Why Administrative Decentralization Cannot Achieve the Purpose of Market-oriented Reforms

Decentralization in institutional change Since the 1980s, China's fiscal system has evolved from the traditional highly centralized "collect all revenues and collect all expenditures" to a hierarchical tax-based fiscal system, whereby expenditure responsibilities have been redistributed among all levels of government, with the central government handing over more expenditure responsibilities to local governments. Along with this, a large-scale decentralization reform has been carried out in the health sector, and the decentralization of fiscal responsibilities has also involved the health sector. Over the past 10 years, in terms of expenditure structure, the central government health expenditure accounted for only 5% of the total health budget, with about 2% of health expenditure at the central level and the rest coming from local government expenditure, while at the local government level, counties and townships **** spent 55-60% of the budget (see Table 3). This shows that local governments (especially grass-roots governments) are the mainstay of health public **** expenditure in China. This is contrary to the institutional arrangement in most market economies around the world where the central and provincial governments usually predominantly bear the burden of education and health expenditures. II. The Dual Advancement of Marketization and Decentralization (I) The Evolution of Health Marketization Reform The starting point of health marketization reform is generally 1985, and the landmark document is the Report of the Ministry of Health on Several Policy Issues Concerning the Reform of Health Work, approved by the State Council in 1985, which suggests that "reforms must be carried out to relax policies, simplify and decentralize administration, and raise funds from multiple sources to To broaden the way to develop the health industry, to improve the health work". Thereafter, in 1988, five ministries and commissions, including the Ministry of Health, the Ministry of Finance and the Ministry of Personnel, issued the Opinions on Issues Relating to the Expansion of Medical and Health Care Services, which further put forward specific measures for marketization. For example, "actively implement various forms of contractual responsibility systems for medical institutions" and "allow units and medical and health personnel with the conditions to engage in paid amateur services, and paid overtime labor can also be carried out for projects with the conditions"; in the area of public **** health, allow "health epidemic prevention, maternal and child health care, drug testing and other units in accordance with the relevant provisions of the State, the implementation of the various health testing, monitoring and consulting work of the income of paid services", and even "medical and health care institutions to implement the 'to supplement the main by deputy ', organizing redundant personnel to hold tertiary or small-scale industrial and sideline businesses that directly serve health care"; and in terms of financial security, "the State's financial subsidies to health care institutions, in addition to funding for major repairs, the purchase of large-scale equipment and the funding of retired personnel, are fixed at a lump sum. " The core idea of the officially launched healthcare reform is to decentralize and allow profits, expanding the autonomy of medical institutions, basically copying the model of state-owned enterprise reform. In the course of the market-oriented healthcare reform, new things such as named surgeries, special care, and special wards have sprung up in the healthcare system like a rainbow. Although the central authorities did not advocate the full commercialization and marketization of medical and health services, they emphasized categorical reform; in 2000, the General Office of the State Council approved the Guiding Opinions on the Reform of the Medical and Health Work System in Towns and Cities of eight ministries and commissions, the main policy point of which was to classify medical and health service institutions into two categories, one of which was liberalized and positioned as a for-profit institution, with the price of medical services liberalized and organized and managed in accordance with the enterprise One is liberalized and positioned as a for-profit institution, with prices for medical services liberalized and organized and managed according to a corporate model; the other is a non-profit institution, pursuing the goal of public welfare. At the same time, it is proposed to "expand the operational autonomy of public medical institutions, implement the independent management of public medical institutions, and establish and improve the internal incentive and constraint mechanisms". After the state clearly divided medical institutions into for-profit and non-profit, some "hot money" into the medical services market. Many large-scale private for-profit hospitals were established at this time, and the larger-scale "market-oriented" reform began. In the above policy guidance, public medical institutions and even public **** health institutions, including all medical www.xiangshui88.com service institutions, but also gradually become the implementation of independent economic accounting, with independent management consciousness of the interests of the main body. In terms of the micro-organization and management of medical and health service institutions, there has been a general shift towards an entrepreneurial management model. Various medical service organizations are gradually moving towards full competition among themselves, and the price-formation mechanism for