17 overall health spending. Additional resources for targeting the uninsured poor can come from an extension in the coverage of social insurance (GIS and LIS), the passage of a basic package in social as well as future private insurance policies, and selective increases in user fees for the uninsured wealthy. The discretionary clinical package can be financed from user fees and insurance and public funds should be used only for truly poor and indigent patients.

_Redeploying_ **_Medical Personnel._** Alternative mixes of labor inputs are influenced by the allocation of public spending which in turn will influence future health outcomes. In China, indices of labor input for western medical treatments show an inegalitarian allocation across provinces. Poor provinces are deprived of more qualified medical staff. Table 4 showed the distribution of more qualified health personnel (doctors, assistant doctors) and less qualified health personnel (specialized nurses, nurses, and midwives). Computed on the basis of relative personnel ratios (RPR) the richest quintile of provinces-- Beijing, Shanghai, Guangdong, Zhejiang, Tianjin and Liaoning clearly have an oversupply of all medical staff but particularly of more qualified staff, as the value of RPR far exceeds unity. Conversely, the poorest quintile of provinces--Guizhou, Xinjiang, Anhui, Henan, Guangxi and Sichuan (Annex Table 9)--have an undersupply of all medical staff including more qualified personnel. Other less disadvantaged provinces in the second quintile--Jiangxi, Yunan, Shannxi, Hunan, and Tibet--also have an undersupply of more qualified medical personnel especially doctors.

Besides their impacts on health outcomes, the different mixes of health personnel will have important underpinnings on cost efficiency. In provinces with high morbidity and mortality rates from infectious and communicable diseases, redeploying the personnel mix toward more preventive health services staff like nurses and midwives can generate further cost savings. To attract and retain more qualified staff in poorer provinces, the government should also provide such incentives as housing, bonuses, education for dependents, and better posting after service in rural areas. To minimize future imbalance in labor input mixes, another powerful policy instrument is to upgrade training and retraining for less qualified health personnel and then substitute them for more qualified staff where feasible. To implement these policies, the government should ease its currently rigid controls on remuneration to make it more amenable to local needs. However, whether the local or the central government should be given authority to choose the structure of such benefit package remains an open question.

_Targeting of_ **_resources:_** One implication of reduced government health financing is that the poor has suffered higher morbidity and mortality. Among the poorest quarter of the rural population, infant deaths are 3.5 times greater than among city dwellers (NHS 1991). Compounding this inequity is the wide disparity in the distribution of provincial government health expenditures particularly in the past few years. Further econometric analysis with 1993 data indicates that province-level public spending on health responds more strongly to changes in GDP in high-income provinces than in low-income provinces. Moreover, a one percent growth in provincial income is associated with much greater increase in government health expenditure in richer provinces than in poorer ones. These results are disturbing, since they imply that even with equitable growth in income across provinces--an unlikely prospect--the _distribution_ of provincial government expenditure on health will become _more unequal._ If economic growth in the province alone is less likely to reduce the imbalance in provincial health expenditures, a strong case can be