Docom of The World Bank FOR FMCIAL USE ONLY \ Cv / ) /3<2 -0¾ Report No. 5876-CHA STAFF APPRAISAL REPORT CHINA RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT May 27, 1986 Population, Health and Nutrition Department This document has a restrictd distribution and may be used by recipients only in the performance of their otcisl duties. I contents may not otherwise be disclosed without World Dank authoriztion. CURRENCY KOUIVALENTS Currency Unit - Renuinbi (MMB) I Yuan (Y) - 100Fen - US$0.31 Y3.20 US$1.00 (as of April, 1986) FISCAL YEAR January 1 - December 31 ABREVIATIONS AND ACRORYKS CNTIC - China National Technical Import Corporation DPT - Diphtheria-Pertussis-Tetanus Associated Vaccine EPS - Epidemic Prevention Stations IBRD - International Bank for Reconstruction and Development ICB - International Competitive Bidding IDA - International Development Association NCH - Maternal and Child Health NOPE - Ministry of Public Wealth NCPM - National Center for Preventive Medicine OPV - Oral Poliomyelitis Vaccine (Live) RIME - Rural Health and Medical Education (Project) UNICEF - United Nations Children's Fund IBLO - World Bank Loan Office 1R0 - World Health Organization FOR OFFICIAL USE ONLY CHINA, RRAL hMALTS AND PREVENTIVE MNDICINE PROJECT Loan/Credit and Project Summiry Borrovexr :People's Republic of Ckains Aunt : Bank Loan : US$15.0 million equivalent IDA Credit: SDR57.2 million ($65 million equivalent) Terus : Bank Loan : 20 years including 5 years of grace at standard variable interest rate ImA Credit: Standard Proiect : The objectives of the proposed project are to strengthen and expand the Ministry of Public HealthVs (MOPE) continued efforts to improve rural health care, to improve the efficiency, coverage and quality of the national immunization program for children, to initiate improved drug quality control and to develop new coumuoicable and chronic disease preventive strategies and health care financing systems in rural areas. The project consists of four main components: (a) Pural UaiLk - expansion and qualitative improvement (through construction, equipment, technical assistance. personnel recruitment and training) of preventive and curative health services in the poorer rural counties of five provinces (Gansu, Hubei, Jilin, Sichuan and Ningzia Rui) and strengthening of the disease monitoring and control activities and immnization delivery and management of the epidemic prevention stations in these and three additional provinces (Heilongjiang, Jiangxi and Shandong); (b) Vaccine Production - iwprovement in the coverage and cost effectiveness of the national iinwnization program against the main childhood diseases through construction and rehabilitation of three national centers for the production of essential vaccines meeting international quality standards; (c) Dma Oualitv Control - improvement of the quality control of drugs used in China through construction, equipment, training, fellowships sud technical assistance; (d) Ouerational Research - undertaking research (i) to strengthen the capacity of the National Center for Preventive Medicine (NCPM) for disease surveillance and disease prevention strategies and (ii) to test new approaches to rural health insurance. Thk document h a restict ditibution and may be used by repients only in the perfonnmace of their ofic dutieL Its contents may noL otherwise be discksed whout World Bank authoriin. - ii - Bzperience with the Rural Health and Nedical Education project, and with preparation of the proposed project, indicates that NMPI has the management capacity and coumituent needed for successful implemeta tion of the rural health component and, with the assistance of ezperienced international vaccine firos, the vaccine production component. Consequently no *ajor implementation risks are anticipated. Implementation of the operational research component, bowever, does carry inherent risk in that it may take time for NCPN, a newly created amalgmation of previously independent research institutes, to shift from laboratory to policy-focused research. To miniize this risk NCP's program will be monitored closely by NOPE and the Bank Group. In the drug quality control component, there is a risk that the expected impact may be compromised by difficulties in coordinating tbe activities of MOPE and the State Pharmaceutical Administration. To min-imie the risk that investments in quality control would not be effectively utilized because industrial capabilities could not keep pace with rapidly improving quality measurement standards, the project will finance only the first phase of the MOPE program to raise drug quality testing capacity. - iii - Estimated Costs Loa Fri2gn ~ Total --is C88(US$ million) - A. Strengthening of Rural Health 53.3 22.3 75.6 B. Vrccine Production 11.2 29.4 40.6 C. Drug Quality Control 7.6 4.2 11.8 D. Operational Research a) Preventive Medicine 6.1 1.9 8.0 b) Rural Realth Insurance .2 .5 .7 Subtotal for Operational 6.3 2.4 8.7 Research Total l Jse Co-ts 78.4 58.3 136.7 Physical Contingencies 8.5 10.0 18.5 Price Contingencies 11.8 10.4 22.2 Total Proiect Costs 11 98.7 78.7 177.4 Finaucing-Plan: Local Foreign Total IBRD 0.0 15.0 15.0 IDA 1.3 63.7 65.0 Government 97.4 0.0 97.4 Total 98.7 78.7 177.4 Estimated Disbursements: Bank Groun FY 1987 1988 1989 1990 1991 1992 - Annual 8.9 15.2 21.5 18.4 12.0 4.0 - Cumulative 8.9 24.1 45.6 64.0 76.0 80.0- Rate of Return: n.a. l/ Project-financed goods are exempt from import duties and taxes. - iv - OMRAL UE<H D PRA VENTIVE MEDICINE Table ogf ContenMt Page 11d, Loan/Credit and Project Su ary .................... ....... .... i Table of Contents .................... . . .. ..... iv Basic Data .................................................... vii Definitions ......... *so ...............s.............. ... 00. 0 iii I. THE HEAITR SECTOR . .......................s........e..... 1 A. Introductiono.................... ...................... 1 B. Health and Population Status .......... o....o..o...... 1 C. Health Sector Services .......................... , 2 D. Health Sector Policies ........ ..... ... .... ... 3 E. Health Sector Financeo ........................ . 5 F. Sectoral Issues ...... ....................** 5 G. Bank Role and Assistance Strategy...................... 6 II. THE PROJECT .........................oo .................. 7 A. Project Objectives and Scope ........................... 7 B. Project Components ............................. o..... 8. 8 1II. PROJECT COSTS AND FIXANCING .. ...... . . . . . . .... .... . .. ... . . 12 A. Cost Estimates ....... o................ o........................ ...... 12 B. Financing Plan ...................... ...... ...... .. 14 C. Procuremet ..... ....... ....... ............... ......... 14 D. Disbursements ................... ...... .... 15 E. Accounts and Audits .......... o.......................... 16 This report is based on the findings of an appraisal mission that visited China in July 1985: Dr. A. Prost (mission leader), Messrs. D. Pearce, N. Prescott and Ms. C. Lee (PHU); Mr. J. van der Gaag (DRD), Dr. J. Krister, Dr. K. Young, and Mr. M. el Fekih (consultants). Mr. F. Orivel (consultant) also assisted in project economic analysis. Post appraisal work on the project was also done by Mr. R. BUmgarner and Ns. C. Fogle (PEU). Table of ConteMts (Continued) Pate No. IV. PROJECT ORGMAIZATION, MANRGEMENT AND INPLUAEHTATION ..... 17 A. Project Organization ................................ 17 B. Project Management ...... e..660-..*-**...*.......... 18 V. PROJECT BENEFITS AND RISKS ..... ......................... 19 A. Project Benefits ....... ............................. 19 B. Project Risks ...................................... 20 VI. AGREEK RTSR'ECED AND RECOMEND&TIOIS .................. 21 ANNEXES: 1. Documents Available in The Project File .................. 23 2. Principal Causes of Death, Urban and Rural Areas, 1980 ... 25 3. Immunization Coverage ..... ....... ..a ...... ............. 26 - Table 1: Percentage of Counties in China with Specified Morbidity Levels, Measles, Faliomyelitis and Pertussis, 1983 ............. 26 - Table 2: Results of EPI Cluster Surveys on Immunization Status of Children, 1984 ......... 27 - Table 3: Percentage of Under-Reportizg of Measles, Pertuseis, and Poliomyelitis, from Surveillance Points ...... .................... 28 4. Table A.: Rural Health Component - Statistics of Summary Participating Provinces (1984) .... .............. 29 Table B.: Construction in The Rural Health Component .... 30 - Si - Table of Contents (Continued) Pate No 5. Table 1 : Sichuan Province General Summary, 1984 ..... 31 Table 2 : Gansu Province General Susmmry, 1984 ... ...... 32 Table 3 : Eubei Province General Su_mary, 1984 .......... 33 Table 4 : Jilin Province General Sumary, 1984 .......... 34 6. Description Prepared by MOPE for Rural Eealth Insurance Ezperi-ent ................... ...............e........... 35 7. Table 1 : Summary Accounts by Year ....... .........e 41 Table 2 : Project Components by Year .............e... 42 Table 3 : Sumnary Account by Project Component .. .... 43 8. Project Implementation Schedule ................ 44 CHART e.e.e. ..........................eeee 45 MAP - IBD 19288R - vii - CEINA RURAL XEALTR AND PREVENTIVE MEDICINE PROJECT Basic Data Total area (million km2) .........-....... ...... 9.6 Total population (mid-1983 in millions) ..................... 1,019 Estimated annual rate of natural increase (Z) ......1.2 Projected population for year 2000 (in millions) 1,242 Population density per km2 (mid-1983) ........................ 106 Population density per km2 of agricultural land (mid-1983) 261 Per capita GNP (1983) (in US$) .............. 300 Crude birth rate (1983) .*..O ....... 19 Crude death rate (1983) .............. o............... ....... 7 Life expectancy at birth (1983) ............................. 67 Infant mortality rate (1983) .. .............. ... ... .0 38 Child death rate (1983) ....2.................... ........ 2 Urban population as percentage of total population (1983) ..... .. ........ 21 Population per doctor of western medicine (1980) ........... 1,740 Population per nursing person (1980) ..............}..... 1,710 Nutrition (1982) Calorie intake as percentage of requirements .......-.... 120 Daily calorie supply per capita (total - 1982) ............ 2,565 - viii - CHINA RURAL EEALTH AND PREVENTIVE MEDICINE PROJECT Definitions Child Death Rate The number of deaths among children 1-4 years of age per 1,000 children iu the same age group in a given year. Crude Birth Rate The number of live births per year per 1,000 people in a given year. Crude Death Rate The number of deaths per year per 1,000 people in a given year. Incidence Rate . The number of persons contracting a disease in a population during a specified period of time. Usually expressed as the number of cases per 1,000 persons. Infant Mortality Rate The number of deaths of infants under 1 year of age in a given year per 1,000 live births during the same year. Life Expectancy . The number of years a newborn child would live if subject to the mortality risks prevailing for the cross-section of population at time of birth. Maternal Mortality Rate The number of maternal deaths per 100,000 live births in a given year attributable to pregnancy and childbearing complications. Morbidity . The frequency of disease and illness in a population. Rate of Natural Increase The difference between crude birth and crude death rates; usually expressed as a percentage of the total population in a given year. Total Fertility Rate The average number of children that would be bo-n alive to a woman during her lifetime if sbe were to pass through her childbearing years conforming to the age-specific fertility rates of a given year; serves as an estimate of average number of children per family. CHINA RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT I. THE HEALTH SECTOR A. Introduction 1.01 Since the early 1950s, China has made remarkable progress in improving health and nutrition. Many factors have contributed to this achievement, including greater and more equitable food distribution, improved water supply and sanitation, a higher literacy rate and advances in education. The health system's strong emphasis on prevention, community mobilization and financing, and paramedical field workers (barefoot doctors) have also contributed greatly to progress. However, China's health care system is entering a period of transition. The changing epidemiological profile and emerging health problems of the 1980s and beyond will increasingly mean that curative as well as preventive health care needs must be adequately and economically addressed. A detailed assessment of China's achievement and prospects in the health sector was undertaken by a Bank mission in October 1982. The mission's report is entitled The Health Sector in China, A World Bank Country Study, 1984. B. Realth and Population Status 1.02 Health conditions in China have improved dramatically since the 1950s and are now far better than in other lov-income countries. Infant mortality has fallen from close to 200 per 1,000 live births in the early 1950s to below 40 per thousand today. At the same time, life expectancy at birth rose by 70Z from about 40 years in the early 1950s to 67 years in 1983. The extent and rapidity of these mortality declines are remarkable and probably unprecedented for a country of China's relatively low income level. Current mortality rates in China compare very favorably to the average infant mortality rate of more than 100 per thousand and average life expectancy of about 50 years in other low-income countries. However, these national averages conceal vide variations within the country. Life expectancy appears to be higher in the more heavily populated and advanced northeastern provinces and coastal areas than in inland and border regions and is also higher in urban than in rural areas. 