medical services is also relying mainly on the market to make decisions. In addition to encouraging competition, liberalizing prices and further introducing the enterprise management model into public health-care institutions, many places have also adopted the practice of reforming State-owned enterprises by privatizing public health-care institutions through various means, such as shareholding reforms, sale of the whole enterprise and authorization to operate. This tendency applies a simple logic of pan-marketization: through market-based competition in health-care institutions, the operational efficiency of the institutions themselves is improved and the price of services is lowered; the Government turns to subsidizing the demand side or purchasing services in order to provide public ****health services and basic medical care, and the financial burden can be greatly reduced as a result. This line of thinking seems to make sense, but the actual results are quite different. An empirical evidence is Suqian City, Jiangsu Province, from 1999 to start the market-oriented reforms, the medical institutions all to the market, the implementation of privatization, in this follow the "U.S. model" of the reform, the government's burden is indeed reduced, but the rapid rise in health care costs, the people difficult to see a doctor, the problem of expensive to see a doctor has become more prominent. (ii) fiscal decentralization of health market-oriented push health market-oriented on the one hand from the government's market-oriented reform of the guiding ideology, another important reason is the financial system changes in the fiscal decentralization reform of health market-oriented push. In the fiscal decentralization reform, the higher level government transferred the responsibility of health financing to the lower level government, the lower level government in financial constraints, and the lack of effective measures to eliminate redundancy in health institutions, and then the main task of financing to the health institutions, in essence, is to give the problem to the original failure of the market. The impulse of local finance to unload the burden is an important motivating factor for the marketization of health care reform. In the planned economy, due to the implementation of the "collect all expenditures" highly centralized financial management system, the central government in fact bear all the responsibility for health financing. In order to mobilize local enthusiasm, the State Council decided that from 1980 onwards, provincial and municipal finances would be "divided into revenue and expenditure, with a hierarchical approach" on a trial basis. In the course of its implementation, it developed into a variety of forms of lump-sum financing, such as lump-sum financing of incremental revenues, lump-sum financing of the total amount of revenues plus a share of growth, lump-sum financing of the incremental amount of the amount to be transferred to the local government, and flat-rate subsidies. The advantage of the financial lump sum is to encourage localities to speed up the development of production, increase income and save money, and avoid the central government's too detailed control and too much intervention. However, the "residual claims" of economic growth have long belonged to the localities, which inevitably weakened the financial power of the central government (Ding Ningning, 2005), which was rapidly apparent after the full contracting of state-owned enterprises in 1987, and the central government had to start concentrating its financial power again and implement the tax system reform in 1994. Under the general pattern of hierarchical financial underwriting, China's health care expenditures mainly come from local budgets, and the proportion of central transfer is very small. As the gap in local economic development and the gap in local financial capacity widens, so does the gap in government health spending between localities. The decline in the proportion of government health expenditures is clearly "regressive," with the poorer the province, the faster the decline in government health expenditures. The problem of urban-rural disparities is even more serious. The "lump-sum" mentality is not limited to the financial system, but has also been inherited and permeated into the financial management of health-care service organizations. Under the traditional system, medical and health institutions, along with cultural, educational, and scientific research institutions, belonged to the same category of public institutions, and all expenditures came from the government budget. The reform of financial "sharing of food", which began in 1980, has fully implemented the "budgeting and retention of savings" method for administrative organs and scientific, educational, cultural and health institutions at all levels of government. However, in actual implementation, the administrative organs are "wrapped up but not dead", and it is the funds for science, education, culture and health institutions that are really "wrapped up" in the budget. In the 1980s, when both the economy and the price index were growing rapidly, the result of many years of unchanged budget underwriting was that science, education, culture and health organizations received a smaller and smaller proportion of government funds. The government attempted to solve the problems of health financing and medical cost control with the help of the role of the market. This orientation can be seen in the 1985 health reform program, a policy document that neither attempted to devise a mechanism to promote increased government investment in health nor to find ways to control costs, but rather gave health institutions the policy of