Part of the reason for this is historical. The end of the collective meant that the state became a far weaker presence within farmers’ lives. It also had considerable impact on China’s policy creation. The Central Government suffered from an inability to raise revenues to fulfil social spending obligations. This resulted in the disproportionate distribution of funds compared to mandates within China.

The Chinese health care system also changed significantly, and the onus shifted firmly onto the individual to fund their social spending under the “Family Responsibility System”.

This changing context had a major impact on service delivery within rural areas of China. The weakening of the role of the state led to a drastic fall in funds available to the providers, and simultaneously reduced the role of the state as a supervisory mechanism over health care providers.

Weaknesses in the fiscal system then exacerbated service delivery problems. The 1994 tax reforms, establishment of hard budget constraints and consequent need to raise revenues provided perverse incentives for the providers.

Resolving health care problems in China urgently requires a reformation of these poor incentives for health care providers. There is limited market competition, yet the social spending structure means that there also is not effective government supervision. If flawed incentives for providers are not changed, an influx of greater money and access into the system (such as that currently occurring under the New Cooperative Medical Scheme) will merely reinforce the incentives for providers to overtreat or overcharge.

Recent reports like this one from CASS hopefully presage a shift in Chinese public policy, and changes in the Chinese fiscal system. This shift would be both vital and overdue.