Purchasing health care in China: Experiences, Opportunities and challenges

Objectives – Purchasing has been promoted as a key policy instrument to improve health system performance. Despite its widespread adoption, there is little empirical evidence on how it works, the challenges surrounding its implementation, its impact, and the preconditions for it to function effectively, particularly in low- and middle-income settings. The objective of this chapter is to analyze critically the extent to which purchasing could be, and has been used strategically in China and to identify modifications that are needed for purchasing to be effective in assuring that the government's new funding for health care will result in efficient and effective health services. Methods – We present a conceptual framework for purchasing, which identifies three critical principal–agent relationships in purchasing. We draw on evidence from secondary data, results of other research studies, interviews, and the impact evaluation of a social experiment in rural China that explicitly used purchasing to improve quality and efficiency. This information is used to examine purchasing relationships in urban social health insurance (SHI), the rural medical insurance scheme, and purchasing of public health services. Findings – To date, use of strategic purchasing is limited in China. Both the urban and the rural health insurance schemes act as passive third-party payers, failing to take advantage of the opportunities to strengthen incentives to improve quality and efficiency. This may be because as government agencies, the extent to which the Ministries of Health and Labor and Social Security can act independently from provider interests, or act in the best interest of the population, is unclear. Other important challenges include ensuring adequate representation of the population's views and preferences and making better use of the leverage provided by purchasing to create appropriate provider incentives, through better integration of financing and improved coordination among purchasers. Implications for policy – In designing purchasing arrangements, attention needs to be paid to all three principal–agent relationships. Successful purchasing appears to require mechanisms to mobilize and represent community preferences and more strategic contracting with providers. More research is needed to strengthen the evidence on which purchasing arrangements work, which do not work, and under what conditions different purchasing configurations can work most effectively.