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"Once the ambulance siren wails, a pig is taken to the market; once a hospital bed is slept in, a year of farming goes down the drain; once a serious disease is contracted, ten years of savings are whittled away," said Dr Ma Wenfang, quoting a well-known Chinese countryside saying.

"The annual average income of farmers in my village is only 500 yuan, (about US$62.5). After paying for children's tuition fees and living expenses, they have nothing left to cover medical expenses even in county-level hospitals," said Ma, 55-year-old doctor of Suliuzhuang Village of Tongxu County in China's central Henan Province.

He has been the village doctor for 40 years and is responsible for 2,500 farmers. But his clinic only has three pieces of medical equipment: blood pressure gauge, thermometer and stethoscope.

"Despite these limitations, 98 percent of farmers came to me," he said, "because at least it is much cheaper for them. Sometimes I give them free medical treatment." For serious cases far beyond the capability of his clinic, Ma encouraged his patients to seek help at county-level hospitals. "But they would rather lie in bed than go to hospital," said Ma, "because it is far too expensive and 25 kilometers away."

The situation in Suliuzhuang Village is not rare. In 2003, the average annual income for China's 800 million rural population was 2,622 yuan (US$328) while the average medical expenses were 2,236 yuan (US$280), according to the Ministry of Health in 2004.

The latest national health survey in 2003 revealed that about 73 percent of people in rural areas who should have sought medical treatment chose not to do so because of the cost.

In urban areas, the figure was 64 percent. As China's socioeconomic system moves increasingly market-oriented and the role of the government as a provider of public services diminishes, the country's health care system, traditionally one of core elements of Chinese socialism, is suffering.

The health care system is dominated by pay-for-service care, notes Ge Yanfeng, deputy director of the Department of Social Development with the Development and Research Center (DRC) of the State Council. "Patients have to pay for treatment out of their own pockets with large differences in quality and access among income groups and between rural and urban populations," he said.

This is in stark contrast to three decades ago. Urban residents enjoyed state-funded hospital services and rural people had access to subsidized health clinics run by "barefoot doctors", who were mainly middle school graduates trained in first aid.

This service, essentially free, helped almost double the country's average life expectancy from 35 years in 1949 to 68 years in 1978. When China began its economic reform in early 1980s, the old system was dismantled as China attempted to switch to a market-oriented health system.

But the government has failed to establish a viable substitute. Almost 90 percent of the rural population has no health insurance. The urban population isn't much better off. Nearly 60 percent of city dwellers are not covered by health insurance, according to the Ministry of Health.

From 1980 to 2004, the central government's share of total funding for health care dropped from 40 percent to 16 percent, according to the World Health Organization. It was 44 percent in the United States, 56 percent in Thailand, 66 percent in Australia, 82 percent in Germany and 85 percent in Japan.

For some developing countries like India, Cuba and Vietnam, medical care is free. Government funding is also distributed unequally. Almost two thirds of the money is spent on urban areas covering only one third of the country's population.

Eighty percent of government funding in urban areas is only used by 8.5 million people, mainly officials at various levels, revealed a report by the China Academy of Sciences. Possessing the fourth largest economy in the world, China ranks 188th of the 191 member countries of the World Health Organization in the fairness of its medical resources distribution.

"China's health care reforms have turned hospitals into clubs for the rich," said a 2005 report released by the Development Research Center (DRC) of the State Council, which concluded the reform "unsuccessful". "It's a market failure," said Li Ling, professor at Beijing University's China Center for Economic Research.

"It is not right. The economy is growing, people have more disposable income, but medicine costs are rising even faster." "Indeed, since doctors and hospitals rely more on profits, they have come to rely on medicine sales for the bulk of their revenues." Ge Yanfeng of DRC noted that five to 20 percent of medical staff salaries are provided by the government, while 80 to 95 percent has to be gained from patients.

"This leads to a tendency to overprescribe medicines, which can carry public health risks," He said. The business of peddling medicines to hospitals has also bred corruption, with many hospitals accepting kickbacks from drug companies.

To quell rising medicine prices, China's National Development and Reform Commission (NDRC) has issued its 19th medicine price cap at the end of this August, which involves 99 antimicrobial drugs. It is estimated that the annual saving from the price cut for patients can reach 4.3 billion yuan (about US$538 million).

However, critics also argued that the cuts may not provide a cure. Prof. Li Ling observed. "They are far from a quick-fix solution, and could even exacerbate the tendency to overprescribe, " she said.

She said the previous price cuts only resulted in some drug manufacturers ratcheting up prices after altering product names and packaging. Some hospitals and clinics raise the costs of medical services, turned a blind eye to government standards or even turned down low-priced drugs.

She urged the central government to bolster spending and initiate a radical restructuring of the health system in a bid to restore fairness and quality service. "Health care has to be accessible and affordable," she added.

Ge Yanfeng believed this is attainable for China. According to his estimation, a new health care system which is accessible and affordable to all will cost 150 billion to 200 billion yuan (US$19 billion to 25 billion), which equals five to seven percent of the national revenue or one to one-and-a-half percent of GDP in 2005.

The NDRC announced this September that the Chinese government has made improving health care a priority, promising to bring virtually every citizen within the health care insurance framework by 2010. A new cooperative medical program was launched on a trial basis in 2003 in the rural areas with 156 million farmers covered so far.

 The program calls for every individual to contribute ten yuan (US$1.2) a year to a special fund, to be subsidized another ten yuan (US$1.2) each by the local government and the central government as well. Eventually, farmers should be able to draw from it to cover their health expenses.

Experts from Beijing University, Chinese Academy of Social Sciences, the Ministry of Agriculture and the Ministry of Health surveyed 70,769 farmers in 257 pilot counties of 29 provinces and regions from March to July this year. The survey showed that the cooperative medical program has helped reduce the medical expenses proportion in farmers' average annual income, down from 89 percent in 2003 to 65 percent in 2004.

Ninety percent of the polled farmers who joined the system said they were willing to continue another year, and 51 percent who had not joined said they would do so the next year.

The survey also revealed that ninety-one percent of the funds collected by the system were spent on farmers in 2005, while the figure was 71 percent in 2004.

From 2006, a farmer puts 10 yuan (US$1.2) a year into his personal medical care account and the government adds another 40 yuan (US$5). The government will pay a maximum of 65 percent of his medical charges a year.

The total allowance provided by the central government from 2006 would reach 4.23 billion yuan (US$529 million), according to the Ministry of Health.

In the next five years, the central government will spend 20 billion yuan (US$2.4 billion) to help rural hospitals and clinics improve technology, upgrade equipment and attract new talent.

The system will cover all 800 million rural residents by 2010, according to the ministry.

"When it comes to providing health care for its people, no country has discovered a panacea," said Vice Health Minister Zhu Qingsheng. However, he said, what is clear is that a system which embraces a market-based approach and also addresses the needs of the society works best.

A team of 11 State Council departments was set up this September. Their plan for a new health care system could be announced before next spring.

As Doctor Henk Bekedam, the World Health Organization representative to China, put it, "Health planners must look beyond the cold calculus of economics and into the core of the human values embedded in the very concept of health care, if they are to develop a truly healthy country."

(Xinhua News Agency October 6, 2006)