The Efficiency and Its Determinants for China’s Medical Care System: Some Policy Implications for Northeast Asia

The medical care system in China has experienced significant changes during three decades of reform, and thus result in a need to investigate the effects of medical reform. This paper investigates the technical efficiency of Chinese hospitals in 31 provinces during the period from 2002 to 2013 by proposing a new global generalized directional distance function (GGDDF) approach taking account of undesirable output, i.e., mortality. Results show that despite the technical efficiency had being improved with time trend, most Chinese provinces are not performing well on hospitals’ technical efficiency and leave a large potential to improve. Some provinces display better performance compared to other provinces of China. We further investigate the factors that affect the technical efficiency of Chinese hospitals with Tobit models. It concludes that the medical insurance reforms have improved the performance of Chinese hospitals, while public subsidies have decreased it. The provinces with higher GDP per capital and population density, the performance of their hospitals is better. The related policy implications for Northeast Asia are derived, including encouraging the development of private hospitals, enlarging the coverage of medical services, and pursuing different policies for the provinces with higher GDP per capital and population density