According to a joint study conducted by the Chinese Government and the World Health Organization in mid-2005 that reforms of China's healthcare system have been "basically unsuccessful." In fact, reforms have resulted in declining levels of both fairness and the efficiency in the sector.

The "business- and market-orientation" route that China's healthcare system has taken is "absolutely wrong" and conflicts with the proper goal of public health, it concluded. "There are obvious flaws with the urban medical insurance system and its prospects are not good."

Speaking at a national medical work conference in January, Minister of Health Gao Qiang, said the four pillars of a new round of medical reforms would be: a basic health care system; medical insurance coverage at all levels; a basic medication system; and a better management system for public hospitals. The outline for this fresh reform is expected to come out later this year.

China's phenomenal economic growth in recent years has failed to translate into improvements in the public provision of social welfare services. Economic reforms designed to reduce government spending on social services and to shift more of the burden for social welfare onto individuals and decentralized economic units, have widened the healthcare gap between urban and rural populations and poor access to healthcare has been a major failure of medical system reforms.

In China's rural areas, until the 1980s when rural people's communes were dismantled, the healthcare system was well organized and highly subsidized by production brigades under the communes. Today, in most of China's rural areas, healthcare has shifted to a fee-for-service system, in which the former rudimentary arrangements for health and medical insurance have not been preserved. Farmers cannot afford to purchase the same amount of health care previously provided by the commune system. Meanwhile, the number of hospitals and healthcare centers in rural areas has decreased significantly.

To guarantee access to medical care for farmers the Chinese Government began to set up a rural cooperative healthcare system in 2003, under which farmers, local government, and central government each contribute 10 yuan per year per person to a medical fund. Under this government-subsidized insurance scheme, farmers contributing to the fund can get a certain proportion of their medical expenses refunded every year. According to official statistics, by the end of September 2006, 406 million farmers, or about 45 percent of the total rural population, had joined this new type of rural medical insurance.

One aim of this basic healthcare system is to narrow the differences in medical care between rural and urban areas. China's rapid economic growth and steady increase of tax revenues have provided the economic basis for establishing the system. Although different government departments are still fiercely debating the scope of the concept of 'basic health care' and how it can be financed, the necessity for the government to provide safe, convenient and inexpensive or even free basic health care for every citizen is widely agreed and is expected to become the central pillar for new health reforms.