| The year 2000 witnessed China's earlier fulfillment of its economic goal ---theGDP reached the fourfold of that in 1980 ---but not its success in finishing the socialgoal of "everyone enjoys primary health care" proposed by World HealthOrganization (WHO). Just in 2000, WHO assessed the outcomes of different healthservice systems in its 191 members using 5 indicators. Measured by one of theindictors, "Out-of-pocket expenditure on health as % of private expenditure onhealth", China ranked 188, that is, the fourth worst. So China was regarded as one ofthe countries with most unfair, most imbalanced public health resources in the world.The outbreak of SARS brought China with severe challenges and rare opportunitiesin the development of public health career and economy. Among the deep lessons leftby SARS crisis, the most direct one is that public health crisis caused great economiccost and delayed short-term economic growth. According to most conservativeestimate, the loss cost by SARS was far larger than the government's totalinvestment in public health during previous years.SARS has exposed the severe situation in China's health care area. Although ishas passed, some questions were left behind:1. Was there some kind of failure in public health area behind the rapideconomic growth in China?2. As one part of fiscal expenditure, has public heath expenditure beenignored for long?3. What's the status quo in China's public heath expenditure? What are theexisting problems? Are its size and structure appropriate? How should we thinkof the status quo?As we can see, both in theory and in practice, it's very necessary and significantto look deeply into the public health expenditure in China. First, it helps in perfectingand supplementing the theoretical system of China's fiscal expenditure. Viewedhistorically, public health expenditure has not attracted much attention or even wasignored for a long period of time, although it is an important part of fiscalexpenditure. Whether in academic books or textbooks focused on theories of fiscalexpenditure, it's very hard to find detailed writings about public health expenditure.It could be said that SARS in 2003 provided an opportunity, from which bothacademies and practitioners began to value the study on public health expenditure.Secondly, the study helps a lot in the construction of the public finance frameworkand the optimization of fiscal expenditure structure. The construction of publicfinance framework is a necessary demand of socialist market economy, because inmarket economy the market mechanism plays a dominant and basic role in resourcedistribution, and therefore the interference from government must be focused on theareas where market failures occur and public goods must be provided by government.Undoubtedly, public health service belongs to public goods and should be providedby government. So the study of public health expenditure is helpful for theconstruction of government's public finance, and my study is unfolded within thepublic finance framework. Finally, the study of public health expenditure is of greatpractical significance. Admittedly, the problems of public health and basic healthcare are gaining unprecedented attention from all walks of life in China. Sincerelated to public finance, the problem is no longer the one which can be dealt withonly by hospitals, but a complex political problem. In case that up to now there arefew researches about public health expenditure from the financial point, my thesis isdevoted to the topic. By analyzing the size and structure, fairness and effectivenessof public health expenditure in China, it will explore, in the era of earlymarketization of economy and diversification of society, whether a public healthmaintenance system mainly supported by government should be built, and if that'sthe case, how much should be afforded by the government. It is hoped that the thesisnot only can enrich fiscal expenditure theories, but also can provide some kind ofguidance to the practice in relevant sectors.The main structure of the thesis is as follows:Chapter One: IntroductionWhy this topic is chosen;analytical structure of public health expenditure;dataresources in the thesis;innovations and shortcomings.Chapter Two: Basic Theory about Public Health ExpenditureFirst, this chapter defines the concept of public health expenditure, analyzes anddefines relevant concepts including health care, public health care and medicalinsurance, and argues that the studying range of public health equals that ofgovernment's health expenditure budget. The aim is to analyze how much fiscalresponsibility has the government taken in the public health sector, whether it createsan ideal effect, and whether market failures exist. Secondly, the chapter lists thetheories that the public health theory based on, which include public health fiscaltheories and human capital theories. Among the public health fiscal theories arepublic goods theory, fiscal decentralization theory and intergovernmental granttheory.Chapter Three: Size and Structure of Public Health Expenditure in ChinaBased on statistical description about the size and structure of public healthexpenditure in China, and giving a qualitative judgment about whether the amountand structure is appropriate, this chapter explains the problem existed in the area:insufficient size and inappropriate structure. In first section, both the absolute andrelative sizes of the public health expenditure have been given positive analysis. Thekey is to look at its relative size. From its percentage in GDP and in fiscalexpenditure, we can conclude that public health expenditure grew at a low rate. Andthen, after elastic analysis of the public health expenditure's percentage in GDP andin fiscal expenditure, it can be found that the growth of public health expenditurelagged far behind the growth of GDP and fiscal expenditure in China. In secondsection, structure of public health expenditure in China has been analyzed from threeangels: its usage, its distribution and its funding. Usage structure of public healthexpenditure is mainly reflected by the ratio between public health care outlay andsocialized medical care outlay;distribution structure of public health expenditureconsists of regional distribution structure and distribution structure of urban and ruralareas;fund structure of public health expenditure is that the expenditure is funded bycentral government and regional government. In third section, the size and structureof the public health expenditure have been analyzed based on previous two sections'analysis. It can be concluded from the previous two sections that the public healthexpenditure in China is not only of insufficient size but also of inappropriatestructure. The judgment on size of public health expenditure in China resulted fromthe comparison with both historical statistics in China and international statistics.The judgment on structure of public health expenditure in China also consists ofinternational comparison, so it can be concluded that whether in usage, distributionor fund, the structure is not appropriate.Chapter Four: Analysis on the Fairness of Public Health Expenditure in ChinaBased on the positive analysis in Chapter Three and using the indicators of GiniCoefficient and Theil Index, Chapter Four concludes that public health expenditure isunfair in China. This chapter also provides preliminary analysis of the causes basedon two