Health Economics Of Medical Security System Reform

The medical insurance system of our country is established with the Planned Economy. Because this system has no cost-control mechanism, medical expenditure increased quickly. The innovation of medical insurance system is becoming an important part of our economic innovation.The aim of the paper is to introduce the development of the Health Economics and review and remark the innovation of the medical insurance of our country briefly. After the Second World War, many west countries became welfare countries. At the end of 1950s, people became to realize that what we can put to medical care is not unlimited. From 1960s, many economists devoted to medical insurance system researching and produced many valuable papers.The major difference between medical care and general products is that at many times medical care is related to consumers' (patients) life safety. So patients pay more attention to the quality of the medical care than quantity. At the same time, because doctors know more than patients about their diseases. Thus there is an important difference between medical care market and general products market: doctors decide what kind and how much medical care patients should accept. So doctors may provide excessive unnecessary medical care to patients. This is the reason why medical expenditure is increasing quickly.In modern countries, there are many kinds of medical insurance. No matter what kind of medical insurance, will make medical care prices lower. So patients will not stop at the point where the marginal benefit of medical care equals its marginal cost. With full insurance, they will continue to consume until they reach the point where the marginal benefit equals zero. This is the moral hazard of the medical insurance. There is another important problem in this field. Generally, the rich think health is more important than the poor. Thus they consume more medical care than the poor. It is efficient in economy, but it conflicts to people's belief that everyone no matter rich or poor should share the same life safety.In order to control the quickly increasing medical expenditure, many countries produced a lot of methods. The quasi-actuarial approach of the U.S. and the 'Universal' medical care of the U.K. are two typical methods. The quasi-actuarial approach is characterized by employer-based or individual purchase of private medical insurance, and by private ownership of medical factors of production. The 'Universal' medical care is characterized by tax funding and public ownership and/or control of the factors of production. An important trend in this field is that these twotypes are becoming fusing.We think that the major problems of our country in medical insurance are same to those that other countries have met. According to other countries' experience, the innovation of medical insurance is very difficult and prices can't allocate medical resources efficiently. So in our innovation of medical insurance system, we should pay more attention to control providers and increase the using and allocating efficiency of medical resources.