1.03 Significant declines have been achieved in fertility. The total fertility rate remained high at about 6.5 from the mid-1950s through the late 1960s, despite a temporary reduction associated with the 1959-62 famine. Following the introduction of strong fertility limitation policies in th early 1970s. the total fertility rate fell sharply to only 2.3 in 1979. Fertility has since turned upwards slightly, probably as a short- lived result of the relaxation in policy regarding age at first marriage and the consequently increased rate of family formation (marriage followed by first births). Overall, according to Bank estimates, the average annual population grovth rate has decreased from 2.7% i.- the period 1965-73 to 1.5Z between 1973 and 1983 and is projected to fall further to 1.2% between 1980 and 2000. 1.04 Many once important communicable diseases such as smallpox, cholera, plague and Kalaazar have been virtually eradizated. Diphtheria and poliomyelitis have been almost eliiminated and the incidence of other infectious and parasitic diseases nas been reduced. However, continuing deficiencies in hygiene and human waste treatment cause the persistence of diseases such as hepatitis and dysentery. Malaria and schistosomiasis remain problems and their control is a public health priority. Tuberculosis, the main cause of death in 1949, still affects nearly one percent of the pcpulation and remains a major health haza-4. Chronic bronchitis, associated with smoking and severe air pollution, is reported in 3.5% of the population. In China, as in the industrialized countries, cancer, cardiovascular diseases and accidents now account for most deaths (see Annex 2). Due to inevitable aging of the population, morbidity and mortality associated with chronic diseases are likely to become even more prevalent. For example, the number of cases of hypertension can be expected to more than double between 1980 and 2010. C. Health Sector Services 1.05 At the apex of China's rural health system are approximately 2,100 counties, each of which has a county hospital, an epidemic prevention station (EPS), a Maternal and Child Health (MCH) clinic, and a health personnel training center. County facilities are funded by the Government through the province and county health bureaus which are responsible for overall direction, technical support and supervision c. all county service delivery. Belov the county facilities are health centers at the township level. In 1981, some 55,000 or 90 percent of all townships had such centers, averaging about 14 beds, which are responsible for routine curative and preventive services. The operation of these centers is financed by county subsidies (either full or partial subsidy of salaries) plus user charges (for drugs and services). At the village level, more than 90% of the villages have a health station with one or more barefoot doctors. Many village-level services have, in the past, been financed by cooperative health insurance, vhich was funded jointly by annual prepavments of individual members and appropriations from village welfare funds. However health insurance coverage bas declined dramatically, from 85% of villages in 1975 to 58% in 1981 and to only a negligible proportion today. This has - 3 - resulted from the introduction of the rural production responsibility system which removed the institutional and fiscal basis of cooperative insurance at village level. 1.06 Although the urban population comprises only 21Z of the total, urban health services are quantitatively very important. They account for about half of total hospital beds and salaried health anpower available in the entire health sector, and recent trends show a more rapid increase in resources for urban than for rural health care in China. The size of the urban sector reflects the high effective demand for services resulting from the extensive insurance coverage provided to urban' residents under the Government and labor health insurance schemes. State enterprises play a key role both in financing and in directly providing urban health services. Approximately half of urban health resources are owned by enterprises. 1.07 At the national level, the Ministry of Public Health (MOPE) supervises activities of the provincial health bureaus. MOPH has broad responsibility for health policy, for preparation of an annual plan, for supervision of medical and paramedical education and for coordination with related ministries and agencies. MOPH is directly responsible for thirteen core medical universities, for medical research, for the vaccine production institutes and for the National Center for Preventive Medicine. 1.08 The licensing of new drugs and the supervision and control of production, '-rketing and utilization are part of the mandate assigned to NOPH by the new Pharmaceutical Administration Law which became effective July 1, 1985. The drug manufacturers (about 1,800 in China), under the general plan of production marketing of the State Pharmaceutical Adminirtration, are responsible for the quality and quantity of the drugs approved by NOPH. Tests of pharmaceuticals are carried out by the 29 provincial and municipal institutes. Biological products and vaccines are produced in seven institutes under the control of MOPH. Each institute produces vaccines, blood derivatives and biological reagents, except for the Kunming Institute which specializes in poliomyelitis. None of these vaccines meet the international standards for safety and potency established by the World Health Organization (WHO). 1.09 The National Center for Preventive Medicine (NCPM) was created in 1983 to coordinate seven research institutes. NCPN has begun to pursue its principal objectives of conducting research on preventive medicine and coordinating similar research programs throughout the country, assisting provincial health institutions and training public health professionals for service in the provinces, monitoring epidemic prevention and quarantine programs, and developing the scientific basis for establishing regulations, standards and appropriate public health priorities and policies. D. Healt1 Sector Policies 1.10 China's progress in improving the health of its people is due in part to effective health delivery and to the policies on whi.h such delivery -4- is based. During the last two decades China has emphasized preventive over curative services more strongly than most low-income countries. China's policies have always reached beyond the health system itself, stressing the importance of nutrition, water supply and sanitation, education and reduced fertility. China has also pioneered the concept of community-financed auxiliary health workers, known as barefoot doctors. Consistent with China's priorities for poverty reduction through rural development and provision of basic social services, a substantial volume of financial resources (over 3Z of GDP at present) has been mobilized for health from central and local governments, insurance systems and community and private expenditures. As a result the resources available for health care, particularly in poor areas, are significantly higher than in comparable areas of most low-income countries. 1.11 The Government's current medium-term health policy objectives include the following: (a) to promote prevention by strengthening anti- epidemic activities, improving the management of immunization campaigns, and identifying preventive measures against chronic diseases; (b) to strengthen and consolidate rural health services by upgrading county-level health institutions and major township health centers and promoting barefoot doctors to rural doctors after they have received sufficient training; and (c) to intensify medical research and training of health professionals and improve the technical and administrative management of health delivery, and to improve the quality, production and distribution of pharmaceuticals and to ensure that they are properly used. 1.12 Rural Health Poliy. The national program, designed to strengthen rural health services, is called the One-Third County Upgrading Program. The program is to be implemented in three phases, each covering about one- third of the counties and lasting five years. The program's major focus is to strengthen the four county-level health institutions - the general hospital, the epidemic prevention center, the maternal and child health center and the training center - together with the major township health centers. An important policy innovation is the development of selected centers as major township health centers designed to serve an intermediate referral function between ordinary centers and county hospitals. Investment in the program during 1980-1982 totaled Y 443 million, and was allocated mainly to construction and purchase of equipment. Provincial budgets financed the largest share (48X), followed by county budgets (29Z), and self-financing by beneficiary institutions (18%). In general, implementation performance has been uneven. Investment per county ranged - 5 - from as little as Y 0.5 million in Shanxi Province up to Y 4.4 million in Shanghai. There has been no detailed evaluation of the impact of the program to date but a preliminary HOPH assessment judged implementation to be satisfactory in about two-thirds of the participating counties. Poor performance was attributed principally to insufficient financing and ineffective management. E. Bealth Sector Finance 1.13 Estimates for 1981 indicate that China spent 3.3Z of GDP on health services, a relatively high proportion compared with other low-income coun- tries. Total expenditures were US$7.50 per capita, of which 95Z was recurrent expenditure. The major sources of finance for recurrent expenditure were individual payment for drugs and services, labor insurance schemes and go-rernment subsidies. Expenditures were mainly for drugs (58Z, of which the bulk were Western medicines), salaries (20x) and hospital care (132). Urban expenditure in 1981 was estimated at about US$16.50 per capita, more than double the national average and almost four times greater than the rural average of US$4.50 per capita. The major cause of this disparity is the uneven distribution of state subsidies, especially for insurance schemes covering urban residents. 