In China's rural areas, until the 1980s when rural people's communes were dismantled, the healthcare system was well organized and highly subsidized by production brigades under the communes. Today, in most of China's rural areas, healthcare has shifted to a fee-for-service system, in which the former rudimentary arrangements for health and medical insurance have not been preserved. Farmers cannot afford to purchase the same amount of health care previously provided by the commune system. Meanwhile, the number of hospitals and healthcare centers in rural areas has decreased significantly.

To guarantee access to medical care for farmers the Chinese Government began to set up a rural cooperative healthcare system in 2003, under which farmers, local government, and central government each contribute 10 yuan per year per person to a medical fund. Under this government-subsidized insurance scheme, farmers contributing to the fund can get a certain proportion of their medical expenses refunded every year. According to official statistics, by the end of September 2006, 406 million farmers, or about 45 percent of the total rural population, had joined this new type of rural medical insurance.

One aim of this basic healthcare system is to narrow the differences in medical care between rural and urban areas. China's rapid economic growth and steady increase of tax revenues have provided the economic basis for establishing the system. Although different government departments are still fiercely debating the scope of the concept of 'basic health care' and how it can be financed, the necessity for the government to provide safe, convenient and inexpensive or even free basic health care for every citizen is widely agreed and is expected to become the central pillar for new health reforms.

Hospital dilemmas

An important aspect of the new reform process is to change the management system of public hospitals. Currently public hospitals finance themselves from selling drugs and medical treatment. This has resulted in doctors rampantly over-prescribing medicines and often unnecessary and expensive medical tests, which has been a cause of confrontation between patients and hospital staff. To put an end to this type of practice the new reform package proposes separating the sale of drugs from public hospitals.

Public hospitals have complained that reduced funding from the state has forced them to rely on drug sales and medical tests for revenue. Answering questions at a press conference in January, Mao Qun'an from Ministry of Health said, "Comparing China's government expenditure on health as part of total expenditure on health with the overall international level, we can see that the government's investment in public health care is insufficient and expansion is urgently needed."

Tongren Hospital in Beijing is the best-known ophthalmic hospital and one of the top comprehensive hospitals in China. The 120-year-old hospital's name hit newspaper headlines in December 2005 when a lawsuit was filed by relatives of a penniless migrant worker, who suffered from acute stomach pains for over 20 hours before dying in the hallway of the hospital without getting emergency treatment.

In a recent interview with Beijing Review, Han Demin, Director of Tongren Hospital, said that it is difficult to maintain the hospital's nature as a non-profitable institution. Han insisted that it is the responsibility of the government rather than hospitals to provide basic health care to the population and it is unrealistic for hospitals to price state-of-art operations and tests according to affordability for the masses.

"It is impossible for us to completely rely on financing from government, which now accounts for 2 to 3 percent of our hospital's annual expenditure. In pure economic terms, we are no longer a public hospital," said Han.

Fan Guanrong, Director of Renji Hospital in Shanghai, also believes it is wrong to accuse public hospitals of low efficiency and wasting medical resources. He said the 720 doctors in his hospital received 2.04 million outpatient visits in 2006, which, together with operations, amounted to a workload equivalent for each one of 438 working days, a considerable amount of overtime. He added that without enough government financial support, excessive unpaid work by the medical staff there has become an important means for the hospital to earn the profits necessary to survive, purchase advanced equipment and build new wards.

In 2006, Fan appeared on a local television program to debate with an attorney on who should take the major responsibility for deteriorating relations between hospitals and patients. Representing the side of hospitals Fan earned support and approval from almost half of the television audience.

In January, the National Development and Reform Commission launched a nationwide campaign to reduce the retail price of 354 kinds of drug, the twentieth such campaign since 1996. Fan said this new campaign would cost Renji medical group, which consists of a dozen of member public hospitals, 50 million yuan in net profits.

The loss of this income could severely affect the operation of public hospitals, according to Fan. "Two of our member hospitals have already run on deficits, and I dare not imagine the disastrous scenario that patients couldn't go to a hospital if we went broke," he said.