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Under the new rural cooperative medical system, China has raised the medical subsidies available to rural residents from 200 yuan to 240 yuan ($35.14) per year per person, according to the MOH.
The new rural cooperative medical system has been on trial since 2003. MOH statistics show that more than 830 million rural residents had joined the new system by the end of 2011.
According to the ministry, the Central Government is planning to provide additional coverage for people suffering severe diseases in rural areas starting this year and raise the medial reimbursement rate to 90 percent.
"The new rural cooperative medical system will cover more diseases by the end of this year, including leukemia, congenital heart diseases and six other conditions," said Minister Chen. Some regions will also be covered for cancers and vascular diseases.
Experts predict the new system will benefit about 10 million households. Assuming each household has an average of four to five people, about 40 to 50 million people will benefit from it.
"Despite rapid development, the country still has a long way to go to establish a high-standard health care system," said Yao Lan, a professor at the School of Medicine of Huazhong University of Science and Technology in Zhejiang Province.
"Currently, there is still a big gap between rural and urban health care systems. Even the urban system needs improvements such as raising the reimbursement ratio, covering more drug expenditures and providing more medical services," he said.
According to the MOH, China will work to reduce household shares of total medical expenditures to less than 30 percent by 2015.
In addition, the ministry has pledged greater efforts to encourage investment in the medical industry, particularly in non-basic health care sectors, in the 12th Five-Year Plan (2011-15) period.
Soaring prices of prescription drugs is a major public complaint in China.
In response, the National Development and Reform Commission (NDRC), the country's top price regulator, has managed to lower retail prices of medicines 28 times since 2005.
In March 2011, the NDRC announced cuts in retail prices averaging 21 percent and affecting 162 antibiotics and cardiovascular system drugs. The reduction was expected to help patients save nearly 10 billion yuan ($1.58 billion) every year.
Last August, the NDRC announced a reduction in the maximum retail prices of 82 medicines for the hormonal, endocrinal and nervous systems with an average reduction rate of 14 percent.
China also released its National Essential Medicines List in August 2009. Prices of the essential drugs are under government control. The Central Government sets reference prices, based on which provincial governments set the purchase prices of the drugs in their jurisdiction.
Public medical and health facilities at the local levels are required to sell the drugs at the purchase prices. Previous prescriptions included a 15-percent mark-up.
But the efforts have failed to achieve their expected results.
Last November, a survey conducted by national broadcaster CCTV exposed a disturbingly large discrepancy between the cost of producing one particular drug and the prices charged for it in hospitals.
A pharmaceutical Clindamycin Phosphate Injection product that sold for 12.65 yuan ($1.85) in several hospitals in Beijing had a gross profit margin as high as 2,000 percent, since its ex-factory price was only 0.60 yuan ($0.09), claimed CCTV in its program Weekly Quality Report. The report sparked widespread public outrage.
"In China, most public hospitals are unable to get sufficient funding from the government. Usually, government allocations only account for about 10 percent of the operating cost of a hospital, while the other 90 percent must be self-raised," said Zhuang Yiqiang, Vice Secretary General of the Chinese Hospital Association.
As a result, doctors at public hospitals have to generate income for the hospitals by prescribing highly profitable, sometimes unnecessary, drugs and treatment, which not only wastes medical resources but also leads to prohibitively expensive medical bills.
At the national health work conference, Minister Chen said that hospitals' reliance on sales of medicine for revenue, which is blamed for over-medication and over-diagnosis in public hospitals, has severely hampered the medical system reform.
According to a timeframe released by Chen, the separation of medical treatment services and medicine sales in public hospitals will be completed by 2015.
Chen said further reform will be carried out on a trial basis in 300 county-level hospitals this year, and all county-level hospitals will hopefully adopt the diagnosis-related group system by 2013. The practice will be adopted in all public hospitals by the year 2015.
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