COMBATING HEALTHCARE COST INFLATION WITH CONCERTED ADMINISTRATIVE ACTIONS IN A CHINESE PROVINCE
| Published date | 01 August 2011 |
| Author | Alex He Jingwei |
| Date | 01 August 2011 |
| DOI | http://doi.org/10.1002/pad.602 |
COMBATING HEALTHCARE COST INFLATION WITH CONCERTED
ADMINISTRATIVE ACTIONS IN A CHINESE PROVINCE
ALEX HE JINGWEI*
National University of Singapore, Singapore
SUMMARY
This article defies the traditional notion that cost inflation in healthcare could hardly be curbed without the significant revision of
economic incentive scheme, but demonstrates the possibility of containing cost inflation with concerted administrative actions in
the Chinese context. It examines the case of Fujian Province that embarked on a health bureaucracy‐led policy reform without an
alteration of economic levers but mainly using administrative tools to combat cost escalation. Through clearly defined, well
designed, targeted and concerted administrative measures, effective cost containment is attainable in China’s healthcare sector,
at least in the short run. If combined well with the powerful economic instruments, administrative tools would be able to aug-
ment their effects in cost containment, provided with the government’s possession of hospital ownership. At the heart of
Fujian’s case are the reassertion of the government stewardship, the reconstruction of the collapsed accountability mechanisms,
the reconfiguration of policy instruments, and the revision of administrative incentives, rather than the decreased costs per se.
Copyright © 2011 John Wiley & Sons, Ltd.
key words—policy instruments; incentive; administrative action; China; cost inflation; health policy
INTRODUCTION
The cost inflation in healthcare is a global problem that most governments are grappling with. The rising unafford-
ability and medical impoverishment have triggered vast public discontent on national healthcare systems. Health
economists and policy advisors have proposed a menu of prescriptions for governments to combat with the upward
spiral in healthcare costs, such as reinforcing the role of third‐party purchasers, moving towards more scientific
payment methods, tightening the gate‐keeping mechanisms, and the like. These proposals aim at restructuring
the incentive regimes on both demand side and supply side such that providers’profit‐seeking behaviours are prop-
erly constrained while patients make rational choices. At the heart of these strategies is the belief on the fundamen-
tal economic incentives that drive provider behaviours, and to a lesser extent, the scepticism on the efficacy of
administrative interventions (World Bank, 1993).
Notwithstanding the merits of these tactics informed by the economic rationality, however, this article
argues that the potential of administrative actions has been arguably downplayed, especially in the Chinese
context. The maximisation of the economic levers’power always necessitates a tight set of conditions often
unavail able in the health s ystems of develo ping countries ( Wu and Ram esh, 2009). This article sheds new lights
on the literature by showing that through clearly defined, well designed, targeted and concerted administrative
actions, cost inflation is containable in the context of China, at least in the short run. If combined well with the pow-
erful economic levers, administrative tools would be able to augment their effects in cost containment, provided
with the government’s possession of hospital ownership. Behind this is not the bridled cost escalation per se,
but the revision of the administrative incentive scheme in healthcare sector, which is the long‐term implication
drawn from this study.
*Correspondence to:A. J. He, Lee Kuan Yew School of Public Policy, National University of Singapore, 469C Bukit Timah Road, Singa-
pore 259772. E‐mail: jingweihe@nus.edu.sg
public administration and development
Public Admin. Dev. 31, 214–228 (2011)
Published online 13 July 2011 in Wiley Online Library
(wileyonlinelibrary.com) DOI: 10.1002/pad.602
Copyright © 2011 John Wiley & Sons, Ltd.
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