What kind of a health care system do China’s 1.3 billion turn to when ill, injured, or in need of care? This article provides a brief overview of how China’s health system has transformed alongside China’s society and economy since the Mao era, including how the current system is financed, organized, regulated, and being reformed. It first provides a brief description of the Mao-era health system and China’s demographic and epidemiologic transitions. Then it gives an overview of China’s contemporary health care system, including the dramatic expansion of health insurance over the last eight years and the progress of national health system reforms initiated in 2009.

A condensed and revised version of this paper is published in The Milken Institute Review 2012 second quarter: 16-27. 

Published: Eggleston, Karen. "Health care for 1.3 billion: An overview of China’s health system." (2012).

Aims:

We evaluated the factors associated with inpatient costs including total costs, pharmaceutical costs and laboratory costs for diabetes-related admissions.

Patients and Methods:

Using data for 960 adult patients admitted between May 2005 and April 2008 with a primary or secondary diagnosis of type 2 diabetes mellitus (DM) at Sir Run Run Shaw Hospital affiliated with Zhejiang University Medical School (SRRSH) in Hangzhou, China, we evaluate the association between patient characteristics and inpatient costs with multivariable regression analyses.

Results:

Total inpatient costs were positively associated with age, higher UKPDS stroke risk score, and presence of any complication. A regression that included patient socioeconomic and clinical characteristics explained 21.5% of the variation in total inpatient costs; regression estimates indicate that patients with coronary artery disease, retinopathy, nephropathy, neuropathy, and diabetic foot had inpatient costs that were respectively 93.7%, 14.0%, 17.5%, 11.5% and 89.0% higher than otherwise similar patients without those complications. Pharmaceutical costs did not differ by insurance coverage. Insured patients spent 7-16% more on laboratory tests than otherwise similar patients did.

Conclusions:

Clinical factors, especially presence of diabetes-related complications, appear to be the primary determinants of variation in inpatient costs for patients with type 2 DM in China. To mitigate the health costs increases associated with China's DM epidemic, policymakers should focus on cost-effective ways to manage patients in outpatient settings to prevent the complications associated with diabetes.

This paper uses macro-level data between 1997 and 2008 to evaluate the effects of China’s pharmaceutical price regulations. We find that these regulations had short-run effects on medicine price indexes, reducing them by less than 0.5 percentage points. The effects could have been slightly reinforced when these regulations were imposed on more medicines. However, these regulations failed to reduce household health expenditures and the average profitability of the pharmaceutical industry, and firms on the break-even edge were worse off. Finally, although these regulations have no significant effects on the price of substitutes or complements for medicines, they increased expensive medicine imports.

Consistent with the property rights theory of ownership incorporating soft budget constraints (SBCs), we find that controlling for SBCs, for-profit hospitals drop safety-net services more often and exhibit higher mortality rates, suggesting aggressive cost control that damages non-contractible quality.

Health systems provide a rich field for testing hypotheses of institutional economics. The incentive structure of current healthcare delivery systems have deep historical and cultural roots, yet must cope with rapid technological change as well as market and government failures. This paper applies the economic approach of comparative and historical institutional analysis (Aoki, 2001; Greif, 2006) to health care systems by conceptualizing physician control over dispensing revenues as a social institution. The theory developed—emphasizing the interplay between cultural beliefs, interest groups, technological change, insurance expansion and government financing—offers a plausible explanation of reforms since the 1960s separating prescribing from dispensing in societies such as Japan, South Korea, Taiwan and China. Technological change and adoption of universal coverage trigger reforms by greatly increasing the social opportunity costs of physician over-prescribing and reshaping the political economy of forces impinging on the doctor–patient relationship.

Established in 2007, the Asia Health Policy Program (AHPP) promotes a comparative understanding of health and health policy in the Asia-Pacific region through research, collaboration with scholars throughout the region, a colloquium series on health and demographic change in the Asia-Pacific, and conferences and publications on comparative
health policy topics.