The political economy of healthcare reform in China: negotiating public and private

Arthur Daemmrich

China's healthcare system is experiencing significant growth from expanded government-backed insurance, greater public-sector spending on hospitals, and the introduction of private insurance and for-profit clinics. An incremental reform process has sought to develop market incentives for medical innovation and liberalize physician compensation and hospital finance while continuing to keep basic care affordable to a large population that pays for many components of care out-of-pocket. Additional changes presently under consideration by policymakers are likely to further restructure insurance and the delivery of care and will alter competitive dynamics in major healthcare industries, notably pharmaceuticals, medical devices, and diagnostic testing. This article describes the institutional history of China's healthcare system and identifies dilemmas emerging as the country negotiates divisions between public and private in healthcare. Building on this analysis, the article considers opportunities for public-private partnerships and greater systems integration to reconcile otherwise incommensurable approaches to rewarding innovation and improving access. The article concludes with observations on the public function of health insurance and its significance to further development of China's healthcare system.