China, like U.S., tackles thorny health care reform

HANGZHOU, China (Reuters) - Construction worker Li Fuxing had been in the wealthy Chinese city of Hangzhou for less than a month when a falling beam smashed his knee, landing him with hospital bills equivalent to half a year's wages.

In striped pajamas and a cast, he is another test case in China's experiment in providing affordable health care to 1.4 billion people, an endeavor expected to cost $124 billion over the three years to 2011.

As debate rages in the United States over whether and how the government can extend health insurance, China is simply attempting to provide a modicum of cover for its people and revamp the hospital system's reliance on peddling drugs to earn revenue.

"In the U.S., the reform is to try and expand coverage whereas in China, they're just trying to make sure everyone has basic health care," said Drew Thompson, who does research on China's health system at the Nixon Center in Washington.

"You keep hearing the word 'basic'."

Li hoards his daily bills from the hospital in Hangzhou, a lakeside city near Shanghai whose prosperity draws migrants from around China.

When Li gets better, he will travel 800 km (500 miles) to his hometown to see what, if any, of the costs he can claim through a new insurance scheme that provides patchwork cover to millions of migrant workers but which is linked to their hometowns.

One illness can ruin a Chinese family, driving everyone -- from well-paid white collar employees at foreign firms to migrant construction workers and hard-scrabble farmers -- to save around 40 percent of household income for a rainy day.

Economists argue a safety net would allow Chinese to spend more of their disposable income, taking the heat out of a debate with Washington over the nation's trade surplus.

"In China, if you do not have health insurance, you do not have access to care. Period," said Gordon Liu, a professor of economics at Peking University's Guanghua School of Management.

BASIC CARE

While China's best city hospitals meet global standards, rural clinics are often staffed with under-educated medics and lack even basic functions such as heating.

To supplement salaries and revenue, doctors and hospitals peddle expensive drugs or prescribe unneeded treatments. Efforts to extend insurance coverage are being accompanied by reforms to improve salaries and revamp the cost structure of hospitals.

The general distrust of the medical system means patients flood the best hospitals for all sorts of complaints, even a cough. One goal of the reforms is to improve rural and neighborhood clinics to relieve congestion at top hospitals.

For patients, one of the biggest problems in China's attempts to roll out coverage is that it is based on the original registered residence of each citizen.

However, China's economic reforms of the last three decades have prompted hundreds of millions of Chinese, like Li, to leave their birthplace to seek jobs elsewhere.

Urban workers are reasonably well-covered, with basic government insurance and private plans, but people who buy the 20 yuan ($2.93) a year insurance for farmers must return to their hometowns for care. Otherwise, they pay upfront and hope that part of their costs will be reimbursed.

A third option, for migrant workers, cannot yet be transferred between localities.

"People like us move a lot," said Xu Zhiquan, an itinerant salesman who brought his feverish girlfriend to a Hangzhou hospital. Neither could use insurance for the visit, since they had contributed to plans in Shanghai, 150 km (80 miles) away.

For the losers in China's great race to development, even the minimal insurance premiums are too much.

"They said I could buy insurance for 400 yuan a year, but that would eat into what I spend for food. I've been healthy for 19 years, so I said no," said Gu Xiazheng, 70, who has eked out a living on a pension of 400 yuan a month since her state-owned employer went bankrupt a decade ago.

Gu and her husband spent 600 yuan in two days at an outpatient facility near Hangzhou after she fainted one morning. Pallid and coughing, she teared up as she said her children had lost their jobs and could not chip in.

"Now I don't know what I will do," she said.

($1=6.826 Yuan)

(Editing by Dean Yates)