The Performance and Driving Force of Government Health Expenditure in China: Evidence from Provincial Panel Data, 1991-2007
The new health reform started in 2009 has shown the determination of the Chinese government, especially the central government, to increase its responsibility in the health sector. The most obvious manifestation of this commitment would be to increase government health expenditure (GHE). But there is still a hot debate about whether the government should allocate more public finds to health or just deepen the marketization of the health sector. Moreover, commitments at the central and local levels are not the same: local government responsibility for GHE is high, and commitments by the central government to increase GHE have not translated into increases in local government GHE as much as proposed in the national health reform.
Our research seeks to answer two questions: What was the actual pattern of GHE? And why did China’s local governments respond as they did? We first discuss the necessity of public financing for health care, and then analyze how intergovernmental economic competition affects local governments’ behavior under “Chinese-style decentralization” (known as fiscal decentralization with political centralization). Empirically, we apply a dynamic panel data model to provincial panel data from 1991 to 2007 to identify the effect of GHE on health performance in each province over time, using infant mortality and some morbidity metrics as health performance variables. We also examine differences across regions, as well as before and after the Severe Acute Respiratory Syndrome (SARS) epidemic of 2003.
Our analysis provides evidence that Chinese-style decentralization negatively impacted GHE. The main findings are as follows:
- Increasing GHE did improve health performance, and this improvement was mainly
driven by the GHE through the health department directly, not
through spending by other governmental departments that also impact health.
However, pursuit of economic performance lowered local governments’ GHE, mainly
by decreasing GHE through local health departments.
- Compared with in the
eastern and western regions, this health improvement was not significant in China’s
middle regions, where the intergovernmental economic competition leads to much
less GHE through health departments.
- The outburst of SARS in 2003 further
increased the positive effect from GHE through local health departments, while
the effect from GHE through other departments was not equally significant.
All these results suggest that adjusting the structure of public health financing, reforming the fiscal system, and improving the performance evaluation system for local governments are critical for the success of China’s on-going health reform.
Philippines Conference Room
Qiulin Chen
Shorenstein APARC
Stanford University
Encina Hall, Room C335
Stanford, CA 94305-6055
Qiulin Chen is a postdoctoral fellow of Shorenstein APARC and a member of the center's Asia Health Policy Program. His main interest of research is health economics and public finance, focusing on policy and outcome comparison of health care systems and Chinese health reform. His dissertation focused on performance comparison between public (or governmental) and private health care financing, between local and central government responsibility on health care, between contracted and integrated health care system. In particular, his dissertation examined under Chinese-style decentralization, known as fiscal decentralization with political centralization, how economic competition affect local government's behaviour on health investment, and why public contracted system obstructs health performance and provides one channel of such effects in terms of preventive care and public health. He is currently involved in a comparative research project on demographic change in East Asia based on the National Transfer Accounts data and analysis.
Chen's recent publication is "The changing pattern of China's public services" (with Ling Li and Yu Jiang) in Population Aging and the Generational Economy: A Global Perspective (Ronald Lee and Andrew Mason, editors), forthcoming 2011. Before studying in Stanford, he has published more than 10 papers in academic journals in Chinese, such as Jing Ji Yan Jiu (Economic Research) and Zhong Guo Wei Sheng Jing Ji (Chinese Health Economics), and 5 book chapters. He has participated in about 20 research projects, such as A Design of Framework for Healthcare Reform in China which is commissioned by the State Council Working Party on Health Reform, Strategy Planning Study of "Healthy China 2020" which is commissioned by the Minister of Health, and Health Challenge in the Aging Society and It's Policy Implication funded by Chinese National Natural Science Foundation.
Chen earned his Ph.D. in Economics from Peking University in 2010, and earned a B.A. in Business Administration from Nanjing University in 2001. From 2004 through 2008, he was Executive Assistant of the Director of the China Centre for Economic Research at Peking University (CCER). He is also a postdoctoral fellow of National School of Development at Peking University (Its predecessor is CCER).
Jonathan Zittrain on minds for sale
The first Liberation Technology seminar of the winter quarter on January 6, featured Jonathan Zittrain, Professor of Law at Harvard Law School and co-founder of the Berkman Center for Internet & Society at Harvard University. Zittrain focused his talk entitled, Minds for Sale, on the variety of online platforms that harness the wisdom of crowds today, and closed with a discussion of the implications of these platforms. Categorizing these new tools by the breadth of their user base, Zittrain began by describing the platforms that pay the most money per task, require the most skill, and subsequently have the least participation. Key examples of these platforms are listed below, and organized by their decreasing level on skill.
- Xprize Foundation attempts to prompt radical breakthroughs through competitions for large quantities of prize money.
- InnoCentive creates a marketplace between engineers and scientists to encourage innovation.
- LiveOps, which bills itself as a contact center cloud, has developed a large set of independent contractors who are designated specific tasks when they sign in to the site. They may be assigned to answer calls placed to a restaurant or emergency hotline or to make political calls on behalf of Liveops clients.
