Screwed up in China, too

The US is rightly worried that high and rising health care costs threaten economic competitiveness. Although it seems impossible, the situation in China may be even worse. Access to health care has declined, hospitals and physicians have a major incentive to push high end, costly treatments, and private insurance often fails to protect patients and their families from financial ruin. Add in the demographic distortions created by the 1 child policy (i.e., an increasing ratio of old to young), unhealthy eating habits, alcohol and tobacco use, and polluted environment and the situation doesn't look too good.It won't be long before China is worried about the impact of health care on its competitiveness. Look for attempts to copy US managed care techniques.See China's Workers See Thin Protection In Insurance Plans; Under State Health Program, 'Big Sickness' Is Pricey; Doctors Demand Cash in today's Wall Street Journal. Here's an excerpt:

Health-care costs in China are rising rapidly, turning hospitals into symbols of unfettered capitalism. Chinese and international health experts blame runaway costs in part on an effort to make treatment more affordable for the poor. Authorities capped prices for basic drugs and procedures at below-market rates. But they let hospitals compensate by profiting on almost everything else, from advanced drugs to sophisticated diagnostic tests.

That decision created an incentive to provide high-end treatment that has transformed Chinese hospitals, making world-class care available to those who can afford it. Even small-city hospitals, once technological backwaters, boast CT scanners. In each of the past five years, Shanghai hospitals have spent nearly $100 million on sophisticated medical equipment, says Hu Shanlian, a professor of health management at the city's Fudan University and an adviser to the Chinese government. Drug sales account for 45% of the revenues of Shanghai hospitals, he says. "The health system is really in a crisis," he says.

Doctors, many of them employees of state-owned hospitals, also have an incentive to steer patients toward high-cost treatments and drugs. The average monthly pay for Shanghai doctors is less than $400, not much more than a taxi driver working overtime can make. But they can double their incomes through bonuses earned by prescribing tests and by dispensing drugs with high profit margins. Few medical systems in the world link doctors' pay so directly to revenue from patients, health-care economists say.

Mr. Mao, the Ministry of Health spokesman, contends that market forces have gone too far. "If you only trust the market, you will have a disaster," he argues. The government needs to play a leading role, he says.

The practices of hospitals and doctors are only lightly regulated by Beijing, and there is little self-regulation. China lacks the kind of medical professional associations that set ethical standards, hear complaints and punish wrongdoers in the U.S. and other countries.