In 1978, Deng Xiaoping began the economic reforms now referred to as "Gaige Kaifang," through which China ushered in an era of unprecedented receptivity to foreign influence. The shift to liberalized trade policy led to reduced poverty levels and set China on the path to economic strength. But the reforms also catalyzed massive change within the formerly centralized medical system. Medicine is now the domain of the private sector and provincial and local governments, rather than the national government. While market reforms in the economy have been a boon for the Chinese, similar reforms in the healthcare system have improved quality but also created unequal access to healthcare due to rising costs.
While healthcare prices have risen over the past two decades, the number of hospitals in China has actually grown. In 1980, there were approximately 9,900 hospitals in China. As of 2005, there were about 18,700. A boom in the number of hospitals in such a short span speaks to the changing medical landscape in China. However, it also obscures the added costs that have come along with this seemingly positive change.
Chinese hospitals, especially in urban centers, increasingly rely on advanced medical technology. The increased importation of such technology, from MRIs to CT Scans and surgical equipment, along with the inevitable diffusion of such technology throughout Chinese hospitals, has certainly increased the efficiency and quality of medical practice. But rather than increasing competition and driving down costs, the introduction of free market reforms and improvements in the level of medical technology have had the reverse effect; they have actually driven costs, and prices for patients, up.
As the Chinese government continues to privatize healthcare, it is vital to understand the cause behind the seemingly paradoxical rise in medical costs. Economic reforms, if focused solely on economic policy and not tailored to specific sectors such as healthcare, can undermine a country's medical system by creating increased disparity in medical services for the wealthy and the poor. There is no better example of this pitfall than today's China. More importantly, and there is no real solution in sight. As medical costs for patients rise, expensive medical technologies continue to enter hospitals all over the country and push up costs even further.
William Hsiao of the Harvard School of Public Health attributes this phenomenon to new profit incentives that are reordering priorities for Chinese hospitals and medical practitioners. Profit incentives decrease physicians' concern for providing affordable, accessible treatment and increase the pressure to use high-cost technology catered towards those who can pay for it. The contradictory coexistence of an economic boom and a healthcare gap presents a tradeoff for China's policy makers. The government can either allow an American-style high-quality but expensive medical care system, or pursue a more egalitarian, but more regulated and inflexible system. Chinese policy towards the market for advanced medical devices reflects the government's attempts to address this dilemma.
Under Mao Tse-tung's government, Chinese healthcare was based on communal principles, wherein the state owned and operated aspects of the healthcare system. China's Cooperative Medical System during the Cold War era ensured that even rural farmers had some access to healthcare, even if it came from barefoot doctors who were community experts in Western and traditional forms of medicine. Some of the accomplishments under the old system included a decline in infant mortality and a modest increase in life expectancy.
The barefoot doctor system would not survive the turbulent years of economic reform. The power struggle between economic liberals and hard-line communists created political turmoil in the early 1980s that shook the foundation of the government's healthcare program. …