Democo, a nomadic Tibetan from northwest China's Qinghai Province, recently had her third child in hospital, the beneficiary of a government-sponsored pilot rural medicare service program.

Fourteen days later, Democo took her baby daughter home to her two other children, without paying the 200 yuan (US$24.4) delivery bill which was covered by the rural cooperative medicare fund.

"My family paid 60 yuan to join the fund last year, 10 yuan for each family member ... 60 yuan is not a small sum for us, but I think it has been worth it," said Democo, who lives in Gangca County, 180 kilometers northeast to the provincial capital, Xining.

Democo's family raises livestock and earns about 3,000 yuan a year.

In contrast to China's fast economic growth, medical services in rural areas remain limited.

There are nearly 120 million people infected with hepatitis B and 840,000 with AIDS, most living in rural China.

While urban workers enjoy government subsidies and insurance, villagers have to pay medical expenses themselves.

The outbreak of Severe Acute Respiratory Syndrome last year saw the government accelerate the rebuilding of rural medicine.

Part of the program is the provision of health cover for rural communities, with the government matching the 10 yuan every family member pays to the scheme, which is voluntary, with the sum pooled.

Niu Huimin, deputy director of the Health Bureau of Qinghai Province said 40 percent of farmers and herdsmen who fall ill in the area did not have the money to visit a doctor, forcing 38 percent to borrow money.

Prolonged illness saw 56 percent of those dragged into severe poverty.

"By covering part of their medical expenses, the new system will ease the constant worry about illness in rural communities," he said.

Qinghai Province began its pilot of the cooperative medicare scheme in August 2003.

By the end of the year, 866,500 people had joined.

The province has since reimbursed 12.34 million yuan to 91,387 villagers and herdsman.

"The cooperative medicare scheme also boosted the development of local medical services," Niu said.

Niu said trained health workers attended 82 percent of births in the first six months of 2004.

The number of patients who visited clinics and were hospitalized increased 39.9 percent and 97.6 percent.

President Hu Jintao and Premier Wen Jiabao said local health authorities should be aware the pilot was a complex reform.

By the end of last June, the new system covered 95.04 million residents, with 68.99 million joining.

The cooperative medicare fund reached 3.02 billion yuan.

Vice Premier and Health Minister Wu Yi said authorities had to play a role in recognizing problems so the pilot could be expanded.