1.14 Important features of healtb financing in China are the emphasis on cost recovery, the consequent importance of health insurance and, until recently, the extensive degree of insurance coverage. Estimates for 1981 indicated that 43% of total expenditure was mediated through healtb insurance schemes. About 70% of the population benefited from some type of insurance coverage. Hovever, since the early 1980s the virtual collapse of the rural cooperative insurance schemes associated with the dissolution of the commtnes and production brigades has essentially limited insurance coverage to the urban minority and enterprises employees. This important new development in the health sector presents policy issue for MOPE, particularly because Government also wants to encourage hospitals to become financially self- supporting by increasing cost recovery and reducing reliance on state subsidies. Development of affordable and efficient rural insurance coverage is high on HOPE's medium-term policy agenda so that rurallurban inequities in access to health care do not threaten many of the past gains. F. Sectoral Issues 1.15 Consolidation of Past Gains. Although China's progress in reducing morbidity and mortality has been considerable, this achievement remains incomplete 2_ several important respects. First, improvements in health conditions have not been uniform. Hajor differences in health status and in the availability of health resources continue to exist between rural and urban areas, and these are reflected in wide disparities between provinces. While effective systems of health delivery have been established in urban areas, similar improvements have not been extended to many poor rural areas. - 6 - These improvements will inevitably require mobilization of increased central and provincial finance for provision of rural health services in order to offset the limitations of local fiscal self-reliance introduced by fiscal decentralization. 1.16 Communicable Diseases. Hepatitis, dysentery and tuberculosis are not yet under control and there are still problems with the vaccine- preventable diseases which typically account for the bulk of infant and child mortality in developing courtries. Although the national immunization program has made considerable progress, its success is still constrained by the poor quality of domestically produced vaccines, lack of refrigeration to preserve vaccine potency during transport to the field, and the infrequent scheduling of immunization sessions, which leaves unprotected children who are either too young or too old to receive immunization when it is offered. Evidence of under-reporting of disease incidence and over-reporting of immunization coverage rates also points to a need to strengthen program management. (See Annex 3, Table 3). 1.17 New ChallennKes. China's transition to a predominantly chronic disease profile has been induced in part by Cbina's past success in disease control and is being reinforced by the shift to an older age-structure as a result of the one-child family planning policy. Prevention is a much harder task for now-communicable diseases but the development of effective yet low cost strategies for chronic disease prevention and treatment is the major priority in the health sector. This will require reconsideration of the role of the epidemic prevention stations which have been narrowly focused on infectious disease control. It will be increasingly important for urban hospitals to provide specialized curative services as part of a hospital referral system serving both rural and urban populations. With the groving cost pressures that accompany a rise in demand for specialized hospital services, there will also be a need to contain costs by eliminating inefficiencies in service provision throughout the health sector. This will require improved hospital management, revision of incentives that encourage excessive service provision and avoidance of wasteful duplication of services such as the development of curative facilities in maternal and child health stations. Additional important issues in the sector include cost recovery and financing policies for both capital and recurrent costs; development of affordable and efficient insurance coverage particularly in the rural areas; and organizational and regulatory reforms to improve pharmaceutical quality. G. Bank Role and Assistance Stratefv 1.18 Bank Group lending operations in China's health sector so far comprise one IDA credit (Cr. 1472-CH&) of US$85 million equivalent for the Rural Health and Medical Education (R ME) Project approved by the Executive Directors on May 3, 1984. The project-s two major objectives are to develop new approacbes to upgrading health service in rural areas and to improve the quality of medical eduication. The REME project is now in its second full year of implementation, and performance to date has been fully satisfactory. In the rural health component, participating provinces have endorsed the -7- methodology developed by Bank Group staff and consultants for preparing county plans. and other counties and provinces have begun to use the methodology. Programs aimed at improving the reporting system for disease monitoring and establishing standard procedures in hospital care management have been extended to non-participating counties. Construction under the project has been implemented ahead of schedule and the output of training programs has exceeded the target set during project appraisal. In the medical education component, the experience of project preparation and implementation in the 13 medical universities serves as a basis to design the reform of curricula and medical education policies currently under preparation. This reform will later be introduced in provincial and other non-project medical colleges. 1.19 The Bank Group's strategy for the proposed project and future lending in the health sector is to focus on policy and institutional changes needed to address inequities in health conditions in poor rural areas, lingering problems of communicable disease and the emerging problems of chronic disease. It will also assist China to gain access to new medical tecbnologieis that will lead to more efficient use of resources as well as support the Government's agenda for reform in systems for supplying and financing bealth services. Bank Group sector and project work in health is aimed to build the basis for a sound dialogue on key policies, meet high priority needs and have a clear demonstration effect consistent with these strategies. The proposed project contributes to this objective, particularly through rural health investments, the upgrading of vaccines, and monitoring cf pharmaceutical production, and support for operational research into new preventive strategies and alternative rural insurance systems. II. THE PROJECT 2.01 The project was first presented to the Bank Group in July 1984 and subsequently prepared by MOPH with the assistance of WHO consultants. A Bank Group mission appraised the project in July 1985. Negotiations were held in Washington in April 1986 with a delegation led by Mr. Luo Qing of the Ministry of Finance and included representatives of the State Planning Commission and Ministry of Public Health. A map (IBRD No. 19288) of the country showing the project locations is attached. A. Project Objectives and Scope 2.02 The objectives of the proposed project are to strengthen and expand MOPH's continued efforts to improve rural health care, to improve the efficiency, coverage and quality of the national immmnization program for children, to initiate improved drug quality control and to develop new communicable and chronic disease preventive strategies and health care financing systems in rural areas. - 8 - 2.03 The project consists of four main components: (a) Rural Health - expansion and qualitative improvement (througb construction, equipment, technical assistance, personnel recruitment and training) of preventive and curative health services in the poorer rural counties of five provinces (Gansu, Hubei, Jilin, Sichuan and Ningxia Hui) and strengthening of the disease monitoring and control activities and immunization delivery and management of the epidemic prevention stations in these and three additional provinces (Heilongjiang, Jiangxi and Shandong); (b) Vaccine Production - improvement in the coverage and cost effectiveness of the national immunization program against the main childhood diseases through construction and rehabilitation of three national centers for the production of essential vaccines meeting international quality standards; (c) Drug Quality Control - improvement of the quality control of drugs used in China through construction, equipment, training, fellowships and technical assistance; (d) Operational Research - undertaking research (i) to strengthen the capacity of the National Center for Preventive Medicine for disease surveillance and disease prevention strategies and (ii) to test new approaches to rural health insurance. B. Proiect Components Rural Health 2.04 The purpose of this component is to upgrade the coverage and quality of preventive and curative health services in about 50 poor rural counties in five provinces (Gansu, Sichuan, Hubei, Jilin and Ningxia Hui) and it will strengthen and reorient disease monitoring and prevention efforts in these and three additional provinces (Heilongjiang, Jiangxi and Shandone.) (see Annex 4, Table A for summary statistics by province). Each of the eight participating provinces prepared an investment program based on overall project objectives and consistent with the national One-Third County Program. The provincial investment programs and implementation plan were the basis of project design and project cost estimates. 2.05 To improve health care at the county level in the five provinces the project will upgrade or construct hospitals, maternal and child health centers, epidemic prevention stations and training centers. Below county level the project will support the establishment of a network of major township health centers and in some cases will rehabilitate existing health centers. Major health centers are designed to provide basic inpatient care that serves an intermediate referral function between ordinary healtb centers and the county hospital. Total construction is estimated at about 471,100 m2, of which about 113,103 m2 is for facilities below county level (sep Annex 4, Table B for details). 2.06 Equipment and vehicles, including teaching aids in the training centers, will be provided to strengthen laboratories, clinical diagnosis, cold chain, X-ray facilities, operating rooms, outpatient clinics, and training facilities. - 9 - 2.07 Selected ccunties are generally much poorer than those supported in the REME project. In Gansu, one of the poorest provinces in China, the participating counties come from the lover two-thirds of the per capita rural income distribution. Participating counties in the other provinces have been selected from the lowest one-third of the income distribution. Also considered in the selection of counties were implementation and management capability, geographic distribution, relative severity of health problems, and strength of local government commitment. (See Annex 5). 2.08 In all eight provinces the component will strengthen disease monitoring and control activities and immunization delivery and management functions of the provincial epidemic prevention stations through expansion of the provincial stations, equipment and vehicles, staff training, fellowships and technical assistance. Cold storage facilities will be constructed at prefecture level wherever needed to ensure an effective cold chain for expanded, effective vaccine distribution. In Heilongjiang, Jiangxi and Shandong provinces the component focuses on improving the management of preventive health programs, with special emphasis on priority diseases. These include programs to strengthen child immunization in Heilongjiang, screening for hemorrhagic fever in Jiangxi, and screening for leprosy and tuberculosis in Shandong. Project activities in these provinces will also include improved disease surveillance of a wide range of both communicable and non-communicable diseases. 