A Theoretical Analysis, Performance Evaluation,And Reform Solution on Health Care System in China / Sheng, Zhang, Qian

Published by World Scientific Press in 2021, Singapore


A Theoretical Analysis, Performance Evaluation,And Reform Solution on Health Care System in China(Second Version)


● The market for healthcare features uncertainty, lack of price elasticity, and information asymmetric, besides other market characteristics.

● The purpose of medical insurance is to eradicate uncertainty and bring about the utility of certainty by transforming the uncertainty of personal medical affairs into predictable risks through integration and professionalization.

● People tend to “buy more” and “buy the expensive” as insurances lower the part of the medical expenses borne by the individuals, which in effect pushes up the prices of health care, and the demand for medical services and goods. The overall effect is an increase of health care expenditure.

● Insurances pushes up 89% of the prices of China’s medical services and goods, leading to an over-expenditure of 16% of all the medical services and goods by consumers, which further increases the healthcare expenditure per capita to 119% of that without these insurances .

● Even though insurances bring about an increase of welfare by 2.25% of the GDP, compared to the loss caused by it, a net loss of some0.46% of the GDP, that is some RMB264 billion, is caused by insurances.

● By 2013, a total of some RMB45.7 billion has been wasted by the public healthcare system.

● The managerial cost of healthcare institutions, i.e., expenditure by healthcare administrations and cost of managing the healthcare insurances, skyrocketed year on year, and reached RMB 43.7 billion in 2014.

● Per capita medical expenses are rising, from 4.03% in 2008 to 5.22% in 2015. In 2015, the national total health expenditure accounted for 6.05% of GDP.

● Therefore, it is not enough to criticize only the use of healthcare insurances. See below:

Weighing the Gains and Losses of Insurance. Unit: Percentage of GDP per capita(%)

● Quality medical resources concentrate disproportionately in big cities and big hospitals, which causes insensible spatial allocation causing an overly high time cost and other indirect medical cost. In 2013, if we put together the overspent cost and time for local and cross-region healthcare services and goods, it equaled to a total waste of resources that priced some RMB445.2 billion a year.
● The growth of labor costs for doctors is lower than that of the per capita GDP. The proportion of labor costs for doctors in per capita GDP fell from 11.7% in 2002 to 3.3% in 2015.
● In an aggregate sense, the demand for healthcare increased 40 times from 1980 to 2014, while the number of licensed doctors only increased 1.51 times. Demand surpassed supply by a large margin.

● Average healthcare resources are distributed in a balanced manner across regions. It coincides with the resource allocation planning approach based on population taken by the Chinese government.

● Quality healthcare resources are distributed in a very imbalanced term with more resources concentrated in administrative centre. And this situation is exacerbating.

● Beijing is the “utmost unfair benefactor” of this distributional system of healthcare finance, while the “unfair victims” include provinces such as Henan, Anhui ,Hebei, Hunan, Jiangxi, Guizhou and Shandong.

● The unfairness index of the financial distribution system in the healthcare system is 0.344. According to our evaluation standard, this score is interpreted as intermediate.

● Civil servants are the “utmost unfair benefactor” in the current healthcare financial distribution system, while the “unfair victims” include farmers, urban residents, and urban workers.

● This research proposes the basic principles for institutional healthcare reform is taking the market institution as the basis, and government regulations as complement.

  1. To increase the self-pay ratio and its scope, to enlarge the function of the market;
  2. To facilitate the market competition for healthcare;
  3. To let the market make the price for healthcare services under the market mechanism;
  4. To let the price of medicines fluctuate when the market makes prices for healthcare services;
  5. To abandon compulsory social insurance and rely more on commercial insurance institutions;
  6. The government should subsidize the medicine fees for the poorest people.

● The main measures proposed by this research include:

  1. Canceling the insurance covering out-patient medical services: the fee inflicted by out-patient medical treatment can be paid either by the patients or by the individual account;
  2. Canceling the threshold for insurance coverage and raise the self-pay ratio for in-patients to 70%;
  3. Setting up a national severe disease charity fund to subsidize those whose self-pay portion exceeds their yearly income’s 40%.

● Estimated according to the model in this research, setting 2014 as the baseline, the proposal of this research should be able to hold back a 62% increase of the price, which would save RMB 964.6 billion, 1.5% of the GDP.

● It would hold back some 17.5% of healthcare overuse, which would save up to RMB 471 billion, about 0.53% of the GDP.

● Some RMB1213 per person would be saved for healthcare, about 2.57% of GDP per capita, which rounds up to some RMB1649.7 billion nationwide.

