The nation's medical system is a serious casualty of free-market reforms over the past couple of decades. There is now no simple cure. It needs to be restored to health, root and branch. The central government has unveiled an ambitious reform plan over the next three years. The aim is to bring medical care back within the reach and the means of the poor and much of the middle class. The goals set by the plan are commendable. But it is not clear how they will fix the financing of public hospitals at the heart of the broken system. The priority is health coverage for 200 million uninsured mainlanders. The 850 billion yuan (HK$965.26 billion) plan also calls for cheaper medicines by limiting the mark-up by hospitals and distributors, and building or upgrading country hospitals and township clinics, including basic clinics in all of the mainland's 700,000 villages. These measures target criticism that the present system has become extortionate, discriminatory and corrupt, thanks to market reforms that ditched a free national health system for the user-pays principle and the profit motive. To pay their way, hospitals rely on a 15 per cent surcharge on medicines and fees for medical services and consultations to supplement government funding. The scope for increasing revenue and doctors' salaries by prescribing unnecessary or expensive drugs is obvious, as is the temptation for fee-gouging. And the system provides no incentive for manufacturers to supply cheaper drugs. As a result, the cost of health care is now a major concern for the middle class as well as the poor. Under the reform blueprint, Beijing will shoulder 40 per cent of the cost of the plan over the three years, while local government's share will fall from 73 per cent to 60 per cent - which still leaves it to contribute more than 500 billion yuan. It is not clear, however, where this is to come from. A senior official says the government will gradually cut the profit margin on basic drugs sold at medical institutions, and eliminate it on those sold at local public clinics. But there is no explicit pledge to scrap the surcharge - only to gradually replace it with a fixed fee for prescriptions, and increases in charges for medical services and consultations. This leaves room for worry. The government should explain how it will ensure hospitals get the funds they need without the need to exploit patients. That said, the plan promises to improve medical services, especially in poor rural areas, where most of the uninsured are to be found. Medical services in rural areas also stand to benefit from proposals that doctors from city hospitals and disease control centres should spend a year in rural areas to qualify for promotion, and that university fees should be subsidised for doctors who agree to work in these areas for at least three years. Social equity and public health aside, there are strong economic arguments why there is a need to push through comprehensive reform of the health system. The renowned Chinese saving ethic is a good thing. But too much is squirrelled away against the day when health might fail because a serious illness could otherwise be financially ruinous. This is not helpful to efforts to boost domestic consumption during the present export slump caused by the global financial crisis, or to the nation's future economic growth.