"I haven't claimed back a single yuan in medical expenses since I joined the university more than 10 years ago," said Zhang Weiying, a professor of Peking University, at a recent forum held in Beijing on China's macroeconomics and hospital reforms.

Zhang, an economist with the university's Guanghua School of Management, said he could not afford the time and energy to go to see a doctor in an overcrowded public hospital, let alone claiming reimbursement for the medical costs from the university.

His remarks would invite criticism since many ordinary Chinese consider the cost of medical services itself more of an obstacle to seeking treatment than anything else.

The third national health service survey, conducted between September and October in 2003, estimated that almost one in two people who should go to a doctor choose not to do so, mainly because of the cost.

The findings are strange when one considers that the country's per capita gross domestic product (GDP) exceeded US$1,000 last year.

Other findings also point to this unbelievable fact.

The survey found that as many as 44.8 per cent of urban residents and 79.1 per cent of rural residents were not covered by medical insurance of any kind last year.

In the past five years, the annual income of urban residents rose by 8.9 per cent, of rural people 2.4 per cent, while medical expenses in urban and rural areas soared by 13.5 per cent and 11.8 per cent.

There are many reasons for the lack of medical insurance beyond just cost.

Inadequate medical resources and regional disparity in their allocation are two.

At the moment, China supports one fifth of the world's population, with only about 2 per cent of the world's total medical resources.

In terms of healthcare efficiency, this is remarkable.

In fact, in the early 1980s, China outperformed most other countries with low medical expenses and relatively high provision of basic healthcare.

But alongside its rapid economic growth over the past two decades, the country has become a mediocre performer, according to Liu Guoen, dean of the Department of Health Economics and Management of Peking University.

Meanwhile, the other side of "efficiency" is a serious short supply of medical services to the 1.3 billion people.

More disturbingly, only 20 per cent of the country's limited medical resources were allocated to farmers, who accounted for more than two-thirds of the population.

Such an urban-rural disparity has even prompted Gao Qiang, deputy minister of health, to urge the central government to include rural healthcare in the top priorities it has placed on agriculture and rural economic development as well as an increase of farmers' incomes.

The deputy health minister also said that fiscal expenditure on medical services was too low.

Though the country's overall expenditure on public healthcare has reached 5.5 per cent of GDP, around US$55 per person, the government paid only for 15 per cent of it.

In some welfare states of Europe, overall medical expenditure amounts to 10 per cent of their GDP, of which the government covers as much as 80 to 90 per cent.

As a developing country, China certainly cannot afford that much for public healthcare.

But when one considers that US$240 fiscal revenue will be collected from each person this year, the US$8 per capita government expenditure on medical service is extremely small, Gao said.

To ensure a fair and basic health service for the public is a prime goal for the Ministry of Health, but it is not confined to it.

As one of the few State sectors lagging far behind the country's market-oriented economic reforms, the public hospital system requires an immediate and thorough overhaul to meet the ever-growing and changing needs of the public.

While most observers readily agree on the necessity of hospital reforms, opinions are divided on what prescriptions to give in terms of implementation.

From the patient's point of view, by citing his personal experience, Zhang Weiying intended to draw attention to the fact that while most of the public are complaining about high medical costs, a portion of rich people are quite dissatisfied with crowded public hospitals.

Zhang suggested a differential pricing system where the rich are taxed to subsidize people who can hardly afford medical costs.

The argument does have a point.

Since all public hospitals charge more or less the same rates, people naturally choose those with a better reputation instead of going to small hospitals, resulting in a serious waste of the country's limited medical resources.

A differential pricing system would divert patients to different hospitals so the country's resources could be used more efficiently.

Nevertheless, while addressing the problem of efficiency, the proposal of better but more expensive medical services for the rich will not sell morally since inequality is now widely considered one of the biggest problems facing the medical service system.

From the hospital's view, Mao Yu, president of Beijing Ditan Hospital, insisted that property ownership reform should be accelerated to grant hospitals autonomy in management.

In name, public hospitals are State-owned and mainly funded by government expenditure. But due to the government's meagre expenditure on medical services in recent years, hospitals have to make money from providing medical services and selling medicine. Since medical services are under prices set by the government, hospitals have no choice but to inflate the price of their medicines.

Small operations such as appendectomies, which need five medical workers are charged at just 326 yuan (US$39.4), not enough to cover the cost of the man power.

The Ministry of Health is keenly aware of the inadequacy of government investment in medical resources. But it still hesitates to introduce private investment in the sector.

Property ownership reform should not take the central stage in hospital system reform, said Liu Xinming, director of the Department of Health Policy and Laws under the Ministry of Health.

He said the main task was to perfect the allocation of medical resources between the few key hospitals and many community-level hospitals while strengthening the government's regulations.

Because of the vital significance of public medical services to the people and the asymmetry of information in this special market, the government must step in, agreed Liu Guoen.

"But the problem is how and for whom will the government intervene," said Liu.

The government is currently still a service provider, directly running public hospitals.

Liu suggested it should change itself into a service buyer to provide basic medical services for the public. In doing so, all sorts of hospitals will be encouraged to compete with each other, raising the overall efficiency of the sector.

Challenges facing China's hospital reforms are multi-faceted. Given the complex interests involved, no one expects a one-size-fits-all solution, or that it will be done overnight.

Considering the country's growing economic prowess, the government should be and is able to fix the hospital system to allow it to serve the people better.

What the third national health service survey needs to find out should not be seen as a cause for awkwardness, but rather a cause for action.

(China Daily December 15, 2004)