China launched its ambitious urban health-care reform in 1998. This paper takes a closer look at three key areas of the reform: the new health-care insurance scheme, the reorganization of health-care institutions, and the new pharmaceutical distribution system. A critical assessment of the past five years indicates that although the reform has had some success in reducing healthcare costs while improving access, the new system also has some structural problems. The success or failure of the new system will be determined by the ability of the program to collect and mange health-care trust funds, and to provide adequate funding for the large number of elderly beneficiaries covered by the program.

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