By Steven Mufson

Doctors have operated twice on Shen to implant stents at a cost of more than $15,000, about five times China’s per capita income. Under China’s health-care system, the government pays 60 percent of his hospital expenses and virtually nothing for the medications and oxygen he has needed since. “I am retired and have little pension every month. So I cannot afford the treatment fee at all,” he said, adding that, luckily, his children could afford to help him out. “Without them, I don’t think I could have had the operation.” China’s health-care system is in disarray, a side effect of the market reforms that have spurred private enterprise and rapid growth since 1980. Before then, state-owned companies offered cradle-to-grave care, part of a system based on danwei, or work units, that provided health, education, pensions and other benefits. But as the economy has grown more diverse, an increasing number of Chinese have had to fend for themselves, with only a porous government insurance program to help. As U.S. lawmakers engage in a tense debate over health-care reform, Chinese authorities, too, are attempting to fix their system. Over the past five years, the government has tried to provide coverage to more of its 1.4 billion people. But even people covered by a minimal health insurance program are often left with big hospital bills and must pay for most outpatient services and medication. More than 300 million people do not have any health insurance.

“We go to clinics for colds, but we don’t trust the doctors because they are all being paid by the drug companies and so they over-prescribe,” said Helen Ye, a Beijing resident who works for a U.S. company. “So most Chinese people, if they don’t feel really sick, do home treatment and try to cure themselves.”

China’s State Council is eager to improve the situation but can’t decide how. The government currently fixes the prices of all medical services, and doctors are treated — and paid — like public officials. But that has contributed to a shortage of doctors as many talented Chinese choose better-paid professions.

Some experts say more private spending and investment would improve the system. Gordon G. Liu, a professor of economics at Beijing University’s Guanghua School of Management, said he would let people with means spend more money on care, which he said would increase the availability of care by giving doctors incentives to work harder and by luring more Chinese into the medical profession.

Even poorer people would benefit because there would be more care overall, Liu said. He also proposed opening the way for foreign investment from companies such as Kaiser Permanente in building hospitals in China.

But other experts say that approach would be unfair to the poor, who might be neglected by doctors seeking rich patients. They say inequality in China is bad enough these days, as scores of millions of people live on a couple of dollars a day while tens of millions of wealthier Chinese buy luxury cars, Louis Vuitton bags and nifty electronic goods.

The State Council has asked health-care experts to run pilot projects in cities and report back in three years.

Some will free up hospital doctors to work at community or for-profit clinics without losing their jobs. Some will stick more closely to the government-run model, in which doctors’ salaries and fees are fixed.

“It’s very interesting to see politics in China. Sometimes they are very old-fashioned and sometimes so liberal, even more than in the U.S.,” said Liu, who has taught at the University of North Carolina. “This time it said, ‘Since you guys are debating, let’s do an experiment and see which way works better.’ I tell my colleagues that what you’re doing is very consistent with your ‘scientific development philosophy’ rather than being like a dictator telling us what to do, like in the past.”

Out-of-pocket costs

With the end of civil war and the Communist victory in 1949, life expectancy in China increased — except during Mao Zedong’s Great Leap Forward, a disastrous economic plan that resulted in the starvation of millions from 1959 to 1962. Between 1963 and 1980, life expectancy at birth increased by an average of one year every year, from 50 to 67.

Until the economic reforms, Chinese workers received health care from their work units, which funded the care out of operating income. The Chinese National Petroleum Corp., for example, once had more than 50 hospitals for its 1.5 million workers. But many state-owned companies suffered financial problems as their workforces aged and retired and as younger, healthier workers increasingly went to work for private enterprises.

In 1994, the State Council overhauled the failing system by putting urban workers in citywide insurance pools, which now include about 200 million people. Hospitals were severed from industrial enterprises. Instead, employers contributed 6 percent of wages and employees 2 percent to cover hospital, clinic and pharmaceutical costs.

Nonetheless, according to Health Ministry statistics, out-of-pocket expenses dramatically outpaced increases in per capita income and national health expenditures. According to the World Bank, 71 percent of Chinese had access to state health facilities in 1981; 12 years later, the figure was 21 percent. In 2005, individuals’ out-of-pocket expenses for health care were more than 100 times what they were in 1980.

In 2003, the government gave more money to rural medical cooperatives and offered farmers a subsidy of $12 a year for insurance if they chipped in $3. The voluntary program covers 25 to 30 percent of hospital costs and little outpatient care, but Liu said 850 million people have enrolled in it. Over the next three years, the government plans to increase its contribution by about half.

In 2007, the government extended coverage to urban workers’ families, which had been without public coverage since the 1994 collapse of the work-unit system. Children, the elderly and the unemployed all qualified for the same $12 government subsidy, but because health costs are higher in cities than in rural areas, they must contribute more than $30 a year. About 120 million people have signed up.

Some cities and provinces provide additional subsidies, and companies and individuals can buy private insurance policies.

But the government’s programs for city dwellers are still based on residency, and experts say greater flexibility is needed for China’s increasingly mobile population.

A case in point

Zhang Honghong, a 34-year-old editor at a Beijing publishing house, is an example of the system’s successes and shortcomings.

In addition to the government program, Zhang is covered by a commercial health insurance policy that her employer bought. For treatment of a recent bout of pneumonia, she had to pay the first $300 in costs, and insurance covered 90 percent of the next $750.

Zhang wants her aging father to move to Beijing to live with her, but the insurance program in his city won’t cover expenses incurred elsewhere. “So, my father dares not to stay in Beijing long,” she said.

Zhang has a 3-year-old son, who has had several colds this year. He wasn’t sick enough to be hospitalized, which would have been covered by the government plan. Instead, he ran up a $200 bill last month. That brought his medical costs for the year to about $600.

“Thank God I only have one child so I can afford his medical bill,” Zhang said. “I feel it’s a little bit expensive for us. But what can we do about it? I bargain everywhere but in the hospital.”

Researcher Zhang Jie contributed to this report.