Fee for service to the extreme: Can China’s problems start happening here? “As recently as the 1970s, China’s health-care network covered just about everybody. Collective farms offered basic treatment and immunization. In cities, health care was a perk of jobs in the government and state factories, which often ran their own clinics and hospitals. But as China embraced free markets, the ‘People’s Communes’ were disbanded in the countryside, and thousands of state factories were shut down or privatized. Starting in the 1980s, hospitals were ordered to turn a profit.

Today, China has plenty of large hospitals packed with state-of-the-art equipment to compete for paying patients. To maximize revenue, hospital doctors routinely overprescribe drugs and diagnostic procedures, according to studies by the Chinese government and international bodies like the World Bank. Hospitals sell many drugs directly to patients and add a profit margin.

A World Bank study estimates that drugs account for more than 50 percent of all Chinese health spending. In the U.S., prescription drugs account for less than 15 percent of total health spending, according to U.S. government figures. The World Bank study says 12 percent to 37 percent of Chinese national health expenditures are wasted because of unnecessary drug prescriptions.”

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