In China, Rx for Ailing Health System - WSJ.com

By GORDON FAIRCLOUGH

AFP/Getty

Employees at a community health center in Shanghai stand ready for patients.

QUNGUANG, China -- Here in China's agricultural heartland, signs of progress abound. Qunguang village's 1,000 inhabitants, who live among rolling fields of corn, rice and peanuts, are linked to the world by a new 215-mile, $1.6 billion expressway. An industrial park is under construction nearby. Incomes for rural people in the county jumped 85% between 2000 and 2008.

At the local health clinic, not far from the highway exit ramp, Mei Ruying diagnoses patients with little more than a stethoscope and a thermometer. To keep abreast of new drugs, Ms. Mei, who lacks a medical degree, reads instructions enclosed in the boxes.

China's rickety health-care system relies on thousands of practitioners like Ms. Mei. Often, they are poorly compensated and ill-equipped to serve their big rural constituencies. According to the national health ministry, just 17% of China's medical workers in 2005 were university graduates. In village clinics and township hospitals, just 2% were.

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As China continues riding a long wave of prosperity, its health-care woes are under a spotlight. Medical treatment has improved greatly for many Chinese in recent times of heady growth. But the system of near-universal but basic coverage offered in the years after the Communist revolution has frayed. Opinion polls rank medical care among citizens' top concerns. Spiraling drug costs, inadequate insurance and big out-of-pocket expenses are all cause for public distress. In poor rural areas, many forgo treatment because they can't afford it.

Now, as the Communist Party leadership this month celebrates its 60th year in power, it is moving away from a nearly single-minded focus on economic growth that shaped policy for much of the past three decades.

This year, the government announced a plan to spend more than $120 billion on the first phase of a 10-year overhaul of the health-care system. By 2020, China says, it wants all its citizens to have access to affordable, basic medical services.

"The public is demanding this," says Mao Qunan, spokesman of the Ministry of Health. "Investment in health-care has not kept up," he says, and the new approach is meant to bring the country's health system "in line with China's economic and social development."

The government is renovating thousands of medical facilities and funding broader state-sponsored insurance coverage. After a recent push, the government says that about 77% of people are enrolled in insurance plans, though the portion of medical expenses covered is often relatively low. About 300 million people have no coverage at all.

Just as health-care reform in the U.S. is testing the Obama administration, China's medical policy has become a political lightning rod for China's president, Hu Jintao. Mr. Hu and other top officials have pledged to "put people first" and to pursue a more balanced approach to economic development than their predecessors.

William Hsiao, a Harvard University health economist who has studied Chinese health care for years, says previous Chinese leaders were deeply skeptical about the benefits of investing in health. The attitude, he says, was: "There's a surplus of labor. So, more people die prematurely. It doesn't affect the labor market materially."

Now, he says, President Hu and other top leaders -- who spent much of their careers working in rural areas -- have a better understanding of the troubles facing the country's rural poor. "They worry that unhappiness at the grass-roots level could result in social unrest. There is that sense of threat," he says.

In 2006, the latest year for which the government has released figures, nearly 10,000 incidents of violent protest were spurred by people unhappy with the care, or lack of it, provided by state hospitals.

In a speech last month, Li Keqiang, China's vice premier, said that repairing the health-care system would have "an overall impact on reform, development and stability" in China.

Chinese health-care reform could also play a role in making the economy less reliant on exports by stimulating domestic demand.

The specter of high medical costs -- and the lack of a social-security system -- is a major force driving Chinese to save rather than spend.

Whether China succeeds in the task has implications for global public health. China is the world's most-populous nation, with 1.3 billion people. And diseases that emerge here -- such as severe acute respiratory syndrome -- quickly spread around the world.

Officials are handicapped by years of underspending. Government outlays for health care amounted to less than 1% of gross domestic product in 2006, ranking China No. 156 out of 196 nations surveyed by the World Health Organization.

The $124 billion infusion, promised through 2011, will provide a substantial boost. But it is only a start. And the tab could be higher than expected: Chronic illnesses -- such as heart disease, high blood pressure and diabetes -- are becoming more prevalent as China grows affluent.

In the first decades of Communist rule, China made significant public-health strides. Initiatives reduced malaria deaths and infant mortality rates. Workers on collective farms and in state-run factories received almost universal, if very basic, medical care.

That system started to unravel in the late 1970s as China began to embrace capitalist-market economics. Rural communes were disbanded and inefficient state enterprises went bust. Funding for public hospitals and clinics slowed. Out-of-pocket payments for medical services rose from 20% of health-care expenditures in 1978 to roughly 50% in 2006, according to government figures.

A central goal of Beijing is to improve the affordability and availability of care in China's less well-off rural areas, which are home to more than half the population. To do that, the government has launched a crash construction program for county hospitals and township clinics. And it is pouring more money into a rural-cooperative health-insurance program.

