The government Tuesday issued new guidelines on the management of the rural cooperative medical scheme, which provides subsidized healthcare for farmers.
Jointly released by the health and finance ministries, and the State Administration of Traditional Chinese Medicine, they provide provincial governments with more details of how funds should be allocated.
Under the scheme, which was launched in 2002, for each farmer who makes a voluntary annual payment of 10 yuan ($1.30), the central and local government will contribute a further 40 yuan to the insurance fund.
In times of illness, members of the scheme can apply to have up to 20 percent of their inpatient medical fees refunded.
Currently, in the majority of areas, the scheme does not cover payments made for outpatient care. However, the new guidelines call on local administrations to address this and urge them to gradually extend the range of cover provided.
At a press conference earlier this month, health minister Chen Zhu said the government was committed to the first principle of medicine that prevention is better than cure.
"We won't allow minor conditions to be left unattended and develop into serious ones," he said.
The government will continue to seek ways to add funds to the scheme to enable more people to benefit, he said.
In June, the government allocated 9.4 billion yuan ($1.25 billion) to the fund, which has since been distributed to local health administrations in 23 provinces - 19 in central and western regions, and four in the east.
The new guidelines state the fund can be used only to subsidize farmers' medical bills and not to finance other public health programs.
The percentage of fees reimbursed should also be "balanced" across the country to ensure all farmers benefit from the country's economic growth.
The guidelines further suggested that scheme members who make no claim on the fund over a 12-month period, should be rewarded with a free checkup.
The cost of giving birth at hospital should also be covered by the scheme, it said.
The guideline said in all cases, it must be made clear what percentage of their fee a farmer is entitled to reclaim.
Also, as most farmers have a limited cash flow, reimbursements should be made on the spot, the guideline said.