Could administrative incentives keep out serious healthcare reform?

Asia Healthcare Blog has long-written about the need to properly incentivize physicians and healthcare workers if China’s healthcare reforms are to succeed as imagined. But we haven’t touched on the perhaps equally important changes that would have to take place in the vast administrative network of cadres (I’m referring here to 干部) that has a stake in maintaining the status quo within the healthcare system.

You may not be aware that China’s public sector employment has been steadily rising since the 1978 Reform and Opening, but it has.  According to University of Michigan Political Science Professor Yuen Yuen Ang, in her paper “Counting Cadres: A Comparative View of the Size of China’s Public Employment,” the number of public personnel in China increased steadily during the Maoist era, “from 1979 onwards, the absolute and relative size of public employment grew at a steeper rate…In 1960, there were 11 million public employees, 1.7 per cent of the population. Thirty years later, in 1990, the number of per-sonnel had jumped to 33 million, or 2.9 per cent of population. By 2005, there were 47 million functionaries staffing the entire party-state apparatus, according  to the Local Financial Statistics.”

The possible reasons contributing to what Doctor Ang aptly refers to as the seeming paradox of faster increases in public employment during a period of capitalist expansion are a mixed bag of political dynamics within public administrative bodies, the misalignment of centrally administered budgets and on-the-ground needs of agencies that results in deliberative overstaffing, the increased self-funding opportunities for subsidiary administrative bodies that are given local monopolies on the provision of certain services and are therefore able to hire somewhat like private employers, and, related to that last point, the use of publicly funded jobs to bestow favors and increase political clout in a non-electoral political system.

What’s undeniable, however, is that the fastest rise in public employment has been concentrated among sub-provincial level organizations that are often responsible for performing services, like road construction or provision of certain utilities. This is due to the increased “self-funding” opportunities referenced in the paragraph above. Obviously then, the ability to draw on funds independently of the central government leads to growth in the local government sector.

Since the vast majority of China’s healthcare system is funded and administered at the sub-provincial level these trends in public employment beg some questions.

1. If thirty years of economic reforms aimed at putting China on the transition to becoming a market-based economy have resulted in a China comprised more than ever of public sector jobs, then it is worth one’s time to wonder how much of the status quo in the healthcare system will really be altered by a similar move to privatize some aspects of the healthcare system? (This includes a period of reforms begun in the 1990s specifically designed to reduce the number of public employees in China by half).
2. Will the influx of money into China’s healthcare space result in an increase of public sector workers because administrative bodies responsible for the oversight of healthcare services will take advantage of certain monopolistic advantages?
3. Would an increase in the size and influence of administrative organizations acting in a quasi-private role further slow down the amount of access foreign investors will have to increase their presence in the country?
4. Will an influx of private capital actually increase the administrative hurdles needed to operate in the healthcare sector because China’s administrative bureaucracy will continue to grow, and grow the fastest at the sub-provinical level where foreign investments best chance for entry lies?

I don’t yet know the answer to these questions, but over the course of this year, as I prepare to write my Masters thesis, I will be examining them in detail on this blog. Is this something you’re interested in? Readers, do let me know.  Your questions and comments will be invaluable in helping guide my research. Think of me as a free part-time consultant of a sort. Do write in, either in the comments or through our contact form.