● Those whose self-pay proportion exceeds their yearly income’s 40% constitute about 2.3% of the total population. If a severe disease fund is set up with a scale of about RMB 190 billion, it will be only about 0.29% of the GDP.

● If the monopoly is eliminated and competition is promoted, that is the slope of the supply function, e, changes from 0.47 to 2, then everyone would be able to save about RMB 112 for healthcare, a total RMB152.3 billion nationwide.

● Healthcare resources will be better allocated in space. If the distance and waiting time for medical treatment is shortened by half, that is the 4 hours needed for local treatment is shortened to 2 hours, then a total value of time amounting to about RMB 266.2billion will be saved; if the distance and waiting time for cross region treatment is shortened from 12.5 days to 6days and 6 hours, when a total value of time amounting to about RMB 29 billion will be saved. Putting them together, a total waste of time estimated for the value of RMB 295.2 billion will be avoided.

● Canceling out-patient(small illness) insurance would reduce 2/3 of the current insurance-related managerial operations, saving a total of RMB16.9 billion according to the current administrative fees of insurance agencies that is RMB 25.4 billion.

● When the increase of healthcare expenditures is contained, a huge amount of resources are saved, which will bring back the advantages of insurances. See blow.

Situation after the Reform Unit: Percentage of GDP per capita(%)

● In summary, this reform proposal will reduceper capita medical expenses from 5.08% to 2.51% of the per capita GDP, a decrease of 50.6%.

● This reform proposal will also reduce the per capita medical expenses originally covered by insurance from 3.1% to 0.9% of the per capita GDP, a decrease of 70.2%.

● If it is shown by the deduction of healthcare insurance fees for urban workers, the deduction from their monthly wage will be decreased from 9.5% to 2.8% of their monthly wage, which would also lower the burden for enterprises.

● Even though the self-pay fees account for a higher ratio than before, as the healthcare expenditure decreased in general, patients pay 86.6% of that they paid for their medical treatments before the reform.


Chapter I The Economic Subject and Market for Healthcare
Ⅰ. Patients: Before Professional Doctors, and the Basic Features of the Patients

  1. Uncertainty
  2. The Lack of Elasticity of the Demand Price
  3. The Lack of Medical Knowledge and the Inefficiency of Self-Performed Healthcare

Ⅱ.Doctor and Simple Healthcare Market

  1. Doctor in the General Sense: Medical Treatment and Manufacturing of Medicines
  2. The Patients after the Emergence of Professional Doctors
  3. A Market with Only the Patients and the Doctor in the General Sense

Ⅲ.Manufacturer of Medicine: After the Division of Medical Treatment and Manufacturing of Medicines

  1. Manufacturer of Medicines and Medical Equipment
  2. Doctors after the Division of Medical Treatment and Manufacturing of Medicines
  3. Patients after the Division of Medical Treatment and Manufacturing of Medicines
  4. Market after the Division of Medical Treatment and Manufacturing of Medicines
    Appendix I: A Two-Phase Model of Doctor’s Reputation
    Appendix II: A Separating Equilibrium Model of Doctor Sending Signals
    Chapter II Insurance and Its Problems
    I. Purpose of Insurance: Eradicating Uncertainty, and Increase Utility
  5. Theoretical Foundation
  6. A Direct Estimation of the Advantages of Insurance
  7. An Indirect Estimation of the Advantages of Insurance

Ⅱ.Previous Study and Criticism of Insurance

  1. Moral Hazard
  2. Reverse Choice
  3. Structural Cost
  4. Monopsony
  5. Driving up Prices III. Proposal of a Deeper Problem: How Healthcare Insurance Hinders Market Mechanism
    1.Issue with the Payment Mechanism of Insurance: Loss of Budget Constraint, and Insensibility of Price
    2.Increase of Cost without the Budget Constraint
  6. The Distribution Inefficiency of Medical Services and Pharmaceutics between Consumer
  7. The Influence of Distortion in the Demand Structure on the Price System, and the Efficiency

Ⅳ.Insurance Paradox: Insurances Do not Reduce but Increase Healthcare Cost

  1. Insurances Change Demand Function: Tilted Demand Curve
  2. Two Parts of the Utility of Insurance
  3. A Hypothesis of Insurances Driving up Prices
  4. A Quantitative Analysis of Insurances Inflicting Healthcare Overuse
  5. Insurances as an Intrinsically Non-equilibrium Institution that Expands to Maintain Dynamic Balance

