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The cost escalation of social health insurance plans in China: Its implication for public policy

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  • Liu, Xingzhu
  • Hsiao, William C. L.
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    Abstract

    China has been alarmed by its rapid rise in health care expenditures of social health insurance schemes. The health care expenditure per person for the 155 million people covered by the Chinese social insurance plans has been rising at an accelerative rate. We analyze why health care cost in China has risen, and show how other nations may benefit from this experience. The annual rate of increase in health expenditure per capita was only 3.1% during 1952 to 1978, the average rate rose to 8.2% during 1978 to 1985 and then 24.4% during 1985 to 1989. We found general inflation explained one-half of the high rates of increase between 1985-1989. Although China introduced patients co-payments in 1985, the residual expenditure per capita (after adjusting for general inflation and aging of the beneficiaries) increased at 7.4% per year due to the adoption of new technology, uses of more expensive drugs and increased quality of services. While we found the expenditure increases in China were largely caused by uncontrollable factors such as general inflation and aging of the population, we also found the change in Chinese hospital financing and payment policy caused rapid adoption of high-tech medicine and abusive usage of more expensive drugs which largely explained the annual increases in expenditures of 7.4% between 1985-1989. Chinese experience also shows that demand strategy (co-payment by patients) had very little effect to contain cost escalation.

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    Bibliographic Info

    Article provided by Elsevier in its journal Social Science & Medicine.

    Volume (Year): 41 (1995)
    Issue (Month): 8 (October)
    Pages: 1095-1101

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    Handle: RePEc:eee:socmed:v:41:y:1995:i:8:p:1095-1101

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    Keywords: China social health insurance cost escalation determinants;

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    Cited by:
    1. Karen Eggleston & Li Ling & Meng Qingyue & Magnus Lindelow & Adam Wagstaff, 2008. "Health service delivery in China: a literature review," Health Economics, John Wiley & Sons, Ltd., vol. 17(2), pages 149-165.
    2. Hong Wang & Licheng Zhang & Heng-fu Zou, 2006. "Health Services in Rural China," CEMA Working Papers 563, China Economics and Management Academy, Central University of Finance and Economics.
    3. Mocan, H. Naci & Tekin, Erdal & Zax, Jeffrey S., 2004. "The Demand for Medical Care in Urban China," World Development, Elsevier, vol. 32(2), pages 289-304, February.
    4. Hou, Xiaohui & Coyne, Joseph, 2008. "The emergence of proprietary medical facilities in China," Health Policy, Elsevier, vol. 88(1), pages 141-151, October.
    5. Teh-Wei Hu & Michael Ong & Zi-Hua Lin & Elizabeth Li, 1999. "The effects of economic reform on health insurance and the financial burden for urban workers in China," Health Economics, John Wiley & Sons, Ltd., vol. 8(4), pages 309-321.
    6. Ardeshir Sepehri & Sisira Sarma & Wayne Simpson, 2006. "Does non-profit health insurance reduce financial burden? Evidence from the Vietnam living standards survey panel," Health Economics, John Wiley & Sons, Ltd., vol. 15(6), pages 603-616.
    7. Adam Wagstaff & Winnie Yip & Magnus Lindelow & William C. Hsiao, 2009. "China's health system and its reform: a review of recent studies," Health Economics, John Wiley & Sons, Ltd., vol. 18(S2), pages S7-S23, July.
    8. Schreyögg, Jonas, 2003. "Medical savings accounts: Eine internationale Bestandsaufnahme des Konzeptes der Gesundheitssparkonten," Discussion Papers 2003/11, Technische Universität Berlin, School of Economics and Management.
    9. Giles, John & Wang, Dewen & Park, Albert, 2013. "Expanding social insurance coverage in urban China," Policy Research Working Paper Series 6497, The World Bank.
    10. Khaleghian, Peyvand & Das Gupta Monica, 2004. "Public management and essential public health functions," Policy Research Working Paper Series 3220, The World Bank.

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