Does the financial reform of China's public health institutions (PHIs) lead to improved healthcare as well as productivity? What lessons are there to be learnt by other countries? China's Shandong Medical University, together with the London School of Hygiene and Tropical Medicine, looked at the results of China’s public health reforms.

China’s public health system is vast and until the 1980s its public health institutions were financed completely by government. These included 3 600 anti-epidemic stations responsible for public health inspections in factories and schools and almost 2 000 independent PHIs for the control of diseases such as TB, malaria and leprosy. In the early 1980s however, driven by the ideological transformation of the Chinese government, these organisations were expected to generate income by introducing fees to patients. The government funding dropped to less than 50 per cent of revenue and barely covered health workers’ salaries.

The reforms increased the financial accountability of the PHIs. Improved management led to fewer wasted resources. There has, however, been a high social cost. The problems that arose as a result of the reforms include:

• Immunisation services were used less, leading to an increase in the number of measles and polio cases, and other infectious diseases, such as leprosy, received less treatment.
• Key health services and health education programmes were cut back.
• Health inspections were carried out unnecessarily in order to generate income.
• Unprofitable factories, most likely to have poor health conditions, were not inspected because they could not pay the fees to the PHIs.

A number of important lessons for policy makers are highlighted. Policy makers should be aware that:

• cutting funding to the public health service can make it less efficient
• introducing charges can reduce demand for public health services and increase the transmission of infectious diseases
• introducing market reforms into public health should not be considered as a policy option because it is likely that the unintended consequences will outweigh the intended ones
• governments should take an active role in financing the PHIs.

While the reforms made China’s PHIs more productive in a narrow sense, in terms of social efficiency their performance has worsened and they are less effective at looking after the health of the public. The study shows that it is essential for public health services to be given top priority for government funds.

Source(s):
‘Financing reforms of public health services in China: lessons for other nations’, Social Science and Medicine 54: 1691-1698, by X. Liu and A. Mills, 2002
HINARI subscribers can access the full-text article here. Full document.
'The response of providers to capitation payment: a case study from Thailand', Health Policy 51: 163-180, by A. Mills, S. Bennett, P. Siriwanarangsun and V. Tangcharoensathien, 2000

id21 Research Highlight: 17 December 2002

Further Information:
Xingzhu Liu
Abt Associates Inc
4800 Montgomery Lane
Suite 600
Bethesda
MD 20814
USA

Contact the contributor: Xingzhu_liu@abtassoc.com

London School of Hygiene and Tropical Medicine, UK

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