Pergamon PII: S0277-9536(96)00350-4 Soc. Sci. Med. Vol. 45, No. 3, pp. 351-360, 1997 © 1997 ElsevierScienceLtd All rights reserved. Printed in Great Britain 0277-9536/97 $17.00 + 0.00 HEALTH SECTOR REFORM: LESSONS FROM CHINA GERALD BLOOM L* and GU XINGYUAN 2 'Institute of Development Studies, University of Sussex, Brighton BNI 9RE, England, U.K. and 2School of Public Health, Shanghai Medical University, 138 Yi Xue Yuan Road, Shanghai 200032, China Abstract--As a result of China's transition to a socialist market economy, its rural health services have undergone many of the changes commonly associated with health sector reform. These have included a decreased reliance on state funding, decentralisation of public health services, increased autonomy of health facilities, increased freedom of movement of health workers, and decreased political control. These changes have been associated with growing inequality in access to health services, increases in the cost of medical care, and the deterioration of preventive programmes in some poor areas. This paper argues that the government's strategy for addressing these problems has overemphasised the identifi- cation of new sources of revenue and has paid inadequate attention to factors that influence provider behaviour. The strategy also does not address contextual issues such as public sector employment prac- tices and systems of local government finance. Other countries can learn from China's experience by taking a systematic approach to the formulation and implementation of strategies for health sector reform. Copyright @ 1997 Elsevier Science Ltd Key words--health finance, health sector reform, China, rural health services INTRODUCTION Until recently, most public health services in com- mand economies and ex-colonies in Africa and Asia functioned as bureaucratic state enterprises. Some of these countries also had formal and informal sec- tor private providers. The appropriateness of this organisational model is increasingly being ques- tioned and some countries are reforming the re- lationship between government and health service providers (Cassels, 1995). These changes reflect new thinking about how to structure the health sector (World Bank, 1993). They are also a response to factors external to the health sector, such as the im- plementation of a structural adjustment programme or the transition to a market economy. A number of advanced market economies have implemented structural changes to their health ser- vices (Saltman and yon Otter, 1992). Concepts developed in these countries strongly influence the design of reform programmes in low and middle income countries. This could lead to problems because little is known about how different organis- ationai structures affect health sector performance in low and middle income countries (Broomberg, 1994). China's experience of rural health sector *Author for correspondence. tBarefoot doctors were peasants who were given a short training course and then returned to their village. They led preventive programmes and public health campaigns and provided basic curative care. They worked part-time in health work and the rest of the time in agricultural production and were paid a share of collective production like all commune members. reform can contribute to the development of this understanding. China has been a laboratory for testing models of health sector organisation for many years; first in establishing centrally planned and managed rural health services, and then in changing the organis- ation of these services radically. These experiments are outlined in the second section, which presents China's rural health services prior to the economic reforms, and the third section, which discusses how they have changed since the early 1980s. The fourth and fifth sections consider the recent situation in more detail, and the final section concludes the paper by highlighting some lessons about the design of health sector reform strategies. CHINA'S RURAL HEALTH SERVICES PRIOR TO ECONOMIC REFORM By the late 1970s most of rural China had a highly structured health service. Approximately 85% of villages had a health station staffed by bare- foot doctorst who provided basic curative and pre- ventive services; townships had health centres that provided referral services and supervised the bare- foot doctors; and county health bureaus planned and supervised countywide health services. A num- ber of public health campaigns were organised under the technical leadership of the Ministry of Health (Moll) and the political leadership of the Communist Party. Almost the entire rural popu- lation had access to essential health services at a reasonable cost. This contributed to a dramatic 351