Overly politicized resource allocation in China’s health care reform process is leading provincial governments to overspend in some areas but fail to meet demand in others, write Lei Yu and Xiao Tan.
In 2009, the Chinese government unveiled its ambitious and complex health reformscommitting to provide affordable, equitable and effective health services for all by 2020. An integral part of the reforms was to strengthen the primary care system, that is, medical care provided outside of a hospital, through stricter central directives on infrastructure standards and resource allocation.
China’s primary care system consists of hundreds of thousands of predominantly publicly owned health centers and clinics across the country. According to the government’s reform agenda, primary care centers should gradually take on a gatekeeper role and change China’s hospital-centric system. Many patients prefer to visit hospitals instead of primary care centers for any health problem, which is viewed as a key driver of China’s rapid growth in health care spending.
This ambitious plan has been supported by a significant increase in government investment in developing primary care infrastructure. Within China’s intergovernmental financial system, all levels of government can contribute to infrastructure projects. At the central level, there was unprecedented investment in primary care infrastructure, averaging 2.6 billion yuan (approximately US$385 million) per year between 2004 and 2008 and 5.5 billion yuan (approximately US$815 million) per year. per year between 2012 and 2015.
This large fiscal injection was badly needed, as primary care centers were underfunded in the 1980s and 1990s. At the turn of the century, many were spoiled and they lacked basic equipment. The situation was particularly serious in economically underdeveloped regions where the resources of local governments were more limited. In recognition of the gross inequity, most central funding went to these areas to equalize health resources.
A key factor behind these developments is China’s paradigm shift towards a greater emphasis on equalization and a more assertive role for the central government. Since the early 2000s, under the banner of “Building a Harmonious Society”, the Chinese government has launched a series of nationwide initiatives to correct economic and social inequality in regions and reduce the gap between urban and rural areas.
in the kingdom of social welfare, including public health, rebalancing efforts required greater centralizing power. The central party-state sought to tighten its control over politico-administrative controls over policy targets and the allocation of resources that had been returned to local governments. This included setting binding targets for primary care infrastructure development and service delivery, while increasing top-down financial support to promote inclusive social programmes.
Despite invigorated partisan rhetoric, some Studies have noted that recentralization only extended below the subnational level, meaning that provincial governments were still empowered with greater resources and capacities to influence policy outcomes. With considerable room to interpret national initiatives in a local context, the provinces have exercised discretionary power, strategically mediating between central objectives and local interests.
In our recent Article published in Asia-Pacific Policy Studies magazine, we explore this intergovernmental power dynamic and its implications for policy and practice through the lens of the expansion of China’s primary care infrastructure.
Drawing on data from national, subnational, and local projects, we assess the extent to which the central government has achieved its goal of equalizing primary care infrastructure.
We find that despite stricter directives from the central government, provincial governments have been entrusted with the task of implementing and enforcing the new national standards for primary care facilities.
Provinces often extend central directives by imposing higher level goals on local implementers. This has triggered waves of investment at provincial and lower levels, eventually leading to excess capacity. The utilization rate of municipal health center beds has stagnated at around 60% over the decade since 2009.
Provincial governments have also played a critical role in raising central funds and driving local investment in primary care infrastructure and facility improvements. The top-down incentive was based on a matching funds approach, where central investment in primary care infrastructure was set according to locally available funds.
To meet their co-financing responsibilities, provincial governments pooled funds from various sources, from budget accounts and land financing to policy bank loans or government bonds. Provincial governments can also channel funds from other national initiatives, such as rural development plans and poverty alleviation and leveling schemes for internal regions.
In the absence of bottom-up accountability, this politicized resource allocation framework has distorted the motivation of local actors, creating a bias toward volume-driven delivery that ignores the real needs behind the reform agenda. Not only has central spending on developing primary care infrastructure projects remained modest at the level of individual projects, but the unequal distribution of resources across regions has continued.
There is little association between the state of local development (closely related to local fiscal capacity), the scarcity of primary care facilities, and patterns of infrastructure expansion. As a result, there has been overinvestment in some areas and a mismatch between supply and demand in others.
meIn light of these results, we conclude that there are significant limitations to the extent to which increased central government funding and more stringent requirements can match primary care infrastructure.
Efforts have been markedly constrained by politicized resource allocation mechanisms and top-down incentive structures for policy implementation. Eventually, these limitations have translated into a persistently unequal distribution of primary care infrastructure, with negative ramifications for China’s ambitious health reforms.
This article is published in collaboration with Development Policy Blog. It is based on an article in Asia-Pacific Policy Studies daily, ‘Has recentralization improved equality? Development of primary care infrastructure in China‘, by Xiao Tan and Lei Yu.