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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.

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.

Suggested Citation

  • Liu, Xingzhu & Hsiao, William C. L., 1995. "The cost escalation of social health insurance plans in China: Its implication for public policy," Social Science & Medicine, Elsevier, vol. 41(8), pages 1095-1101, October.
  • Handle: RePEc:eee:socmed:v:41:y:1995:i:8:p:1095-1101
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    Citations

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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. Ramesh, M. & Wu, Xun, 2009. "Health policy reform in China: Lessons from Asia," Social Science & Medicine, Elsevier, vol. 68(12), pages 2256-2262, June.
    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. 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.
    5. 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.
    6. Meng, Qingyue & Rehnberg, Clas & Zhuang, Ning & Bian, Ying & Tomson, Goran & Tang, Shenglan, 2004. "The impact of urban health insurance reform on hospital charges: a case study from two cities in China," Health Policy, Elsevier, vol. 68(2), pages 197-209, May.
    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 7-23, July.
    8. Khaleghian, Peyvand & Das Gupta Monica, 2004. "Public management and essential public health functions," Policy Research Working Paper Series 3220, The World Bank.
    9. He, Alex Jingwei, 2014. "The doctor–patient relationship, defensive medicine and overprescription in Chinese public hospitals: Evidence from a cross-sectional survey in Shenzhen city," Social Science & Medicine, Elsevier, vol. 123(C), pages 64-71.
    10. Linda Yueh, 2010. "The Economy of China," Books, Edward Elgar Publishing, number 3705, April.
    11. Adam, Taghreed & Evans, David B., 2006. "Determinants of variation in the cost of inpatient stays versus outpatient visits in hospitals: A multi-country analysis," Social Science & Medicine, Elsevier, vol. 63(7), pages 1700-1710, October.
    12. 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.
    13. Bloom, Gerald, 1998. "Primary health care meets the market in China and Vietnam," Health Policy, Elsevier, vol. 44(3), pages 233-252, June.
    14. Wu, Ming & Xin, Ying & Wang, Huihui & Yu, Wei, 2005. "Private and public cross-subsidization: financing Beijing's health-insurance reform," Health Policy, Elsevier, vol. 72(1), pages 41-52, April.
    15. Li, Cheng & Yu, Xuan & Butler, James R.G. & Yiengprugsawan, Vasoontara & Yu, Min, 2011. "Moving towards universal health insurance in China: Performance, issues and lessons from Thailand," Social Science & Medicine, Elsevier, vol. 73(3), pages 359-366, August.
    16. 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.
    17. Giles, John & Wang, Dewen & Park, Albert, 2013. "Expanding social insurance coverage in urban China," Policy Research Working Paper Series 6497, The World Bank.
    18. Tu, Feng & Tokunaga, Shoji & Deng, ZhouLu & Nobutomo, Koichi, 2002. "Analysis of hospital charges for cerebral infarction stroke inpatients in Beijing, People's Republic of China," Health Policy, Elsevier, vol. 59(3), pages 243-256, March.
    19. Hou, Xiaohui & Coyne, Joseph, 2008. "The emergence of proprietary medical facilities in China," Health Policy, Elsevier, vol. 88(1), pages 141-151, October.

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