Big changes to China’s healthcare insurance system expected at 3rd Plenum

Jun 17, 2024
The Great Hall of the People in Beijing

The Communist Party of China has said the upcoming Third Plenary Session of its current 20th Central Committee will focus on “deepening comprehensive reform to advance Chinese modernisation.” Based on past practice and some recent public reports, Beijing is drafting its agenda now, but details are hard to come by.

To piece together potential changes, observers will have to keep their eyes wide open, and I believe the Seventh meeting of the Standing Committee of the 14th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), held between June 4 and June 6, is meaningful to gauge the July agenda, for three reasons:

1. The CPPCC is an official body of political advisors, meaning its very job is to advise top decision-makers.

2. The CPPCC has officially published some recommendations for policy changes by some political advisors, throwing its institutional weight behind them.

3. The political advisors whose recommendations have been publicised by the CPPCC are influential. Most of them are current or former senior government officials, with “senior” in the Chinese mainland context being typically defined as officials at or above the rank of vice provincial and vice-ministerial. The rest are figures at the top of their fields in China.

The CPPCC has released 14 recommendations from 14 political advisors in the meeting entitled “Building high-level socialist market system”.

Today, let’s start with two of them focusing on potential changes to China’s state-run healthcare insurance system, a subject that I care most about because it impacts directly the well-being of the 1.4 billion people, who I truly care about.

The national medical security system in China is a multilevel system, with the basic medical insurance (BMI) as the pillar. The BMI system serves two groups of people: employees and residents. Employees are enrolled in the employee basic medical insurance (EBMI) program, and non-working residents are enrolled in the residents basic medical insurance (RBMI) program.

According to China’s National Healthcare Security Administration (NHSA), the BMI system covers 1.33 billion people, over 95% of the Chinese population. Among them, 371 million are enrolled in the EBMI system and 963 million are enrolled in the RBMI system, by the end of 2023.

It’s important to note that the BMI system is highly fragmented. Despite that China is a unitary state led by the Communist Party of China with no federalist system, neither the EBMI nor the RBMI is nationally pooled. They are NOT even pooled at the provincial level – the Chinese mainland has 33 provincial jurisdictions, in addition to Hong Kong and Macau, and below them around 333 prefectural jurisdictions – most of them “cities.” Most of the EBMI and RBMI are pooled only at the prefecture level, meaning that it would be more accurate to say China has around 666 state-run medical insurance pools/programs, funded by their respective enrollees, their employers, and the local governments running the pools. Because different local governments’ fiscal spending varies, the benefits of the hundreds of programs vary, despite the Beijing-seated NHSA somehow setting national standards that the local governments have to follow.

The BMI system, funded by the contribution of enrolled individuals and their employers, which is set by the Chinese government, and fiscal subsidies from the government, is facing growing complaints from the public that personal contribution has been surging for years. Earlier this year, the NHSA was forced to publicly address the issue, saying that a fall in the number of participants in the voluntary urban and rural residents’ scheme is just a ‘slight fluctuation.’

Bi Jinquan, former Ministerial-level Official in charge of China Food and Drug Administration

Explore the Establishment of a Unified Urban-Rural Medical Security System for the Elderly

Establishing a basic medical insurance system for the elderly is essential to address urgent issues faced by the public, significantly promote common prosperity, release the consumption demand of people saving for retirement, drive economic growth, and urgently reform the basic medical security system to meet the challenges of an aging society.

China’s state-run basic medical security system has been gradually established since the late 1990s, but it has some issues: significant differences in benefits among groups [enrolled in different schemes under the state-run basic medical security system], regional disparities, a stark contrast between insufficient coverage and substantial fund surpluses, and a pressing need to regulate non-governmental, commercial medical insurance.

Illness and disability are inevitable issues that everyone will face in old age and should be addressed through public services. Illnesses among the working-age population, their spouses, and children are relatively rare events where non-governmental, commercial medical insurance can play a larger role. Medical needs for disadvantaged groups and those with major illnesses form the baseline of medical demand, necessitating an improved medical assistance system.

It is suggested to explore the establishment of a unified urban-rural medical security system for the elderly without increasing the financial burden on enterprises and individuals by maintaining the current funding standards.

1. Strengthen Overall Coordination: Enhance coordination based on the pooled funds of employee medical insurance and fiscal subsidies for urban and rural residents’ medical assistance, guiding more public resources towards basic medical care and care services for the elderly.

2. Coverage of Basic Medical Insurance for the Elderly: This should cover the cost of generic drugs and standard treatment medications for general outpatient and chronic disease treatments for the elderly over 65 years old, expenses for general wards and related costs for inpatient treatments, and home care costs for disabled elderly individuals.

3. Establish Supplemental [Non-governmental] Commercial Medical Insurance for the Elderly: This insurance, to be voluntarily paid by individuals, would cater to multi-level medical needs beyond the basic medical insurance for those over 65 years old.

Zhang Shoukuan, Vice Chairman of Yunnan Provincial Committee of CPPCC

Improve the Financing and Benefit Adjustment Mechanism of Basic Medical Insurance

As the basic medical security policies continue to be deeply implemented, the national urban and rural residents’ basic medical insurance system is operating smoothly. However, the annual increase in individuals’ payment has led to increasing difficulty in fund-raising and collection pressure, impacting the safety and sustainability of the fund. Therefore, the following suggestions are made:

1. Establish a Coordinated Financing Mechanism to Stabilise Urban and Rural Residents’ Participation in Insurance: Personal contributions from urban and rural residents should not necessarily increase in tandem with fiscal subsidies. Instead, provinces and cities should reasonably determine personal payment standards based on their level of economic and social development and capacity, ensuring compliance with the national basic medical insurance benefit list and maintaining overall growth in funding levels without a “one-size-fits-all” approach.

2. Incentives for Continuous Insurers: Develop corresponding incentive measures for urban and rural residents who maintain long-term stable insurance participation and differentiate their contributions and benefits from those who do not.

3. Establish Family Accounts for Basic Medical Insurance for Urban and Rural Residents: Use families as the unit for insurance contributions, creating family accounts within the basic medical insurance system. A portion of the residents’ own insurance payments (such as about 50% of personal contributions) can be accumulated in these family accounts, managed and used similarly to employee medical insurance. The family account balance can be used for outpatient payments and the next year’s medical insurance payments, shared among family members. To avoid large surpluses in family account funds, the system can be designed to use family account funds first, followed by proportionate reimbursement from the pooled fund.

4. Enhance the Guiding Role of Medical Insurance Policies in Promoting the Coordination of medical services, medical insurance, and the medicine industry (known as “Three Medicines” in China). Clarify the concept of “Three Medicines” for coordinated development and governance with the goal of health protection and promotion. Strengthen inter-governmental departmental coordination, especially between the medical insurance and governmental department in health, enhance the capacity of primary healthcare providers, and reasonably adjust the general outpatient benefits for urban and rural residents. Continue to use surplus medical insurance funds to actively and steadily advance the adjustment of medical service prices and expand the coverage of basic medical insurance, ensuring that doctors provide services based on clinical needs and basic medical insurance provides coverage based on insured people’s needs, fully reflecting the technical value of medical service providers and the labor value of medical professionals. Fully leverage the guiding role of medical insurance policies to stimulate the reform of the “Three Medicines” linkage, transitioning hospitals’ revenue models from primarily service-based charges to primarily medical insurance composite payment models, and shifting profit models from mainly “more revenue, more profit” to primarily “reasonable diagnosis, reasonable savings for profit,” promoting the return of medical providers and medical services to the public welfare to meet the health needs of the people.


Republished from Pekingnology Substack, June 09, 2024

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