* Hospitals lack staff, basic equipment and supplies
* Pharmacies demand cash for drugs
* Free clinics staffed by volunteer doctors
By Karolina Tagaris
ATHENS, June 14 (Reuters) - Greece's rundown state hospitals are cutting off vital drugs, limiting non-urgent operations and rationing even basic medical materials for exhausted doctors as a combination of economic crisis and political stalemate strangle health funding.
With Greece now in its fifth year of deep recession, trapped under Europe's biggest public debt burden and dependent on international help to keep paying its bills, the effects are starting to bite deeply into vital services.
"It's a matter of life and death for us," said Persefoni Mitta, head of the Cancer Patients' Association, recounting the dozens of calls she gets a day from Greeks needing pricey, hard-to-find cancer drugs. "Why are they depriving us of life?"
Greece, a member of the euro zone that groups some of the richest nations on earth, has descended so far that drugmakers are even working on emergency plans to keep medicines flowing into the country should it crash out of the currency bloc.
The emergency has grown out of a tangle of unpaid bills, with pharmacists and doctors complaining of being unable to pay suppliers until competing health insurers clear a growing backlog of unfilled state payments.
Greece imports nearly all its medicines and relies heavily on patented rather than cheaper generic drugs, making it vulnerable to a funding squeeze that would grow sharply worse if it were forced out of the euro after elections on Sunday.
Long queues have been forming outside a handful of pharmacies that still provide medication on credit - the rest are demanding cash upfront until the government pays up a subsidy backlog of 762 million euros, or nearly $1 billion.
"We're not talking about painkillers here - we've learned to live with physical pain - we need drugs to keep us alive," Mitta, a petite former marathon runner and herself a cancer survivor, said in a voice shaky with emotion.
Greeks have long had to give medical staff cash "gifts" to ensure good treatment. Nevertheless the health system was considered "relatively efficient" before the crisis despite a variety of problems including a fragmented organisation and excess bureaucracy, according to a 2009 report for the Organisation for Economic Cooperation and Development.
But it has been unable to respond to the growing crisis. The European Union and International Monetary Fund, which provided a 130 billion euro lifeline to Greece in March, have demanded big cuts to the system as part of a wider package of austerity measures.
But powerful medical lobbies and unions have resisted fiercely. Caretaker Prime Minister Panagiotis Pikrammenos, in office until a new government is formed after the elections, has pleaded for a solution but been powerless to force a change.
"It is imperative that this matter is resolved immediately in order to prevent putting people's lives at risk," Pikrammenos said last week.
Outside one of the 133 state hospitals - whose managers have sometimes been appointed as supporters of whichever political party was in power at the time - a banner put up by protesting staff reads "Hospitals Belong to the People". Inside, its gloomy labyrinth of corridors tell a different story.
A doctor at the university hospital in the northwestern Athens suburb of Chaidari cites a lack of basic examining room supplies in her own department, such as cotton wool, catheters, gloves and paper used to cover the examining table.
The shortage of paper, which is thrown out after each patient has used it, means corners have to be cut on hygiene.
"Sometimes we take a bed sheet instead and use it for several patients," said Kiki Kiale, a radiologist specialising in cancer screening. "It's tragic but there's no other solution."
Kiale, 52, said staff cutbacks and a lack of crucial equipment - including a digital mammography machine - meant some doctors were seeing 40 patients during a shift but many patients were still unable to get treatment.
In the chaos, patients can slip through the cracks or turn up for treatment again only when their illness has progressed too far for them to be saved.
"Some incidents are lost completely, others manage to return after a year but it's too late," said Kiale, who spent five years working in Britain's National Health Service (NHS), adding that the lack of stable government made the problem worse.
"Everyone is hiding behind the elections, behind political uncertainty. Everyone is hiding behind the crisis."
Elections last month produced a stalemate, with no party achieving a parliamentary majority or able to form a coalition.
Greeks vote again on Sunday to try to break the deadlock, with pro-bailout conservatives neck-and-neck with a radical leftist party SYRIZA which rejects the EU and IMF's austerity demands. This has raised the possibility that the lenders will cut off the financial lifeline and Greece will have to leave the euro zone if SYRIZA wins and manages to form a coalition.
Pharmaceutical industry sources say drugmakers have already discussed with European authorities how to keep Greece supplied with medicines should it have only new, radically devalued drachmas to pay for them.
They have been looking closely at the experience of Argentina's collapse in 2002, when some firms agreed to continue to supply medicines without payment for a while.
Greece's wider crisis, which has deprived it of a stable administration for months and absorbed official attention, has made it impossible to push through deep health reform and forced the government to resort to sticking-plaster measures.
The Health Ministry says the reports of shortages have been exaggerated and has promised to pay health suppliers 600 million euros from its own budget and that of finance ministry. However, this covers only existing arrears to March, leaving the period to June uncovered.
The IMF has said Greece needs to keep public health spending below 6 percent of GDP, down from around 10 percent at present and must sharply cut spending on pharmaceuticals which has surged over the past decade.
It says Athens must cut such spending by at least 2 billion euros from 2010 levels, a step that would bring the average public expenditure on outpatient pharmaceuticals to 1 percent of GDP by the end of this year.
What effect such cuts will have on patient care is likely to be dramatic, especially without a wider reform of healthcare.
Even before the crisis, public hospitals were under strain and the notorious cash-filled "fakelaki" or "little envelope" which patients have had to hand over to get good treatment have become a byword for the corruption in the system.
As the crisis has bitten, ever more Greeks can no longer afford to pay. Rocketing unemployment has meant many have fallen behind with insurance contributions or have trouble paying the 10-25 percent of prescription costs not covered by the system.
"The health system has shut its door in their face," said Katerina Avloniti, a 27-year-old psychologist at a free medical clinic in Athens whose patients are no longer eligible to get a blood test, a cardiogram or a simple check up.
Housed on one floor of the Athens Medical Association, the clinic is staffed by volunteer cardiologists, general practitioners, dentists and physiotherapists who see about 60 people a day, relying on unused drugs donated by other patients.
"Most are on the verge of depression, others are thinking of suicide. Many are ashamed because until recently, they had a job," she said, adding that many of the patients are 25 to 30-year-olds who have not been able to find work.
Avloniti said the crisis risked spiralling into a wider health emergency if treatment levels continued to fall. "Some people are walking timebombs - they could have a disease that is highly transmittable. We shouldn't close the door on them." (Additional reporting by Yiorgos Karahalis; editing by David Stamp)