As a centrally controlled country, the Chinese government plays a large role in furnishing healthcare facilities. With the growing market economy, however, the government’s investment gradually has decreased in the past 20 years. Currently, China’s healthcare spending is only 4 percent of GDP, compared to 20 percent of GDP in the United States. As the basic healthcare system deteriorated and costs rose, public outcry to control prices prompted the government to reinstate its control over products and services as part of the universal healthcare reform currently being implemented.
Central purchasing programs in the form of public tenders—or bidding processes—have been reinstated and will expand to include more medical supplies and products in the future.
In 2004, when China started to introduce advanced medical technology and equipment into the healthcare market, the Ministry of Health (MOH) organized a group of experts—leading physicians, medical technologists and government officials—to evaluate and approve importation of large devices, such as computerized tomography (CT) and magnetic resonance imaging (MRI) systems. The group’s objective was to make sure that the products introduced to Chinese hospitals represented current technology and to prevent China from becoming a dumping ground for secondhand or obsolete equipment. Government funding also was approved based on support from this group. Because of this group’s decision-making power, its members were intensely courted by companies and hospitals. Rumors of corruption and favoritism were widely suspected.
Between 2005 and 2006, private investment and financing companies began to enter the medical market. Eyeing a large patient base and high outpatient volumes, financiers were willing to afford the equipment purchase initially and share profit with the hospitals. It was common for a CT unit (costing around $1 million to $1.5 million) to be fully paid back in a little more than a year. Excessive prescriptions of unnecessary procedures were rampant.
As costs rose, public discontent began to surface and became louder at the 2006 National People’s Congress, where healthcare costs and consumer prices were the two hottest topics among delegates. Following the conference, a special group was assigned to look at the healthcare system, which decided the past 10 years of market-driven healthcare management were “fundamentally unsound.” Consequently, the National Development and Reform Commission (NDRC), the top level macro economic authority under the State Council, began to plan for healthcare reform and a universal health insurance program, which are aimed at rebuilding the fundamental healthcare system, expanding health coverage and reducing patient costs.