principles about fairness. First section is the theoretical analysis of publichealth expenditure in China. Combined with the contents in John Rawls' A Theory ofJustice, two principles ---principle of fairness and principle of difference ---havebeen developed. In second section, the methods of how to measure the fairness inpublic health expenditure have been supplied. The economic concepts of LorenzeCurve, Gini Coefficient and Theil Index have been explained. Using Gini Coefficientand Theil Index, the second section analyzes the fairness degree of public healthexpenditure in China. Gini Coefficient has been used to analyze the general fairnessdegree of public health expenditure in China. Theil Index has been used to analyzethe fairness degree between East China, Middle China and West China, and betweenthe provinces within the three regions. From the analysis it can be concluded that theresources of public health expenditure distributed into the three parts and differentprovinces are unfair. In third section, the causes of unfairness of public healthexpenditure have been analyzed. This section concludes that the main causes are thedifference of economic development between different regions, the flaws existed inpublic health expenditure system and the imperfection of public heath fiscalintergovernmental grant system.Chapter Five: Analysis on the Efficiency and Effect of Public HealthExpenditure in China.The analysis on efficiency and effect of public health expenditure mainly focuson its distributive efficiency and economic effect. First, the efficiency and effect havebeen distinguished, and the output of public health expenditure has been defined.Secondly, the theoretical framework of correlation analysis has been put forward,much analysis have been given to the resource distributional efficiency andproductive efficiency of public health expenditure so that it can lay a goodfoundation for next positive analysis. Thirdly, positive analysis has been given to theefficiency and effect of public health expenditure in China. Input/output ratio hasbeen used to evaluate the distributional efficiency of public health expenditure inChina. And then, the error correction model has been used to analyze the effect ofpublic health expenditure in China and the contribution to the economic growth bypublic health investment. Finally, the reasons why the public health expenditure islow efficient have been analyzed. It is concluded that the reasons are insufficient sizeof public health expenditure, inappropriate structure of the expenditure, unfairness ofthe expenditure, flaws in the relevant management system, and flaws in the budgetmanagement system.Chapter Six: Conclusions and SuggestionsBased on the previous conclusions in the thesis, this chapter put forward theideas of how to solve the problems through a series of reforming measures, whichincludes: improving fiscal systems by appropriately allocating the rights of decisionand finance between governments of different levels on the matter of public healthexpenditure;establishing an appropriate, effective investment assurance system forthe public health career;especially improving the public health finance assurancesystem in rural areas so that the structural error between urban and rural areas couldbe corrected;improving the intergovernmental grant system so that the differencebetween different regions could be reduced;reforming the budget system andimproving the distributional efficiency of public health expenditure.Innovations in the thesis are as follows:First, the main innovation in the thesis is that a systematic analysis frameworkhas been put forward to look at the public health expenditure. In order to study, findand solve problems, we must put all researching objects in an appropriate framework,otherwise the analysis of these objects will be in a mess. Since the current studies onpublic health expenditure are fragmentary, a complete and systematic frameworkneeds to be put forward so that the further study could be done within it. In theframework, why does the government need to be responsible for the public healthexpenditure? The answer provides the study of public health expenditure withtheories including the theory of public goods, the theory of power division and thetheory of human capital. Then, on basis of the theories, it is concluded that howmuch public expenditure the government should be responsible for. Based on thepositive analysis of the size and structure of public health expenditure in China, andusing the principles of fairness and efficiency, the problems of public healthexpenditure are evaluated. Finally, reforming measures have been suggested to solvethe problems.Secondly, analysis on fairness of public health expenditure is an innovation.Positive analysis has been given to the public health expenditure by using the GiniCoefficient, from which it can be concluded that public health expenditure should bea kind of governmental behavior. Since the aim of public health expenditure is toimprove the level of public health service, the distribution of public health resourcesshould be in accordance with the fair principle of indiscrimination. The criterionevaluating fairness should be different from the criterion evaluating incomedistribution. The Gini Coefficient used in evaluating the fairness of public healthexpenditure has been given different meaning: less than 0.1 means "highly even",0.1-0.2 means "relatively even", 02.-0.3 means "comparatively reasonable", andmore than 0.3 means "difference is too much". According to this criterion, the GiniCoefficient of public health expenditure in China ---which is 0.31 according to ourcalculation ---reflects the expenditure in China is unfair. The research in this regardhas never been done in China.Thirdly, in the study of the effect of public health expenditure in China, the errorcorrection model has been used to analyze the statistics between 1978 and 2002 andquantitatively analyze the contribution of public health investment to the economicgrowth. This research is also first done in China.In addition, there are some shortcomings in the thesis and that's where furtherstudies needed.First, with regard to public health expenditure, government's decisions musttake into account the balance in resource distribution. In other words, from the angelof public resource distribution, the government must consider the relationshipbetween public health expenditure and expenditures in other sectors, such aseducation, infrastructure, social security etc. In this regard, the thesis only comparesthe investment multipliers of fiscal expenditure in different sectors. So the researchin the thesis mainly focuses on the expenditure inside the public health sector.Secondly, when doing analysis on the efficiency and effect of public healthexpenditure, most statistical data used are open and macrolevel materials. However,this kind of analysis should mainly rely on the sampling data on micro-level,otherwise, the conclusions cannot be practical and reflect the reality. Since theauthor's ability and time is limited, this kind of data has not been obtained. Thisindicates a direction of the author's next work.Thirdly, when doing analysis on public health intergovernmental grant, similarlysince short of detailed data, the measures suggested are not so powerful. If backed bymore relevant data, the conclusions could be more persuasive.
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