2.09 For the component as a whole, improved outreach, patient care and management will be supported by training in the following areas: (a) pre-service training of primary health workers at the county level, and of middle level workers at the province level; (b) upgrading of professional skills in specific disciplines and subjects, such as improved clinical practice for doctors and equipment maintenance for general service staff; and (c) specialized training for doctors and supervisors in technical fields such as epidemiology, statistics and management. An extensive program has been organized by MOPH and the health bureaus in participating provinces. County training schools will be eetablished or upgraded in all participating counties. Provincial training centers will be upgraded to in-service schools for medical cadres. Local trainers and consultants from universities, medical schools, NCPM, provincial hospitals and other high level institutions inm China will organize a series of training workshops, assist in design of curricula for in-service training and provide on-the-job training in medical procedures and nise of equipment. An estimated 72,000 health staff will benefit from some kind of retraining during project implementation (see Annex 4, Table C for summaries of provincial training requirements). Additional personnel (doctors, nurses, laboratory technicians, administrators and trainers) will be recruited after the expansion in the scope and quality of health services. Vaccine Production _or Im_Lroved Imunization 2.10 China tlis produced essential vaccines for cbildhood diseases for some years in seven institutes under the MOPH. However, problems of vaccine quality and potency, use of liquid, rather than freeze-dried vaccine, and - 10 - weaknesses in the cold chain have made Cbina's immunization p:.ogram less effective and more expensive than it should be. The vaccine component of the project will strengthen the national immunization program by enabling China to produce improved-quality essential vaccines that meet quality standards for potency and safety established by the World Pealth Organization. The component will also provide for packaging of vaccines in small numbers of doses appropriate for frequent immunization programs in villages. Improved packaging , and freeze drying, will also allow transport with less vulnerabi- lity to temperature variation and provide a longer shelf life. These quality improvements, combined with revision of the national immunization schedule, are expected to yield a significant improvement in the coverage and cost- effectiveness of the national childhood immunization program. 2.11 Specifically, the component will: (a) establish a new production center for oral poliomyelitis vaccine (OPV) in Kunming, Yunnan Province, with an annual production capacity of 100 million doses of liquid trivalent vaccine. The rest of the annual requirement (about 40 million doses) will continue to be produced in the Beijing institute; Cb) establish two new production centers for essential vaccines, including DPT, tetanus toxoid, and freeze-dried measles vaccine, in Sbanghai and Lanzbou (Gansu Province), each with an annual production capacity of 100 million doses of DPT, 40 million doses of tetanus toxoid, and 20 million doses of measles vaccine; and Cc) rehabilitate the quality control laboratories in each of the three sites, using existing buildings. 2.12 During negotiations, understanding was reached on (i) a timetable for transitional and final implementation of the revised immunization schedule as recommended by the WHO preparation team and used to estimate the annual production requirements of vaccine; and (ii) a monitoring system and procedures by which MOPH will evaluate effectiveness of the new vaccines. Assurance vas obtained that all domestic production of DPT and measles vaccines, tetanus toxoid and OPV will, after one year from the start of operation of vaccine production centers under the project, meet the international guidelines established by WHO on the quality of biological products, including vaccines, Drug Qualitv Control 2.13 This component will assist MOPH to routinely monitor the quality and safety of pharmaceuticals, both domestic and imported, and to evaluate the properties and adverse effects of new drugs to be introduced on the market. - 11 - 2.14 The program developed by the MOPH will be implemented in stages, enabling the manufacturers to progressively raise the quality of the products and to adjust to higher production standards. To provide the basis for a further dialogue with Government on the issues of manufacturing, teeting, evaluation and control, the project will support the first phase of such a rehabilitation program and will consist of: (a) upgrading three municipal institutes in Beijing, Tianjin and Shanghai for drug quality control. Each of them will become the national referral center for a given category of pharmaceuticals. Each will assist NOPH to develop quality standards and training for staff working in the 26 provincial institutes for drug quality control; (b) training pharmaceutical administrators and drug quality inspectors in the Western China Medical University and Zhejiang Medical University. Enrollment of small groups of 20-30 students for successive specialized sessions will result in the training of 140 to 280 persons/year in each college; and Cc) developing clinic pharmacology and laboratory facilities in the clinical pharmacology units of the Medical University of Beijing and the Medical University of Shanghai. Each unit will undertake tasks assigned by the Bureau of Drug Policy and Administration for evaluating the pharmarco- dyna-.ics. toxicity, and clinical effects of about eight new compounds every year. Operational Research 2.15 Building upon the assistance provided under the RHME project, this component will strengthen research programs of the NCPM which are designed to improve disease monitoring, identify new preventive health strategies, support epidemic prevention stations, and develop the analysis and exchange of information. The support would include construction, equipment, foreign technical assistance and overseas fellowships. 2.16 The component will also support an experiment aimed at implementing and evaluating several new health insurance schemes to contribute to the formulation of a new national policy on rural health insuraace. The experiment would test the feasibility of introducing new rural insurance arrangements that would: (a) provide more extensive risk-pooling; (b) be financially independent of state subsidies yet affordable for the majority of rural inhabitants, and (c) minimize incentives for unnecessary use of curative services while retaining incentives for preventive care. The three- year experiment would be implemented in two counties in Sichuan province under the overall direction and management of MOPH. Assurancea were obtained that MOPH would carry out the experiment with the assistance of conbultants and in accordance with terms of reference and time schedule acceptable to the Bank Group. MOPH confirmed that appropriately qualified staff would be - 12 - assigned from both central and provincial levels to direct and manage this experiment. Detailed background and description of the rural health insurance experiment is contained in Annex 6. III. PROJECT COSTS AND FINANCING A. Cost Estimates 3.01 Total Droiect costs. The total cost of the project is estimated to be US$177.4 million or Y 567.5 million equivalent, net of duties and taxes from which the project will be exempt. The foreign exchange cost would be US$78.7 million (44Z of the total). Project costs by objective and by expenditure category are summarized in Tables III.1 nd II1.2, and details are given in Annex 7. Equipment lists for rural health, drug quality control and operational research have been prepared and unir prices are based on January 1986 world market prices for imported equipment. The cost of equipment and materials to be procured locall, and not to be financed by the Bank Group was estimated on the basis of current domestic prices. Costs for the vaccine production component are estimated on the basis of bid prices received by MOPH in April 1986. 3.02 Contingencies. Physical contingencies of 1OZ of base costs are provided for construction, vehicles, equipment and technical assistance except for vaccine production which includes an allowance of 25 Z to reflect a margin of uncertainty attached to the base cost estimate pending award and negotiation of contracts. Price contingencies are based on the following expected rates of increase for both domestic and international prices: 7.2% for 1986; 6.8% for 1987 and 1988; 7.0% for 1989; 7.1% for 1990; and 4.0% for 1991. Physical contingencies total 13X of base costs and price contingencies are 14% of base costs plus physical contingencies. 3.03 Recurrent Costs. Project investment in rural health will increase recurrent outlays in the 50 participating counties by about Y 8.2 million commencing in 1988, or about Y 164,000 per county. In 1984, total recurrent health expenditures in the provinces of Jilin, Sichuan, Hubei and Gansu averaged about Y 1.8 million per county, which is projected to increase to about Y 2.7 million per county in 1988. The incremental recurrent expendi- tures generated by the project represent about 9.5% of total recurrent health expenditures of the aeove four provinces in 1984, and about 6% of projected total recurrent health expenditures for the same provinces in 1988. Project investments in drug quality control and operational research are expected to generate only minimal incremental recurrent expenditure requirements for operation and maintenance of new equipment. - 13 - Table 11.1 oREaMw NxiM Mm OKa N.MT MECT TM CET Tn (IVWI '00l 0USI 000) z TOtI I Forein Is. local Foaigm Toal Local Fer ln rotal Emam, Cats A. STIE1NINO MM. WAIN 31 170,77.M2 71324.8 242,09.9 53366.3 22&2,9.0 75,.Z.3 29 5S 3. WD1lE W IT 35P04.6 940s.9 IUP7.5 11.22 29,395.6 40,615.1 72 30 C. N 1 ? WANl. 2W4IS.9 13,341.2 37,127.1 79651.8 4,169.1 112.0 35 9 3. OPETIUUL 4OI 1. Nl9VI1UE 1301 C KMH I3 192.4 6,043.2 25,53.6 6v091.4 1,319.5 7.979. 24 6 2. M. E4LTI DfEtN s S.4 I,56S.0 2.123.4 174.5 439.1 3.5 74 0 Sub-Total W13TIU. LEE 20050.8 7,40.2 27,659.0 6,265. 2377.6 9,643.4 29 6 Totl JISEE CTS 251,213.5 136,340.1 437,553.5 78,504.2 5h,231-3 16,735.5 43 100 Physical cbn Xmiciu 2,790.- 32,212.4 3,913.4 1,344.0 10,06.4 13,410.4 55 13 Price Ctird,em 37,71.9 33,204.q 71,076.3 1I835. 10,36.4 2211.4 47 16 Tall PROJECT CIST 315736.3 251,756.9 567.543.2 98,633.2 71,674.0 177,357.3 44 130 Table 111.2 a'Im FRPWNI ICIIE MD RM. WT14 PECT 9fU 1611fl3 COST SN~ (Tm '0003 000 lotal - - - 2 hFostn Lim Local Foisi Total Local Forzimn Total Eeab Costs 1. IN1ET1 COE1 A. ACCDIE CO N 35,904.6 94,065.9 129.970.5 11.220.2 29.395.6 40,615.9 72 30 B. CIQL mES 1. 3WEl 79,971.9 9,952.2 0.824.1 24,679.7 3,079.8 27-757.5 11 20 2. ICWRT IY,69.7 2,457.3 21,53.9 6PI55.2 767.9 6,923.1 13 5 3. EPIUIC PEW I STATIn 9,515.7 1,187.1 10,792.9 2.973.7 371.0 3,344.6 11 2 4. C1SN6TUCI' 22,429.9 29798.3 25.229.1 7,009.3 974.5 7,983.8 11 6 Sub-Tout CIVIL L 130,614.1 16,294.9 146,90.0 40,616.9 5.092.2 45.909.1 11 34 C. EJPIIT Al OMES 1. E0EfIIT 40.370.9 609S65.1 101,336.0 12.615. 19.01.6 31,667.5 60 23 2. 1E5 - 9,731.3 9,731.3 - 3,041.0 3,041.0 100 2 3. INIEUM TRNSIRT,111STAL.CST5 6261.S - 6,281.8 1,963-1 - 1,963.1 - I w,h-TotI ESflT me PiW1 4,462.7 7M,69.4 117,349.1 14P579.0 22P092.6 36,671.6 60 27 2. TRADM 1. JlM LIE. LOE. T1116 9,410.9 - 3,610.8 2,60.9 - 2.690.9 - 2 2. IIDIIE LEVEL LUCM. TLl 5,699.3 - 5.6S.3 1,40.4 - 1,340.4 - 1 3. 96l111 LNE. LU. T1llBII1 61a62.4 - 6,162.4 1.923.8 - I.923.9 - I 4. FBUIIS . T116 _0 - 3,5l5.3 3,55.3 - 1120.4 1,120.4 100 1 Sub-Total T11S 20,662.5 3.55.3 24,247. 6,457.0 1,123.4 7,577.4 15 6 E. 1EI1U. NSSISTACE 1. LIU COJTNS 2,20.3 - 2,20.3 689.2 - 689.2 - I 2. FORE1171 C.TMT - 1,97.6 1,697.6 - 530.5 530.5 100 0 9br-Tot THCM. AShISTN1E hm5.3 1,697.6 3,902.9 619.2 530.5 1,219.7 43 1 F. L9UL 6C EENI 6,043.9 - 6,043.9 IPON.7 - 1,M93.7 - I S. ST1FF EITUllEIIT 9,130.3 - 9,13.3 2,53.2 - 2,953.2 - 2 Tobl SELD IE 5C 231,213.5 I,340.1 437.553.5 73,504.2 5B,231.3 136h735. 