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Health Care System Reform in China: Issues, Challenges and Options

Listed author(s):
  • Rong Hu
  • Chunli Shen
  • Heng-fu Zou

This paper examines health care reform in urban and rural China. Before health care reform, Chinese health service facilities were run entirely by the state and basically they performed a social welfare function. This health care system greatly improved the population health conditions but many problems started to emerge in 1980s when the economic reform started. Since then, the government has been struggling to maintain a balance between meeting people¡¯s health care needs and develop the health care "industry". Problems and their contribution factors in organization, financing and performance of the health care reform are examined and analyzed. In terms of organization, decentralization of the decision making power in health sector and marketization of the medical establishments constitutes the main organizational changes in the health care reform. This organizational reform of health sector as an imposed institution change, encounters lots of resistance in the process of implementation. A tremendous amount of conflictions arises because of the commercialization of health sector that used to perform social welfare function. In terms of financing, share of organized financing (government and social fund) in the total health expenditure declined dramatically since the reform. In urban China, Health care insurance faced tough going on universal access. In rural China, there are lots of problems in implementing new cooperative health system partly because of its imperfect design. In terms of performance, data shows that there is growing inequity in health status between rural and urban in the past 15 years. Inefficiencies also exists in both resource allocation and service delivery. Several options are analyzed for organizational reform and health care financing. The report recommends that the aims of the future reform policy that government would adopt should be to improve the population health status instead of generating profit for institutions or industry. The social welfare function of health care system should be reinforced and at the same time managed competition in the health care market should be encouraged. In health care financing in urban area, several directions of broadening risk pooling are discussed. In rural health care financing, the designing of new cooperative health care system is analyzed. Rural financing should be more flexible in order to attract more people to join the cooperative medical system. It is recommended that Chinese government should increase funding for public health programs and subsidize health services for the disadvantaged groups.

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Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 517.

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Length: 40 pages
Date of creation: 2011
Handle: RePEc:cuf:wpaper:517
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  1. Gordon G. Liu & Xiaodong Wu & Chaoyang Peng & Alex Z. Fu, 2003. "Urbanization And Health Care In Rural China," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 11-24, 01.
  2. 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.
  3. Justin Yifu Lin, 1989. "An Economic Theory of Institutional Change: Induced and Imposed Change," Cato Journal, Cato Journal, Cato Institute, vol. 9(1), pages 1-33, Spring/Su.
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