Anatomy of intergovernmental finance for essential public health services in China

The Chinese government launched health care reforms in 2009 and introduced a national list of essential public health services (EPHS) as an integral part of the plan to deliver health care for all. EPHS was also built into the national plan to promote the equalisation of public services across the country. A national standard was set for financial input to EPHS. As the services are co-funded by the central and local governments, a robust intergovernmental fiscal system is essential to guarantee that the hundreds of thousands of service providers have adequate financing to meet the service commitment.

We examined the flow of funds through China's complex intergovernmental fiscal system to see whether the promise of equal funding for EPHS was implemented, and how the costs were distributed across levels of government. Information was collated from funding documents issued by all levels of governments involved, for a sample that includes the central government, 12 provincial governments, eight prefectural governments and 11 county-level governments. For each level of government, we examined: (i) when and how much funding they disbursed or received from higher levels; (ii) when and how much matching funds were made; and (iii) the allocation rules adopted.

Overall, we found the central government met its commitments for the program on time and in full, and good compliance from local governments in passing through funding from higher levels and as well as meeting their own financial responsibilities. However, we also found the following problems: (i) the involvement of so many levels of government resulted in delays in the disbursement of funds; (ii) the use of outdated population data in calculating required funding resulted in some under-allocation; and (iii) localities that needed funding the most were not well targeted by the distribution of funds.

This study traces how the 2018 subsidy for EPHS was disbursed from the central government to service providers, focusing on the roles played by intermediate levels of subnational governments-provinces, prefectures and counties. In this way, it identifies gaps in the current intergovernmental financing of EPHS and points to areas for further improvement.