Ⅴ. Other Issues with Insurances

  1. Analysis of Insurances Regarding Threshold for Payment, Self-pay Ratio, and Payment Ceiling
  2. Insurance Hardly Subsidize the Unhealthy
  3. Managerial Costs of Insurance Agencies Drive up Financial Risks
  4. How the Current Insurance System Works

Ⅵ Economic Subject and the Market in the Current Insurance Institution

  1. Patients of the Insurance Institution
  2. Doctors of the Insurance Institution
  3. Pharmaceutics Manufacturers of the Insurance Institution
  4. Insurance Companies of the Insurance Institution
  5. Managerial Healthcare
  6. Healthcare Market of the Insurance Institution

Chapter III Government Intervention in Healthcare
I. Conventional Government Intervention in Healthcar

II. Intervention in Market Failures

  1. Prevention and Treatment of Contagious Diseases
  2. Public Health
  3. Intervention in Geographic Monopoly and Emergences: Price Control for ER etc.
    4.Intervention in Information Asymmetry and Clientism: Investigation of Doctors’ Qualifications, and the Quality of Medicines

Ⅲ.Intervention in Uncertainty: Government-Set Insurance Institution

Ⅳ.Government Intervention of the Insurance Institution

  1. Government Regulation of the Income of Doctors
  2. Government Regulation on Medicines Subsidizing Medical Services
  3. Government Regulation on Prices of Medicines
  4. The Extreme Form of Government Intervention— Universal Healthcare Insurance

Ⅴ.Macroeconomic Impacts Caused by the Insurance Institution with Government Intervention

  1. Decrease of Overall Efficiency of the Society
  2. Rapid Increase of Prices for Medical Services and Medicines
  3. Ratio of Healthcare Expenditure to GDP Increases
  4. The Unsustainability of Social(Healthcare) Insurance Institution

Ⅵ.Summary of the Theoretical Analysis
Chapter IV The Formation, Status and Issues of China’s Basic Healthcare System
I. China’s Healthcare Institution and Reforms

  1. Healthcare System During the Planned Economy(1949-1980)
  2. Market Reform and Loosening of Regulations for Healthcare During the Economic Transformation(1980~1997)
  3. All Round Healthcare Reform Era(1998~)

Ⅱ.The Institution and Policy Framework since the 2009 “New Healthcare Reform”

  1. Guiding Thoughts of the “New Healthcare Reform”: Market or Government
  2. Government-Led Healthcare Insurance Institution and Policy
  3. Constitution and Reform of Healthcare Insurance Resources
  4. Market for Medical Services: Institution, Policy and Industrial Organizations
  5. Market for Medicines: Institution, Policy and Industrial Organizations
  6. Comment on the New Healthcare Reform

Ⅲ. Basic Framework and Features of the Current System

  1. An Incomplete and Interfered Market
  2. A Healthcare System with Public Hospitals as the Main Entity
  3. Regulation on Setting Up a Hospital
  4. Qualification Validation and Entry Regulation for Doctors
  5. Tendencious Distribution of Financial Resources among Hospitals
  6. Price Regulations on Medical Services of Public Hospitals
  7. Price Regulations
  8. Regulation of Circulation of Hospital Medicines
  9. Duel Track System of the Medicines Retailing Market

Ⅳ. Healthcare Insurance in China

  1. Social Healthcare System: Compulsory Insurance
  2. Graded Insurance System of the social Healthcare System
  3. Basic Healthcare Insurance for Urban Workers
  4. Healthcare Insurance for Urban Residents
  5. The New Cooperative Rural Healthcare Insurance
  6. Differences in Healthcare Insurance for Out-Patient and In-Patient Services for Different Groups
  7. Actual Payment Ratio for Healthcare Fund
  8. Institutions of Healthcare Insurance
  9. Operations and Procedures of Healthcare Insurances

Chapter V. Efficiency and Fairness Evaluation of the Resource Allocation in Healthcare Industry
I. Standard for the Efficiency and Fairness of the Institution

  1. Market as the Fundamental Institution for Private Goods
  2. Inefficiency and Unfairness to Undertake Regulations for Private Goods
  3. Perfect Monopoly and Strong Oligopoly Should Be Regulated Following Certain Principles
  4. The Allocation of Financial Resources Should Follow Rawl’s Second Rule of Justice
  5. The Government Could Regulate when There’s Externalities
  6. Other Measures Should Be Taken to Deal with Market Failure Before Government Regulations

