Social Sciences in China (Chinese Edition)

No.8, 2015

The Source of Constantly Rising Health Care Costs—An Analysis Based on Historical Data and Field Materials

(Abstract)

Liu Junqiang, Liu Kai and Zeng Yi

China has successfully achieved universal health coverage, thus laying a sound foundation for the resolution of worldwide health care problems. However, the three major pillars of universal health coverage (employee health insurance, resident health insurance and the new rural cooperative medical system) are under ever greater pressure from costs. On the basis of data on inpatient and outpatient services from hospitals in the past 25 years, we divide cost increases into average costs and service usage rates. Average costs were the main driver of the increase in hospitalization costs from 1988 to 1999, but from 2000 on, average costs and the service usage rate were jointly responsible for the increase in hospitalization costs. From 1988 to 2002, average costs were the major driver of increased outpatient costs, but from 2003 on, prices and service usage rates were the joint drivers of increased outpatient costs. Interviews with seventy people connected with medical insurance policy in Henan and Sichuan showed that the six tools in the cost-control toolbox of medical insurance departments are not always effective at present. Given that .hospitals have the advantage of a monopoly on information and patients have become less sensitive to prices thanks to medical insurance, the “conspiracy” between hospitals and patients is worsening the problem of excessive medical treatment. Depiction of the interconnections and conflicts among patients, suppliers and medical insurance can reveal the distortions and inefficiencies in the rational design of mechanisms for third party purchase of medical insurance in reality.