- Samasource offers "dignified digital work for women, children and refugees" located in developing countries.
- Amazon Mechanical Turk (also known as Artificial Artificial Intelligence) allows users to participate in anonymous, minimally paid tasks. These tasks can be submitted by any party and are highly disaggregated among hundreds or thousands of users, each of whom receives a payout of between approximately one to fifteen cents for completing the task.
- Soylent, which calls itself "a word processor with a crowd inside" embeds workers from Mechanical Turk into Microsoft Word. When users install the site's Shortn add-in into Microsoft Word, they can use the tool to have written samples shortened in two minutes. In order to achieve this, the written sample is disaggregated by paragraphs, and each paragraph is shortened within two minutes by a "Turker"-a user who accepts the task on Mechanical Turk.
- Microtask enables disaggregating previously sensitive data to be work processed from a scanned image. The ultimate goal of this group is to put distributed work into video and computer games. For now, they disaggregate larger tasks into two-second tasks that can be distributed across a crowd.
- Games With A Purpose (GWAP) has a game-like platform designed to get users to complete disaggregated tasks for virtual points, rather than for actual remuneration. One of its more popular activities quickly attracted 23,000 players who contributed 4.1 million labels to images they were presented with in The ESP Game. Many players routinely play more than 20 hours a week.
Next, Zittrain moved on to offer some additional examples, hypothetical scenarios and questions that highlight some of his own concerns about the potential of these technologies. One key question is whether this market may be too efficient at linking up solvers and payers, if certain tasks are not in fact beneficial for society. After all, it was highly contentious when Texas governor Rick Perry set up video cameras on Texas' border with Mexico and invited people to watch the video feeds and report if they saw anything suspicious. Similarly, a site called InternetEyes allows users to watch video feed from CCTV cameras in the UK for free, offering the chance to "earn reward money, have a chance at reducing crime, and potentially become a hero and save lives," instead of actual compensation.
In another example, the University of Colorado Police Department recently offered a $50 reward for identification of students shown to be smoking marijuana in photos from a large April 20 gathering. Hypothetically, the Iranian government could use Turkers to identify Iranian protestors through national ID photographs in the very same way; by Zittrain's calculations, this task could be disaggregated and carried out quickly at a cost of only $17,000 per protester identified.
Another cluster of issues relates to the use of anonymous users to carry out disaggregated tasks that may have the effect of exerting influence on others. For example, Turkers were recently offered the opportunity to write a positive 5 out of 5 review for a product on a website, which hundreds accepted and completed for a few cents at a time. Users on SubvertandProfit.com are paid to "Like" something on Facebook, "Digg" something, or show their approval of a site or product via some other social network. The users are remunerated for their effort, and the site also profits. Taking this a step further, these platforms also enable users to pay people to evince opinions on legislative issues they do not actually care about. For example, health insurers were recently caught paying Facebook gamers virtual currency to oppose the health reform bill. By enabling any task to be disaggregated and monetized, these new platforms can have highly controversial and unethical implications.
Health Reform in the Pacific: Comparing Approaches to Universal Coverage in the Philippines and the State of Hawaii
The Republic of the Philippines began on the path to universal coverage with the passage of the National Health Insurance Act of 1995 (Republic Act 7875) which established the Philippine Health Insurance Corporation (PhilHealth) . Building on the Philippine Medicare program which began in 1971, PhilHealth has expanded coverage to more than 80% of the population with basic benefits, but accounts for only 10% of total health financing—wide population coverage with thin public benefits. An extensive system of private insurance provides additional benefits for high-income Filipino households. While the Philippines is pursuing a public insurance approach with private add-ons, Hawaii has mandated private employment-based coverage through the Pre-paid Health Care Act of 1974 and operates under a Congressionally granted ERISA exemption as well as an exemption from the Affordable Care Act of 2010. Combining the employer mandate with generous Medicaid and SCHIP programs, Hawaii has achieved a coverage rate exceeding 90% of the resident population with extensive benefit packages. The presenter will provide an overview of the two systems and present original research on the labor market effects and public insurance effects of the Hawaii system.
Daniel and Nancy Okimoto Conference Room
Health reform spans the Pacific
In early spring, historic health reform passes, extending insurance to millions of uninsured. Despite problems with workplace-based coverage, controversy over government subsidies for insurance premiums, and disparities across a large and diverse nation, dramatic shift to a single-payer system was seen as impractical.
Instead, reforms focus on expanding current social insurance programs as well as new initiatives to cover the uninsured, improve quality, and control spending. They provide a basic floor, subsidized for the poorest, but preserve consumer freedom to choose in health care. No government body dictates choice of doctor or hospital; investor-owned and private not-for-profits compete alongside government-run providers like community health centers and rural hospitals.