Ⅱ.Symptoms of Healthcare System Issues

  1. Aggregate Supply Grows Too Slow
  2. Huge Difference Between Hospitals of Different Grades
  3. Price of Medicines Pushed Up by Circulation and Pricing Mechanism
  4. Long Waiting Time and High Expenditure
  5. The Behavior of Doctors/ Hospitals Under Insurance Institution
  6. The Behavior of Consumers Under Insurance Institution: Excessive Demand
  7. Manufacture and Sales of Medicines Under Insurance Institution
  8. Doctors’ Income Are Generally Too Low
  9. Medical Treatments Subsidised by Selling Medicines and Abusing Equipment
  10. Concentrating of Patients in Big Hospitals
  11. Insurance Coverage Differs Largely among Different Groups
  12. Doctors’ Constrained by Regulation of the Locales of Practices
  13. Rent-Seeking Caused by Government Power to Allocate Healthcare Resources
  14. Tension Between Doctors and Patients
  15. Social Healthcare Insurances Fail to Meet Its Goal: to Cover Severe Diseases
  16. Increase of Healthcare Expenditures in the Current Healthcare System

Ⅲ.Institutional Analysis and Comment of the Current Healthcare System

  1. Compulsory Monopoly of Social Healthcare Insurance Institutions
  2. Low Efficiency of Public Hospitals Providing Private Goods
  3. Entry Regulation Hinders Competition
  4. Manufacture and Sale of Medicines: Concentrated Bidding Brings About Monopoly
  5. Healthcare Insurances and Public Financed Healthcare Weaken Market Mechanism
  6. Rent Dissipation by Regulations and Rent Conservation
  7. Inefficiency and Unfairness of Power-Led Healthcare Resource Allocation
  8. Unfairness Brought by Price Regulations
  9. Non-Equilibrium and High Transaction Cost Caused by Regulation

IV. Efficiency of Resource Allocation in Healthcare

  1. Aggregate Allocation Efficiency
  2. Insurances Drive Up Prices
  3. Loss Caused by Excessive Use of Healthcare Resources with Healthcare Insurance Institution
  4. Static Efficiency Loss with Healthcare Insurance Institution
  5. Loss Caused by Price Distortion with Healthcare Insurance Institution
  6. Efficiency Loss with Public Healthcare Institution
  7. Efficiency of Spatial Allocation of Healthcare Resources
  8. Cost and Disadvantages of Social Healthcare Insurance Agencies
  9. Summary

V. Fairness of Healthcare Resource Allocation

  1. Fairness of Spatial Allocation of Resources
  2. Fairness of Financial Resources Allocation
  3. Fairness of Healthcare Allocation Among Different Groups
  4. Fairness of Financial Resource Allocation
  5. Fairness of Competition between Private and Public Hospitals
  6. Summary
    Chapter VI. Reform Proposal Based on Market Institution
    I. Direction and Principle of Healthcare Reforms: Market as Foundation, Government Regulation as Supplement
    1.Two Key Points: Self-Pay Ratio and Monopoly
    2.Increasing Self-Pay Scope and Ratio, Better Utilize Market Institution
    3.Promoting Healthcare Market Competition
    4.Let Market Determine the Prices for Medical Services Under the Market Institution
    5.Open Prices for Medicines as the Market Determines the Prices of Medical Service
    6.Promoting the Division of Medicine and Medical Treatment, Medicine Prices Formed in Medicine Retailing Busines
    7.Cancelling Compulsory Social Insurance and Rely on Commercial Insurances
  7. Free Choice of Healthcare Insurance Forms by Individuals and Organisations
  8. Government Finance Should Subsidize the Poorest Group for Medical Services and Medicine
  9. Government Should Regulate the R&D and Sale of Western Medicines
  10. Government Should Maintain Market Order for TCM

Ⅱ.Comparative Study of the Main Healthcare Systems in the World and Lessons to be Learned

  1. The US Model
  2. The UK Model
    3 .The German Model
    4.The Singapore Model
  3. Quantitative Analysis Regarding Cost and Benefit
  4. Basic Comments and Lessons

Ⅲ.Institutional Reform of Healthcare Insurances
1.Institutional Reform of Insurance: Cancelling Compulsive Insurance and Establishing an Insurance Institution Where Market Comes First

  1. Reducing Social Healthcare Insurance Payment, Implementing Self-Pay for Small Illness(Out-Patient Treatment), Partial Self-Pay for Severe Disease(In-Patient Treatment), and Partial Insurance
  2. Cancelling Public Finance Healthcare, and Establishing a Fair Healthcare Insurance Institution
  3. Establishing National Medical Assistance Funds for Severe Diseases
  4. Developing Commercial Healthcare Insurance and Forming a Competitive Healthcare Insurance Market
  5. Encouraging Charity in Healthcare
  6. Allowing Differentiated Price Policy for TCM
  7. Allowing Consumers to Choose Healthcare Insurance Forms
  8. Establishing Compulsory Healthcare Family Savings Accounts

