Conclusion

The Chinese healthcare system has been going through extremes since the middle of the twentieth century. During the planned economy era, its achievements were impressive given the limited resources the country had available. During the first two decades of the reform period, it was substantially weakened by a lack of public funding and political support, among other things. Since 2000, the central government has enacted a series of policies that aim at expanding public social security for the population, and at tightening the grip over the health sector and its dynamics. Despite these efforts, health costs have kept rising continuously, which casts doubts on the party-state’s ability to steer the health sector in accordance with its stated goals. Institutional misfits between the multi-level state (and the public finance

system in particular) and health sector regulation are a crucial dimension of this development. In the reform period, the Chinese state experienced substantial decreases in its fiscal and steering capacity. Health sector regulation was only partially adapted to this change. Although public financial support for the healthcare providers decreased, they were still expected to perform their previous social functions, most notably the provision of basic health services below the costs of production. Relying on profits from drug sales and diagnostic tests as the primary mechanism of compensation created a regime of perverse incentives, which has substantially damaged the efficiency of the public and semi-public health sector, and the reputation of the medical profession in China. This study challenges two larger paradigms that have been very influential

in the research on health and social policy in the PRC, and the NRCMS in particular: the implicit notion of a united central government with an integrated hierarchy of preferences, and the dominance of practical constraints in restraining the implementation of health policy. I argue that the central government’s contradictory decisions are largely generated by the coexistence of contradictory preferences between bureaucratic coalitions and factions on the one hand, and the prevalence of consensual modes of decision-making on the other. Although there is a strategic component to central-local relations as well, in this particular case, policy conflicts on the national level are a dominant explanatory variable. This study thus largely confirms Yip and Hsiao’s (2015)

conflict-centered view of Chinese health policy, though assigning explanatory power to organizational self-interest, rather than political ideology. The second paradigm implies that practical constraints, such as the lack of

fiscal capacity and control of local government agents, are the primary explanatory factors for problems and failures in implementing health policy. I argue that the state capacity perspective obliterates important structural dimensions. China’s public finance system is in itself dysfunctional (Wong 2009) and not compatible with the regulatory system of the health sector. As Chapter 6 has shown, this is a primary cause for many of the governance and steering problems in local health policy. These structural institutional misfits are rooted in the transition from a planned economy to a market economy, and their continued prevalence is linked to the coexistence of opposing political interests and consensual modes of decision-making-that is, to the nature of the political system. The systemic interdependence between public finance and health sector regulation breeds complex problems of governance and steering, which are highly interdependent. This perspective has far-reaching consequences for both research and

policy. Several studies in the field of health economics have-in adherence to methodological individualism-argued for changes in the incentives of individual doctors to control induced demand. From the perspective of this study, the incentives of individual doctors are but symptoms of an illness, the causes of which lie in the structural institutional misfits between the multi-level state and health sector regulation. If significant changes in the remuneration practices of hospitals are to be sustainable, they have to come with changes in the funding of hospitals. These in turn will require structural reforms that provide a coherent formal institutional framework-either by increasing or by decreasing the role of the state. Previous studies on the NRCMS have largely built upon the assumption

that it is a genuinely voluntary program, in accordance with its official description in administrative documents (see, for example, Wang et al. 2008). Building on this idea, Klotzbücher and colleagues have interpreted the NRCMS as a market-based mechanism of governance: the center made the system voluntary to rely on the fluctuating enrollment rates as indicators of the quality of the local implementation (Klotzbücher et al. 2010; Klotzbücher and Laessig 2009). Recent research has questioned the degree to which the NRCMS is a truly voluntary system, given stable enrollment rates of almost 100 percent and a prevalence of informal practices connected to premium collection (Müller 2016). This study furthermore argues that the contradictory policy objectives of voluntary enrollment and fixed enrollment targets are an outcome of the interest conflict between the pro-government and pro-market actors: the former tried to implement a de facto mandatory system as advocated by international experts, whereas the latter sought to keep the door open for the insurance industry and retain well-tried vulnerable points of attack in the policy. Another influential study has highlighted the role of advocacy coalitions in

the policy process leading to the NRCMS reform, arguing that the central

government had decided by themid-1990s to implement aNRCMS-like policy, but lacked the fiscal capacity to do so until the early 2000s (Wang 2009). This study downplays the fact that there have been two initiatives to launch a CMS policy in the 1990s, both of which were largely aborted in the course of attacks defunding the policies and criticizing them as involuntary. A stable consensus in the leadership core only emerged after inside initiation in 2001 (Liu and Rao 2006), and even thereafter bureaucratic fighting continued until a consensual solution integrating the insurance industry had been found. While the advocacy-coalition perspective identifies some crucial policy dynamics, it does not fully recognize the opponents of the CMS and their counter-actions. This book thus contributes to an ongoing paradigm shift in the research on

health and social policy in the PRC. Previous studies have already criticized the idea of the collapse of the planned-economy CMS in the 1980s as being a mere byproduct of economic reforms: although the reforms were a crucial factor, the sacrifice of rural health insurance was ultimately a political decision (Duckett 2011). My previous work has challenged the idea of universal voluntary enrollment. Building upon this, this book has come to challenge the assumption of a united central government with integrated preferences, which is held back in pursuing its beneficial policies merely by a lack of fiscal capacity and the ability to control its potentially deviant local agents. Rather, a variety of opposing social interests are represented at the central level. They manifest themselves in latent policy conflicts and contradictory policy decisions under the prevalence of consensus-oriented decision-making. Finally, my book challenges the prevailing state capacity perspective and the related focus on practical constraints, arguing that they fall short of grasping the fundamental institutional complexities that make health reforms more difficult and challenging than other fields of policy. The benefits of the actor-centered-institutionalism perspective include the

systematic linking of political dynamics at the central and local level, and the exploration of the interdependent nature of institutional structures and the synergies between different policy fields and policy processes regarding their political impacts. The lens of systemic interdependence creates important insights into the regulatory contradictions and how contradictory institutional structures neutralize one another in a local context. The case of the NRCMS bears important lessons about political decision-making in China’s central government, and shows how even comparatively coherent policy designs with substantial political support at the central level can suffer from the distorting effects of the contradictory institutional context.