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The Chinese health care system: Lessons for other nations


  • Hsiao, William C. L.


This paper examines China's health care from a system perspective and draws some lessons for less developed nations. A decade ago, Chinese macro-health policy shifted its health care financing and delivery toward a free market system. It encouraged all levels of health facilities to rely on user fees to support their operations. However, China continued its administered prices and hospitals continued to be operated by the government. These financing, pricing and organizational policies were not coordinated. The author found these uncoordinated policies created serious dissonance in the system. Irrational prices distorted medical practices which resulted in overuse of drugs and high technology tests. Market-based financing created more unequal access to health care between the rich and poor. Public control of hospitals and poor management caused inefficiency, waste and poor quality of care. The disarray of the Chinese health system, however, had not caused a measurable decline in health status of the Chinese people. One explanation was that the government had maintained its level of funding (per capita) for public health and prevention. Another possible explanation was that rapid rising income in China had improved nutrition, clean water and education which offset any adverse impacts of poorer medical services to the low-income populations. Nonetheless, the Chinese experience showed that its increasing expenditure per person for health care through user fees and insurance had not produced commensurate improvement in health status. China's experience holds several lessons for less developed nations. First, there is a close linkage between financing, price and organization of health care. Uncoordinated policies could exacerbate inequity and inefficiency in health care. Second, incentives had great influence on the hospitals' and physicians' behaviors one what drugs and medical modalities were used to treat patients. Prices have to be rationalized and modern management of hospitals and health centers has to be instituted to produce better quality health services and improve efficiency. Finally, China showed that a small amount of spending (U.S.$0.21) per person spent for public health can yield large benefits for the people.

Suggested Citation

  • Hsiao, William C. L., 1995. "The Chinese health care system: Lessons for other nations," Social Science & Medicine, Elsevier, vol. 41(8), pages 1047-1055, October.
  • Handle: RePEc:eee:socmed:v:41:y:1995:i:8:p:1047-1055

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    Cited by:

    1. 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.
    2. 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.
    3. Rakesh Mohan, 2004. "Fiscal challenges of population aging : the Asian experience," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 299-357.
    4. Bredenkamp, Caryn, 2008. "Health reform, population policy and child nutritional status in China," Policy Research Working Paper Series 4587, The World Bank.
    5. 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 7-23, July.
    6. David Chu & Kolleen Rask, 2000. "The Transformation of China’s Health Care System and Accounting Methods: Current Reforms and Developments," Working Papers 0003, College of the Holy Cross, Department of Economics.
    7. Philip H. Brown & Caroline Theoharides, 2009. "Health‐seeking behavior and hospital choice in China's New Cooperative Medical System," Health Economics, John Wiley & Sons, Ltd., vol. 18(S2), pages 47-64, July.
    8. Karen Eggleston & Winnie Yip, 2004. "Hospital Competition under Regulated Prices: Application to Urban Health Sector Reforms in China," International Journal of Health Economics and Management, Springer, vol. 4(4), pages 343-368, December.
    9. Rong Hu & Chunli Shen & Heng-fu Zou, 2011. "Health Care System Reform in China: Issues, Challenges and Options," CEMA Working Papers 517, China Economics and Management Academy, Central University of Finance and Economics.
    10. 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.


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