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Paying the Price for China's Milk Scandal

12-16 18:48 Caijing Magazine

Hospitals and parents of babies sickened by melamine-tainted milk powder formula are shouldering huge costs they can't pay.

By staff reporters Ye Doudou and Liu Jingjing

From Caijing Magazine


Hangzhou construction worker Yang Yong watched his hospitalized, 1-year-old daughter struggle with painful kidney stones every day for more than six months.


Meanwhile, Yang struggles to pay the medical bills. He fell into debt after daughter Yang Huan became one of nearly 290,000 babies in China diagnosed this year with urinary tract problems linked to powdered milk formula contaminated with toxic melamine. Reports say six babies have died.


Relatives in a distant city recently loaned Yang 5,000 yuan. That helped pay some bills, but it was far from enough to save his baby girl. The loan equals only one-fourth of what he’s spent, and surgery cost an additional 20,000 yuan.


The Yang family is not alone. Caijing learned that many families with melamine-poisoned babies are strapped for cash. Few got the free medical help promised by government officials after the crisis became public in September.

And it’s an enormous cash crunch, since melamine-related health problems have been found in more than 1.3 percent of the 22 million babies that the Chinese Ministry of Health reported had been tested for toxic formula as of December 1.


Neglected Promises


On September 13, a few days after the Chinese public was informed about the formula scandal, the Ministry of Health announced that all local hospitals would provide free medical treatment to babies sickened by melamine-tainted milk powder. Five days later, a state task force formed to deal with the crisis made clear that medical tests and treatments for all children aged 3 and under would be free.


Some children received free medical help. But for others, promises were broken. After mid-October, Caijing learned, local authorities started cutting back on the number of hospitals offering free tests.


The Henan Province branch of the Ministry of Health issued a notice October 29 saying provincial medical institutions would stop offering out-patient checkups; only municipal and county-level hospitals would continue free tests. Similar notices were issued in Jiangsu, Zhejiang and Anhui provinces.


Shanghai Children’s Hospital has continued offering free B-ultrasonic scans to children 3 and younger. But patients must pay for all follow-up treatment.


A health ministry official in Beijing told Caijing that the provincial announcements reflect local cutback decisions, and that from the central government’s perspective, there have been no changes in the free treatment policy.


Little Yang Huan received treatment at the Children’s Hospital affiliated with the Zhejiang University Medical College between May and November. But her parents were forced to postpone the surgery that the hospital recommended twice -- October 13 and November 4 -- because they couldn’t afford it.


Informed by doctors that medical treatment at Xuzhou Children’s Hospital in nearby Jiangsu Province was cheaper, the family made the journey in late November. Doctors performed the surgery December 3.


A staff member at the Zhejiang hospital, a provincial facility, told Caijing that its doctors currently care only for seriously ill babies transferred from municipal and county hospitals. Others must pay their way.


Meanwhile, the Xuzhou hospital is giving free treatment only to previous patients or those transferred from other hospitals. But transfer procedures are complicated, and requests for free treatment have to be approved by local health authorities and hospital experts.


Health authorities in Gansu Province, which reported the country’s first two melamine-related deaths, said hospitals there should be providing free treatment regardless of government funding. But they acknowledged that hospitals are in a difficult situation.


And there’s no guarantee that hospitals offering free medical help today will do so tomorrow. As of mid-December, Beijing Children’s Hospital continued giving free medical tests and treatment to babies from anywhere in the country. But one doctor warned, “You have to take the chance quickly. If the policy changes, you’ll have to pay out of your own pocket.”


Steep Obstacles


Even families that find hospitals offering free treatment can have their hopes dashed if their children are too old.


That’s the circumstance facing the family of 4-year-old Liao Siyao, who drank contaminated milk and, over the past year, has had three major surgeries. She is currently recovering at the Macro Invasive Center of the No. 1 Affiliated Hospital of Guangzhou Medical College. The medical costs – all charged to the family -- have topped 100,000 yuan.


State policy says hospitals must provide free medical tests and treatment for babies diagnosed with kidney stones from toxic milk powder. The state is supposed to pick up the bill later. If the patients pay up front, they are to be reimbursed by hospitals.