43 100 Fhsical Conu7s 26700.9 329212.4 53,913.4 83344.0 10i6.4 18B410.4 55 13 Pflc CS,UrnEiff 37,371. 33,204.4 71076.3 11,835.0 10,376.4 22211.4 47 la Total PuCT cuT 315,79.3 251,756.9 567,54.2 911,63.2 7B,674.0 177,357.3 44 130 - - - 14 - B. Financine Plan 3.04 The proposed Bank loan of US$15 million equivalent and IDA Credit of SDR 57.2 million (US$65 million equivalent) will finance 45Z of total project costs, including all foreign exchange costs (US$78.7 million) and US$1.3 million or 1.3% of local costs. The local counterpart contribution for the Rural Health component will be provided by province and county-level budgets. Local financing for other project components will be provided by the Central Government. C. Procurement 3.05 Vaccine Production Comnonent. Under ICB prccedures according to the Bank Procurement Guidelines, eligible firms were prequalified to bid for this component in July 1985. Criteria for prequalification included (a) experience a,. a major international producer with production capacity comparable to that required under the proposed project; (b) commitment to continued future production so as to ensure continuity in transfer of technology; and (c) proven experience of technology transfer to other countries. Of ten bidders expressing potential interest, two were prequalified for the OPV production center and two for the DPTIMeasles production centers. Technical terms of reference and detailed bidding documents were reviewed by Bank Group financed consultants and bids were received in April 1986 and are currently under evaluation. Contracts are expected to be awarded on a turn-key basis with the process suppliers responsible for project management, transfer of technology, plant design, supervision of civil engineering, supply and inspection of goods, installation and testing of plant equipment, training of plant personnel and plant start-up and trial operation. 3.06 Procurement for 0tber Project Comuonents. All procurement of equipment to be financed by the Bank Group (about 70% of total) would be procured under International Competitive Bidding (ICB) folloving Bank Procurement Guidelines, except as describeJ bel'w. Items vould be grouped into bid packages to encourage competition and bulk procurement. Local manufacturers would be eligible for a margin of preference of 15% or the prevailing customs duties, vhichever is lower, in the evaluation of bids. Items and groups of items estimated to cost less than US$200,000 and in aggregate not exceeding US$5.0 million equivalent may be procured through: (a) contracts awarded on the basis of comparison of quotations invited from at least three suppliers eligible under the Guidelines; or (b) direct purchase for proprietary items or vhere justified by the need for standardization. The US$5.0 million limit is reasonable in light of experience under the REME project. Prior Bank Group review of contract awards would include all contracts of US$500,000 equivalent or more. Sample post reviews of smaller contracts would be carried out during regular supervision missions. Remaining equipment comprises basic laboratory equipment, pharmaceutical and laboratory materials and standard teaching supplies all of which are available locally and will be procured by - 15 - Provincial Health Bureaus for widely scattered local distribution. This equipment would be procured in accordance with local procedures and financed by the provincial governments. Selection of technical assistance consultants would be carried out in accordance with Bank Group Guidelines on the use of consultants. Local training and fellowships will be organized by MOPH. 3.07 Draft equipment lists have been finalized by project institutions and reviewed by MOPE and the Bank Group. An expert procurement committee has been appointed by HOPH to review quantities and to prepare detailed specifications. Agreement was reached with MOPE during appraisal that this committee would be appropriately staffed to undertake this task with due regard to the following criteria: appropriateness of equipmpnt proposed to institutional functions; cost-effectiveness, taking into account expected utilization and impact; and ease of operation and maintenance. For items procured througb ICB, HOPH would be responsible for preparation of bidding documents, bid evaluation and recommendations for award; the International Tendering Company of CNTIC has been designated to be responsible for advertising and receiving bids, and for undertaking contract awards on behalf of HOPH. MOPH would be responsible for taking delivery of equipment and for its distribution to project institutions. During negotiations understandirg was reached that procurement of equipment would be appropriately synchronized with the construction of physical facilities and the training of personnel needed to operate and D,aintain it. 3.08 Civil Works. Civil vorks for rural health facilities, for the expansion of epidemic prevention stations and for extensions to buildings imder the Drug Quality Control and NCPM components would be procured mainly through local bidding amongst local companies and would be financed by the Government. Architectural plans have been prepared by provincial, municipal and county design bureaus which would also be responsible for supervision of construction. Sites for facilities have been selected and have been made available by the respective levels of government. To make improvements in civil works design for rural health MOPH is establishing a central unit for health facilities research and design. Its role would be to study and synthesize alternative designs and technologies suitable to improve the design of buildings for health care. It would investigate construction techniques and layouts to incorporate modern ideas for patient flow, supervision, management and the delivery of technical services. It would bave the capacity to produce educational materials and sample designs for provincial health and design authorities. D. Disbursements 3.09 The proposed credit of SDR 57.2 million (US$65.0 million equiva- lent) would be disbursed as follows: - 16 - (a) 100Z of the CIF cost of imported equipment (including vehicles), 100% of the ex-factory cost of locally manufactured equipment and 75% of the :ost of local expenditures for other items procured locally; (b) 100% of the cost of consultants; (c) 100% of expenditures for local training (tuition, transportation, room and board) for the Rural Eealth component; (d) 100% of foreign expenditures for overseas fellowships; and (e) 100% of foreign expenditures for the vaccine production centers. The proceeds of the proposed loan (US$15 million equivalent) would be disbursed against item (e) above. 3.10 Reimbursement of training and contracts for goods ard services, each valued at less than US$200,000 equivalent, would be made on the basis of statements of expenditure, the supporting documentation for which would be retained in the World Bank Loan Office (WBLO) for review by the Bank Group during project supervision missions. In order to reduce the administrative burden of disbursing against a large number of applications NOPE would open a Special Account in a bank acceptable to the Bank Group, with an authorized allocation of up to the US dollar equivalent of SDR 5 million. Applications for replenishment would be submitted, with appropriate supporting documentation, at quarterly intervals or when amounts withdrawn equal half the amount of the initial deposit, whichever comes sooner. All disbursements for expenditures for training and consulting services, and contracts for goods and services for amounts of less than US$200,000 equivalent, will be made from the Special Account. Disbursements will be completed by the Closing Date of June 30, 1992, one year after the estimated date of project completion (Annex 8). E. Accounts and Audits 3.11 Accounts of expenditures for the rural health component will be maintained by the provincial WBLOs under the supervision of the WBLO in the NOPE. The finance division of the WBLO will maintain accounts for all other project components. During negotiations assurances were obtained that project accounts would be maintained according to accounting principles and practices satisfactory to the Bank Group; that annual audits of project expenditures would be carried out by independent auditors acceptable to the Bank Group; and that the Government would provide the Bank Group with certified copies of such audited financial statements and the auditors' reports thereon within six months after the close of each Chinese fiscal year. - 17 - Table 111.3: SCHEDULE OF DISBURSEMN8TS (us$ Million) Bank Group fiscal ProDortion disbursed byvyear year and semester Semester cumulative Estimate for All PHN All China -(USS million)-- this project projects sectors ------- (percent)… 1987 1st 5.7 5.7 7 1 0 2nd 3.2 8.9 4 3 4 1988 1st 6.4 15.3 8 3 8 2nd 8.8 24.1 11 5 11 1989 1st 11.1 35.2 14 5 14 2nd 10.4 45.6 13 12 13 1990 lst 10.4 56.0 13 2 13 2nd 8.0 64.0 10 8 10 1991 1st 5.6 69.6 7 9 7 2nd 6.4 76.0 8 7 8 1992 1st 3.2 79.2 4 8 7 2nd 0.8 80.0 1 8 5 IV. PROJECT ORGANIZATION. MANAGEMENT AND IMPLEMENTATION A. Project Organizton 4.01 Two of the project components - Vaccine Production and Drug Quality Control - fall under the administrative and technical jurisdiction of the Bureau of Drug Administration and Policy of NOPH. Within the Bureau, the Biological Products Division will be responsible for implementing the Vaccine Production component, and the Pharmaceutical Standard and Quality Control Division for implementing the Drug Quality Control component. The Rural Health component will be the responsibility of the Rural Health Division of the Bureau of Medical Administration. The Operational Research component will be under the technical responsibility of two units reporting - 18 - directly to the Minister of Public Health, namely the National Center for Preventive Medicine, and a leading group for Health lusurance Reform chaired by the first Vice Minister. The Chinese Academy of Medical Sciences, an institution which is also direc:;y under the Minister of Public Health, vill assist the Bureau of Drug Administration and Policy in developing the production of OPV in the Kunming Poliomyelitis Institute which reports to the Academy. The Bureau of Health and Epidemic Prevention will provide technical guidance in the upgrading of provincial epidemic prevention stations. A chart depicting the current organizational structure of the MOPH is attached. 4.02 Responsibility for project management and coordination as a whole would rest witb the WBLO which has already been established in MOPH to coordinate the implementation of the Rural Health and Medical Education Project. The WBLO is headed by a director with a day-to-day responsibility for all aspects of project execution. He is supported by 25 full-time staff organized into three divisions responsible for project execution, procurement, and finance and accounts, respectively. The WBLO will coordinate the implementation of all project components, procurement of equipment, administration of technical assistance and training, project finances (including counterpart funding and loan/credit disbursements) and overall project progress reports. To this end, it will have a strong liaison function with the technical departments responsible for individual project components. Finally, the WBLO will be responsible for the preparation of the project completion report. B. Project Manaeiement 4.03 Tne project will be directed by a steering group within MOPH, consisting of the heads of the divisions and bureaus concerned, and co-chaired by the director of the Foreign Affairs Bureau and the director of the Planning and Finance Bureau. This group will meet periodically and have responsibility for setting overall policy guidelines, approving plans and budgets for individual project components, monitoring the project's overall progress and effectiveness, and resolving any issues affecting project goals and implementation. The WBLO is the staff secretariat for this group. 