A report co-sponsored by the State Council's Development Research Centre and the World Bank has come to the conclusion that the reform of the national medical system is "basically unsuccessful."

Despite growing public complaints about soaring, unaffordable medical costs, the government has never admitted publicly that the reform, which includes reduced State subsidies for hospitals, commercial operation of medical institutions and the establishment of a nationwide medical care system, is "unsuccessful."

The authoritative report proves that public grievances are well founded.

The reform of the medical system in a country of 1.3 billion people, admittedly, is a Herculean task, especially considering the chronic inefficiency of the State medical system that emphasized equality at the expense of efficiency in the planned economy period.

Still, that is no excuse for failure to redress the problems and provide the public with better services.

The report rightly points to inequality in access to medical services and low efficiency in the use of funding as the two main symptoms of the malfunctioning medical system.

Physicians and surgeons often prescribe unnecessary medicine, and surgery or medical check-ups for patients, pushing up their costs, according to the report.

The leading researcher behind the report and some government officials say the country's "market-oriented reform of the sector" is to blame.

By contrast, other experts opposing the State monopoly of hospitals suggest a fully market-oriented reform of the sector is the solution as it would benefit consumers by introducing competition and improving efficiency.

Both have overlooked the merits of what they are opposed to.

The anti-market voices hold that since the government handed the reins to the market, a "market failure" has affected the general public's access to basic medical services.

But the fact is the government has never adopted a true market-based reform programme. What it has done is to reduce financial support for hospitals -- to alleviate its fiscal burdens left over from the old all-inclusive, free public medical system -- and allowed them to sell drugs to maintain their operations.

In the absence of effective regulation, hospitals, drug and medical apparatus distributors and producers have joined hands to overcharge consumers.

The government seldom gives licences to private investors to open new hospitals, nor does it allow the prices of services, such as registration fees, to be raised with quality in accordance with market demand.

An inevitable by-product of the distorted "market reform" programme is a lack of competition, which affects efficiency, and doctors' over-prescription, which is used to subsidize deficit in service provision.

For those advocating a purely market-based solution, past experiences worldwide have proved that although the market can improve efficiency of resource distribution, the market can also deprive the poor of their right to medical treatment. The government is morally obliged to intervene where the market fails to ensure medical care for the poor.

To make the medical system more efficient while providing basic services to the majority, a mixed stance incorporating the positive parts of both the government and the marketplace is advisable.

The government needs to accelerate the establishment of a medical system to ensure the basic health care needs of the general public. It also needs to encourage the establishment of efficient commercial medical insurance agencies so they can, out of commercial considerations, help supervise and control rocketing medical costs that are a consequence of over-prescription.

Opening up the sector to private investors would be a way to enhance the overall efficiency of the sector.

(China Daily August 1, 2005)