Reallocating authority in the Chinese health system: an institutional perspective

Abstract

Affordability of health care is still a serious concern in China after the health reform in 2009. According to the literature of the economics of organization, allocation of authority in hospitals and social insurance is extremely important for improving affordability. The information structure and the degree of conflicts in tasks within an organization determine the optimal allocation of authority. However, the progress of the governance reform to reallocate the authority is relatively slow during the reform period. This article argues that the slow progress is associated with ineffective coordination among government departments in China. Two institutional reasons are illustrated in this article. First, there is no institutional arrangement to facilitate the horizontal coordination among ministries and bureaus. Second, the performance evaluation system for officials, which mainly addresses the vertical coordination between upper and lower level governments, has unintended consequences for horizontal coordination among local government departments. Future reforms should take into account these institutional aspects.