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China's Healthcare System Receives Recovery Treatment

As Zhang Lan approached 60, she found herself often feeling dizzy when going up and down the stairs.

Zhang, 58, a retired employee of a failed state-owned washing machine factory, dismissed her son's pleas for her to see a doctor. "These problems are common when you get old," she said.

Zhang's reluctance to see a doctor is common among China's elderly who fear doctors are only out to make money from them. Many delay going to a doctor, allowing minor ailments to develop into serious conditions that end up consuming their savings.

On top of the cost is the inconvenience.

Zhang's son, Wang Qi, usually makes appointments for her, rushing to the hospital early only to find a long queue in front of the registration window – another reason for Zhang not to see a doctor about her dizziness.

Her unwillingness persisted until she fell down the stairs of her apartment block.

The doctor said she had a brain tumor, which was still treatable – but only with immediate surgery.

Since the operation, Wang Qi, a 27-year-old bank clerk who earns just 2,000 yuan (267 U.S. dollars) a month, has scrimped and saved and investigated every possible avenue to pay his mother's 100,000-yuan (13,300 U.S. dollars) medical bill.

He still hopes China's medicare system might help.

Coughing Up the Cash

When Zhang was still working in 2000, she joined a "medical insurance system for employed urban residents" through her factory, or "danwei", having 2 percent of her monthly salary automatically submitted as premiums to her account at the local social security service center.

A 1998 State Council decision that launched China's medicare reform allowed urban employees, including pensioners, to join locally-operated medicare systems, combining personal insurance and social security.

Smaller outpatient treatment fees are mainly paid from the personal account, while larger hospitalization expenses are paid mainly from the social security fund.

Pensioners are exempted from paying the premiums. Zhang, with a monthly pension of 1,000 yuan (133 U.S. dollars), receives 1,200 yuan (160 U.S. dollars) a year from her personal account for outpatient treatment.

"Actually, the government will let pensioners have free outpatient services. If they see the doctor frequently, they still have most of the outpatient fees refunded," said a staff member with the social security service center of Chaoyang District in east Beijing.

However, larger medical expenses for surgery and hospitalization are still a major financial burden for the ill. The government encourages enterprises to establish supplementary medical insurance for their staff, mainly for medical expenses not covered by the medicare system.

But Zhang's factory was on the verge of total financial collapse.

"About half of my mom's medical bills were reimbursed via medical insurance," says Wang Qi.

"The medical insurance only covers part of the surgery cost for complicated services like brain surgery, but we still have a huge amount to pay ourselves," says Wang.

The Collapse of the Free Medical Service

Under China's planned economic system last century, Zhang enjoyed completely free healthcare. The work unit, or danwei, provided everything.

The danwei provided for all needs, including subsidies for daily necessities, education, transport and housing. A generation of Chinese are still nostalgic over food coupons for staples like eggs and meat.

"The danwei was omnipotent," says Tian Ying, 51, a retired accountant of a state-owned cotton textile factory.

Tian says people at that time had few wants as everyone had a similar standard of living and the low salaries were enough to get by.

"If you needed an operation, you asked the danwei to pay the medical fees, even for your children. Everything was free."

However, Tian says, many danweis could not afford to maintain the welfare from the cradle to the grave. "Gradually the burgeoning medical bills became too much, and if your danwei was rich, you were very lucky."

Financial departments were the danweis' busiest offices. Workers rose early to have medical bills reimbursed through a small window, but usually after a morning, the accountants had to tell waiting queues that the money had run out.

"The problem was that the free medical care resulted in a huge waste of resources," says Tan Shen, a research fellow with the Chinese Academy of Social Sciences, a government think-tank.

Medicare for Everyone

The central government began to reform the healthcare system in the 1990s after finding the dilapidated public-funded medicare system was no longer effective.

In 1998, urban employees began paying 2 percent of their salaries into their personal medical insurance accounts, and employers were obliged to contribute 4 percent of their total wage bill to a social security fund operated by local governments.

"This has separated employee medicare from the danwei system, and greatly reduced enterprises' financial burden. It has made it easier to rejuvenate state-owned enterprises," says researcher Tan.

However, the health sector is coming under growing criticism for rocketing medical fees, inaccessibility, poor doctor-patient relations and the low coverage of the medicare system.

Statistics from the Health Ministry show that soaring medical costs have plunged many rural and urban Chinese back into poverty, with one third of rural patients choosing not to go to hospital and 45 percent of rural patients discharging themselves from hospital before fully recovering.

A survey released last December by the Chinese Academy of Social Sciences showed healthcare expenses had risen to 11.8 percent of average household consumption, exceeding spending on education and transport, a very high percentage even compared with developed countries.

A 2005 report by the Development Research Center under the State Council, China's cabinet, harshly criticized the health sector reform and concluded that reforms over the past decade were "basically unsuccessful". The report stirred a public debate over the path of China's reforms of the healthcare system.

The government is yet to decide on a long-term policy. Experts are still comparing reform paths by studying different medicare systems and proposals. The thorniest issues are funding and management structures.

However, the government took a major step this year, extending access to reasonably priced medical care and insurance to 80 percent of Chinese counties and more urban residents, including those without danwei.

Official statistics show just 157 million of the country's 1.3 billion people were covered by medical insurance at the end of last year, most of them urban workers and pensioners who had danwei.

This year, urban residents – including children and the self-employed – who are not covered by the "medical insurance for urban workers" can be insured through the "medical insurance for urban residents". Local governments will allocate funds to partially cover major treatments.

"Urban residents without danwei, including the self-employed and private business owners, can now be covered," says researcher Tan Shen.

One reform plan that might be adopted is to change a number of public hospitals into community medical service providers that offer almost outpatient services for residents and migrant workers, says Liu Xinming, a Health Ministry official in charge of medical policies and regulations.

The rural cooperative healthcare system, founded in 2003, will cover 80 percent of all China's counties before the end of the year and all rural areas by next year, to help China's 900 million rural dwellers.

About 50.7 percent of the country's rural areas, or 1,451 counties, were covered by the system at the end of last year, with 410 million farmers, 47.2 percent of the rural population, signed up. Last year, the system raised 21.36 billion yuan (2.85 billion U.S. dollars), and spent 15.58 billion yuan (2.08 billion U.S. dollars), statistics show.

Participants pay 10 yuan (1.3 U.S. dollars) a year, while the state, provincial, municipal and county governments jointly chip in another 40 yuan (5.3 U.S. dollars) for the cooperative fund. Farmers who contribute then get a proportion of their expenses refunded according to the treatment they receive.

The State Council earlier this year adopted a five-year plan to further develop the public health system, which promises to establish a basic medicare network covering the whole population by the end of 2010.

The public health service network will include rural cooperative medicare, urban community medical services and public hospital management systems.

However, a unified national medicare system is still a long way off due to the low level of urbanization, widening wealth gap, and vast contrast in regional development, former Health Minister Gao Qiang has said.

A final version of the medicare reform policy will be unveiled after authorities compare reform schemes and solicit public opinions, according to him.

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