Elsevier

Health Policy

Volume 77, Issue 2, July 2006, Pages 212-220
Health Policy

Health care in China: The role of non-government providers

https://doi.org/10.1016/j.healthpol.2005.07.002Get rights and content

Abstract

While China's health services are primarily financed by out-of-pocket spending (private financing), health care providers, especially the hospital industry, are still dominated by state ownership and government control (public provision). Even though the private sector plays an increasing role in the ambulatory sector, private services are not included in the social insurance benefit package, and thus, it primarily serves self-paying patients. The ambiguity of the government policy toward private provision stems from concerns that an increasing private sector would drive up costs and its services may be of questionable quality. This paper tries to gather evidence on the relative performance of private and public sector in China. Neither literature review nor our primary data analysis provides any support for the notion that the private sector charges a higher price and they serve primarily the better-off people. Quite on the contrary, available data seem to suggest that not only the private sector tends to serve disproportionately the low–middle income groups (this may well be due to its relative lower direct and indirect costs), consumer satisfaction also seems to be higher with regards to certain dimensions of the private than public sector.

Introduction

Developing countries continue to face difficult challenges in meeting the health needs of their populations and in achieving the Millennium Development Goals [1]. The problem is not just lack of resources, but also how to use existing resources more equitably and more efficiently [2]. Due to equity considerations as well as considerations of market failures, governments of most countries have become central to health policy and health systems during the 20th Century, often engaging in both the financing and provision of a wide range of health services, including public health, ambulatory and hospital services [3]. However, largely motivated by ideological and technical arguments during the 1980s and 1990s, non-government health care has become more visible and increasingly recognized as a significant part of national health systems [4], [5], [6], [7], [8]. This is especially true for the “transitional countries” such as China, which have undergone transformation from a command to market economy [9].

The extent to which the non-government sector is involved in financing and provision of health care varies widely across countries. One of the central policy debates for health system reform around the world is whether or not and how the government should mobilize this sector to help achieve improvement in access to better quality care and better health outcome of the populations. In part, the ambiguity of the policies regarding the proper role of the private sector stems from the lack of understanding of the rationale for and performance of the private sector. For example, China's economy as a whole is now dominated by the non-government sector [10]. But the role of the private sector in health care provision is still very limited. Since profit motive may cause private providers to ignore the needs of the poor and induce demand by those who are able to pay, policy makers in China are concerned about the negative consequences on access and efficiency of health care, if the private sector is allowed to proliferate. Are those concerns warranted? Is there empirical evidence on the relative performance of the private and public sector in health care? Answers to these questions will not only enhance our understanding of the private sector, but also have direct implications for new policy development regarding the proper role of the private sector.

Based on both secondary and primary data analysis, this paper first provides an overview of China's health system and the overall scope of private sector in health care in Sections 2 An overview of China's health system, 3 The scope of private sector in China. Section 4 addresses the question of why people choose private providers in China. Then, in Section 5, we analyze evidence on the performance of private providers, compared to the public providers. The performance criteria include perceived quality by the consumers, average costs, and satisfaction. In Section 6, we conclude the paper by discussing the major findings and issues that should be considered for future studies in this field.

Section snippets

Health care supply

In 2002, China had over 306,000 health establishments and a wide array of supporting research organizations. The country has 5.2 million health professionals, including 1.8 million physicians with various levels of training (about 1.5 physicians per 1000 people) and 1.2 million nurses. Averaging 2.4 beds per 1000 people, there are over 17,844 hospitals with some 3.1 million hospital beds. About 8200 urban community health centers and 46,000 rural township health centers (a township health

The scope of private sector in China

The development of private health care sector in China is closely related with China's overall political, social and economic systems development. Before the People's Republic of China was founded in 1949, there were about 520 private hospitals (mostly mission hospitals operated by churches, especially by American missionaries), which outnumbered the 248 hospitals run by the government. Additionally, there were more than 200,000 private medical practitioners at the time. From 1950s to late

Why do people choose private providers in China?

As indicated by Table 3, the supply conditions in China are such that people do have a choice between public and private providers when it comes to ambulatory services. Models of demand for medical care indicate that the major factors affecting people's choice behavior include perceived quality of the providers, compared to the costs (including monetary and time costs) [16]. Conventional wisdom also tells us that services provided by the private sector may tailor consumers’ diverse demand,

Preliminary evidence on performance of the private sector

There have been a very limited number of studies in China on private providers. Fewer still are studies on the relative performance of the private and public sector in health care. Let us look at some international literature. Berman and Rose identified the problem of the lack of a consistent definition and role of private providers across 11 developing countries and found that private providers were significant factors in family planning services and children's health using DHS surveys [20].

Discussion

As China is gradually transforming itself from a planned to market economy, private ownership and competitive forces are already dominating the economic sector. Currently, more than 60% of the country's GDP is produced by private enterprises [10]. China's health sector, however, presents an interesting public and private mix. While health services are primarily financed by out-of-pocket spending (private financing), health care providers, especially the hospital industry, are still dominated by

Acknowledgments

The Swedish International Development Agency provided a grant support for this study. Part of Drs. Liu and Li's time on data analysis is supported by a grant from the Rockefeller Foundation to conduct the China Health Surveillance Survey. Annie Chu provided excellent research and editing assistance. The authors remain responsible for the contents of this paper.

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