A Study On The Role Of Government And Market In Health Financing In China

The issue of the role of government and market in health financing has always been a hot topic in the study of political economy and public economics, which is also an important topic in the health system reform. The historical experiences show that, the coordination and complementation of the role of government and market in health financing has significant meaning for improving the equity and efficiency of raising and allocation of health funds. From the perspective of economic theory, the health care service differ from general products in some special properties, its social benefits tend to be greater than the private benefits, thus bringing about the problem of "market failure".Therefore, the decision-making based on the personal cost-benefit analysis often causes insufficient consumption. Thus, the government intervention is needed for reducing and eliminating the market failure. But on the other hand, due to the low efficiency, slow response to the demand, rent-seeking, corruption and some other problems associated with the government interventions, "government failure" also occurs. Therefore, we need to make full use of market power to make up for the insufficiency of government’s intervention.Since the foundation of the PRC, the role of the government and market in health financing has experienced a tortuous process of change. The ebb and flow of the role-of them also caused extensive research and discussion on this issue in the academic circle. With the role of government and market in China’s health financing as the main clue, on the basis of theoretical interpretation, historical investigation, and empirical analysis, from the dual perspectives of national health financing and medical institutions’financing, this paper explores the optimal proportion of government and market in health financing in China, analyzes the equity and its impact factors in health financing, analyzes the medical institution’s financing mechanism and its influence on the efficiency of health financing, then puts forward policy objectives of health financing structure and approach to improve the equity and efficiency of health financing.One important issue on the combination of the government and market in health financing is the optimal proportion of government (public) financing and individual (family’s) financing in total health expenditure. This paper investigates the health financing situation in the countries which rank top 20 in WHO health care performance ranking, finding that, Singapore and Switzerland have relative low proportion of government health expenditure due to their special health care financing system, other most countries have the proportion between 70%-80%, their average proportion is 74%, median proportion is 76%, the highest value reaches 87%. In addition, using data of 203 countries in 1995-2015 and econometric models, this paper analyzes the impact of government health financing’s proportion on health status, and tries to find out the optimal proportion of government and market in health financing. Through empirical research, the paper finds that, for low-middle income countries, the linear model is better on fitting effect; for the high-middle income countries, nonlinear model has better fitting effect, namely, the government health financing proportion’s impact on health status can be depicted as inverted U-shaped curve, and the position on peak value is at 80%. Based on the above results, we suggest that, the policy target of government share in China’s health financing can be set at 75%-80%. Considering the medical expenses is only part of the total health expenditure, we infer the policy target of proportion of government and individual payment in medical expenses from the above target on health financing, the optimal proportion of government financing in medical expenses is about 72%-78%, correspondingly, the individual’s expenses account for about 22%-28%.From the perspective of health financing’s equity, this paper compares the gap of proportion of government and market between the urban and rural areas, different regions, and various health insurance systems, then points out that, the main reasons causing the gap include the fiscal decentralization system, fragmentation of social health insurance, transfer payment system. Based on the above findings, some suggestions are made.For the financing at the level of medical institutions, the paper analyzes the pros & cons and practice from domestic and abroad of two modes of compensation——"pay the service-providers directly" and "pay for the use of service", then suggests that the primary and secondary care institutions focusing on the provision of basic health care services should be compensated on the basis of "pay the providers directly", thus ensuring the government could take more financing responsibility, and encouraging primary care institutions to emphasize preventive services and disease management and control; For the tertiary medical institutions, we could use more compensation mode of "pay for the use of services", namely, various types of health insurance purchasing health care services to encourage market competition among the providers and to meet the diversified medical needs of the insurees.This paper also gives special attention to the medical institution’s micro incentive issue, namely, the health care system reform should pay more attention to the better agreement of micro incentives of medical institutions and social goals. If the incentives of medical institutions are consistent with the social goals, then positive incentive is easily formed; If the former is not consistent with the later or even moves in the opposite direction, then negative incentives of "bad market economy" is easily formed, resulting in the distortion of medical institutions’behavior. For example, to solve the problem of virtual high drug prices and over treatment, it is necessary to eliminate "bad market economy" such as price distortion and compensation of medical institution through revenues derived from drug sales in health care system. Otherwise, only relying on administrative means is difficult to work. This paper also compares various health insurance payment methods, and suggests making use of different payment methods according to their pros and cons counting the prepayment method as the core, in order to reduce the occurrence of moral hazard of medical institutions.Finally, the paper makes comparative study on the reform and evolution of three countries’ health financing system in the United Kingdom, the United States and Germany, the results shows that the common trend of these countries is the roles of government and market in the health financing are toward the more mix "middle way", namely the country whose government’s power is strong in health care system gradually introduced more market mechanisms, and the country which has stronger market power strengthened the government’s intervention, this trend has very important significance for our country to reasonably play the role of government and market in health financing.China is experiencing a period of rapid social and economic development, the government should establish the fundamental goal of improving the urban and rural residents’health level, and play more active role in health financing, especially give more support to those health care fields which has properties of externality, public goods and income redistribution. At the same time, the important role of the market in the health financing also should not be ignored, it should be given all play to the advantage of improving utilization efficiency of health resources. In the development of China’s future health financing system, both the government and the market should play proper roles simultaneously in the complementary and coordinated manner, and jointly promote China’s equity and efficiency in health financing.