International Health Care Systems

Olympic Post II: Comparing the Health Care Systems of China and India

Health Affairs’ July/August 2008 edition discusses the health care system of 2 emerging powers: China and India. Today, I will analyze the two countries health care systems over time and what they they can expect in the future.

Like most developed countries, healthcare spending as a percentage of GDP has risen over time for these two countries. Health care is a luxury good, and the rise in health care spending should be expected due to these countries incomes have increase significantly over the past few decades. Despite the increase in spending, health care is often unaffordable for many individuals. Many individuals do not seek physician care or hospitalization when needed since they cannot afford this care. In both countries, provinces and states with higher levels of GDP per capita have better health care outcomes than provinces and states with lower levels of GDP per capita.


Overall both countries have experienced a significant shift from government funded health care to privately funded health care. In China, this was mainly due to the transition from a centrally planned to a more market-oriented economy. Government spending decreased from 30% of GDP in 1978 to 10% in 1996 and government health spending fell concurrently. In India, government spending as a percentage of GDP has been between 20-25% for the last 2 decades, but debt payments and pension liabilities have eroded the government’s ability to fund adequate health care.

Health Care Delivery

“China has maintained public ownership over most health facilities, making public provision of care the dominant mode for the majority of services while legitimizing profit-seeking behavior at public facilities through a set of perverse incentives. In contrast, India has followed a policy of benign neglect and allowed entrance into and expansion of the private sector to fill in the gaps, with little effective regulation or enforcement.”

In China, government subsidies for public health facilities fell drastically in the early 1990s and prices for most basic medical were below cost. In order to operate in the black, public hospitals can charge high prices for high-tech tests and pharmaceuticals. “These seemingly sensible cross-subsidies have created perverse incentives for providers, who now have to generate 90 percent of their budget from revenue-generating activities, turning hospitals, township health centers, and village doctors alike into profit-seeking entities. As a result, even though structurally the delivery system of China is public, the behavior of public facilities is consistent with that of for-profit private providers.”

In India, the government pays for most of the care in public facilities, but–like in China–prices are generally low or below cost. The government, however, allows public practitioners to run private practices which means that many providers try to divert their patients to their higher margin, private practice. Yip and Mahal claim that in this environment, “supplier-induced demand is prevalent.”


In China and India, providers are well known for systematically overprescribing drugs and tests (this is where they make their money). Counterfeit drugs are often used in rural China. In India, it has been shown that even licensed doctors generally provide poor-quality service. Smaller hospitals in India lack basic medical equipment and trained personnel. “The public sector, too, is inefficient, with shortages of drugs and consumables and frequent absenteeism.”


In China, one major reform is the New cooperative Medical Scheme (NCMS) discussed in the 10 Aug 2008 post. India has introduced the National Rural Health Mission (NRHM) which aims to increase Indian government spending on health to 2% of GDP. The NRHM hopes to expand insurance coverage by establishing risk-pooling schemes. In addition, the Indian government, beginning in 2003, introduced an insurance scheme, heavily subsidized by the central government budget and targeted to the poor. Enrollment is voluntary, and to date the take-up rate is low.”


  1. If one looks at the medical tourism industry as global benchmark for health care between China and India, there is little question that India has taken a huge lead in marketing their technogically advanced medical system. India has been marketing their “world-class” medical services throughout the developed economies for the past several years, while china is just beginning to test the waters. It reamains to be seen if Chaina can match India’s entrapreneural energies when it comes to dominatiing emerginging trends in low cost service industries.

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