New Papers

Regulated Competition: The Prescription for China's Health Care System
- Lessons from Russia

October 15,2010 12:00:00

As the Chinese government wrestles with its ongoing reform of the country's health care system, CEIBS Assistant Professor of Management Zhang Wei and three co-authors have suggested that the best prescription may be government-regulated competition among insurers and health care providers, to achieve the government's goal.

The details are outlined in "Prospects for regulated competition in the health care system: what can China learn from Russia's experience?" Parallels are drawn between the two countries because of the historical similarities between the pre-reform Russian and Chinese health care systems. The research paper is forthcoming at Health Policy and Planning and was published online on September 3, 2010. It is co-authored by Weiwei Xu and Wynand P M M van de Ven from the Department of Health Policy and Management, Erasmus University Rotterdam and Igor Sheiman from the State University-High School of Economics, Moscow.

The Chinese government has given a commitment to increase its health care funding by 1-1.5% of Gross Domestic Product during the coming years. The long-term aim: to ensure that at least 90% of the population is covered under a consolidated universal health insurance scheme at the end of 2011. "Prospects for regulated competition in the health care system: what can China learn from Russia's experience?" draws on lessons to be learned from the Russian  Federation's 1993 implementation of legislation intended to stimulate regulated competition in the country's health care sector.

"Although it has been 17 years since Russia implemented legislation to stimulate regulated competition in the health care sector, competition is lacking among both insurers and providers, which is not surprising since most, if not all, of the necessary pre-conditions for regulated competition are not fulfilled in Russia," Zhang and his co-authors note. Prof. Zhang is also Director of CEIBS Health Care Management and Policy Research Centre. "The experience of Russia in implementing regulated competition is a signal to Chinese policy makers that the necessary pre-conditions, such as consumer choice, contracting freedom and appropriate government regulation (to name but three), must be fulfilled for such reform, and implementation strategies must be carefully considered," the authors add.

The easy-to-read and excellently-structured paper outlines: the pre-conditions necessary for successfully implementing regulated competition, the extent to which these conditions are being fulfilled in the post-reform Russian and current Chinese health care systems, lessons from the Russian experience for the Chinese health care system, and analyze the prospects for regulated competition in China.

The authors conclude, "Implementation strategies need to be carefully considered in a reform towards the regulated competition model. Pro-competition policy makers who are interested in regulated competition in the health care sector need to be aware of the technical and political complexity of this model. At the same time, learning lessons from other countries will help the Chinese government to avoid repeating mistakes and to implement health care reforms successfully."

Read on for an excerpt from "Prospects for regulated competition in the health care system: what can China learn from Russia's experience?"

"If the Chinese government decides to employ regulated competition in the health care sector, the following lessons can be drawn from the Russian experience:

* Firstly, direct payments from insurers to providers should form a significant share of Total Health Expenditure in order to reap the benefits of an insurance-based health care system...

* Secondly, the government should be willing and prepared to let market forces work in the health care sector. Furthermore, the central government must have adequate tools to enforce and supervise the implementation of the law...

* Thirdly, when implementing regulated competition in the health care sector, the government needs to change its role from an active player in the health care system to a collective sponsor who sets the rules of the game and organizes cross-subsidization...

* Fourthly, generating enough public resources is a must in implementing any health care system that aims to enhance efficiency and ensure a reasonable level of equity. Under-funding from the government will inevitably lead to a large share of private spending. Powerful third-party purchasers are difficult to introduce in this context...

* Fifthly, introducing proper incentives is as important as structural reforms...

* Finally, it is important to disseminate consumer information via multiple channels... In China, generating and disseminating information about the services and prices of insurers and providers by independent entities is a must if any competition mechanisms are going to be introduced successfully in the health care sector."