IV. Reform of the Healthcare Service Institution
1.Canceling the Government Entry Regulation for Medical Professionals,and Substituting with Competitive Association Certifications
2.Cancelling Entry Regulation for Hospitals, and Substituting with Constraints by Association and Competition

  1. Cancelling Price Regulation for Healthcare Services
    4.Cancelling Regulation on Fixed Locale Practices for Doctors, and Substituting with Contract Between Doctors and Hospitals
  2. Promoting and Encouraging the Establishment and Development of Professional Associations
  3. Encouraging the Transformation of Public Hospitals into Private Hospitals
  4. Encouraging the Development of Private Hospitals
    8.Encouraging Cooperation in Diagnosis Across Hospitals and Regions via the Internet 203

V. Institutional Reform of the Manufacturing and Circulation of Medicines
1.Approval Mechanism for New Medicines Should Be Established on the Basis of Cooperation Between the Government and Technical Associations

  1. Cancelling the Concentrated Bidding, and Allowing Enterprises to Compete in the Market
  2. Cancelling the Price Control of Medicines
  3. Cancelling the Entry Barrier for Medicine Circulating Enterprises, and Substituting with Constraints by Association and Competition
  4. Encouraging the Establishment of Associations in the Manufacturing and Circulation of Medicines
  5. Improving the Market Rules for TCM to Guarantee Quality

VI. Supplementary Regulation in the Healthcare

  1. Special Regulations: Contagious Diseases, ER, Medicine Quality
  2. Regulatory Monopoly and Collusion
  3. Property Rights Protection; Fulfillment of Contracts; Fair Competition
  4. Encouraging the Establishment of Consumer Association in Healthcare
  5. Encouraging the Development of Intermediary Services in Healthcare
  6. Promoting the Public-Private Partnership in Public Healthcare

VII. Estimation of Healthcare Reforms

  1. Basic Numerical Mode
  2. Constraint of Increase of the Healthcare Prices by Raising the Self-Pay Ratio
  3. Healthcare Resources Saved from Reducing Overuse
  4. Market Mechanism Strengthened by Enlarging the Scope of Self-Pay, Social Welfare Increased by Improving the Allocation of Healthcare Services and Medicines
  5. Better Co-Sharing of the Risks of Severe Diseases
  6. Breaking and Cancelling of Monopolies, Encouraging Competition
    7.Opening the Establishment of Hospitals, Encouraging Doctors to Move, and Improving the Spatial Allocation of Healthcare Resources by Utilizing the Mobile Internet to Shorten Waiting Time
  7. Reducing the Managerial Cost of Social Healthcare Insurance Agencies and Insurance Companies
  8. Better Healthcare at a Lower Cost for the Whole Society
  9. Summary
    Chapter VII Strategy and Procedures for Healthcare System Reform
    Ⅰ.Transition Economics:Pursuing reform cost minimization

Ⅱ.Experience of China’s Reforms

  1. External Reform
  2. Incremental Reform
  3. License Reform and Promoting
  4. Subsidy Reform
  5. Incremental Reform

Ⅲ.Possible Issues and Solutions in the Healthcare System Reform

  1. Public Misunderstanding of this Reform Proposal: A Political Economic Analysis
  2. Objection from the Previous Government Regulatory Agencies
  3. Objection from the Previous Social Healthcare Insurance Agencies
  4. Objection from the Interest Groups
  5. Temporary Turbulence before the New Equilibrium
  6. Short-term Increase of Healthcare Expenses

Ⅳ. Breakthrough of the reform
1.Cancelling of the Compulsiveness of the Social Healthcare Insurances, Promoting the Development of Commercial Insurances, and Free Choice of Insurances Forms by Individuals and Enterprises
2.Promoting the Development of Internet-Based Healthcare

  1. Opening of the Healthcare Service Price

Ⅴ. Reform Procedures

  1. Healthcare Insurance Reform
  2. Reform of the Medical Professionals Validation and License
  3. Opening of the Medical Services Prices
  4. Encouraging Public Hospitals to Transform into Private Hospitals
  5. Canceling of the Regulation in Medicine Circulations

Ⅵ. Sequence of Reform
Subreport 1 International Comparative Study of Healthcare Systems
I. Brief Introduction of Main Forms of Healthcare System(Four Healthcare Insurance Systems)