4.04 The pattern of national organization and management arrangements has been replicated in the provincial health bureaus responsible for the Rural Health component. Specifically, leading groups chaired by the provin- cial Vice Governors would oversee project implementation, backed up by provincial NBLO0 or project managemeat units in the provincial and county health bureaus, each comprising five to ten full-time staff headed by a Bureau Deputy Director. The provincial WBLOs have appraised and approved the plans and programs developed by the county-level institutions. They will supervise all aspects of project implementation including those executed by the provincial epidemic prevention stations. Assurances were obtained that the MOPH and the provinces concerned would maintain the WBLOs through the project implementation period with appropriate functions and staffing. - 19 - 4.05 The implementation of the Vaccine Production component vill be managed by the directors of the three institutes concerned, in close collaboration with the Biological ProductB Division of the NOPH which will be responsible for the reassignment of technical staff. During negotiations, understanding was reached that MOPH would reassign to the three institutes supported by the project the technical staff they vill need to operate the new facilities. 4.06 Drug Quality Control will be executed by the following agencies: the Municipal Health Bureaus of Beijing, Shanghai, and Tianjin for the Drug Quality Control Institute; the Zhejiang Medical University and Western China Medical University for the training subcomponent; and the Medical University of Shanghai and the Medical University of Beijing for the clinical pharmacology subcomponent. Each implementing agency has set up a project office headed by the director of the institute/department concerned, under the leadership of the presidents of the universities and the directors of the Municipal Health Bureaus. Assurances were obtained that the Borrower would ensure through a Project Implementation Agreement that the municipalities of Beijing, Tianjin, and Shanghai and Zhejiang Province will maintain the project offices within the respective local Health Bureaus throughout the project implementation period and implement project activities under the supervision of the Drug Administration and Policy Bureau of MOPH. Execution of a Project Implementation Agreement satisfactory to the Bank Group would be a condition of effectiveness. 4.07 The Operational Research component will be implemented by the relevant institutes of the NCPM. The Director of the NCPM will be responsible for overall program implementation and will report directly to the Minister of Public Health. The rural health insurance experiment will be implemented by the Health Bureau of Sichuan Province under the leadership of the steering group established in MOPH. V. PROJECT BENEFITS AND RISKS A. Project Benefits 5.01 The project is expected to improve the health status of about 30 million beneficiaries in rural areas of 50 counties. NEtionwide there will be better coverage, quality and cost-effectiveness of child immunization. National capability for epidemiological surveillance and research will be stronger. The Rural Health component will strengtben the capacity of the county health care delivery system to deliver an extensive range of curative and preventive services. The effect will be improved efficiency of communi- cable disease control and chronic disease management, and greater accessibi- lity to and quality of curative services both in the counties and at intermediate referral locations in rural areas. - 20 - 5.02 The Vaccine Production component vill substantially increase the coverage and cost effectiveness of the national imnunization program by raising the proportion of eligible children covered by a full series of immnnizations, reducing the cost per fully imminized child and improving the efficacy of the imunization given. It will make possible increased frequency of iuznization sessions at the ultimate delivery site. Anticipated increases in unit production cost per vaccine dose are expected to be more than offset by decreases in wastage in the distribution chain, resulting both from better packaging and from longer shelf-life associated in part vith the substitution of freeze-dried for liquid vaccines. Substantial improvement in vaccination effectiveness will also result from the reduction of losses in vaccine potency. 5.03 The Druz Oualitv Control component is expected to improve the capability of the drug quality control institutes to test the quality of drugs available on the market. It will also improve the training of pharmaceutical administrators and quality control inspectors. The result is expected to be a more effective and extensive system of drug quality control which would help to ensure that all drugs meet acceptable safety standards. 5.04 The Operational Research component will support and improve the formulation of national policies on disease prevention and on rural health insurance. B. Proiect Risks 5.05 Experience with the RMR project, and with preparation of the proposed project, indicates that HOPE has the management capacity and commitment needed for successful implementation of the rural health component and, with the assistance of experienced international vaccine firms, the vaccine production component. Consequently no major inplementation risks are anticipated. Implementation of the operational research component, hovever, does carry inherent risk in that it may take time for NCPM, a newly created amalgamation of previously independent research institutes, to shift from laboratory to policy-focused research. To minimize this risk NCPM's program vill be monitored closely by NOPH and the Bank Group. 5.06 In the Drug Quality Control component, interagency coordination could pose difficulties. The responsibility for drug quality lies with NOPE, whose capacity for pharmaceutical administration would be strengthened by the project. However, the responsibility for drug manufacture rests with the State Pharmaceutical Administration which controls the pharmaceutical enterprises but is administratively independent from MOPH. Due to constraints in terss of equipment and technology of manufacturers, the State Pharmaceutical Administration might be unable to comply with the standards established by NOPE in the short term. To minimize the risk that investments in quality control would not be effectively utilized because industrial capabilities could not keep pace with rapidly improving quality - 21 - measurement standards, the project will finance only the first phase of the HOPE program to raise drug quality testing capacity. VI. AGREEMENTS REACHED AND RECUNNENDATIONS 6.01 During negotiations, understandings were reached on the folloving: (a) a timetable for the implementation of the revised immunization schedule and a monitoring system and procedures by which NOPE will evaluate effectiveness of the new vaccines (para 2.12); (b) that procurement of equipment would be appropriately synchronized with the construction of physical facilities and the training of personnel needed to operate and maintain it (para 3.07); and (c) that NOPE would reassign to the Shanghai, Lanzhou and Kunming vaccine production institutes the technical staff needed to operate the new facilities (para 4.05). 6.02 During negotiations, assurances were obtained that: (a) all domestic production of DPT and measles vaccines, tetanus tozoids, and OPV would, one year from the start of operation of vaccine production centers under pi ject, meet the international guidelines established by WHO on the quality of biological products, including vaccines (para 2.12); (b) MOPH would carry out the rural health insurance experiment with the assistance of consultants and in accordance with terms of reference and time schedule acceptable to the Bank Group (para. 2.16); and (c) project accounts will be maintained according to accounting prin- ciples and practices satisfactory to the Bank Group; annual audits of project expenditures will be carried out by independent auditors acceptable to the Bank Group and certified copies of such audited financial statements and the auditor's reports thereon will be forwarded to the Bank Group within six months after the close of each Chinese fiscal year (pars 3.11); (d) the NOPE and the provinces concerned would maintain the World Bank Loan Offices through the project implementation period with appropriate functions and staffing (para 4.04); (e) through a Project Implementation Agreement the Borrower will ensure that the municipalities of Beijing, Tianjin and Shanghai and Zhejiang Province will maintain the project offices in their - 22 - respective local health bureaus through the project implementation period and will implement project activities under the supervision of the Drug Ad-inistration and Policy Bureau of MOPE (para. 4.06). 6.03 The following would be conditions of loan and credit effectiveness: (a) Execution of a Project Implementation Agreement satisfactory to the Bank Group; and (b) State Council approval of the Loan, Credit and Project Agreements. 6.04 Subject to the above conditions and assurances, the project herein proposed vill constitute a suitable basis for a Bank loan of US$15 million equivalent and a credit of SDR 57.2 (US$65.0 million equivalent). The Bank loan would be for a term of 20 years, including a five-year grace period, at the standard variable rate, and the IDA credit would be on standard IDA terms. - 23 - Page 1 of 2 CHINA RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT Documents Available in The Proiect File General 1. China: The Health Sector. A World Bank Country Study, 1984. 2. China: Lon=-Term Issues and Options, Report No. 5206-CJM, The World Bank, 1985. 3. Hill, K. (1985) Deogfrabhic Trends in China. 1953-1982 Technical Note Series, No. 85-4, Population, Health and Nutrition Department. 4. Young, M. and Prost A. (1985) Child Health in China. The World Bank. 5. Project proposals from participating project institutions. 6. Project detailed cost tables. Rural Health 7. Krister, J. et al. (1985) Report of an Assignment: Preparatory Phase of a World Bank-Assisted Rural Health Project in the People's Republic of China (Jilin and Hubei Provinces), World Health Organization, Western Pacific Regional Office, Manila. 8. Growth and Develonment in Gansu. China. Report No. 6046-CHA, The World Bank, 1986. 9. Muller, M. & Young, M. (1984). The Availability. Utilization and Cost of County Hosaitals. Population, Health and Nutrition Department. 10. Krister, J. (1985) Issues and ODtions in Rural Health Investent iD China, Population, Health and Nutrition Department. 11. Young, M. & Co. (1985) Background Statistics for Appraisal: Forty-Nine Counties, Population, Health and Nutrition Department. - 24 - ANUU 1 Page 2 of 2 Vaccine Production 12. Gibson, B. et. al. (1985) Improving Vaccine Production in China, Report of a WSO sission, World Health Organization, Western Pacific Regional Office, Manila. 13. Orivel, F. (1985). Economic Analysis of Vaccine Production: Choice Between Domestic Production and Iuport of Vaccines in China, Population, Realth and Nutrition Department. Drug oualitv Cou-xp-. 14. Pharmaceutical-Administration ]a. of the People's lemulic of Cina, Decree No. 18 of the Chairman of the People's Republic of China, September 20, 1984. 15. Essential Druso and Vaccines, Assignment reports by Keiser, B. R. (20 January - 20 February, 1985), Schroff, A.P. (2-17 February 1985) and Knapp, G. (2-17 February, 1985), World Realth Organization, Western Pacific Regional Office, Manila. - 25 - CllIM ~ ~ ~ ~~ NIM- RURAL HMLTR AND PREVENTIVE MEDICINE PROJECT Princi2&l Causes of Death. Urban and Rural Areas. 