Research On Efficiency Of Government Health Expenditure And Its Improvement

The basic health care service is an important livelihood issue in China, whichconcerns the population health. As health care is lagging behind economicdevelopment in China, the government plans to achieve the goal of “universal basichealth care coverage” by2020through implementing the new round health carereform. The proposal for this reform centers around the dominant role of government,which sets the government health spending as the key channel of this dominance andexplicitly put forward the objective to establish a multi-resource fund system. Withthe new health care reform being implementing for3years up until now, thegovernment health spending grows fast in real terms. However, there are still quite afew questions to be addressed, i.e. whether the scale of government health spending isappropriate; whether the structure distribution is effective; whether the fund is usedefficiently and whether the whole input of government spending on health brings theimprovement of population health. All these concerns people working in differentareas. The research of this topic “the efficiency of government health spending and itsimprovement” will have pivotal theoretic and policy implications for the achievementof the goal of the universal basic health care coverage and the inclusive growth ofsocial economic development in China.This background that the implementation of the reform is still at its initial stageprovides the author an ideal opportunity to explore the issues mentioned above.Integrating the theories of public economics and health economics and choosing theperspective of health improvement, this paper establishes a theoretical framework andanalyses the determinants of government health spending efficiency in terms ofeconomic growth, fiscal decentralization, demographical characteristics etc. byempirical approaches, which is based on the analysis of a system of governmenthealth spending efficiency. By systematically studying of the scale efficiency,structural efficiency (between rural and urban areas and between supply and demandside respectively) and productive efficiency of government health spending, theauthor attempts to draw some policy implications of providing a theoretical andpolicy foundation for the establishment of a basic health care system covering ruraland urban residents, improving the population health and achieving the goal ofuniversal coverage of health care. Firstly, this paper studies related literatures both home and abroad, andestablishes a system of government health spending efficiency from three aspects, i.e.scale efficiency, structural efficiency and productive efficiency. Under this basis, itinvestigates the theoretical mechanism for the determinants of scale efficiency,structural efficiency and productive efficiency of government health spending interms of economic growth, fiscal decentralization system and demographiccharacteristics and establishes a unitary analyzing framework and theoretic platform.Economic growth has an impact on the efficiency of government health spendingthrough the supply side effects, demand side effects and technology progress effects;The impacts of fiscal decentralization on government health spending can be achievedby the competition among governments, information symmetry and the distribution offinancial resources; The impacts of demographical characteristics, however, comefrom its influence on the scale, structure and quality of the population.Secondly, this paper does a comprehensive empirical study of the determinants ofthe scale efficiency, structural efficiency and productive efficiency of governmenthealth spending. Using panel data approach, this paper establishes a determinantsmodel of scale efficiency of government health spending. Economic growth and fiscaldecentralization are found to be the most important determinants of governmenthealth spending: Economic growth has a significant positive impact and fiscaldecentralization has a significant negative impact on government health spending.The other significant positive factors include environmental factor, urbanization rate,and hospital delivery rate. The determinants of structural efficiency of governmenthealth spending between rural area and urban area are investigated using biased OLSapproach. Policy measures, economic growth, mortality rate, medical technicalpersonnel in health care institutions per thousand persons in rural areas, the number ofbeds in health care institutions and incidence rate of infectious disease have asignificant negative impact on the structural efficiency of government health spendingbetween rural area and urban area. However, fiscal decentralization andenvironmental factor have positive impacts on the structure ratio, which is to thedisadvantage of improvement of structural efficiency between rural area and urbanarea. In analyzing the determinants of structural efficiency of government healthspending between supply and demand side, economic growth, the number of beds inhealth care institutions and environmental factor are found to have a positive impacton the improvement of structural efficiency between supply and demand sides.Urbanization rate and infectious disease mortality rate can lead to the reduction of this efficiency rate. The results of the determinants of health productive efficiency ofgovernment health spending turns out to be that fiscal decentralization has significantnegative impacts on health productive efficiency. Economic growth, urbanization rateand population density are found to have insignificant positive impact. All theseempirical analyses fit with the theoretical analysis in the previous part.Furthermore, in the analysis of scale efficiency of government health spending,the author establishes a production model in order to calculate the optimal scale ofgovernment health spending in China. The empirical results demonstrate thatgovernment health spending in China is productive, which has a positive impact oneconomic growth; the optimal scale of government health spending is9.6%of GDP,based on which a conclusion is drawn that there can still be a moderate growth ingovernment health spending. In the part of structural efficiency analysis, the authorgauges the inequality of government health spending between rural and urban areas byusing Theil index and finds out that the inequalities in rural and urban areas is themain reason of inequalities in China. The author also finds that government healthspending discrepancy between rural and urban areas have different impact on theincome gap between rural and urban areas in high quartiles. DEA approach is used tocalculate the health productive efficiency in1990,2000and2010respectively. Thesame provinces are found to be on the productive frontier, but the provinces off thefrontier are different. In general, health productive efficiency of government healthspending is increasing gradually, and the regional difference in efficiency issignificant.Lastly, based on the theoretical and empirical analysis above, this paper putsforward corresponding policy suggestions of improving the efficiency of governmenthealth spending from four perspectives, i.e. ensuring the moderate growth ofgovernment health spending, optimizing the structural efficiency of governmenthealth spending, improving the health productive efficiency and completing thesystem of fiscal decentralization, in hope of supporting the government policy indesigning effective health policies and establishing basic health care system coveringthe rural and urban areas.