These rural figures edged up to be on par with those in cities after the New Rural Cooperative Medical Care System was introduced. “The increase of average rural incomes certainly plays a role, but more government funding is the biggest cause of the change. Medical services are no longer out of the reach of farmers,” Xu said.

Under the New Rural Cooperative Medical Care System every member pays RMB 60 per year and receives RMB 70 from the local government and RMB 70 from the central government for the premium, in comparison with the RMB 10 from individuals and RMB 20 from the state when the system was introduced a decade ago. The result was that payouts also soared. The maximum reimbursed sum was raised from RMB 10,000 to the current RMB 150,000 for inpatients, and no ceiling is set for those diagnosed with severe diseases. Inpatients can have 70 percent or more of their expenditures recovered. The category of severe diseases is expanding steadily, including 16 diseases such as congenital heart disease, leukemia, uremia and cancers, with another 20 diseases poised to join them by the end of this year.

In Lianyungang City 99.58 percent rural residents are enrolled to the New Rural Cooperative Medical Care System, eight percent higher than the national average. To cater to the increasing number of patients, local medical institutes are becoming better equipped and staffed. Punan Central Hospital, for instance, boasts 30-odd physicians and surgeons of a variety of specialties who have sophisticated equipment at their disposal such as an automatic radiography X-ray, a digital ultrasound scanner and an automatic biochemical analyzer. Now, its inpatient wards are furnished and equipped as well as those in larger city hospitals, but the fees are much lower.

According to National Bureau of Statistics, during the past three years the central budget allotted RMB 63 billion to improve the facilities and services of 33,000 county-level hospitals. Monitoring by the Ministry of Health confirms the reimbursement rate for inpatient costs under the New Rural Cooperative Medical Care System climbed from 48 percent in 2008 to 70 percent in 2011, equal to that of urban residents.

Curbing Excessive Drug Sales

Starting from July 1, 2012, the Friendship Hospital in Beijing removes mark-ups on the prices over 1,500 drugs. Such a reform has been on trial in other areas for a long time. The move signals the end of the half-century practice whereby public hospitals are allowed to add 15 percent to the wholesale prices of the drugs sold to patients.

This practice is the major cause of expensive healthcare in China. Because registration fees were very low, ranging from a few to a dozen yuan, hospitals were forced to seek extra income from drug sales and doctors were known to over-prescribe medicine for profits. Moving away from this practice means much cheaper medical bills. Furthermore, in August 2009, China started to promote a national basic medicine system and purchasing prices of drugs have since been cut by an average of 30 percent.

This will greatly help cut the financial burden on patients. According to statistics of the China Health Insurance Research Association, in 2010 the per capita cost for outpatients was RMB 166.8 and that for inpatients was RMB 6193.9, equivalent to one third of the annual per capita income of urban residents and surpassing annual per capita income of rural residents.

“If Song Guicai has the operation this year, she will only have to pay RMB 8,100 herself,” Xu Debin tells China Today. As of this year, the payment schemes for 16 diseases, including esophageal cancer, have been included in the diagnosis-related groups (DRGs) payment system in Lianyungang City. Under the system, hospitals, in cooperation with the New Rural Cooperative Medical Care System, estimate that the maximum cost Song will have to pay for treatment including drugs will be RMB 27,000. The new rural cooperative medical insurance covers RMB 189,000. Anything above RMB 27,000 will be paid by hospitals to curb excessive prescription.

Of course the healthcare reform also takes into consideration increasing doctors’ incomes. A medical service fee has been introduced to replace the registration fee. The medical service fee, which will be much higher than the registration fee, will mostly be covered by government subsidies and healthcare insurance. The new fee is supposed to replace profits from medicine sales, allowing hospitals to continue to enjoy good revenues. The average monthly salary of doctors in the central hospital of Punan Town is over RMB 4,000, higher than that of local civil servants. About 60 percent of their salaries comes from government funding and 40 percent from fees for medical service and tests – not a penny comes from the mark-ups on drugs.

Deepening Healthcare Reform

In towns and cities, except for civil servants in some areas who still enjoy free healthcare, enterprise employees and urban residents enjoy the country’s basic health insurance, which covers about 70 percent of the medical costs. The reimbursement rate in big cities such as Beijing and Shanghai is higher.

Liu Jinshu is on the staff of a publishing house in Beijing. In 2010 he underwent a liver transplant at a cost of RMB 800,000. Liu, however, only paid 15 percent of that figure.

In the summer of 2012 a case of the health insurance system being conned out of RMB 170,000 of medical fees drew wide attention. Liao Dan, a Beijing resident of a low-income family, was accused of copying the hospital’s seal and using it to make fake receipts for blood dialysis treatments for his wife who suffered from uremia. Liao’s wife didn’t have permanent residency in Beijing, which meant she did not qualify to join the public insurance scheme in the capital. The RMB 170,000 cost of the treatment left Liao with no choice but fraud.