1980 Percent of all Deaths Disease In Urban Areas In Rural Areas Heart disease 23 26 Cerebrovascular disease (stroke) 23 17 Cancer 20 15 Acute respiratory disorders (excluding tuberculosis) 9 12 Digestive disorders 4 5 Tuberculosis 2 3 Other 19 22 - 26 - ANNEX3 Page 1 of 3 CHINA RURAL BEALTH AND PREmVNTIVE MEDICINE PROJECT Immunization Co-verage Table 1: Percent8&e of Counties in China vith Specified Morbidity Levels!.Mej-s1es Poliouvelitis and Pertus8is. 1983 Morbidity/100.000 Percentage of Counties '=easles 0 8 0.01 - 10.00 29 10.01 - 30.00 16 30.01 - 70.00 15 70.01 - 100 7 100 25 Poliowivelitis 0 76 0.01 - 0.10 1 0.11 - 0.50 16 0.50 7 Pertussis 0 8 0.01 - 10.00 44 10.01 - 60.00 28 60.00 20 CHINA RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT I_munizat ion Coverage Table 2: RESULTS OF l.PI CL WSThR 8.iIVREYs ON IMMUNIZATION STATUS OF cIILDREN, 1984* Population Percent Immunized Full Immuni- Sample Age Group No. Surv. BCG DI'T-3 OPV-I Measles zatton Henan 34,990,000 12.24 mos 30,869 70 78 92 85 53 Hebel 13,447,784 12.24 moo 6,280 - 72 87 87 68 Jiangxl 14,205,637 18.24 mos 6,300 54 38 57 58 22 Guangdong 26,009,732 12.24 mos 10,081 37 58 72 53 18 Liaoning 171,366 12 mos 213 98 99 99 98 96 590,129 12.18 mos 211 96 97 98 57 54 Heilongjiang 30,734,684 12.22 mos 13,873 65 74 88 84 50 Shanghal. 11,930,932 12.24 moo 2,514 99 96 98 97 84 18.24 mon 2,242 96 86 96 93 66 Shaanxi 6,642,895 12.26 mos 5,518 14 46 83 82 14 Yunnan 3,000,000 12.24 moo 1,957 72 59 76 73 20 Ningxia 346,240 1.5.3 yrs 420 99 95 99 98 94 553,848 1.5.3 yrs 630 - 95 92 91 79 Qinghai 1,559,507 1-2 yrs 1,670 57 35 73 60 25 Gansu 2,653,889 12.24 mos 5,037 30 17 74 52 5 Sichuan 19,324,215 12.24 mos 5,231 33 66 79 72 13 Inner Mongolia 4,631,927 12.48 mon 3,448 - 37 90 92 - Hubei 3,020 ,0(00 12.23 mos 1,2603 82 81 85 86 61 Shanxi 5,10(,741 12.24 mon 2,925 79 64 79 74 47 Tianjin 7,764,141 12.18 mos 3,360, 82 75 80 88 60 Beijing 9,230,687 12.24 mos 4,039 94 92 96 94 82 Guangxi 19,745,049 12.24 mos 2,925 - 43 66 73 *Provisionai tabulation. CHINA RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT Immunization Coverage Table 3: PERCENTACY. UF UNDER-REPORTlNG OF MEASLES, PERTUSSIS, AND POLIOMIYE1ITIS, FR(M SURVE1LLANCE POINTS 1981a/ 1984_/ 1984b 1984E/ Surveillance Gansu Cansu Shandong Lintao Lintao 15 Rural q No. Points I Rural 4 Rural I0 Urban 5 Rural 5 Urban County Hospital Counties Sample Size 1,579 97,720 55,265 9,621 19,117 5,978 - Unknown (> 7,100,000) Measles - 2'1 30 - - 76 36 66 Pertussis - - - 8 67 78 0 66 Poliomyelit.is 22 - - - 50 a/ Unpubialshed data provided by Institute for Epidemn1ology and Microbiology. Chinese Academy of Medical Sciences. b/ Data provided by bureau of llealt i, Ganhtt, 1985 c/ Data provided by bureati of healtth, Shandong, 1985 0 5*11 - 29 - ANNE 4 Page 1 of 2 RURAL RELTR -AD PREVUTIVE MNDICINE PROJECT Table A.: Rural Health Comuonent - SuMar Statistics of Particioatine Provinces (1984) Province Item Gansu Hubei Jilin Sichuan Total Number of Counties La 15 11 10 13 49 (Z of Province Total) (21) (15) (27) (7) Population (million) 5.13 7.65 4.63 11.21 28.63 (Z of Province Total) (26) (16) (20) (11) - GVTAO& per capita (Y) 270 533 550 441 n.a. Death Rate Lc 5.9 7.0 5.5 7.1 n.a Birth Rate & 15.6 14.0 12.4 9.9 n.a. County Hospital Beds L£ 0.39 0.51 0.58 0.31 n.a. Total Proiect Investenat 24.0 26.2 16.6 28.6 95.4 (Y million) Total Investment per County 1.6 2.4 1.7 2.2 1.9 LA Excluding Ningxia Rai Antonomous Region. lb Gross value of industrial and agricultural output tW Per thousand population, 1984. - 30 - ANNEX 4 Page 2 of 2 CHINA RURAL HELTH AND PREVENTIVE MEICINE PROJECT Table B.: ConstrUction in The Rural Realh Comonent (1) (2) (3) (I + 3) Province County & above Belov county EPS Total (=2) (m2) (m2) (m2) Gansu 73,200 28,600 2,911 76,111 Sichuan 120,491 49,694 9,300 129,791 Hubei 87,927 20,509 2,000 89,927 Jilin 30,729 14,300 3,006 33,735 Ningxia 8,700 6,920 15,620 Heilongj-ang 4,520 4,520 Shandong 5,590 5,590 Jiangxi 2,700 2,700 To,&al 321.047 113.103 36.947 357,994 Table C.: Traigin2 Required Under Rural Health Coununent a/ (Nan-Years) Province Junior Level Middle Level Senior Level Total Gansu 2,079 1,338 630 4,047 Sichuan 1,598 1,070 312 2,980 Hubei 2,175 2,058 656 4,890 Jilin 1,738 765 618 3.121 Ningxia 30 101 9 227 Heilongjiang 67 67 Shandong 185 185 Jiangxi 240 240 Total 7.620 5.332 2.804 15.756 a! Assumes that the duration of training averages 6 months for junior level staff, one year for one third of middle and senior level staff, 6 months and 3 months respectively for the other two thirds of the middle and senior categories. CHINA RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT SOU1n4 PWN0(E FAL z4AY, 1984 PoIlatio- Per Capita prodwtlon (Y) Health Iudicatorsa enAl crd& Infart Bde per Staff Project Tbtal X X Distrlbitsi Death Rate WIrth Rate Mrtaaity x 1,000 per 1.000 0iuntias Millni Rural Illiterate Agriculture Inftistty onare aCRO 0/ 00 CR/0 Rate 0/CD Pop pop (I) Gorgxian 0.3 79.6 211.0 229.9 215 6.3 10.7 40.9 2.1 3.9 lAmdan 1.4 94.7 301.9 10().2 232 6.2 7.1 41.7 0.67 2.6 Zhrxgian 0.9 94.3 235.3 73.9 187 8.0 8.4 42.6 0.66 3.8 Qixian 1.2 92.6 236.6 119.3 211 7.3 11.1 40.2 1.1 3.8 Yanting 0.6 94.5 314.8 103.7 lf6 7.9 10.9 35.2 1.6 4.7 Zhongjian 1.3 95.4 '39.0 96.3 237 8.1 8.6 43.2 0.81 3.6 ' Nanbu 1.2 95.6 247.4 0.A 163 6.7 10.9 52.3 1.0 3.4 Qiorglai 0.6 88.8 429.3 241.2 344 5.9 9.1 40.2 0.96 5.0 Jianyarg I.3 92.0 381.6 227.9 231 6.1 5.8 41.R 0.88 3.8 Torgliarg 0.8 92.4 316.5 162.9 272 6.4 9.0 41.9 1.4 6.7 Helushn 0.7 9U.1 350.0 328.5 221 5.5 7.9 33.6 1.5 5.0 Yueid 0.2 91.9 237.2 41.4 198 10.2 19.8 85.2 2.n 4.8 Diaji.mg 0.8 93.5 252.3 99.6 225 7.2 9.6 50.9 0.81 4.0 (W. Toe.i t,ialth staff excludirg srde' fran eltenrdew health units. 0 CHINA RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT GANUJ PIN(NN CI*I3AL IRY, 1964 Pomlati ction (Y) Hlth Indicatora Cnxis Ctdee Infart Bde per Stdf Project Total Z Z Distributed Dath Rate Rlrrth Rate MDttality x 1,000 per 1,000 Oountim Killion Rural Il Literate Agriculture Irdtutry Ilncnae C)R 0/00 CDR 0/00 Rate 0/00 Pop Pop (1) Mtuinirg 0.4 98.1 24.8 175.1 20).2 57 5.3 18.5 39 0.81 .1 Tbrgwei 0.3 98.8 39.( 196.3 196.3 61 5.0 16.7 43 1.2 0.98 Lirtao 0.4 97.1 32.5 19h.3 31.5 83 5.4 18.3 41 0.76 1.4 Llrda 0.4 84.6 42.5 Yh.1 2.6 87 6.6 20.9 - 0.3 .53 Xitie (.1 67.9 38.9 251.4 33.6 127 7.8 28.4 51 0.76 2.0 'rianrhu ll.7 8.7 35.1 14R.2 33.2 84 5.8 16.4 34 0.72 1.9 Fulxian 0.2 91.1 37.3 225.3 .11.8 156 7.7 17.1 41 1.5 2.1 1aclharg 0.2 97.4 53.2 161.3 14.7 58 5.9 20.3 30 0.87 1.2 Chagxluan 0.2 94.7 22.3 216.2 41.0 150 8.6 16.5 45 0.82 I.R NilgKdan 0.4 97.1 34.5 220.2 13.4 117 5.6 20.8 46 0.47 1.3 Lirgtai 0.2 97.8 33.3 1511.9 25.3 106 7.9 18.3 49 1.4 1.6 Yotgderg 0.4 91.4 29.6 132.5 85.7 77 5.4 16.5 54 0.7 1.4 MAM i 0.8 87.3 30.2 301 .2 89.6 179 5.6 16.7 - 0.45 1.4 Shardan 0.2 90.1 28.9 27A.1 77.3 176 6.3 16.3 42 1.6 2.0 Jlrta (.1 91.2 3().h 565.1 147.9 358 5.3 12.5 38 1.3 2.0 (l) 1'Eial IL'ltlit st af e xrlIliilg stc af ir4m eituilitp11 IILsnlILhI tinits. CHINA RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT IMiME PRIJN (WERAL SWMARY, 1984 Popilation __Per -ta Productio n (Y) HealLh Indicators Cmxde Crude Infart am pe Staff Project Total Z I Distribtrld Death Rate Birth Rate Mtrtality x I .000 per 1,000 Courties KUlion Rural IlIUterate Agrlwlture Irdustry Incam aOR (/00 CBR 0/0C Rate O/00 Pcp Pop (1) Torgshan 0.3 92.7 24.5 2h2.2 166.1 176 7.6 16.2 37.0 3.i 3.6 Tianion 1.4 97.8 22.8 451.1 186.5 - 7.2 19.7 38.6 1.6 2.6 liaryarg 1.2 91.7 24.8 449.8 339.8 298 6.2 14.3 38.3 1.5 2.6 iarugarg 0.6 89.7 2n.6 431.8 198.9 282 7.9 12.9 32.3 2.2 3.4 lbrgan (.5 98.9 12.2 341.5 11b.8 252 8.9 15.3 41.n 1.7 2.6 p Anlu 0.5 91.5 2h.8 513.3 484.2 232 7.0 18.1 35.1 2.4 3.6 w Hanruian 0.9 89.7 14.5 478.8 333.1 305 6.9 23.6 29.7 1.9 2.5 Yurud 0.5 95.3 32.2 2i2.4 62.3 207 8.6 16.3 42.0 1.0 2.4 ZaOyaM 0.9 94.8 21.8 465.8 257.4 299 7.1 14.9 31.1 1.3 2.8 Xuansen 0.3 96.2 27.9 273.1 39.6 166 8.7 26.7 32.9 1.5 3.1 enshl t).7 89.9 21.1 223.0 130.1 164 7.7 17.7 33.2 1.6 2.5 (I) Total health staff exoludirg staff fran erterlprie lhealtlitiinlts. I!3 CHINA RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT JILIN MWWINQ. (FIERAL R, 1984 Popxlation Per C'.pita Prcxiuctlon (Y) Health Indicators widle Cnmde Infart hxl per Staff Projet Total 2 X DLatr1huted Death Rate Birth Rate Mortauty x I,000 per I ,000 Countles Million Ralral Illiterate Pgriculture lrdustry Incare aO 0/00 CIR 0/00 Rate n/00 Pop Pop (1) Da'an 0.4 72.3 15.6 336.9 304.1 213 5.5 11.4 40.9 9.3 3.3 Qianguo 0.5 77.8 18.7 451.0 451.( 281 4. 13.2 24.9 4.6 2.1 Zenlai 0.3 77.8 15.7 378.5 210.8 378 4.5 11.3 35.6 6.4 2.8 .Iiutal 0.7 90.3 b.4 406.0 115.6 282 5.8 10.1 33.2 5.8 2.3 Panshl 0.6 70.4 19.9 265.2 128.4 28) 6.2 12.4 31.2 5.8 2.2 YongjL 0.7 86.3 17.5 275.1 111.8 287 6.2 11.5 38.9 5.1 1.3 Shuanglio 0.3 73.3 15.4 523.8 243.1 25.1 I . 2.2 Artu 0.2 59.5 17.5 227.1 217.9 306 5.3 3h.h I '.t 3.5 1.7 Dwhina 0.4 72.6 15.6 387.4 213.4 301 5.6 h1. 371.1 1.2 2.6 1l.uhe 0.3 79.9 17.6 252.0 326.2 289 6.4 13.9 31.0 1.4 3.8 (1) Total health staff excludig staff fran erterpris health units. I1 - 35 - ANNEX 6 Page 1 of 6 CHINA RURAL HRALTH AND PREVENTIVE MEDICINE PROJECT DescriRtion Prepared by MOPH for Rural Realth Insurance ExDeriment 1. Backaround 1.1 The numbers of villages and peasants participating in rural cooperative insurance plans have, in recent years, decreased gradually from 80 Z of the total to 5 Z at present. Several factors have contributed to this decrease such as lack of local level knowledge of insurance principles and plans, management weaknesses and actuarial unsoundness. However, the primary cause of problem has arisen with the introduction of the production responsibility system which has eroded the financial base for the cooperative insurance plans. As the rural economy develops, peasants are demanding increasingly better medical care and that the health syste1. be utrengthened in a sound way so that the financial burden due to serious illness can be relieved. 1.2 Therefore, a major task for China', health policysakers is to study and establish a new health insurance system accommodated to rural circumstances. The new system should satisfy the following criteria: a) require no additional subsidies from Government; b) protect the peasant from finaucial ruin due to serious illness; c) strengthen prevention services to raise the health status of the people; d) discourage unnecessary utilization of health services; e) strengthen the primary care role of the village health station and permit serious cases to be referred to higher levels; and f) be affordable and acceptable to the peasant. 1.3 Although, at present, there is an urgent need to reform the rural health insurance system, it is technically infeasible to implement a broad scale reform because of lack of experience with sound alternative insurance schemes. Most importantly, there is inadequate information about the relationship of insurance coverage to utilization. Without suchinformation, premiums cannot be set to cover expected reimbursements by the plans. - 36 - ANNEX 6 Page 2 of 6 Reforms in the village level delivery system further complicate predictions of how insurance will affect the utilization and the coat of care. Rural insurance reform will be ineffective unless plans are well managed, but there is at present no experience in managing a village-level insurance system of the type that is needed. 1.4 If ineffective reform are instituted now, adverse effects may arise. Peasants already distrust health insurance schemes because of the past failures in village cooperative plans. A aecond failure would further undermine their faith in insurance and probably make future reforms more difficult. 1.5 For these reasons, it is only prudent to gather more information about the effects of alternative insurance plans before proceeding to implement reforms on a broad scale. The most efficient way to collect reliable information is by means of an experiment. This component of the Rural Health and Preventive Medicine Project is for the conduct of such an experiment in two counties in Sichuan Province. 2. Goals of the frx eriment 2.1 This health insurance experinent has both immediate and long term pu.p-ses. First, it should demonstrate the feasibility of the experiment to offset and correct the deficiencies from the cooperative medical plans. Second: it should provide experience that will be helpful in a broader implementation of rural health insurance reforms. 