Always good to check in with China’s overhaul of the health care system, particularly in light of the huge debate going on now in the U.S.

The very general trend here is that after much of the public health care system was overhauled back in the mid-80s, with market principles in mind, and people were essentially left to fend for themselves in a fee-for-service system, the pendulum is swinging back towards State subsidization and control.

Those of us who are in the foreign investment biz bemoan State consolidation and control of many industries. In many cases, that is quite troublesome, but in the area of health care, a lot of this reform is welcome and sorely needed.

At the center of health care provision are hospitals, and unfortunately privatization and lowering of subsidies have incentivized these institutions in ways that have done quite a disservice to the public, which bears the brunt of cost hikes and poorer services.

After the hospitals were told to focus on revenue, many of them saw expensive diagnostic equipment and pharmaceuticals as big profit centers, and the docs prescribed accordingly. So costs have gone up significantly, yet the quality of service is questionable.

Some current reforms are aimed at changing these financial incentives:

China has chosen 16 cities to pilot reform of government-run hospitals in an effort to ease public complaint of rising medical bills, according to an official circular released on Tuesday.

The cities are required to establish a reasonable, effective and optimized medical service system, and to fully motivate all medical workers to provide the public with safe, effective, convenient and affordable medical services, according to the document.

Public hospitals must retain its goal of serving the public interests and their top priority should be protecting people’s health[.] (Xinhua)

OK, this sounds quite general and not so useful as a mission statement, something like probably could be adopted by just about any health care provider. But remember that this is all being discussed within the context of the entire public health system. What is the fundamental goal of these individual institutions? What is the overriding mandate? This guidance spells out that their “customers” are more important than profits, which really does represent a shift in emphasis.

This is all going to take time. The overarching plan for this reform was just published last year. So I have my doubts that we will see quick results, particularly since there are now entrenched moneyed interests here that will no doubt push back against these reforms.

But hey, kudos for getting all this going. Looking at the debate in the U.S., the one thing that is obvious is that once the health care industry becomes entrenched, it is very difficult to turn things around. China is lucky in that it has comparatively less history to unravel.