  1. Medical Services
  2. Medicine Manufacturing
  3. Healthcare Insurances


  1. Historical Development
  2. National Health System(NHS)
  3. British NHS Trust
  4. Private Healthcare Institutions
  5. Medicine Circulation in the UK
  6. UK’s Pharmaceutical Price Regulation Scheme (PPRS)
  7. The 2012 Cameron Healthcare Reform


  1. Healthcare System
  2. Medicine Manufacturing and Approval Institution
  3. Healthcare Insurance System
  4. Conclusion and Comments

Ⅴ.Brief Introduction of Germany’s Healthcare Insurance System

  1. Historical Development
  2. Status Quo
  3. Reforms
  4. The Role of Government

Ⅵ. Chinese Taiwan
1.Administrative Structure of Taiwan’s Healthcare

  1. Healthcare Service System
  2. Pricing and Management of Medicines
  3. Control Measures to Handle Medicine Prices Increase
  4. National Healthcare Insurance of Chinese Taiwan
    Subreport II Domestic Practices in Healthcare System Reforms
    I. Shenmu(神木) Model
  5. Background
  6. “Free Healthcare” in Shenmu
  7. Supplementary Reforms
  8. Influence
  9. Issues

II .Wuhu(芜湖) Model

  1. Content of the Reforms
  2. Achievements
  3. Issues

III. Suqian(宿迁) Model
1.Content of the Reforms

  1. Achievements
  2. Issues

IV. Summary and Lessons from Domestic Healthcare Reforms

  1. Positioning of the Healthcare Market: Government-Led or Market-Led
  2. Insurance Payment Reforms: From Item Payment to Multiple Payment
  3. Capacity-Building for Local Level Healthcare Institutions, Establishing Multi-Level Healthcare System
  4. Establishing Multi-Faceted Healthcare Insurance System
    Subreport III Comparative Study of the Economic Features of Western and Traditional Chinese Medicine
    Ⅰ.Basic Differences

Ⅱ.An Economic Comparison
Subreport IV Status Quo and Development of Internet-Based Healthcare 305
Ⅰ. Status Quo and Issues with China’s Mobile Online Healthcare

  1. Content and Development Background of China’s Mobile Online Healthcare
  2. Case Study of China’s Mobile Online Healthcare
  3. Profit-Making Pattern
  4. Issues and Challenges

Ⅱ.Status Quo and Development of Mobile Healthcare Applications in the US

  1. Sharing Economy: A New Definition of Internet-Based Economy
  2. China’s Mobile Internet Development
  3. Healthcare-Related O2O and Platforms
    Subreport V Survey
    I. Background and Methodology
  4. Background
  5. Methodology and Flaws

Ⅱ.Basic Situation

  1. Basic Information of the Surveyed
  2. The Healthcare Condition of the Surveyed
  3. Pharmacy and Out-Patients
  4. Comments on Payment Threshold, Prices of Medical Services and Medicines
  5. Cross-Region Healthcare
  6. Choices of Healthcare
  7. Survey of Accessibility

III. Main Issues and Conclusion

  1. Waiting Time and High Healthcare Expenditure
  2. Consumers and Doctors’ Certain Strategic Choice with the Current Healthcare System
  3. “Internet+” and New Opportunities of Mobile Internet
    4 The Withering Traditional Chinese Medicines
    Subreport VI Negative Influence of Healthcare Technology
    Appendix I: Pricing of Life and Health
    Appendix II: Survey
    Appendix III: Crowd-Funding as a Remedy for Insurance

List of Figures
Figure1.1 Estimation of Some Price Elasticity

Figure 2.1 Summary of the Influence of Co-Payment Insurance on Annual Average Healthcare Consumption according to Rand
Figure 2.2 Prices Comparison with and without Insurnaces
Figure 2.3 Numerical Ratio Matric(Rq)
Figure 2.4 Healthcare Expenditure Numerical Ratio Matric(Rq)

Future 3.1 Problems, Solution and Effects in the Healthcare Market

Figure 4.1. Price Changes for Medical Services 1956~1980
Figure 4.2 Difference Ratio in the Medicine Circulation (Real Term Price)
Figure 4.3 Categorized Income of China’s Insurance Industry
Figure 4.4 Combination of the two Social Insurances and Commercial Insurances, “Zhanjiang(湛江) Model” and “Taicang (太仓)Model”
Figure 4.5 Concentration of Anti-Cancer Medicines and Antibacterials for Systemic Use
Figure 4.6 Financial Subsidies and Education and Technology Funding for Hospitals of Different Grades(2015)
Figure 4.7 Reimbursement Policy for Urban Residents and Workers in Beijing
Figure 4.8 Beijing New Rural Cooperation Policy(Miyun District)
Figure 4.9 Reimbursement Ratio for In-Patient Treatment for Some Urban Workers
Figure 4.10 Reimbursement Ratio for In-Patient Treatment for Some Urban Residents
Future 4.11 Reimbursement Ration for Out-Patient Treatment for Different Groups in Beijing
Figure 4.12 Reimbursement Ratio for In-Patient Treatment for Different Groups in Beijing
Figure 4.13 Payment Ratio for Urban Workers by Social Healthcare Fund
Figure 4.14 Payment Ratio for Urban Residents by Social Healthcare Fund
Figure 4.15 Payment Ratio for New Rural Cooperation Healthcare Fund

