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Financing reforms of public health services in China: lessons for other nations

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  • Liu, Xingzhu
  • Mills, Anne

Abstract

Financing reforms of China's public health services are characterised by a reduction in government budgetary support and the introduction of charges. These reforms have changed the financing structure of public health institutions. Before the financing reforms, in 1980, government budgetary support covered the full costs of public health institutions, while after the reforms by the middle of the 1990s, the government's contribution to the institutions' revenue had fallen to 30-50%, barely covering the salaries of health workers, and the share of revenue generated from charges had increased to 50-70%. These market-oriented financing reforms improved the productivity of public health institutions, but several unintended consequences became evident. The economic incentives that were built into the financing system led to over-provision of unnecessary services, and under-provision of socially desirable services. User fees reduced the take-up of preventive services with positive externalities. The lack of government funds resulted in under-provision of services with public goods' characteristics. The Chinese experience has generated important lessons for other nations. Firstly, a decline in the role of government in financing public health services is likely to result in decreased overall efficiency of the health sector. Secondly, levying charges for public health services can reduce demand for these services and increase the risk of disease transmission. Thirdly, market-oriented financing reforms of public health services should not be considered as a policy option. Once this step is made, the unintended consequences may outweigh the intended ones. Chinese experience strongly suggests that the government should take a very active role in financing public health services.

Suggested Citation

  • Liu, Xingzhu & Mills, Anne, 2002. "Financing reforms of public health services in China: lessons for other nations," Social Science & Medicine, Elsevier, vol. 54(11), pages 1691-1698, June.
    • Handle: RePEc:eee:socmed:v:54:y:2002:i:11:p:1691-1698
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    Citations

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    Cited by:

    1. Cook, Ian G. & Dummer, Trevor J. B., 2004. "Changing health in China: re-evaluating the epidemiological transition model," Health Policy, Elsevier, vol. 67(3), pages 329-343, March.
    2. Kimberly Singer Babiarz & Hongmei Yi & Renfu Luo, 2013. "Meeting the Health-care Needs of the Rural Elderly: The Unique Role of Village Doctors," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 21(3), pages 44-60, May.
    3. Carine Milcent, 2011. "Baisse du recours aux soins dans les zones rurales en Chine," PSE Working Papers halshs-00653450, HAL.
    4. Khaleghian, Peyvand & Gupta, Monica Das, 2005. "Public management and the essential public health functions," World Development, Elsevier, vol. 33(7), pages 1083-1099, July.
    5. Yang, Jinqiu & Zeng, Wu, 2014. "The trade-offs between efficiency and quality in the hospital production: Some evidence from Shenzhen, China," China Economic Review, Elsevier, vol. 31(C), pages 166-184.
    6. Ng, Ying Chu, 2011. "The productive efficiency of Chinese hospitals," China Economic Review, Elsevier, vol. 22(3), pages 428-439, September.
    7. Carine Milcent, 2010. "Healthcare access for migrants in China : A new frontier," PSE Working Papers halshs-00575014, HAL.
    8. Gang Chen & Brett Inder & Paula Lorgelly & Bruce Hollingsworth, 2013. "The Cyclical Behaviour Of Public And Private Health Expenditure In China," Health Economics, John Wiley & Sons, Ltd., vol. 22(9), pages 1071-1092, September.
    9. Bredenkamp, Caryn, 2008. "Health reform, population policy and child nutritional status in China," Policy Research Working Paper Series 4587, The World Bank.
    10. repec:rre:publsh:v:38:y:2008:i:3:p:381-93 is not listed on IDEAS
    11. Xie, Jipan & Dow, William H., 2005. "Longitudinal study of child immunization determinants in China," Social Science & Medicine, Elsevier, vol. 61(3), pages 601-611, August.
    12. Tabea Bork-HÜffer & Frauke Kraas, 2015. "Health Care Disparities in Megaurban China: The Ambivalent Role of Unregistered Practitioners," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 106(3), pages 339-352, July.
    13. Bredenkamp, Caryn, 2009. "Policy-related determinants of child nutritional status in China: The effect of only-child status and access to healthcare," Social Science & Medicine, Elsevier, vol. 69(10), pages 1531-1538, November.
    14. Dummer, Trevor J.B. & Cook, Ian G., 2008. "Health in China and India: A cross-country comparison in a context of rapid globalisation," Social Science & Medicine, Elsevier, vol. 67(4), pages 590-605, August.
    15. 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.
    16. Hendrik P. van Dalen, 2006. "When Health Care Insurance does not make a Difference – The Case of Health Care ‘Made in China’," Tinbergen Institute Discussion Papers 06-091/1, Tinbergen Institute.
    17. World Bank, "undated". "East Asia Update, October 2003," World Bank Publications - Reports 33503, The World Bank Group.
    18. Yanmei Wang & Zhiqun Shu & Jianjun Gu & Xiaoming Sun & Limei Jing & Jie Bai & Xuan Huang & Jiquan Lou & Qunfang Zhang & Ming Li, 2017. "Evidence for capitation reform in a New Rural Cooperative Medical Scheme in Pudong New Area, Shanghai: A longitudinal study," International Journal of Health Planning and Management, Wiley Blackwell, vol. 32(3), pages 307-316, July.

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