The cooperative medical system, part of the government's drive to offer medical services to rural communities, still faces several major problems.

The medical system is a pilot project initiated in 2003. By the end of June 2004, the project had been implemented in 310 counties in 30 provinces, municipalities and autonomous regions, covering 68.99 million rural residents, according to the Ministry of Health.

Rural residents participate in the programme as a household unit. Each year a family hands over 10 yuan (US$1.20) for each member. Both the central and provincial governments pump money into the system, in addition.

If rural dwellers pay into the programme they are entitled to have part of their medical costs, spent in clinics or hospitals, reimbursed.

The Health Ministry says the fund had paid out 1.39 billion yuan (US$167.4 million) for 41.94 million cases of clinic treatment or hospitalization by June 2004.

As a result, many rural residents who had refused to seek hospital treatment because of the high costs involved can get the care they need, without hesitation. The reimbursement scheme eases the often heavy financial burden placed on patients.

But more than two years after implementation, the system still faces a number of challenges.

The central government decided to suspend enlisting more counties for the pilot project this year. Instead, greater efforts will be put into improving the system already in place.

According to a recent report by the Development Research Centre of the State Council, the major problems originate primarily in the arrangements of the system itself.

Firstly, like commercial insurance, the co-operative medical system is not compulsory.

An inevitable result is that the poorest rural residents, who often have the greatest need, are left out because of their inability to afford even the basic fee, according to the report.

This is obviously at odds with the basic principle of a social welfare system that helps economically disadvantaged groups get priority in obtaining protection from social security authorities. The co-operative medical system is like a mutual fund for better-off groups in rural areas, instead of a social security system offering equal assistance to everyone.

Although the government injects funds, only families that choose to be covered by the programme benefit, and the very poor are left at an even greater disadvantage.

Government money, which is collected from all taxpayers, benefits only the better-off families, which is clearly against the principle of helping the poor, and would undermine social fairness, according to the report.

One of the main aims of the co-operative medical system is to help patients with serious diseases.

Such an arrangement is not a realistic option under the conditions on the ground. Most illnesses are of course not serious, so financial aid should be set aside for tackling common complaints, which could in any case worsen if left untreated.

To help patients suffering from more serious diseases, the co-operative medical system should reserve a substantial portion of its funds for reimbursing hospitalization fees.

But a balance must be struck so that patients with serious and more minor complaints both benefit.

According to calculations from several provinces, the system could cover 30 to 40 per cent of costs for each hospitalized patient. But with the majority of the costs paid by patients, the arrangement seems less attractive.

The Development Research Centre's report proposes alterations to the current operation mode of the co-operative medical system to pave the way for further development of the scheme.

First of all, the system should cover as much of the rural population as possible.

Establishing a social security system offering medical services to all rural residents is very important, both to ensure social fairness and to maintain social stability. As a mechanism initiated by the government and supported by public funding, it should grant common benefits without discrimination, with helping financially disadvantaged groups remaining a priority.

At the same time, once the aims and priorities of the system have been chosen, the scheme should play a bigger role in improving public health, even though it has very limited capital.

The co-operative medical system should aim to guarantee the health of all subscribers, not just those with serious diseases. The system should focus on prevention as well as treatment of frequently occurring illnesses.

In this way more people would benefit from the system and the money invested would be better spent.

Another dramatic change that must be considered is the current premium paying method of operation. Subsidized medical services should be offered directly to rural residents.

The government should transfer investment into packages of medicine and medical services, which could become a basic right offered to all rural residents.

To avoid waste, these service packages should be supplied at modest prices within the financial reach of rural residents. But poverty-stricken families should not have to pay beyond their means.

Thus all rural residents would be beneficiaries of the system. Such an operational model would also be much easier to control and supervise for the authorities.

Medical resources could be utilized with higher efficiency if the government is able to adjust service packages flexibly according to local conditions.

As a programme that is still being tested, the co-operative medical system should be developed in line with what works in practice, before it is rolled out nationwide.

(China Daily July 4, 2005)