One beneficiary of the new funds is the Ninghe County Hospital, located in a farming area outside the northeastern port city of Tianjin. Using government cash, the hospital was able to complete an 11-story surgical in-patient building, more than doubling its capacity, to 800 beds from 350.

The new facility boasts nine operating rooms, a 15-bed intensive-care unit and a kidney-dialysis ward equipped with state-of-the-art blood-filtering equipment from Germany. The hospital also has two CT scanners and two MRIs.

"We are responding to the call of the government to help farmers with better health-care services," says Meng Qinghai, the hospital's deputy director. "Our goal is to provide a U.S. standard of modern medicine."

One problem, analysts say, is that few of China's rural poor can afford such high-tech offerings.

The government has been ratcheting up the insurance coverage available to farmers through county-level rural-cooperative insurance plans. The programs, which began in 2003, now cover roughly 90% of rural people, according to the health ministry.

So far, coverage remains limited. Most out-patient services and medicines aren't included in the plans at all. Bills for hospitalization are available for reimbursement at varying rates, which are different from county to county. The health ministry says its goal is 50% reimbursement for hospital stays by next year.

"Fifty percent may not seem like that much for Americans or British people. But for Chinese farmers, it's a very big milestone," says Mr. Mao, the health ministry spokesman.

Compared to having no coverage, which was common for rural Chinese as recently as a few years ago, it is a vast improvement. In Jingshan county, home to Qunguang, about 93% of people were enrolled in the cooperative insurance plan in 2008, up from 85% the year before.

"Now that there's insurance, people come to see doctors. Before they were too poor," says Zhu Zhongnian, a surgeon the Jingshan county hospital. "It's a very good thing for ordinary people." But with the high cost of medical care, the coverage offered by the cooperative insurance still leaves many vulnerable.

Ma Deqing, a farmer here in Hubei's Qunguang village is a case in point. Mr. Ma, 67 years old, was diagnosed in the spring with cancer of the esophagus, the tube connecting the mouth and stomach, after a spell of vomiting and being unable to eat. He spent 44 days in the hospital before being discharged in July.

His medical bills totaled 25,000 yuan, or about $3,600 -- more than three times his family's annual income growing rice, peanuts and cotton. Mr. Ma had to pay the whole amount up front before his plan paid benefits, of about $1,000.

Mr. Ma, who lives with his wife, son, daughter-in-law and 7-year-old grandson, said his family used to be well-off by local standards. But it took the family's entire savings, gathered over years, to pay his medical bills. "If I need more treatment, I don't know what I'll do," he says.

Another problem with rural insurance, administered county by county, is that benefits aren't always portable. A worker who might have had coverage in one area but migrated to another could be out of luck. People who aren't registered residents of a county may be shut out of benefits, even if they pay premiums.

Zhang Jianfang has been renting farmland near Qunguang for years, growing corn, peanuts and cotton on a plot far from his hometown in the neighboring province of Henan. Mr. Zhang bought insurance through the local rural-cooperative plan for himself and his family. But when he had a motorcycle accident last year, the hospital told him he wouldn't be covered because his household registration was in Henan.

Local doctors said surgery to repair his broken collarbone would cost 10,000 yuan, or $1,400. Hoping to save money, he took a 24-hour train trip back to Henan, gritting his teeth against the pain and trying not to jostle his right arm. Surgeons there repaired the fracture with a steel plate for 3,000 yuan. But they wouldn't take his insurance, he says, since it was from Hubei province.

The government says that over time, it intends to increase benefits in order to reduce out-of-pocket expenses. And it is working on ways to ensure that people traveling or living outside their home counties will be covered in the event of illness or accident.

China's grass-roots medical personnel pose a different set of challenges. Driven in part by a fee-for-service model and a lack of sound treatment guidelines, they routinely overuse antibiotics and antiviral drugs, international public-health experts say. They prescribe them for patients with colds and flus -- a practice that could help spawn a new generation of drug-resistant pathogens.

The government is supporting continuing-education programs for rural practitioners and financing efforts to send more university-trained doctors to poor rural areas. Tuition assistance, for example, will be offered to medical students who pledge to spend a certain number of years working in the countryside.

In Qunguang, Ms. Mei's clinic income comes from fees for giving injections and the 15% markup she is allowed to charge for dispensing medicines. Still, she says, her medical work doesn't earn enough to support her. "If I didn't do farming, I couldn't even feed myself," says Ms. Mei, who, along with her husband, grows rice on a small plot.

Ms. Mei, who was a midwife before being selected to become a village doctor, passed an equivalence exam for a technical-high-school diploma in the 1990s. She says she thinks that is enough for her to do her job.

"It's complicated. We need a lot of medical knowledge," says Ms. Mei. "But you learn through experience."

—Ellen Zhu contributed to this article.

Write to Gordon Fairclough at gordon.fairclough@wsj.com