Collaborative Governance in China's Health Sector

Preliminary; comments welcome Please do not cite without first asking the corresponding author, [email protected] Collaborative Governance in China’s Health Sector: A Comparison with Education, Housing, and Long- Term Care By Jack Donahue1, Karen Eggleston2, Yijia Jing,3 and Richard Zeckhauser1 1Harvard University 2Stanford University 3Fudan University Abstract This paper examines the role of the private sector in contemporary China’s health sector, compared to education, affordable housing, and long-term care policies for the elderly and the disabled. We first briefly summarize the economic theory of comparative advantages in public and private delivery and collaborative governance, defined as government sharing with the private sector a real measure of discretion as to the means and, to some extent, the ends of collective action. We then analyze data about the extent of private sector engagement in the health sector nationwide, compared to private school enrollment for compulsory education, and discuss cases ranging from commercial insurance companies’ participation in management of medical insurance to the role of private companies in biomedical innovation. We supplement the nationally representative data with results from our survey of the delivery and financing of 9 public services in 18 medium-size cities in early 2013. The survey includes information about contracting for delivery of emergency medical services; hospital and primary care; health insurance; long-term care and other support services for the elderly and disabled. These services are compared to education policy and minban schools; expansion and management of affordable housing; job training; park management; and public transportation. The survey results confirm what the national and provincial-level data suggested: although localities differ in the extent of 1 private sector hospitals and clinics, in all surveyed cities the public sector continued as the dominant insurer and provider; few cities systematically contracted with private providers; and no cities adopted an explicitly collaborative approach in the health sector. Within health insurance, medical services and public health, private engagement has been peripheral but seems poised to expand. China’s local authorities and central government will be increasingly challenged to understand and apply effective collaboration to reap the rewards associated with increased non-government roles in the health sector. Introduction In July 2012, China released plans for “equalization” of access to 8 different areas of public services: education; employment services; social insurance (pensions, maternity and unemployment insurance, etc.); social services; health care and public health; family planning; housing security; and cultural and sports activities and recreation. How does China deliver these services, and plan to do so in the future? What is the role of the private sector in contemporary China’s health sector, compared to other sectors (e.g. education, long-term care, affordable housing)? How prevalent are government initiatives to engage non-government providers across China’s medium-sized cities? What might explain the heterogeneity in approach across cities? Are there examples of the government sharing discretion with private collaborators, what we term “collaborative governance”? This paper starts to address these questions. The main empirical section of the paper draws from statistical summary information about the extent of private sector engagement in the health sector nationwide, compared to private school enrollment for compulsory education (primary and secondary school). We discuss cases ranging from commercial insurance companies’ participation in management of medical insurance, to the role of private providers of primary care (widely discussed as an important component of the next phase of health reforms). 2 We supplement these trends in each section with quotes and analysis of results from our survey of 9 public services in 18 medium-size cities in early 2013 (Figure 1). The survey includes information about contracting for delivery of emergency medical services; hospital and primary care; health insurance; long-term care and other support services for the elderly and disabled. These services are compared to education policy and minban schools; expansion and management of affordable housing; job training; park management; and public transportation. This paper focuses on the health sector and care for the elderly and disabled, compared to education and housing; for a description of results regarding park management, job training, and public transportation, as well as a comparison with those same services in a selection of US cities, please see our companion paper. Our analyses are predominantly descriptive and positive, as opposed to normative or prescriptive. Before the empirical discussion, we first introduce our conceptual framework in the next section. Conceptual Framework Collaborative Governance as Shared Discretion Drawing on previous conceptual work and research in the United States, we use the term “collaborative governance” to refer to innovative ways to create public value by drawing on the private sector with some shared discretion. Indeed, shared discretion is what distinguishes collaborative governance from straightforward contracting—where little or no discretion is granted. With a collaborative approach, the government shares with the private sector a real measure of discretion as to the means and, to some extent, the ends of collective action. 3 In many countries and contexts, especially in developing countries, the primary motivation for collaboration is to harness additional resources from the private sector. While this may be an important reason to collaborate, there are also many other important rationales linked to improved outcomes, including the ability of private firms, NGOs and social organizations to enhance productivity, provide information, or even confer legitimacy (Donahue and Zeckhauser 2011). Our approach explicitly recognizes the dangers of collaborative governance. Arrangements must be carefully crafted and performance effectively monitored. Otherwise, private players will exploit their discretion to warp collective undertakings in ways that cater to their narrow interests. Collaborative Governance in China’s Development China’s approach to the private sector reflects its position as a developing economy, one transitioning from a centrally planned economy to a strongly market-based economy. In the service sectors that we examine in this paper, our conceptual framework places at the forefront an examination of the constraints on the Chinese government’s institutional capacity that complicate efforts to share discretion and accountability and that limit China’s ability to “harvest the benefits and limit the risks associated with private discretion” (Donahue and Zeckhauser 2011, p. 197). Several factors enhance China’s ability and willingness to embrace collaboration. Perhaps foremost, collaborative governance—as distinct from related themes like social entrepreneurship or corporate social responsibility—preserves for government a privileged role in defining the public purposes to be pursued. This assumption resonates with Chinese history and with China’s top leadership. Moreover, China’s most urgent goals for the decades ahead feature the kinds of missions that invite collaboration with the private sector. China has 4 embarked on the challenging tasks of dismantling central planning and developing a market- based economy. The government now retains land ownership but allows private households full discretion in agricultural production, while pursuing an incremental approach to reducing the relative size of state-owned enterprises in the economy. The complex process of redrawing the boundaries between private enterprise and various levels of the government has involved privatization (termed “ownership restructuring”) and the transfer to local jurisdictions of many social services previously provided by state-owned enterprises, including hospitals and clinics, schools, and daycare centers. Simultaneously, legal changes allowed non-government provision of the same services, with the government sector continuing to play a dominant role in several cases. Before turning to how this process has unfolded in the health sector, it is worthwhile articulating how economic theory might guide governments in deciding which services are most amenable to the collaborative approach, the focus on the next section. Comparative Advantage and Collaborative Governance in the Health Sector Analysts and citizens alike may reasonably disagree on whether the collaborative realm should constitute a big or small share of what government does. However, our guiding conceptual framework assumes that we may well be able to agree on which functions are comparatively better and worse suited to the collaborative approach. In other words, we can come together to gauge a delivery model’s fitness for a particular task, not on an absolute basis, but in relative terms (Eggleston and Zeckhauser 2001; Donahue and Zeckhauser 2011). Not all services are equally appropriate for private sector engagement in financing and/or delivery. Economic theory—including incomplete contracting and principal-agent theory in light 5 of public goods and externalities—provides insights about the strengths and weaknesses of collaborative governance for accomplishing specific public goals in the health sector.1 As

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