Left to be addressed in later phases are the difficult questions of how to slow the relentless pace of health care spending increases -- driven in part by technological change and population aging, but also perverse incentives embedded in fee-for-service payment and fragmented delivery. Pushed through despite multiple crises confronting the leadership, the final landmark health reform works in conjunction with measures enacted as part of the fiscal stimulus package to strengthen the healthcare system. Some provisions take effect immediately; others will take many years to unfold.
President Obama’s triumph on his top domestic priority? Actually, there were no votes along partisan lines, no controversy over abortion. I am describing health reform in China, which was announced almost exactly a year ago.
We do not hear much about the parallels in the US and Chinese social policy. But we cannot fully understand each other if we ignore these commonalities. We do not hear much about those who, in both societies, have been rendered destitute merely because they or a family member became sick or injured in a system with a social safety net full of gaping holes.
It will surprise many Americans to know that government financing as a share of total health spending was lower in socialist China over the last decade than in the United States. Now China has pledged about US$124 billion over 3 years to expand basic health insurance, strengthen public health and primary care, and reform public hospitals.
In China, the injustice of differential access to life-saving healthcare had sparked cases of social unrest. The April 2009 reform announcement was the culmination of years of post-SARS (2003) soul searching for a healthcare system befitting China’s dynamically transforming society. Special interests block change. (Sound familiar?) The CPC Central Committee and the State Council acknowledge that successful health reform will be “an arduous and long-term task”.
If the US can pass sweeping health reform despite an unprecedented financial crisis, and China can envision universal health coverage for 1.3 billion while “getting old before getting rich,” then together we should be able to look past our many differences to focus on our common interests. Our two proud nations must work together to confront numerous challenges, such as upholding regional stability (e.g. on the Korean peninsula); redressing global economic imbalances (increasing health insurance can help spur China towards more domestic consumption); and investing in “green tech” for a warming planet and “grey tech” for an aging society.
* * *
When searching for insights about how other countries deal with similar challenges, Americans often look to Europe and Canada. Rarer is the comparison to counterparts across the Pacific. Yet President Obama has clearly articulated the vision of the US as a Pacific Nation, and there are developments around the Pacific Rim that merit consideration in our debates.
Australia pioneered cost-effectiveness in health care purchasing, while the US continues to debate whether cost should be part of comparative effectiveness research and policy decisions.
Both Japan and South Korea, like Germany, have enacted long term care insurance to smooth the transition to an aging society. Their experiences might be fruitful as we implement the first national government-run long-term care insurance program, a little-heralded component of the newly passed legislation (and a fitting legacy of Senator Edward Kennedy).
Japan and Singapore provide universal coverage to older populations than ours with health systems that, although surprisingly different from each other in terms of public financing and role of market forces, both ranked among the best in the world -- and far higher than the US -- in the World Health Organization’s ranking of health systems in the year 2000. Although one may quibble with the ranking, it is indisputable that Japan spends a much smaller share of GDP on healthcare than the US does, despite being one of the oldest and longest-lived societies in the history of the world and having (like the US) a fee-for-service payment system.
Japan and South Korea are also democracies, where health policies occasionally engender heated debates. In South Korea, physicians went on nationwide strike three times to oppose the separation of prescribing from dispensing. Although Japan’s incremental reforms rarely spur such drama, the passions aroused by end-of-life care – embodied in the bizarre “death panels” controversy in the US health reform debate of 2009 – has its counterpart in the bitter nickname for Japan’s separate insurance plan for the oldest old: “hurry-up-and-die” insurance.
Yet Japan, Singapore, and Hong Kong all offer health systems that provide reasonable risk protection and quality of care for populations older than ours, with a diverse range of government and market roles in financing and delivery, while spending far less per capita than the US.
No system has all the answers. But the US and our neighbors across the vast Pacific have a common interest in sharing what we’ve found that works for health reform. Despite divergence in our political and economic systems, we all value long, healthy lives for ourselves and our children -- and we’re united in health reforms that try to further that goal.
Can You Trust Your Doctor? Patients, Providers, and Health Reforms in China
In this colloquium, we hear about Tsinghua University researchers' studies on physician-patient trust and satisfaction with health care in China. Professor Shen describes her research on “Social distance and its impact on patients’ trust in their providers in transitional China.” Using 2008 data from over 3500 patients that includes unique measures of patient trust – such as whether or not patients followed doctor recommendations for treatment – Dr. Shen and colleagues find large differences in trust, with patients of lower socio-economic status displaying higher trust in doctors than other groups. Analyses also examine how trust is related to satisfaction with health services, and how patient dissatisfaction in China compares to that in other countries’ health systems. Related research explores patients’ and providers’ attitudes towards separation of prescribing and dispensing, a key component of the 2009 health reforms, and how patient mistrust of providers stems from concerns about both competence and profiteering from overprescribing.
Philippines Conference Room
Qunhong Shen
Shorenstein APARC
Stanford University
Encina Hall, Room E-301
Stanford, CA 94305-6055