__Abstract__\ud
\ud
Since 1950, the Chinese government has been building and rebuilding a healthcare system\ud
to improve the health status of the Chinese population. The accomplishments are\ud
significant. Some communicable diseases such as tuberculosis and malaria have been\ud
largely controlled. Average life expectancy at birth increased from 42 years (1950) to 73\ud
(2009) (Ministry of Health of China 2010). The infant mortality rate fell from about 200‰\ud
(1950) to 19‰ (2005) (Ministry of Health China 2007).\ud
With the devastation resulting from World War II and the Civil War1 as a starting point,\ud
the Chinese government has over the past 60 years built a three-layer healthcare network\ud
that includes (i) rural area primary clinics and (since 2007) urban community health\ud
centers, (ii) county and city hospitals, and (iii) tertiary hospitals. Before the mid-1980s, all\ud
Chinese hospitals were public, owned by the central or local government, and financially\ud
dependent on governmental subsidies. Since then, China has gone through a series of\ud
market-oriented and open-economy reforms that have had great impact on almost all\ud
aspects of society. In the healthcare sector, the government dramatically decreased\ud
governmental subsidies to public hospitals with the goals of “pushing the hospitals to\ud
the market” and enhancing efficiency. Along with a soaring economic development, the\ud
Chinese healthcare system encountered serious problems. Affordability and accessibility\ud
have been two major complaints since the late 1980s (Ge 2005). Since the mid-1990s,\ud
the central and some local governments have been reorganizing and establishing health\ud
insurance schemes and taking better control of the public hospitals. After more than 10\ud
years of healthcare reform, however, criticism remains. In 2004, private expenditure on\ud
health as a percentage of total health expenditure (THE) was as high as 62%, with the\ud
government shouldering 38%. And of the private share, the percentage of out-of-pocket\ud
(OOP) payment was 87% (WHO 2008)