- Associated Press - Wednesday, March 9, 2011

BEIJING (AP) - Top Chinese officials vowed Wednesday to improve public hospitals and cut their dependence on drug sales for income _ a major problem that drives up health care costs.

Public health care in China has been underfunded for years, and the high cost and poor availability of health services are among the public’s biggest complaints. In 2009, China announced it would pour $124 billion into reforming the system over three years to provide basic medical coverage and insurance for all of its 1.3 billion people.

Experts have warned, however, that large injections of public funds will be wasted if underlying problems such as the chronic reliance on revenue from drug sales are not solved. World Bank research shows that more than 40 percent of total health spending goes to medicines in China, a disproportionately high amount compared to most other countries.

“I think that no matter what kind of hospital, you should rely on medical technology and improved services to gain income,” Sun Zhigang, deputy director of the National Development and Reform Commission, told a news conference on the sidelines of China’s national legislature.

China wants to push forward health reform efforts this year to improve access to medical care, with plans announced this week to build more county hospitals, reduce prices of some common drugs and increase state insurance subsidies.

The government says the reforms are part of a promised national economic overhaul that will encourage greater domestic consumption instead of relying on exports for economic growth. Many Chinese set aside a significant amount of their earnings for possible future medical costs instead of spending it.

The State Council, China’s Cabinet, announced Monday that the central government would fund the construction of more than 300 county hospitals, while state media said the maximum retail prices of some commonly used antibiotics and other drugs will be reduced by an average of 21 percent. That is expected to save Chinese patients $1.5 billion in expenses.

The central government plans to spend 172 billion yuan ($26 billion) this year on health care, an increase of 16.3 percent from the previous year, the Finance Ministry said Saturday. That includes boosting annual government subsidies for insurance premiums to 200 yuan ($30) per person from 120 yuan ($18).

Although the reforms have already increased insurance coverage in rural areas and improved primary health services at the village level, the government’s efforts to fix problems at profit-driven state hospitals have been criticized as insufficient.

Many Chinese health experts say the government should spend even more on health, pointing out that its budget for health care last year amounted to just 1.2 percent of the gross domestic product, compared to nearly 4 percent for education.

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