Distributive policy

Equality in China’s healthcare infrastructure

In 2009, the Chinese government unveiled its ambitious and complex health care reforms, pledging to provide affordable, equitable and efficient health services for all by 2020. Strengthening the primary care system – that is i.e. health care provided outside of a hospital – was an integral part of the reforms. through stricter central guidelines on infrastructure standards and resource allocation.

China’s primary care system consists of hundreds of thousands of mostly public health centers and clinics across the country. Under the government’s reform program, primary care institutions are expected to gradually assume a gatekeeper role and change the hospital-centric system in China. Many patients prefer to go to hospitals rather than primary care facilities for any health issue, which is seen as a key driver for the rapid growth of healthcare spending in China.

This ambitious plan was supported by a significant increase in public investment in the development of primary care infrastructure. Within China’s intergovernmental financial system, all levels of government can contribute to infrastructure projects. At the central level, unprecedented investments have been made in primary care infrastructure, averaging 2.6 billion yuan (about $385 million) per year from 2004 to 2008 and 5.5 billion yuan (about 815 million dollars) per year from 2012 to 2015.

This large budget injection was essential, as primary care facilities were consistently underfunded in the 1980s and 1990s. By the turn of the century, many were dilapidated and lacked basic equipment. The situation was particularly dire in economically underdeveloped areas where local government resources were more limited. In recognition of the severe inequality, most central funding has been directed to these areas to equalize health resources.

A key factor behind these developments is China’s paradigm shift which places greater emphasis on equalization and a more assertive role for the central government. Since the early 2000s, under the banner of “Building a Harmonious Society”, the Chinese government has launched a series of far-reaching national initiatives to correct economic and social inequalities between regions and reduce the urban-rural divide.

In the area of ​​social protection, including public health, rebalancing efforts have called for increased centralization of power. The central party-state sought to tighten its grip on political-administrative controls of policy goals and resource allocations that had been devolved to local governments. This included setting binding targets for primary care infrastructure development and service delivery, while increasing top-down financial support to promote inclusive social programs.

Despite the party’s reinvigorated rhetoric, some studies have noted that recentralization only extends below the sub-national level, meaning that provincial governments still have increased resources and capacities to influence policy outcomes. With considerable latitude to interpret national initiatives in a local context, provinces exercised discretion, mediating strategically between central goals and local interests.

In our recent article published in Policy Studies in Asia and the Pacific journal, we explore these intergovernmental power dynamics and their implications for policy and practice through the lens of China’s expanding primary care infrastructure. Drawing on data from national, subnational and local projects, we assess the extent to which central government has achieved its goal of equalizing primary care infrastructure.

We find that, despite stricter directives from central government, provincial governments have been given the task of implementing and enforcing the new national standards for primary care settings. Our review of local implementation plans shows that provinces often amplify central directives by imposing higher-level objectives on local implementers. This triggered waves of investment at provincial and lower levels, eventually leading to excess capacity. The township health center bed utilization rate has stagnated at around 60% in the decade since 2009.

Provincial governments have also played a central role in securing central funds and stimulating local investment in primary care infrastructure and facility improvements. The top-down incentive was based on a matching fund approach, where central investment in primary care infrastructure was set according to locally available funds. To fulfill their co-financing responsibilities, provincial governments have pooled funds from a variety of sources, ranging from budget accounts and land finance to loans from strategic banks or government bonds. Provincial governments can also channel funds from other national initiatives, such as rural development plans, anti-poverty programs and intra-regional equalization.

In the absence of upward accountability, this politicized resource allocation framework has distorted the motivation of local actors, creating a bias towards volume-driven delivery that ignores the real needs behind the reform agenda. Not only has central spending on primary care infrastructure development remained modest at the level of individual projects, but the uneven distribution of resources across regions has continued. There is little association between the state of local development (i.e. local fiscal capacity), shortages of primary care facilities, and patterns of infrastructure expansion. As a result, there has been overinvestment in some areas and a mismatch between supply and demand in others.

In light of these results, we conclude that there are significant limits to the extent to which increased central government funding and more stringent requirements can equalize primary care infrastructure. Efforts have been particularly hampered by politicized resource allocation mechanisms and top-down incentive structures for policy implementation. Ultimately, these limitations translated into a persistent unequal distribution of primary care infrastructure, with negative ramifications for China’s ambitious healthcare reforms.

This article is published in partnership with Policy Forum. It is based on an article by Policy Studies in Asia and the Pacific review, ‘Has recentralisation improved equality? Development of primary care infrastructure in China‘, by Xiao Tan and Lei Yu.

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