JEFFREY BROWN: The United States isn't the only country struggling with health-care reform.
Special correspondent Jeffrey Kaye reports for our Global Health Unit about China's efforts to improve care for more than a billion people.
JEFFREY KAYE: When Westerners think about Chinese medicine, what often comes to mind is acupuncture, herbal treatments and massage, all of which are still common.
But, in fact, since the 1990s, the more remarkable aspect of health care in communist China has been capitalism and the development of a profit-driven, fee-for-service medical field, heavily reliant on sales of expensive pharmaceuticals.
Chinese officials now say the market-oriented approach hasn't worked. It produced huge disparities, which left many people without access to care. So, two years ago, the government embarked on a massive scheme to reform the system to make it more affordable and accessible and to make people healthier.
As minister of health, Dr. Chen Zhu is overseeing a plan. One major goal is to provide universal health insurance.
DR. CHEN ZHU, Chinese minister of health (through translator): And we have already made some significant progress.
JEFFREY KAYE: What changes do you think the average person at this point can see in the health-care system?
DR. CHEN ZHU: First of all, the insurance system, 94 percent of the Chinese people are under the coverage of the medical insurance.
JEFFREY KAYE: Ninety-four percent?
DR. CHEN ZHU: Ninety-four percent, yes.
JEFFREY KAYE: That's a threefold increase in health insurance coverage since 2005. Even so, there are major gaps. Patients still have to pay out-of-pocket fees and large deductibles. And with separate plans for rural and urban residents, many migrant workers from the countryside are not covered in the cities.
Altogether, the government has pledged to invest as much as $200 billion on health care between 2009 and the end of this year. Expanding health insurance programs has led to a problem: an increased demand for services that the system is hard-pressed to accommodate, according to Gordon Liu, an architect of China's health reforms and an economics professor at Peking University.
GORDON LIU, Peking University: That's why most Chinese people feel very difficult to get into a hospital. Even if they have insurance programs, even if they have money in their pocket, they cannot easily get into a hospital for diagnosis or beds if they need it.
JEFFREY KAYE: That's because so many people prefer to seek treatment at prestigious hospitals, instead of at local health centers, for even minor complaints, such as headaches and colds.
At this Beijing hospital, doctors see as many as 50 patients a day. Emergency services are so overcrowded that the staff has set up beds in the corridor. People start lining up early in the morning to obtain appointments for the following day. Many patients travel long distances to get to the hospital.
WOMAN (through translator): I arrived really early this morning. Every day, there are so many people waiting in line, I can't even find out where to start.
JEFFREY KAYE: What time did you get here this morning?
WOMAN (through translator): I came at 7:00. I stayed at my relatives' house last night nearby to make sure I would get here early.
JEFFREY KAYE: To address the problem, the government is constructing or improving thousands of medical centers in both rural and urban areas.
At Fangzhuang Community Clinic in Beijing, construction workers were putting the finishing touches on new rooms that will be dedicated to maternal and child care.
So, this is a whole new wing that you're building here.
Dr. Wu Hao, the clinic's director, says, as a result of the reforms, his facility is paying greater attention to preventive care.
DR. WU HAO, Fangzhuang Community Clinic (through translator): This center will be used for shots for children and health checkups for newborn babies and pregnant women. We have also built a mental health center for those people who need psychologists.
JEFFREY KAYE: At the same time, authorities have promised to narrow the vast disparity in health care between urban and rural residents by improving facilities in the countryside and making sure every village has a clinic by the end of this year.
For this small neighborhood rural clinic, health care reform hasn't meant a lot physically. It's still in need of quite a great deal of repair. But for the people who come here, they're much more able to afford the care they need.
The doctor at the clinic, Gang Yongsheng, says that, since reforms began, clinics like his have received an extra $6,000 a year for new equipment. But he says he's spent the money on additional checkups for villagers and for education. Gang says rural patients who previously had no insurance can now afford medical care.
Li Shuean, who's receiving an I.V. drip for high blood pressure, says each treatment costs her $4.50, less than half what she used to pay.
LI SHUEAN (through translator): That's a big difference. Before, I had to pay everything by myself. Now the government pays 55 percent.
JEFFREY KAYE: In the cities, among the more tangible signs of the increased spending on health care is new hospital equipment. At the Shenzhen People's Hospital in southern China, government subsidies have quadrupled in four years. There were 18 dialysis machines before the reforms. Now there are 38 and more on the way.
Eighty-one year old Zhang Guansheng, who suffers from renal disease, says his treatments are more efficient.
ZHANG GUANSHENG (through translator): Before, they only had a few machines here. And now they have brought in a lot of new equipment. And they have improved the environment here.
JEFFREY KAYE: One big problem that China's health officials have to tackle is how to finance big public hospitals. Under the current system, hospitals earn most of their money not only by charging for costly equipment, but by prescribing medications.
The more drugs they dispense, the more they make, as Roberta Lipson explains.
ROBERTA LIPSON, Chindex International: Underinvestment in the hospitals by the government meant that the hospitals had to earn their keep themselves. So, whereas they were called public facilities, the hospitals needed to find a way to pay their doctors.
JEFFREY KAYE: Lipson is president and CEO of Chindex, a private health-care company in China which serves mostly foreign nationals and wealthy Chinese.
ROBERTA LIPSON: And so there were all kinds of moral hazards that came out of that, including overprescription of pharmaceuticals. Hospitals were making 60 percent of their revenue, and until this day, actually, public Chinese hospitals make about 60 percent of their revenue through the sale of pharmaceuticals.
JEFFREY KAYE: In many respects, the reforms have not yet taken hold. Drug profits remain an important part of hospital revenues. And a billboard in the lobby of this hospital even advertises the prices of prescription drugs.
Sales at pharmacies are bustling. And everywhere, it seems, patients are on intravenous drips, the delivery method of choice in China, which leads the world in per capita bottles of I.V. fluids. To address the perverse incentives to overprescribe medication, the Chinese government recently slashed the maximum price on about 1,200 commonly used drugs.
It has also told hospitals that no more than half their income can come from prescription medications.
Gordon Liu says China still has a long way to go in reforming its health care system.
GORDON LIU: I have not seen much changes in this task, which is the reform from hospitals, but I am still hoping that more changes will be made.
JEFFREY KAYE: Liu wants to see the government invest more funds and expand health insurance by stepping up reimbursement for outpatient services.
And while the government is pumping money into the public sector for lower- and middle-class patients, it is also encouraging the development of private health care for wealthier individuals, who can afford to pay more.