current status and issues,” Journal of International Affairs (New York), No. 52 (1998), pp. 253–264. 9. Colin A. Carter, “The urban–rural income gap in China: implications for global food market,” American Journal of Agricultural Economics, No. 79 (1997), pp. 1410–18; Azizur Rahman Khan and Carl Riskin, “Income inequality in China: composition, distribution and growth of household income, 1988 to 1995,” The China Quarterly, No. 154 (1998), pp. 221–253. 10. Xingzhu Liu and Anne Mills, “Financing reforms of public health services in China: lessons for other nations,” Social Science and Medicine, Vol. 54, No. 11 (2002), pp. 1691–98. 11. William Hsiao, Dean T. Jamison, William P. McGreevey and Winnie Yip, Financing Health Care: Issues and Option for China (Washington DC: World Bank [World Bank Report No. 17091 (1997/09/30)]). 103 Children’s Social Welfare in China, 1989–1997 population. It provided access to both cost-effective preventive and curative health care services. With market reforms, fiscal decentralization and the diminishing role of rural collectives resulted in an increasing private share in health expenditures. The co-operative medical system (hezuo yiliao), no longer supported by collective farming income, disintegrated, leaving the majority of rural residents without medical insurance. In urban areas, the breakdown of the state-owned enterprise system left many uninsured. At the same time, the state reduced public funds channelled to health care and encouraged public health institutions to see themselves as economic bodies and to operate on a fee-for-service basis. Rural health stations that once provided free medical care were transformed into fee-for-service health clinics. In this way, the financing gap that resulted from the reform was filled mainly by private out-of-pocket spending. In the 1990s, some evidence suggests that an increased reliance on individual resources resulted in growing inequities in access to health. Preventive health care services declined as costs for those services rose, and immunization rates dropped as fees increased. Throughout the 1990s, levels of insurance coverage were low. One study suggests that the overall insurance rate dropped from 26 per cent in 1989 to 23 per cent in 1997. Moreover, research indicates that the uninsured are less likely to seek medical care, experience shorter hospital stays and receive less medication and treatment compared with those who have insurance. Similarly, research links insurance status to both the probability of seeking medical attention and selection of a medical provider. The insured are more likely to seek care when ill, and they are more likely to seek higher quality health services. The implications of these changes 12. Ibid. 13. H. Yu, S.H. Cao and H. Lucas, “Equity in the utilization of medical service: a survey of poor in China,” IDS Bulletin 28, No. 1 (1997), pp. 16–23. 14. Marilyn Beach, “China’s rural health care gradually worsens,” The Lancet, No. 358 (1997), pp. 567–68; J. Gao, S. Tang, R. Tolhurst and K. Rao, “Changing access to health services in urban China: implications for equity,” Health Policy and Planning, Vol. 16, No. 3 (2001), pp. 302–312. 15. Liu and Mills, “Financing reform of public health services in China,” pp. 1691–98; Beach, “China’s rural health,” p. 567. 16. Hsiao et al., Financing Health Care. 17. X.Y. Gu, G. Bloom, S.L. Tang and H. Lucas, “Financing health services in poor rural China: a strategy for health sector reform,” Institute of Development Studies Working Paper 17, Shanghai Medical University – Institute of Development Studies Collaborative Research Program, 1995. 18. John S. Akin, William H. Dow and Peter M. Lance, “Did the distribution of health insurance in China continue to grow less equitable in the nineties? Results from a longitudinal survey,” Social Science and Medicine (forthcoming). 19. Gordon G. Liu, Xiaodong Wu, Chaoyang Peng and Alex Z. Fu, “Urbanization and health care in rural China,” Contemporary Economic Policy, Vol. 21, No.1 (2003), pp. 11–24. 20. Michael Phillips, Shao-hua Lu and Rui-wen Wang, “Economic reforms and the acute inpatient care of patients with schizophrenia: the Chinese experience,” The American Journal of Psychiatry, Vol. 154, No. 9 (1997), pp. 1228–34. 21. W. Yip, H. Wang and Y.L. Liu, “Determinants of patient choice of medical provider: a case study in rural China,” Health Policy and Planning, Vol. 13, No. 3 (1998), pp. 311–322. 