2.2 The experiment will provide: a) estimates of the coBt and utilization effects of alternative insurance plans; b) an opportunity to develop, test and refine a system to manage a village-level insurance system; c) a reinsurance mechanism to be formed to pool risks; d) a test of the interaction between insurance reform and other reforms in the village delivery system. 2.3 In sum, the experiment will provide an example of implementation for the health insurance system and a sound analytic base which other provinces can use to evaluate and implement health insurance options. 2.4 The experiment will also have a training component. Work on the experiment, carried out cooperatively by Chinese and foreign experts, will - 37 - ANNEX 6 Page 3 of 6 provide a core group of Chinese analysts with theoretical knowledge and practical experience in advanced health policy-oriented research. 3. Current Status of the Ezxeriment 3.1 Considerable progress has been made toward design of the experiment in the preparation of the Rural Health and Preventive Medicine Project. Administrative groups have been established at several levels in China, and a pilot study has been completed. 3.2 A pilot survey of 880 households in the two counties was carried out in July, 1985. The pilot survey confirmed the ability of a consultant group, the Ministry of Public Health and the Provincial Health Bureau staff to cooperatively design and execute the kind of data collection efforts that sill be required in the larger experiment. Using the survey data, the consultant group developed preliminary models to predict inpatient and outpatient utilization and expenditures for different kinds of insurance plans. 3.3 A working group of national and provincial official visite' .he U.S. in October 85 to work with the consultant group to refine these models and draft working documents for the health insurance experiment. During the next three months, Sichuan provincial and county officials used the preliminary models to develop proposals for experimental plans. In late January and early February, 1986, the consultant group visited China again. The models vere further developed and used to estimate utilization and costs for plans proposed by the counties. In joint discussion, new options were proposed and analyzed. 3.4 On the administrative side, the Government has already created or designed much of the organizational system required for the experiment. A Leading Group has been set up at national level, and there have been discussions between the Ministry of Public Health and the State Planning Commission. A group of technical advisors has been created, consisting of able, interested health statisticians, health economists and scholars. In Sichuan Province, parallel leading and working groups have been established, as well as provincial county-level organizations for managing the experiment. Township and village-level organizations have also been designed, and 56 villages have been enlisted for the experiment. 4. Design and Conduct of The ExReriment 4.1 The experiment will be designed and conducted in four phases: a) a planning phase in which the design of the experiment will be completed in detail; b) a testing phase in which the experimental plans will be pilot tested in a few villages before full scale implementation; c) an - 38- ANNEX 6 Page 4 of 6 implementation phase during which the experimental insurance plans vill be operational in all test villages and data will be collected; and d) an evaluation phase in which the experimental data will be analyzed and the results presented to policy makers in briefings and written reports. The tasks in each phase are given below in outline form. A. Planning phase (9 to 12 months duration) 1. Decision will be made regarding the extent to which health status and quality of care will be monitored, in addition to the primary focus of the study, utilization and costs. 2. Data collection instruments vill be developed and tested. 3. Baseline data will be collected at all sites. 4. Baseline data will be analyzed in order to refine plan options. 5. Final decisions will be made on which plans to demonstrate. 6. Individual villages will be assigned to experimental plans. 7. Protocols will be developed for village-level implementation of plans. 8. A claims management system will be designed and appropriate personnel trained. 9. A reinsurance system will be studied and created to protect individual villages from extraordinary claims. B. Testing phase (approximately 6 months) 1. The insurance system will be started in pilot villages. 2. Neceasary adjustments in insurance plans, management apperatus and data collection procedures will be made on the basis of early experience. 3. Revised plans will be started in the remainder of the villages. - 39 - ANNEX 6 Page 5 of 6 4. Reliability checks will be performed on data from the collection system. 5. The final experiment design and procedures vill be documented. C. Implementation phase (approximately 24 months) 1. The claims processing system vill be monitored on an ongoing basis. 2. Periodic checks will be made on the data. 3. At the end of the first year of operation, the claims and utilization data vill be analyzed to determine if premiums need to be adjusted upward or downward. 4. Individual premiums or plans subsidies will be adjusted to cover the expected cost of each plan in each village. 5. The reirsurance system will be evaluated in terms of its reserves and payouts, and changes in the reinsurance premiums for villages will be calculated. 6. Demographic and other data will be collected on all participants at end of the experiment. D. Evaluation phase (9 to 12 months) 1. All data will be cleaned and edited. 2. Nodels to estimate the effects of plan characteristics on utilization and costs will be developed and tested. 3. These models will be used to estimate the effects of plan characteristics on utilization and costs. 4. Depending on decisions made in the planning phase, analyses will be conducted to estimate the effects of insurance on health status and quality of care. 5. The management system used in the experiment will be evaluated to determine what changes would be required for full scale implementation. - 40 - ANNEX 6 Page 6 of 6 6. A draft final report that synthesizes the evaluation will be circulated for review. 7. The results of the evaluation will be presented to policymakers in formal briefings. 8. A final report that takes account of reviewers' comments will be prepared and eventually published. - 41 - ANNEX 7 Page 1 of 3 CHINA PREETIVE IIEDICINE AND RLRAL HEALTH PROJECT Sauary kAounts by Year Base Costs (YUAN Nillian) Foreign Exchange 86/87 07/88 98/59 09/90 90/91 Total x Amount I. INUESTHENT COSTS At VACCINE COPOMENT 19.5 52.0 32.5 26.0 - 130.0 72.4 94.1 B. CIVIL ON 1. COUNTT 44.4 35.5 8.9 - - 88.8 11.1 9.9 2. BELOW COWUTY 11.1 8.9 2.2 - - 22,2 11.1 2.5 3. EPIDE1IC PREVENTION STATION 5.4 4.3 1.1 - - 10.7 11.1 1.2 4. COSTRUCTION 3.6 8.7 8.5 3.7 0.7 25.2 11.1 2.8 Sub-Total CIVIL WORS 64.4 57.4 20.7 3.7 0.7 146.9 11.1 16.3 C. EIJIPIIEfT B VEHICLES '. EGUIPIENT 52.2 33.8 14.8 0.6 - 101.3 60.2 61.0 2. VENIO.S 9.6 0.2 - - - 9.7 100.0 9.7 3. INTERNAL TRANSPORTPINSTAL.CDSTS 2.7 2.0 1.6 - - 6.3 0.0 0.0 Sub-Total EQUIPIENT ND VEHICLES 64.5 35.9 16.3 0.6 - 117.3 60.2 70.7 D. iRAING 1. JUNIOR LEVEL LOCAL TRAINING 2.9 2.9 2.8 - - 8.6 0.0 0.0 2. KIBLE LEVEL LOCAL TRAININ6 2.0 2.0 1.9 - - 5.9 0.0 0.0 3. SENIOR LEVElE LOCAL TRAINING 2.2 1.8 1.8 0.3 0.0 6.2 0.0 0.0 4. FELLOISNIPS TRAINING AOADM 1.3 1.6 0.6 0.1 - 3.6 100.0 3.6 Sub-Total TRAININ6 8.4 8.3 7.1 0.4 0.0 24.2 14.8 3.6 E. TEDNNICAL ASSISTANCE 1. LOCAL CONSULTANTS 0.7 0.8 0.7 0.0 - 2.2 0.0 0.0 2. FORE16N CON5ILTANTS 1.3 0.3 0.1 0.0 - 1.7 100.0 1.7 Sub-Total TEDIfICAL ASSISTANCE 2.0 1.1 0.7 0.0 - 3.9 43.5 1.7 F. LOCAL RESEARCH 2.1 2.0 1.2 0.6 - 6.0 0.0 0.0 6. STAFF RECRUITIENT 3.9 2.9 2.2 0.1 - 9.1 0.0 0.0 Total INUESTEiT COSTS 164.9 159.6 80.8 31.5 0.7 437.6 42.6 186.3 Total BASELINE COSTS 164.9 159.6 80.8 31.5 0.7 437.6 42.6 186.3 Physical Contingencies 17.8 22.3 11.8 6.9 0.1 58.9 54.7 32.2 Price Contiencies 11.9 25.7 20.9 12.3 0.3 71.1 46.7 33.2 Total PROJECT COSTS 194.5 207.6 113.6 50.7 1.1 567.5 44.4 251.8 Foreign Exchange 78.1 89.6 51.8 32.1 0.1 251.8 0.0 0.0 NIb It 1986 17:59 - 42 - ANNEX 7 Page 2 of 3 CHINA PREVENTIYE MEDICINE MID RURL HEALTH PROJECT Project Components by Year (YUAN '0003 Base Costs Total 89687 87/88 88/89 89/90 90/91 YUAN USS '000) A. STRENGTHENIN6 RURAL ALTH SERVICES 122,722.4 86,594.4 32,635.9 144.3 - 242,0496.9 75,655.3 D. VACCINE CONEN 19,495.6 51988.2 32,492.6 25t994.1 - 129,970.5 40,615.8 C. DR ULTM CONTRIN 11,721.8 12393.1 9,851.2 3,280.3 580.7 37827.1 11,821.0 D. OPERATIONAL RESEARCI 1. PREVENTIVE EDICINE ( NCPN ) 89855.3 89622,2 5,839.4 2,106.8 1119. 25,535.6 79979.9 2. RURAL HEALTH INSURANCE 2,074.3 49.1 - - - 2v123.4 663.5 Sib-Total OPERATINAL RESEARCH 10,929.6 8,671.3 5,839.4 2,106.8 111.9 27,659.0 8t643.4 Total BASELINE COSTS 164,69.4 159,647.0 80,819.0 31,525.5 692.7 437,553.5 136,735.5 Physical Continbgenies 17,758.9 22r328.3 11v824.5 6,933.3 68.3 58,913.4 18,410.4 Price Continlencies 119892.5 25t668.2 20,923.2 12,281.0 311.5 719076.3 22,211.4 Total PROJECT COSTS 194e520.8 207.643.5 113,566.7 50,739.7 1,072.4 567,543.2 177,357.3 Foreisn Exchange 789128.8 89,598.2 51,765.7 329146.7 117.5 251,756.9 78,674.0 fa 1, 1986 18:02 - 43 - ANNEX 7 CHIN Page 3 of 3 PREIlE EDICINE RMD O WALTN PRC Smaiy Acmt by Projuc Comwoht (YUAN Nillian) OPERATIONAL RESEARCH STRENOTINS NO PRENUTIVE RUIAL EALTH VACCINE GUM.ITY EDICINE RRAL HEALTH SERBICES CONENT COaTROL OM INIICE Total =m=== === = ==- _= _ I. NT COSTS A. VACINE CKOIUEN - 130.0 - -10.o 3. CIVI 1(S 1. UNITY 8B.8 - - - - C.8 2. DM.C0 ITY 22.2 - - - - 22.2 3. EPIUIC EVMIN STATIN 10.7 - - - - 10.7 4. CNSRUICM - - 20.4 4.9 - 25.2 Sib-Total CIIL OM 121.7 - 20.4 4.9 - 146.9 C. EIUIPEN AM VHIOES 1. EWIDINT 75.2 - 15.1 10.9 0.1 101.3 2. VEQES 9.7 - - - - 9.7 3. DINTEi TRMWRiDISTAL.COST 6.3 - - - - 6.3 Sub-Total EDPI ANTl MENOS 91.3 - 15.1 10.9 0.1 117.3 D. TRAININ 1. JNIR LEVEL LMCAL RAINING 8.6 - - - - 8.6 2. NIn LEVE LOCK TRAII 5.9 - - - - S. 3. SEN LEVLLOCAL TRADn 3.3 - 0.2 2.6 0.1 6.2 4. FBLLOSHi,TRAININM 0.9 - 1.3 0.9 0.5 3.6 Sub-Total TRAIM 18.7 - 1.5 3.5 0.6 24.2 E. TECHICAL ASSISTANCE 1. LOCAL COSiJLTANTS 2.0 - - 0.1 0.1 2.2 2. FEIGN CONStTANTS - - 0.3 0.4 1.1 1.7 Sub-Total TECHNICL ASSISTANCE 2.0 - 0.3 0.5 1.2 3.9 F. LOCAL RESEARC - - - 5.8 0.2 6.0 6. STAFF RERBITNT 9.4 - 0.6 - 0.1 9.1 Total DINESTIENT COSTS 242.1 130.0 37.8 25.5 2.1 437.6 Total IDSELIE COSTS 242.1 130.0 37.8 25.5 2. 437.6 Phsical Cmti,imcies 59.9 Price Continumcius 71.1 Total PR.ECT COSTS 57.5 22=3 Foruign Exdni 251.1 Nb 1, 1996 18:03 - 44 - ANNEX 8 CIINA RURAL ERATH AUND PREVENTIVE MEDICINE PROJECT Proiect Implementation Schetule (Percent Completion by Quarter) Calendar Year 1986 1987 1988 1989 1990 1991 Bankg Group -- -- Fiscal Year 1987 1988 1989 1990 1991 Ban Group Quarters 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 A. Rural Health Construction 15 20 20 35 10 Equipment 0 30 20 20 10 10 10 Training 15 15 15 15 15 15 10 B. Vaccine Production (i) Shanghai (ii) Lanzhou 10 15 15 25 25 10 (iii) Kunming C. DrM Quality Control (i) Institutes Construction 10 20 20 20 10 10 10 Equipment 0 30 20 20 10 10 10 (ii) Pharuacology Unit Construction 10 20 25 25 10 10 .Equipment 0 20 20 15 15 15 10 5 Training 10 10 10 15 15 15 15 5 5 (iii) Training of Inspectors (iv) Constructiou 10 20 20 20 20 10 (v) Equipment 0 20 20 20 20 20 D. Oxerational Research (i) NCPN 5 10 15 15 15 15 10 10 5 (ii) Rural Health Insurance 10 30 20 20 20 45- - I(- e lt. I1t . fh "Mal CIlims (13) t~~~psr _ tt FolN*tS - lfht of hup & Dhsnsical n :::Mvea ""Malvuiiui FMOM k M i M -il WrM . ,,, fo. ,Offi_ Cuumuuu~~~~~tlvI Fd Dt tsds. Coolant ~ ~~~ ~ ~ ~ ~ of~ -Tnztit_I Cli_ tw e -cid~~~~ ~ ~ ~ ~ ofei rst t scene _4 =im of _ C 0 Ot tdvii 1=,..wai w trc 3 Dvi' ;'~~~~~~~~~~~~~~al rbCltiul td EbaLt' t_ DltI'. *D, dW | F_~~bwoctl=Fl_|;llttU Cl Advammi 913Mg (uhuleul) DIviulAdmaoda ] Seinindu~ ihilcul Mmciii'. 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