Healthcare's for-profit non-profit balancing act

A nurse checks the blood pressure for an old man.

In 2009, China launched its healthcare reform, This is often considered one of the world's greatest social projects, given its broad coverage of more than 1.3 billion people and dedicated investment of over half a trillion US dollars. It has made major achievements, but there are still many challenges that need to be overcome.

The major challenge is how to balance the non-profit "mission" of the State-owned healthcare industry with the for-profit nature of the market economy. There has been a great deal of debate about whether China should turn left or turn right when implementing further healthcare reforms; yet in reality it can go straight ahead.

In healthcare, a fundamental principle is "no margin, no mission". The world shares the same mission to provide better care to more people. The world also shares the understanding that all missions have costs and rely on high productivity, efficient management and sustainable investment. Creation and distribution, these are keywords. Value or "profit" can be created in any margin driven system to ensure productivity, and value and profit can thereby be distributed as public gains if publicly owned.

To link margin with mission is not always easy. What we can learn from developed countries is the need for comprehensive legislation to cover the healthcare industry. Today, this appears more critical than ever. Healthcare reform requires a top-down design to secure its not-for-profit general mission. To make the mission achievable and sustainable, each reform must be secured by specific and comprehensive legislation that ensures nobody can change the mission during its execution. Stable execution, instead of uncertain or fast-changing regulation, is necessary to attract the participation of active market players.

Major legislated reform is needed for the medical insurance sector in China, in order to encourage participation and investment from major commercial insurance companies. At present, the legislation is insufficient with regard to claim adjudication, risk adjustment, shared savings, and payment management. Without strengthening the legislation, most insurance companies will continue to consider healthcare an uncertain market and fear to make significant investments in technology, human resources and advanced products. As a result, the Stated-owned social benefit system is left with limited adjudication capability and massive abuse, and thus the threat of overdraws.