The Policy on Elderly Care Service in China

Social innovation sometimes may be limited by a legal, regulatory environment. Thus, the government needs to explore whether outdated rules may be limiting different kinds investments especially for-profit or hybrid ones with a social purpose[1]. This reminds me of my intern experience at Development and Reform Commission of Pudong, Shanghai, China, a governmental agency that helps administrate and plan local economy. There, I witnessed how lagged policy negatively influenced social enterprises, and how a newly designed system addressed the problem.

Shanghai government had been imposing strict restrictions on kinds of organizations that could act in elderly care service industry. Despite of governmental organizations, only non-profit organizations are allowed to provide service such as community nursing service and home-based care service. The governmental organizations taking advantage of preferential policy had no incentive to improve their service, while non-profit organizations did not operate well either because of a lack of resources and business acumen. This led to a poor-functioned and uncompetitive market of elderly care service, and thus the industry had been lagged with little high-quality service provided.

Even worse, the government set a goal that the number of elderly care beds should equal 3% of elderly citizens population in Shanghai till 2015. This goal was too difficult to be achieved in the predefined timeframe. So, some local municipal officers had no other means but to force nongovernmental organizations to make over their rights of operation to the governments so that these elderly care beds could be counted into the performance of the governments.

While we were visiting a well-managed elderly care center, which was built by the government but operated by non-governmental organization that gained rights of operation through bidding. President told us that a municipal officer threatened her team to leave although they were still in tenure, simply because nongovernmental-operated institutions would not be figured into the number of the target. At that moment, we could do nothing but comfort president that policy would evolve better in the future.

Fortunately, the goal was later abandoned. Instead, the policy makers began to work on marketization reforms of the elderly care service industry. We then helped design a new, economically sound system within which for-profit and other kinds of organizations were newly allowed to compete equally. For example, service provided by any kinds of organizations could be paid by public pension, which used to be the privilege of governmental organizations. In this way, customers would go to their favorite service providers, no longer making their choice based on the availability of pension use. So, the market players would try to improve quality of service and lower their price. Meanwhile, some for-profit companies were doing well with business acumen as well as doing good through innovative ways.  This new policy would be implemented for trial in Pudong, Shanghai. If proved success, it would be generalized to the whole country.

From this experience, I see the important roles policies play in social innovation and enterprise. Although the elderly care service industry is evolving, there is still a long way for China to go to build a legally friendly environment for all the organization with a social purpose. 

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[1] Investing in Social Entrepreneurship and Fostering Social Innovation (Jolin, Center

for American Progress, December 2007);

www.americanprogress.org/issues/economy/report/2007/12/21/3706/investing-in-socialentrepreneurship-

and-fostering-social-innovation/