Figure 5.1 Comparison of Bidding Price and Market Price for Some Medicine in Shanghai
Figure 5.2 Bidding Fee Standard for Medicine
Figure 5.3 Medicine Circulation Value Chain
Figure 5.4 Yearly Healthcare Expenditure per Person(2005~2014))
Figure 5.5 Ratio of Surveyed Residents Taking Medical Treatment in Two Weeks in 2008(0/00)
Figure 5.6 Supplementary Medicines Type and Quantity for Some Provinces
Figure 5.7 Doctors’ Annual Income, GDP Per Capita, and Ratio in Europe and US
Figure 5.8 Coverage of Different Healthcare Insurances(2014)
Figure 5.9 Main Cooperative Insurance Platforms in China
Figure 5.10 Actual Self-Payment Ratio Among Different Groups(2013)
Figure 5.11 Healthcare Insurance for Civil Servants(2007~2014)
Figure 5.12 Administrative Cost for Commercial Insurance Agencies Managing New Rural Healthcare Insurances(2010)
Figure 5.13 Healthcare Resources in Difference Cities and Provinces(2014)
Figure 5.14 Gini Coefficient for Healthcare Resources Allocation Across Provinces
Figure 5.15 Relative Strength Index of Financial Subsidies Per Person in Healthcare Across Provinces
Figure 5.16 Comparison of Healthcare Expenditure Among Different Groups
Figure 5.17 Financial Healthcare Insurance Fund Per Person for Different Healthcare Insurance Forms(2014)

Figure 6.1 Healthcare Expenditure and Percentage of GDP before and after the Reform(%)

List of Tables
Table 1.1 Standard Market with Demand That Lacks Elasticity
Table 1.2 Location Competition between Healthcare Providers
Table 1.3 Doctors Sending Signals and the Separating Equilibrium of the Market

Table 2.1 Mean Value and Standard Deviation Indifference curve
Table 2.2 The Random Number of Logarithmic Normal Distribution of Healthcare Expenditure and the Utility Indifference Curve
Table 2.3 Difference in Consumption Due to Fixed Cost and Variable Cost
Table 2.4 Inefficiency of Resource Allocation on the Supply Side Brought by Insurances
Table 2.5 Inefficiency of Resource Allocation on the Consumption Side Brought by Insurances
Table 2.6 Efficiency Loss Due to Price Distortion
Table 2.7 Tilted Demand Curve
Table 2.8 Influence of Change of Self-Pay Ratio on the Utility Curve(I)
Table 2.9 Influence of Change of Self-Pay Ratio on the Utility Curve(II)
Table 2.10 Utility of Insurance and Its Illustration
Table 2.11 Influence of Self-Pay Ratio(%) on Prices and Its Derivative
Table 2.12 Influence of Self-Pay Ratio and the Price (e=0.5)
Table 2.13 Influence of Self-Pay Ratio and the Price (e=2)
Table 2.14 The Relation between Self-Pay Ratio and Prices with Different Degree of Monopoly(e)
Table 2.15 The Influence of Self-Pay Ration on Quantity and the Quantity
Table 2.16 The Influence of Self-Pay Ration on Healthcare Expenditure and the Expenditure
Table 2.17 The Quantity of Demand(α=0.5) with Different Degree of Monopoly(e)
Table 2.18 Influence of the Degree of Monopoly on Healthcare Expenditure and the Expenditure
Table 2.19 Healthcare Demand Curve with and without Insurances
Table 2.20 Canceling the Threshold for Reimbursement and High Self-Pay for Insurance
Table 2.21 Consumers Tend to “Buy More” and “Buy More Expensive”
Table 2.22 Insurance Companies Constrain “Buy More” and “Buy More Expensive”
Table 2.23 Aggregate Pre-Pay Institution
Table 2.24 Insurance Companies Constrain “Buy More” and “Buy More Expensive”
Table 2.25 Comparison of Price Ratio Matrix Spatial View with and without Insurances
Table 2.26 Price and Quantity Change due to the Change of Self-Pay Ratio with a Certain Supply Function
Table 2.27 Quantity Ratio Matrix Spatial View

