Since economic liberalization in the late 1970s, China's health care providers have grown heavily reliant on revenue from drugs, which they both prescribe and sell. To curb abuse and to promote the availability, safety, and appropriate use of essential drugs, China introduced its national essential drug list in 2009 and implemented a zero markup policy designed to decouple provider compensation from drug prescription and sales. The authors collected and analyzed representative data from China's township health centers and their catchment-area populations both before and after the reform. They found large reductions in drug revenue, as intended by policy makers. However, they also found a doubling of inpatient care that appeared to be driven by supply, instead of demand. Thus, the reform had an important unintended consequence: China's health care providers have sought new, potentially inappropriate, forms of revenue. 

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Abstract: The overall goal of this article is to understand the progress in implementing the New Cooperative Medical Scheme, while seeking to assess the strengths and weaknesses of the programme and, in particular, to understand its effects on the incidence of catastrophic medical payment. The study is based on two rounds of nationally representative household survey data collected in 2005 and 2008. The study found that the programme has a very high level of participation, and has increased farmers’ use of medical services. However, despite efforts by both central and local governments and high household participation, the programme is only partially achieving its policy objectives. In particular, it has been able to extend to almost all of the rural population, but has failed to cover expenses for catastrophic illness, due to insufficient funds.

Abstract The overall goal of this article is to understand the progress in implementing the New Cooperative

Medical Scheme, while seeking to assess the strengths and weaknesses of the programme and, in particular,

to understand its effects on the incidence of catastrophic medical payment. The study is based on two

rounds of nationally representative household survey data collected in 2005 and 2008. The study found that

the programme has a very high level of participation, and has increased farmers’ use of medical services.

However, despite efforts by both central and local governments and high household participation, the

programme is only partially achieving its policy objectives. In particular, it has been able to extend to almost

all of the rural population, but has failed to cover expenses for catastrophic illness, due to insufficient funds.

Over the past decade, China has implemented reforms designed to expand access to health care in rural areas. Little objective evidence exists, however, on the quality of that care. This paper reports results from a standardized patient study designed to assess the quality of care delivered by village clinicians in rural China. To measure quality, we recruited individuals from the local community to serve as undercover patients and trained them to present consistent symptoms of two common illnesses (dysentery and angina). Based on 82 covert interactions between the standardized patients and local clinicians, we find that the quality of care is low as measured by adherence to clinical checklists and the rates of correct diagnoses and treatments. Further analysis suggests that quality is most strongly correlated with provider qualifications. Our results highlight the need for policy action to address the low quality of care delivered by grassroots providers.