Medical Expenditure, Medical Service Quality And Social Welfare

With the developing emphasis on residents’ welfare, Chinese government health care spending continues to increase, and covers more residents in recent years. However, there are region gap and urban-rural gap in public health spending and quality of medical services, because of regional differences. So I established a Hotelling model with regional differences to study the region oligopolistic public hospitals competition on quality, and found the quality competition cannot achieve social optimal standards. Then I studied the partial privatization of local public hospitals to find ways to improve social welfare. My study showed that whether the privatization will improve the social welfare depends on the gap of medical fees and differences of regional compensation systems. Meanwhile, privatization of public healthcare market should be moderate, because medical services include in public goods.My article can be divided into four parts. The first part described the research background and significance, advantages and shortages in my paper. The second part reviewed the theoretical study related to my paper, and found my entry points, which combined "Public medical spending" and "medical services quality". The third part is the core of my paper. I built a competition model with framework of medical service reimbursement system and price information, on the basis of Aiura and Sanjo (2010). Then I compared the competition equilibrium to first best equilibrium and proposed partial privatization to improve social welfare. The last part made countermeasures and suggestions of improving the fairness and efficiency of public hospital.