Abstract:

China’s supply of medical and health service follows a market-pricing mechanism and a formula of contract-based governance.The supply process includes two chains of principal-agency of property right and value compensation.Capital flow runs in the two directions of heath expenditure collection and value compensation for medical service consumption.The general expenditure on health and medical service on the demanders’ side is to be shouldered by a multiple mechanism composed of governmental interest，social relief and individual payment.The suppliers，such as medical institutions，obtain cost reimbursement and reasonable earnings through financial aid and health and medical service.With the intervention of the third parties such as medical insurance，the interaction among interested parties leads to the problems of moral hazard in public sector and market failure in private sector，the incentive to which is the reform of division of administrative power and public finance.The regulation of efficiency goals for corresponding participants，strengthening supervision and integration of medical security systems in both urban and rural areas，all play positive roles in improving the accessibility of medical service and enhancement of social justice.

Key words: health and medical service, medical security, public pricing, value compensation