The policy also says local governments should provide financial backing for hospitals. Local authorities in need should get support from the central government. In line with these stipulations, medical costs should be shared by local and state financial agencies as well as the medical institutions.


Ultimately, those found accountable for the milk crisis, which is still under investigation, would reimburse the government. But the definition of accountability has not been clarified. And a health ministry spokesman said December 11 that a compensation scheme for families of sickened and deceased babies is still under review.


Central and some provincial governments started a fund in September to help hospitals finance free treatment. Nevertheless, perhaps because the fund was insufficient, medical institutions have continued to bear the brunt of the costs.


For example, the Zibo District Hospital in Shandong Province gave free medical tests to 2,619 babies between September and October, and treated nine. The procedures cost 300,000 yuan, of which only 60,000 yuan came from the government.


A county-level hospital in Zhejiang Province, however, spent much more -- 10 million yuan -- on free medical treatment. The hospital had to cover all costs.


Government funding ran out for Gansu’s No. 2 Hospital Affiliated at Lanzhou University. A doctor said the hospital received just one government allocation. “No one cares to talk about medical expenditures any more,” the doctor said. “It’s sad.”


Chinese public hospitals are trapped between their responsibility as public welfare institutions and their limitless liabilities, which far outweigh government support, a manager at Taizhou Enze Medical Center in Zhejiang told Caijing.


The government’s annual subsidy to the Taizhou center accounts for a fraction of its revenues. During the SARS outbreak in 2003, for example, the center spent more than 4 million yuan but received only 1.2 million yuan from the government. And so far, the manager said, the government has provided no financial support for treating melamine babies.


Pressure Mounts


A Beijing father of a melamine baby, Zhao Lianhai, launched a Web site called Kidney Stone Babies in September as a platform for victimized families. He told Caijing many babies have not recovered since leaving hospital.


Some babies were not allowed to stay in hospital because their kidney stones were too small, Zhao said. Afterward, their conditions deteriorated and they developed hydronephrosis, which may cause complications for the rest of their lives.


But many families of the little victims have taken another step – legal action. Since September 23, many families around the country have filed lawsuits with local courts.


On October 13, the parents of Yi Kaixuan -- the first baby to die from tainted formula -- filed a lawsuit with the Lanzhou Intermediate People’s Court in Gansu against makers of baby formula. The parents are seeking more than 1 million yuan in damages.


So far, however, courts across the country have refused to hear the lawsuits, saying they are waiting for further instructions before processing legal investigations.


A similar hurdle confronted three lawyers who volunteered to act as representatives of 54 victims who wanted to sue a formula maker at the center of the scandal – Sanlu Group. They wrote letters to company President Zhang Zhenling as well as the Hebei Province and Shijiazhuang governments, where Sanlu is based.


But when the lawyers tried to deliver the letters November 24, they were stopped at the gate of the provincial government office. Government staffers told them instead to visit the local quality inspection authority. Shijiazhuang government officials refused the letters as well.


Chinese consumer law says victims of faulty products and their families are entitled to file civil cases in court and ask for compensation. According to the People’s Supreme Court, they can also file for psychological damage compensation.


Now, melamine victims are waiting for the law to be applied.


Meanwhile, authorities have started restructuring Sanlu, a joint venture partly owned by New Zealand dairy giant Fonterra. So far, seven Sanlu companies have changed names and resumed production. But no one has devised a victim compensation plan.


Caijing learned that Sanlu’s balance sheet is now in the red. If the company files for bankruptcy, family compensation requests may go unanswered. But even if the company stays in business, victims may have a hard time making direct links between kidney stones and its dairy products. What’s more, few parents retained milk powder packages or receipts.


Sanlu is not alone. Melamine was found in products sold by some 20 other brands including Yili, Mengniu, Sanyuan and Bright Dairy. The government's quality supervision and inspection agency, which had taken a non-inspection approach to some of the so-called quality food products for years, has also been blamed. Many think the dairy industry and government should share responsibility for compensating victims.


Some have suggested a joint fund run by the government, enterprises and other social groups. “Considering China’s current judicial system, a joint foundation is probably the best and only way to help victims,” said Dr. Zhang Zhao of the international group Medicins sans Frontiers.


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