104 The China Quarterly for China’s children are unclear. To our knowledge, studies of access to insurance among children do not exist. Education. Many of the reform-era changes in the health sector have parallels in the education sector. The transition to a market-oriented economy was clearly reflected in educational reforms aimed at efficiently producing an appropriately skilled labour force. Policy reforms revolved around perceptions that educational quality was a serious problem at all levels, vocational and technical training were insufficient, and central administration of education was too rigid. A complex hierarchy of programmes varying in length, quality, curriculum and financial base supplanted the egalitarian educational system of the 1970s. A major component of market-era educational reforms was the decentralization of the administration and finance of primary, secondary and tertiary education. Decentralization (fen quan) had a profound, exacerbating impact on variation in public educational expenditures. Through the 1980s and 1990s, provincial and county economic indicators were closely linked to educational investments, per-pupil spending and school availability. Even within provinces and counties, case studies have established large differences in educational expenditures. Currently, the central government runs and finances certain institutions of higher education; more typically, provincial, county, township and village governments respectively take responsibility for schools at the tertiary, upper secondary, lower secondary and primary levels. For many poor rural areas, the lack of local government revenues or subsidies from upper levels of government significantly hinders school functioning. In general, the government budget finances only teachers’ wages. Other costs must be covered from local resources, either through specially raised earmarked funds collected from households, collective 22. One recent study that examines the distribution of health insurance in China during the 1990s controlled for age cohort, but did not focus on access for children or the family or community characteristics associated with children’s access. Akin et al., “Did the distribution of health insurance ...?” 23. Education laws continue to exhibit this orientation. The Education Law of 1995 and the Education Plan for the 21st century of 1999 confirmed the priority placed on education as a strategic area for social and economic development. 24. Keith Lewin, Angela Little, Hui Xu and Jiwei Zheng, Educational Innovation in China: Tracing the Impact of the 1985 Reforms (Essex, England: Long Group Limited, 1994). 25. Mun Tsang, “Financial reform of basic education in China,” Economics of Education Review, Vol. 15, No. 4 (1996), pp. 423–444. 26. Mun Tsang, “Costs of education in China: issues of resource mobilization, equality, equity, and efficiency,” Education Economics, Vol. 2, No. 3 (1994), pp. 287–312; Loraine West and Christine Wong, “Fiscal decentralization and growing regional disparities in rural China: some evidence in the provision of social services,” Oxford Review of Economic Policy, Vol. 11, No. 4 (1995), pp. 70–85. 27. Albert Park, Wen Li, and Sangui Wang, “School equity in rural China,” paper presented at the Education Reform in China Conference, Center for Chinese Education, Teachers College, Columbia University (New York, February 2003). 28. Mun Tsang, “Education and national development in China since 1949: oscillating policies and enduring dilemmas,” manuscript posted to http://www.tc.columbia.edu/centers/ coce/publications.htm, 2000. 29. Ibid.; Park et al., “School equity in rural China.” 105 Children’s Social Welfare in China, 1989–1997 contributions (shehui jizi), school-generated revenues or fees charged directly to students. For example, in rural Gansu, one of China’s poorest provinces, about 70 per cent of daily costs such as classroom supplies, heating and other similar obligations are financed from student fees, and 20 per cent are financed from school-generated revenue, mostly in richer villages. Available research from the early 1990s suggests that community resources significantly affected children’s educational opportunities. One analysis of 1990 census data indicates that county per capita income was positively correlated with the probability of rural youth’s enrolment in primary school, middle school and high school, net of family characteristics. Consistent with these results, analysis of data from a national survey conducted in 1992 indicated that village income significantly predicted rural seven to 14 year-old children’s enrolment status, net of household socio-economic status. Using survey data from the early to mid-1990s, another study of 12 to 15 year-olds in eight provinces indicated that community poverty was a significant constraint not only on enrolment but also on progress through school. Summary. In short, in both the health and education sectors, finance changes in the reform period have raised the salience of both individuals’ ability to pay and communities’ ability to generate resources. While these changes emerged in the context of unprecedented prosperity in China, they also coincided with rising regional and household income inequalities. The renewed reliance of both the health and education sectors on local and individual support, taken together with increased economic inequality, raises important questions about trends in access to health and education services in the 1990s, and about whether children in poor families and poor communities were increasingly disadvantaged. We investigate these questions below. Data and Methodological Approach This article employs data from the China Health and Nutrition Survey (CHNS), a multi-purpose panel study of households that contains detailed measures of household and community socio-economic status, health, education and other social indicators. The first wave was collected in 30. Ibid. 31. Hannum and Park, “Educating China’s rural children,” pp. 8–14. 