Decentralization-based and ‘trial and error’strategies

Third, the adoption of decentralization-based and ‘trial and error’ strategies facilitated local experiments that eventually grew into a nationwide health insurance reform. During Deng’s era, the central government replaced compulsory planning with guidance planning and shifted the emphasis from direct to indirect control (Leung 1998: 624). The central government, which assumed the role of macro control at the top, only delineated broad guiding principles for reform (Leung 1998: 624). Under administrative decentralization, local governments were encouraged to experiment with different solutions to contain medical costs according to local circumstances and capacity (Leung 1998). The adoption of ‘trial and error’ strategics helped minimize resistance and facilitate readjustments through feedback from local governments (Leung 1998: 624). After several years of experimentation and evaluation, the central government promoted the successful experiences or models through legislations (Leung 1998: 624). Local governments were empowered to enact local statutes in light of local circumstances when implementing health insurance reforms (Wong et al. 2006: 25-6). They enjoyed a wide discretion in determining ‘the contribution rate, funding structure, payment structure, medical coverage and reimbursement ratio of health insurance schemes’ (Luk 2017: 53).

Ideational forces

Fourth, ideology plays an important role in shaping the design of the health insurance model. During Deng’s era, the old ideas of free healthcare and egalitarianism were no longer embraced by political leaders and key bureaucratic actors because they ‘were regarded as one of the root causes of rising health care expenditure and impediments to promote economic reform further’ (Luk

2014a: 67). Instead, the new ideas of individual responsibility and social solidarity gained political prominence as reflected in the institutional design of the new health insurance model. The new health insurance model combined the individual MSA and the SPF. The government sought to achieve individual responsibility through premium contribution from an individual and the individual MSA. When individuals were asked to pay premiums, they would take more responsibility for healthcare decisions and became more cost-conscious. The individual MSA resembled the Medisave account in Singapore because Vice-Premier Zhu Rongji drew on Singapore’s experience in financing healthcare. The government also sought to achieve social solidarity and promote the idea of mutual aid through the SPF because the SPF could redistribute funds from the healthy to the sick and ensure financial protection against catastrophic health expenditures. The SPF resembled sickness funds of a statutory health insurance system in Germany, indicating that the government borrowed experience from Germany when designing the new health insurance model.