A Theoretical Analysis, PerformanceEvaluation, And Reform Solution on Health CareSystem in China Third Version Research Team of Unirule Instituteof Economics 2018年6月25日 The effectiveness of thereform ● In summary, this reformproposal will reduce per capita medical expenses from 5.2% to 2.6% of the percapita GDP, a decrease of 49.9%. ● This reform proposal willalso reduce the per capita medical expenses originally covered by insurancefrom 3.1% to 0.4% of the per capita GDP, a decrease of 87%. ● If it is shown by thededuction of healthcare insurance fees for urban workers, the deduction fromtheir monthly wage will be decreased from 9.5% to 1.2% of their monthly wage,which would also lower the burden for enterprises. ● Even though the self-payfees account for a higher ratio than before, as the healthcare expendituredecreased in general, patients pay 112% of that they paid for their medicaltreatments before the reform. Abstract ● The market for healthcarefeatures uncertainty, lack of price elasticity, and information asymmetric,besides other market characteristics. ● The purpose of medicalinsurance is to eradicate uncertainty and bring about the utility of certaintyby transforming the uncertainty of personal medical affairs into predictablerisks through integration and professionalization. ● People tend to “buy more” and “buy the expensive” as insuranceslower the part of the medical expenses borne by the individuals, which ineffect pushes up the prices of health care, and the demand for medical servicesand goods. The overall effect is an increase of health care expenditure. ● Insurances pushes up 73%of the prices of China’s medicalservices and goods, leading to an over-expenditure of 21% of all the medicalservices and goods by consumers, which further increases the healthcareexpenditure per capita to 115% of that without these insurances . ● Even though insurancesbring about an increase of welfare by 2.25% of the GDP, compared to the losscaused by it, a net loss of some0.44% of the GDP, that is some RMB361 billion,is caused by insurances. ● By 2013, a total of someRMB45.7 billion has been wasted by the public healthcare system. ● The managerial cost ofhealthcare institutions, i.e., expenditure by healthcare administrations andcost of managing the healthcare insurances, skyrocketed year on year, andreached RMB 35.9 billion in 2017. ● Per capita medicalexpenses are rising, from 4.03% in 2008 to 5.2% in 2017. In 2017, the nationaltotal health expenditure accounted for 6.4% of GDP. ● Therefore, it is notenough to criticize only the use of healthcare insurances. See below: 
● Quality medical resourcesconcentrate disproportionately in big cities and big hospitals, which causesinsensible spatial allocation causing an overly high time cost and otherindirect medical cost. In 2013, if we put together the overspent cost and timefor local and cross-region healthcare services and goods, it equaled to a totalwaste of resources that priced some RMB445.2 billion a year. ● The growth of labor costsfor doctors is lower than that of the per capita GDP. The proportion of laborcosts for doctors in per capita GDP fell from 11.7% in 2002 to 3.2% in 2017. ● In an aggregate sense, thedemand for healthcare increased 45 times from 1980 to 2017, while the number ofhealth technical personnel only increased 1.64times. Demand surpassed supply bya large margin. ● Average healthcareresources are distributed in a balanced manner across regions. It coincideswith the resource allocation planning approach based on population taken by theChinese government. ● Quality healthcareresources are distributed in a very imbalanced term with more resourcesconcentrated 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” includeprovinces such as Henan, Anhui, Hebei, Hunan, Jiangxi, Guizhou, Guangxi andShandong. ● The unfairness index ofthe financial distribution system in the healthcare system is 0.335. Accordingto 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” includefarmers, urban residents, and urban workers. ● This research proposes thebasic principles for institutional healthcare reform is taking the marketinstitution as the basis, and government regulations as complement. 1. To increase theself-pay ratio and its scope, to enlarge the function of the market; 2. To facilitate themarket competition for healthcare; 3. To let the market makethe price for healthcare services under the market mechanism; 4. To let the price ofmedicines fluctuate when the market makes prices for healthcare services; 5. To abandon compulsorysocial insurance and rely more on commercial insurance institutions; 6. The government shouldsubsidize the medicine fees for the poorest people. ● The main measures proposedby this research include: 1. Canceling the insurancecovering out-patient medical services: the fee inflicted by out-patient medicaltreatment can be paid either by the patients or by the individual account; 2. Canceling the thresholdfor insurance coverage and raise the self-pay ratio for in-patients to 70%; 3. Setting up a nationalsevere disease charity fund to subsidize those whose self-pay portion exceedstheir yearly income’s 40%. ● Estimated according to themodel in this research, setting 2017 as the baseline, the proposal of thisresearch should be able to hold back a 62% increase of the price, which wouldsave RMB 1404.9 billion, 1.7% of the GDP. ● It would hold back some17.5% of healthcare overuse, which would save up to RMB 397 billion, about0.48% of the GDP. ● Some RMB1537 per personwould be saved for healthcare, about 2.6% of GDP per capita, which rounds up tosome RMB2036.4 billion nationwide. ● Those whose self-payproportion exceeds their yearly income’s 40% constitute about 2.45% of the total population. If a severedisease fund is set up with a scale of about RMB 250 billion, it will be onlyabout 0.3% of the GDP. ● If the monopoly iseliminated and competition is promoted, that is the slope of the supplyfunction, e, changes from 0.47 to 2, then everyone would be able to save aboutRMB 127 for healthcare, a total RMB152.3 billion nationwide. ● Healthcare resources willbe better allocated in space. If the distance and waiting time for medicaltreatment is shortened by half, that is the 4 hours needed for local treatmentis shortened to 2 hours, then a total value of time amounting to about RMB266.2billion will be saved; if the distance and waiting time for cross regiontreatment is shortened from 12.5 days to 6days and 6 hours, according to dataof 2013, when a total value of time amounting to about RMB 29 billion will besaved. Putting them together, a total waste of time estimated for the value ofRMB 295.2 billion will be avoided. ● Canceling out-patient(small illness) insurance would reduce 2/3 of the current insurance-relatedmanagerial operations, saving a total of RMB23.9 billion according to thecurrent administrative fees of insurance agencies that is RMB 35.9 billion. ● When the increase ofhealthcare expenditures is contained, a huge amount of resources are saved,which will bring back the advantages of insurances. See blow. 
● In summary, this reformproposal will reduceper capita medical expenses from 5.2% to 2.6% of the percapita GDP, a decrease of 49.9%. ● This reform proposal willalso reduce the per capita medical expenses originally covered by insurancefrom 3.1% to 0.4% of the per capita GDP, a decrease of 87%. ● If it is shown by thededuction of healthcare insurance fees for urban workers, the deduction fromtheir monthly wage will be decreased from 9.5% to 1.2% of their monthly wage,which would also lower the burden for enterprises. ● Even though the self-payfees account for a higher ratio than before, as the healthcare expendituredecreased in general, patients pay 112% of that they paid for their medicaltreatments before the reform. DOWNLOAD | 
