Health Care System in China
October 22nd, 2007
Submitted By: Brandi Eng-Rohrbach
I just read an interesting article in The Economist titled, “Missing the Barefoot Doctors”.
This article was interesting to me because it highlighted the fact that China is also facing a health care crisis like the rest of the world.
In the United States currently “47 million Americans, or 16 percent of the population, were without health insurance in 2005.” (Source: National Coalition on Health Care) . It appears that currently neither the free-market system employed by the United States nor the universal government programs employed by the likes of countries like Canada are working. The free market system moves health care out of the reach for many and the universal system is plagued by inefficiency and long wait times.
In this article, it appears that China has developed a novel approach. This is a system of public insurance, whereby health care is not free but paid for but insurance is sold through the government. This system would seem to be a way of creating a synergy of the two dominant systems. It encourages efficiency like the free market system by creating a system of deductibles and co-pays. This encourages people to use the system only when the necessary and this reduces unnecessary visits. This keeps waiting time and costs down. The Chinese system also features the advantages of a universal health care system. It maximizes consumer surplus because the government sells to consumers at cost. It also takes advantage of economies of scale. These two things drive down cost and make it available for more. I think this is an interesting solution to the health care crisis.
I do realize that the article, in fact, highlights why such a system is not working in rural China. First of all, the insurance is too expensive. It is the equivalent of 11 days pay. Second, the co-pays are too high. People in rural areas are forced to pay 40% of such treatments. This is equivalent to four months’ income. These prices make the insurance too cost-prohibitive to be used and do not allow the government to take advantage of the economies of scale that could be realized. Still if such a system was tweaked it could provide a novel approach to a global problem.
In addition, I think another issue highlighted in the article is quite disturbing. This is the fact that China follows the “One Country, Two Systems” policy not just in an economic sense, but also a social sense. The health care system directly discriminates against people based on their birth location. It does not allow people born in rural areas to have access to the urban health care systems even if they relocate to a city. This is a direct discrimination against people from rural areas. This is disappointing to see as much of China’s continued growth relies on the migration of people from the rural to urban areas.
Entry Filed under: Pre-Departure, Beijing, China
3 Comments Add your own
1. Chris Carr | October 22nd, 2007 at 8:51 am
Interesting article. Well done. This topic will also be perfect for discussion with Dr. Marlow in your macro econ course when spring quarter rolls around, and maybe even in your managerial econ course with Dr. Zambrano this fall. Check in with them on this and see what they have to say!
2. Chris Carr | October 22nd, 2007 at 9:19 pm
Part II: Addendum from Prof. Carr
This is a significant social, political and economic issue in China, as is the issue of the funding of pensions as China’s population ages.
As I understand it, the “one child” policy was actually enforced pretty strenuously in rural areas, where a heavy tax was placed on families that had a second child. Bearing the cost of paying that same tax in urban areas was economically more feasible. The purpose of “one child” policy was to slow population growth to a level that might be sustainable given the national natural and industrial resource base.
The male bias is largely due to the lack of a pension/retirement system. Traditionally Chinese women became part of their husband’s family, and during old age it is that family that takes care of the “grandparents”. So, imagine the social strain when you can only have one child without a significant financial penalty, and if that child is a little girl, you have no prospects for an extended family who will care for you during old age, and no “retirement” plan or social safety net.
Some of this is being thrown into the wind with urbanization, and with migration of many young people to the coastal areas where there are a lot more opportunities. This extended family dislocation may be at least as big a social problem as is the comparative shortage of women as marriage partners during the next 10-20 years.
Here in the US we are going to face some issues that are related to the Chinese problem with retirement and pensions. Our society is somewhat unique in the way that both health insurance and retirement pensions have often been linked to employment. Now we see that health care during retirement is harder to secure, and that prior agreements on health care benefits and retirement plans are being jettisoned.
But here is the important point that I would like you all to think about — will economic success in the future go to those nations (USA, China, or others) that are most effective in sorting out the issues of health care, pensions, etc.?
3. Brandi Eng-Rohrbach | October 23rd, 2007 at 9:33 pm
I would argue yes, because healthy employees are more productive. Poor health coverage leads to more sick days and less productivity. I would say that thus it is in society’s interest to provide such benefits if companies no longer are able to afford to do so and remain competitive. I think what delineates a developed nation from a developing nation is access to education, health care, and support for the elderly/disabled.
Pensions are different however. Pensions are usually provided by a company. Since it is no longer the standard companies to have pensions those that do tend to have increased costs and thus probably aren’t able to compete in the price takers/commodity market. I mean this is the reason most manufacturing has left north america.
I think countries that achieve economic success in the long run are going to be about sustainability. I believe that countries that can ensure the majority of their country has health care and monetary support for the elderly will be the most competitive at attracting talent. This is going to prove to be the most difficult in countries that have had a decreased growth rate and have more elderly than young. Any health care system or pension plan would be strained by this. But I feel in the span of say 100 years, achieving sustainability of the population and environment will lead to success.
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