charging fees to make up for funding gaps. 1994's tax-sharing reform was a major restructuring of the system, and the policy document further clarified the principle of territorial hierarchical responsibility for health affairs, such as the 1997 Central Government Reform Plan. The principle of territorial hierarchical responsibility for health matters was further clarified in policy documents, such as the 1997 Decision of the Central Government and the State Council on Health Reform and Development, which explicitly stated that "health work is to be carried out with hierarchical responsibility and hierarchical management, and local governments at all levels are to be held responsible for the health work of their regions as a matter of principle and as a matter of responsibility for the tenure objectives and performance standards of their leaders. Local governments at all levels are fully responsible for the health work in their areas, making it an important element of the tenure target responsibility system and performance appraisal of leading cadres". However, the reform of the system in 1994 increased the proportion of central government revenues while at the same time weakening local financial resources. Especially as the main body of health expenditure in the county and township finances (55% to 60% of government health expenditure from the county and township levels), in the reform of the tax system, due to the higher level of government have layers of centralized financial resources, the financial situation is becoming increasingly difficult, and even can only maintain the basic functioning of the right to health and the right to a high degree of asymmetry of the right to health and financial resources. In this situation, the county and township governments of some public health institutions, either funding subsidies are increasingly reduced, or directly sell them, forced to the market. A serious consequence of the reduction in government health service fees is that public health institutions have lost a stable source of funding. after the 1990s, in most areas of China, the government service fees allocated to public hospitals were not only insufficient to pay the basic salaries of medical staff, but even insufficient to pay for utilities, and the situation was similar for public **** health institutions. The results of the two national health services surveys show that the proportion of government funding in the income of sanitary and epidemiological defense stations has been declining year by year, from 46.2 per cent to 38.8 per cent in 1997 compared with 1994 for urban sanitary and epidemiological defense stations, and from 40.2 per cent to 34.8 per cent for rural sanitary and epidemiological defense stations. As a result, the vast majority of public health-care institutions are forced to maintain their operations through a variety of income-generating activities. In order to encourage income generation, the internal distribution system of health-care institutions has been adjusted accordingly. The common practice is to link income generation to small group or even individual income. With the continuous strengthening of the role of economic interest inducement, income generation has gradually evolved into the active behavior of medical institutions and medical personnel, as a result of which the whole medical service system has fully embarked on the road of commercialization and marketization. The overall layout and structure of the medical service system, as well as the focus of the public **** health services and choice of technical routes, etc., have thus gradually deviated from the direction of social welfare. III. Overall Performance of China's Health Care Under Marketization and Decentralization Reforms Before the reform and opening up, China used to be regarded as a very successful model in the field of public **** health, despite the fact that China's economy had a very weak base and the people's material standard of living was very low. When it was first liberated, China's health indicators belonged to the lowest level of country groups in the world. By the end of the 1970s, China had become one of the countries with the most comprehensive health care system, with 80-85% of the population enjoying basic health care. Life expectancy had risen from less than 40 years in the old China to nearly 70 years by the end of the 1970s, and the infant mortality rate had dropped from 195 per thousand to 41 per thousand. Until the 1980s, whenever international organizations ranked countries, China ranked poorly in terms of GDP per capita, but much higher in terms of health, winning wide acclaim.The market-oriented, decentralized health reforms carried out since the mid-1980s have also achieved some positive results. On the supply side, for example, the number of medical service organizations, doctors and beds has increased significantly compared with the planned economy, the level of technical equipment has been improved across the board, the quality of medical personnel has been rapidly raised, the number of treatment items available has been increasing, and many of the clinical services and technologies have reached the international advanced level. In addition, there has been a general increase in the motivation and micro-operational efficiency of medical service organizations and the personnel involved. The medical service needs of some members of society, particularly the affluent groups, have also been met to a greater extent. At the macro level, however, there has been no significant improvement in the comprehensive health indicators of the population, and in some areas, especially in public **** health, some health and health indicators have even deteriorated.