Private sector must not be allowed a free rein in China's health care
Tsung-Mei Cheng says that an unfettered private market is a poor provider of health care, as other economies have proved and China has found in a failed experiment that must not be repeated
In a recent speech to party cadres, Premier Li Keqiang said that Beijing wants the private sector to play a more prominent role in China's economy. The stated objective is to unleash the creative energies of private enterprise and thus improve standards of living for the middle class.
This makes sense in many areas of China's vast economy, where easy state credit and excessive regulation can lead to a misallocation of scarce capital.
Private enterprise is not structured to achieve the ethical objectives sought for a health system
It will not, however, make sense in China's growing health care sector, where unfettered private market forces can easily divert the country from the goal of a "harmonious society" - the aim of the ambitious health reform begun in 2009. In health care, a retreat by the government would be a giant step back.
After all, China has been there before, when in the wake of the market reforms of 1978, its health sector was turned over to private market forces, only to end up with a hugely expensive but much diminished system that denied millions access to health insurance and health care and led to widespread public dissatisfaction with the system. In 2005, the powerful Development Research Centre of the State Council pronounced the then market-driven health reform "fundamentally unsuccessful". A 2006 survey by the Chinese Academy of Social Sciences found "high medical expenses" the top social concern.
The government responded to these cries for help with its health reform of 2009, which can claim some impressive results so far. Today, more than 95 per cent of China's population of 1.34 billion is covered by one of three health insurance schemes: for urban employees, non-remunerated urban residents, and rural residents. A medical assistance programme takes care of the poor and needy.
China has also begun to introduce clinical pathways in public hospitals to make health care more efficient and has started to limit the dangerous overuse of drugs - especially antibiotics - in treatment.
It is important to understand that private markets work well only when certain conditions are met. These include: first, both sellers and buyers must make rational choices; second, they must fully understand the nature and quality of the goods or services being traded; third, the price of the goods and services must be correctly understood by both sides; fourth, buyers must bear the full price of the goods and services they buy; and, fifth, there must be free and easy entry into and exit from the market for goods or services.