Economic Aspect of the Healthcare System in China

The World Health Organization defines a healthcare system as ‘all of the activities whose primary purpose is to promote, restore or maintain health.’ With the largest population in the world, China faces a tremendous challenge in operating a viable healthcare system and providing affordable and accessible healthcare to its citizens. The economic aspect of China’s healthcare system is intriguing, with the need to strengthen healthcare delivery and expand health insurance coverage to meet the increasing demand for healthcare amid an evolving policy landscape.

The evolution of China’s healthcare system has four periods in terms of economic and epidemiological transitions: pre-revolutionary China (before 1949), until the economic reform (1949–1978), until the 2009 health reform (1979–2009), and after the 2009 health reform. In the pre-revolutionary period, traditional Chinese Medicine practitioners provided care to the majority of the Chinese population. The introduction of Western medicine sped up during the last decade of the Qing Dynasty. Before the economic reform, China had tight state control in healthcare, where government-funded and run hospitals provided most healthcare services. A three-pronged healthcare system included ‘public medicine’ for public servants, ‘collective medicine’ for workers in state-owned enterprises, and ‘cooperative medicine’ for rural residents. Between 1979 and 2009, economic liberalisation rationalised the loosening of regulations on healthcare provision, followed by the collapse of the rural health system in the early 1980s. Since 2009, the Chinese government has undertaken a series of reforms, including social health insurance expansion, public hospital reform, and primary care reform, to improve the affordability and efficiency of the healthcare system.

To address market failures in China’s healthcare system, such as moral hazards and asymmetric information, it is essential to understand the economic dynamics underlying the perspectives of five stakeholders, including provider, payer, policymakers, producer, and patient. First, as the primary healthcare provider in China, public hospitals are classified into three levels according to their size and service capability: primary health providers (fewer than 100 beds in general), secondary hospitals (100–500 beds), and tertiary hospitals (more than 500 beds). Second, to achieve universal coverage for its citizens, China has developed three government insurance programmes: Urban Employee Basic Medical Insurance, Urban Resident Basic Medical Insurance, and the New Cooperative Medical Scheme for rural residents. Third, agencies involved in health policy formulation and decision-making in China include the National Health Commission, the National Medical Products Administration, and the National Healthcare Security Administration. Fourth, producers in the healthcare system include the pharmaceutical and medical device sectors, in which the market size has almost doubled over the last several decades. Finally, due to public health efforts and improved economic conditions, nutrition transition and epidemiologic transition have dramatically shifted the spectrum of diseases in China. Patients in China today are more likely to seek care for non-communicable diseases, a high priority for China’s healthcare system.