Written by Alex Jingwei He.

Everybody talks about China’s rise as a global power but few appreciate the fragility of its social welfare system, especially in the area of health care. An average Chinese household reputedly saves as much as 30 per cent of its total income, an incredulous amount by Western standards. What’s often overlooked is the underlying weakness of China’s safety net for its 1.3 billion people, which necessitates the high savings for the proverbial rainy day. It was not until the spring of 2003, when SARS (Severe Acute Respiratory Syndrome) brought China’s deteriorated health system to international spotlight.

Health policy in China over the past four decades offers a good illustration of both market and government failures. While the government conceived of market forces as useful in addressing critical resource shortage and poor incentives under the planned economy, the actual steps taken towards them in the 1980s were unfortunately misguided by shaky market assumptions. The laissez faire policies adopted in the following years soon transformed an internationally revered health system providing basic but cost-effective care to one characterised by rampant overprescription, expensive access to care, and medical impoverishment. Total health expenditures escalate at double-digit rate, but a large percentage of them are spent on unnecessary care, which is provided to serve hospitals’ insatiate demand for revenue rather than wellbeing of patients. With the evaporation of medical ethics, the doctor-patient relationship has been damaged to an unprecedented level. Recent years even see a proliferation of outright violence targeted at doctors.

Widespread public dissatisfaction and unprecedented political will from Beijing were eventually translated to a comprehensive national health care reform launched in 2009. Five years have elapsed since the Chinese government announced this ambitious reform programme. The fact that both the United States and China unfolded their gigantic national health care reforms almost simultaneously reflects the daunting health policy challenges that most national governments are grappling with. Skyrocketing costs and continuous demand for quality improvement best describe the thorny problems testing the wisdom of policy-makers. While Obamacare has barely survived the obstruction from Congress and remains controversial, its Chinese counterpart has concluded its first phase at a fairly smooth pace. Having had three trillion RMB invested into it within five years, this landmark reform stands out as one of the biggest health policy interventions in modern history in terms of both scale and scope. Is this reform a success? One can hardly reach a definitive conclusion given the multidimensionality of the reform programme and the much longer time span needed to assess its effects. But what is certain is that the ongoing reform has been transforming a system that affects the health of 1.3 billion people in a dramatic manner.

In this critical juncture, the author convened a group of scholars based in China, the US, Hong Kong and Singapore to conduct an interim interdisciplinary evaluation of the reform. A series of tentative conclusions are summarized in this short essay. For the original study, readers may refer to Alex Jingwei He & Qingyue Meng’s ‘An interim interdisciplinary evaluation of China’s national health care reform: emerging evidence and new perspectives’ or ‘Chinese National Health Care Reform: On the Mend,’ edited by Alex Jingwei He and Qingyue Meng.

First and foremost, social security is not the silver bullet for China’s health care reform. Financial protection will continue to be limited if the rapid escalation of health care costs remains unharnessed. A major elevation of benefit standards is also needed in order to better shield the insured population against catastrophic medical spending. However, the fragmentation of insurance and limited managerial capacity have not enabled social health insurance to fully unleash its potential. The creation of a capable and prudent third-party purchaser is of strategic importance.

Second, the root causes of China’s double-digit cost escalation stem from the inefficient delivery system. Realigning the perverse incentives is a formidable mission in light of the massive tangible as well as intangible interests involved. The sluggishness of public hospital reform provides clear evidence of the difficulties encountered. While a battery of new initiatives have produced mixed results, payment reform appears the most promising ‘control knob’ to realign the fundamental economic incentives. There is a growing consensus that reform of the delivery system ultimately hinges on provider payment reforms.

Third, the mixed outcomes of many new initiatives reveal the path-dependent nature of health systems. Gerald Bloom has insightfully shown that specific policy interventions are much less important than the way the reform process is managed because any health care reform must ultimately tackle the underlying institutional arrangements if it is to succeed. A constellation of fast-moving as well as slow-moving institutions coexist within the broader institutional environment. Strategic attention must be given to the compatibility and the interaction between these two categories of institutions that are the ultimate source of the poor reform performance observed thus far.

This relates to the final key message of this interim evaluation: governance matters. Reformers need a holistic vision of good governance encompassing the full range of institutions (formal and informal), incentives (economic, administrative and social), and actors (central and local, public and private). Managing the process of a reform of such magnitude as the ongoing one requires rich policy vision and wisdom.

Dr Alex Jinwei He is Associate Head and Assistant Professor of the Department of Asian and Policy Studies, Hong Kong Institute of Education. He specializes in health policy and governance and social policy reforms in Greater China. He co-edits the Journal of Asian Public Policy. Image Credit: CC by 景摄/Flickr