32. Rachel Connelly and Zhenzhen Zheng, “Determinants of primary and middle school enrolment of 10–18 year-olds in China,” Economics of Education Review, Vol. 22, No.4 (2003), pp. 379–390. 33. Emily Hannum, “Poverty and basic education in rural China: communities, households, and girls’ and boys’ enrolment,” Comparative Education Review, Vol. 47, No. 2 (2004), pp. 141–159. 34. Jennifer Adams, “Educational opportunity and school finance reform in China: is the right to education increasingly dependent on family income and community wealth?” paper presented at the Annual Meetings of the Comparative and International Education Society, Washington, DC, March 2001. 106 The China Quarterly 1989 by the Chinese Academy of Preventative Medicine and the Institute of Nutrition and Food Hygiene, in collaboration with the Carolina Population Center at the University of North Carolina. Subsequent waves were collected in 1991, 1993, 1997 and 2000. The survey used a multi-stage, random cluster process to draw a sample from eight geographically diverse provinces that vary by level of economic development, public resources and welfare indicators. Counties in each of these provinces were stratified by income, and four counties were randomly selected from each province. In addition, the provincial capital and a lower income city were selected. During each wave of the survey, household heads from approximately 3,600 households were interviewed about the attributes and activities of all household members. The analyses employ data from the 1989, 1993 and 1997 waves of the survey. To improve the comparability of the sample across years, we limit the analyses presented here to cases drawn from the seven provinces present in all waves of the survey: Jiangsu, Shandong, Henan, Hubei, Hunan, Guangxi and Guizhou. We used two subsamples of children drawn from the larger sample. In the insurance analysis, we used data for children aged 16 and under in each wave of the survey. In the analyses of educational outcomes, we used data for children aged 6–16 years old in each wave of the survey. We linked children to family and community characteristics. We consider three outcomes: insurance, enrolment and progress through school. In each wave of the survey, the household respondents were asked whether each member of the household had medical insurance or not. The respondents were also asked questions regarding the education status of each member of the household, which we used to construct indicators of enrolment and progress through school. Table 1 shows descriptive statistics for individual and community level characteristics used in analyses to predict child welfare outcomes. The durable goods index is used as an indicator of household wealth and economic status. Because within the age range of our sample, children 35. The provinces surveyed in the 1989, 1991 and 1993 are Liaoning, Jiangsu, Shandong, Henan, Hubei, Hunan, Guangxi and Guizhou. In 1997 and 2000, Heilongjiang replaced Liaoning. 36. To date, the 2000 wave is not publicly available. We chose to omit the 1991 wave for ease of interpretation, in order to have equal time intervals between waves. 37. Medical insurance was defined to include public insurance, labour insurance, work unit insurance, dependent medical insurance, co-operative medical insurance, maternal-child health insurance and planned immunization insurance. 38. We created an enrolment variable based on the answer to “Are you currently in school?” To measure progress through school, we used the response to “How many years of formal education have you completed in a regular school?” and the child’s age to construct a second variable, expected grade, which measures grade attainment for age. 39. We created a durable goods index to measure family wealth. In each wave of the survey, household respondents were asked, “Does your household or do any household members own the following electrical appliances or other goods?” To reflect economic changes over time in China, several new items were included in the list of choices in the 1993 and 1997 waves. Regardless of small differences in the lists of items across the different waves, we summed the ownership of all items in each household, and divided the household into quartiles based on the total of items owned. 107 Children’s Social Welfare in China, 1989–1997 Table 1: Descriptive Statistics of Community and Individual Characteristics Influencing Child Welfare in Seven Chinese Provinces, 1989, 1993 and 1997 (standard deviation)*