Table 3.1 Government Constrains the Price and Quantity of Medicine
Table 3.2 Doctors’ Income Constrained by Regulators and the Public
Table 3.3 A Market without Insurances and Free Choice of Insurance
Table 3.4 World Healthcare Expenditure and Its Percentage of the GDP

Table 4.1 Pricing of China’s Medicines
Table 4.2 National General Public Budget Expenditure on Urban Residents and New Rural Cooperation Healthcare Funding(2010~2015)
Table 4.3 Healthcare Insurance Market Structure According to the Premium(2014)
Table 4.4 Amount of Patients in the Three Grades of Hospitals(2005~2015)
Table 4.5 End Medicine Market Structure(2015)
Table 4.6 Government Healthcare Expenditure(1999~2015)
Table 4.7 Amount of Patients in Public Hospitals and its Percentage to the Total Out-Patients (2005~2015)
Table 4.8 Development of Medicine Price Regulation
Table 4.9 Personal Obligations Standard for New Rural Healthcare Insurance and the Standard for Financial Subsidies
Table 4.10 Amount of Medical Assistance Funds by Ministry of Civil Affairs
Table 4.11 Healthcare Insurance Payment Procedures and Functions of Different Departments
Table 4.12 Healthcare Insurance Payment Process

Table 5.1 Change of Aggregate Supply and Demand in the Healthcare Market (1980~2014)
Table 5.2 Comparison between China and Other Countries In Terms of Healthcare Resources Owned by Every 10,000 People(2013)
Table 5.3 Ratio of Patients in Different Grades of Hospitals(2005~2015)
Table 5.4 Medicine Bidding Mechanism
Table 5.5 Utilisation Rate of Beds in Different Grades of Hospitals (2005~2015)
Table 5.6 Ratio between Healthcare Cost Per Person and GDP Per Capita
Table 5.7 The Constitution of the Income of Public Hospitals(2015)
Table 5.8 Changes in the Structure of Healthcare Expenditure Per Person in Comprehensive Hospitals of Different Grades
Table 5.9 Ratio between Labour Cost and GDP Per Capita and Its Changes
Table 5.10 Ratio between Out-Patients Cost and In-Patients Cost in Public Hospitals(2015)
Table 5.12 Amount of Doctor-Patient Conflicts
Table 5.13 Increase of Out-Patients Cost(2000~2015)
Table 5.14 Increase of In-Patients Cost(2000~2015)
Table 5.15 Welfare Loss Caused by Regulations
Table 5.16 Change of the Aggregate Supply and Demand in the healthcare Market(1980~2014)
Table 5.17 Structure of Financial Subsidies
Table 5.18 Density of Medics Per Million People Across Provinces
Table 5.19 Administrative Expenditures in Healthcare Institutions
Table 5.20 Advantages and Disadvantages of Insurance
Table 5.21 Number of Medics Per Million People Across Provinces(2014)
Table 5.22 Number of Grade Three Hospitals Per Million People Across Provinces
Table 5.23 Financial Subsidies Per Person Across Provinces Modified by GDP Per Capita (2014)
Table 5.24 Relative Strength Index of Financial Subsidies Per Person in Healthcare Across Provinces
Table 5.25 Comparison of Healthcare Expenditure Among Different Groups in 2013
Table 5.26 Relative Strength Index of Financial Subsidies Per Person in Healthcare in Different Groups

Table 6.1 Relation between Healthcare Expenditure Ratio and Healthcare Profit
Table 6.2 Ranking of Some Countries’ Healthcare Efficiency
Table 6.3 Relation between the Payment Ratio of Cash for Healthcare and Efficiency
Table 6.4 Logarithmic Normal Distribution Based on the Data of CHARLS
Table 6.5 Random Number Distribution of In-Patient Cost Generated by the Logarithmic Mean Square Error Based on the Data of CHARLS
Table 6.6 Income Standard and Healthcare Cost Random Number
Table 6.7 Distribution of Out-Patient Healthcare Expenditure and In-Patient Healthcare Expenditure
Table 6.8 Canceling Out-Patient Insurance
Table 6.9 In-Patient Healthcare Insurance Cancelling Payment Threshold and Raise Self-Pay Ratio
Table 6.10 Percentage of Healthcare Expenditure before against after Reforms

Table 7.1 Illustration of Healthcare Reform Process

Author: flourishflood

Economist, Confucianist

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: