Part V:challenges and outlook for China's medical security system
Part V:challenges and outlook for China's medical security system
Final issue of the five-parter on China's medical security system, featuring income-expenditure imbalance, medical benefit disparities, and non-basic service deficiency.
Finally, we've reached the last part of Cai Haiqing's article on China's medical security system. This part - and the entire series - could be an in-depth, complementary reading to the Financial Times' recent report that Millions drop out of China’s state health insurance system.
Cai Haiqing is the former Director of Treatment Insurance, Jiangxi Province Healthcare Security Administration. This article was originally published in Chinese on the WeChat account Hailiao Qingtan 海聊清谈. It was then reposted by China Health Insurance 中国医疗保险, a magazine affiliated with the National Healthcare Security Administration of China.
For today's section, Cai identifies four major challenges confronting China's medical security system:
Continuous pressure on balancing the income and expenditure of the medical insurance fund
Urgent need to address the issue of insufficient and imbalanced development
New Business Models Raise New Requirements for Medical Insurance Reform
Strengthened Coordination among Medical insurance, Medical services, and Pharmaceuticals is Needed
and suggests five approaches to addressing these challenges:
Enhance the Fairness of the Medical Insurance System
Promote the Sustainability of the Medical Insurance System
Enhance the Convenience of Medical Insurance Services
Strategically Purchase Through Coordinated Reforms
Legalize the Medical Insurance System
Please enjoy.
Major Challenges Faced by China’s Medical Insurance System
As China's population ages and its economy grows at a medium-to-high pace, the medical insurance system's sustainability faces fresh challenges.
Continuous pressure on balancing the income and expenditure of the medical insurance fund
On one hand, the sources of financing and potential growth for the fund's income are shrinking. China's economic development is shifting away from its previous high-speed growth model, which limits the ability to increase income through higher contributions from businesses and residents. Additionally, as per data from the Ministry of Human Resources and Social Security, China expects over 40 million new retirees during the "14th Five-Year Plan" period, while the working-age population will decrease by 35 million. Since retirees no longer contribute, this will inevitably reduce the income sources for the medical insurance fund.
On the other hand, China's increasingly aging population is driving a substantial increase in medical insurance fund expenditures. The nation is transitioning into a "moderately aging" society, and due to its large population, the absolute number of elderly citizens is set to surge. Elderly individuals tend to be the primary consumers of healthcare services, and as medical technology advances, this trend in healthcare consumption will continue to grow rapidly.
In the long term, this dynamic will further escalate the challenges in maintaining a balance between the income and expenses of the medical insurance fund, posing significant financial sustainability concerns for the basic medical insurance system.
Urgent need to address the issue of insufficient and imbalanced development
This is notably reflected in the following aspects:
Firstly, China initially adopted a low standard for medical security benefits, believing that only a low standard could achieve broad coverage. While there have been notable improvements in both coverage and benefit levels over the years, the overall medical insurance level still falls short of meeting the increasing demands of the population.
Secondly, there's an imbalance in coverage, protection methods, benefit levels, and quality across various insurance systems, regions, and demographic groups. Both excessive overlap and inadequacies in medical benefits persist, especially across different regions, significantly eroding the credibility of the medical insurance system.
Thirdly, there's a blurred distinction between basic medical insurance and non-basic medical insurance, with the latter often taking a back seat. Non-basic medical insurance remains underdeveloped and plays a limited role in catering to the increasingly diverse and individualized medical protection needs of the public. It also falls short in addressing the high medical expenses associated with major illnesses. The inadequate development of non-basic medical insurance and the imbalance between basic and non-basic medical insurance not only hinder the healthy evolution of the basic healthcare, but also restricts the varied medical requirements of the Chinese people. Furthermore, it hampers the realization of a diverse medical security system "based on collaboration, participation, and shared benefits," a concept raised at the 19th National Congress of the Communist Party of China (CPC) in 2017.
New Business Models Raise New Requirements for Medical Insurance Reform
Presently, as China experiences the rapid emergence of new business models and economic development patterns, both enterprise and individual employment exhibit a trend towards greater "flexibility." It has become the norm for people to live away from their registered household location, creating fresh demands for medical insurance system reform.
On the one hand, the proliferation of information technology and widespread internet usage has led to the rapid growth of various new employment forms. Flexible employment has become the dominant trend in the job market. This presents challenges to the traditional labor-based structure of worker's basic medical insurance, resulting in limited coverage. Workers outside formal labor arrangements often lack adequate medical protection, typically resorting to resident medical insurance with lower premiums and benefits.
On the other hand, according to data from the seventh national population census in 2020, approximately 493 million people, or around 35% of the total population, were living in places other than their household registration areas. Among them, the migrant population [who are registered in rural areas but work in the cities on a long-term basis] numbered 376 million, a nearly 70% increase compared to the sixth national population census in 2010. The share of the permanent urban population in the entire populace also rose by 14.21% compared to 2010. These statistics underscore the high mobility of China's population, making the trend of people living away from their registered household location irreversible.
Given that urban and rural residents' basic medical insurance system (URRBMI), which covers three-quarters of the insured population, currently relies on household registration as its basis, many individuals will be separated from their insurance location. This could significantly disrupt the medical insurance system. While there is an online national billing platform for settling medical insurance claims across regions, the risk of fund overspending remains. Therefore, transitioning to covering the permanent population should be the direction of reform. However, this reform involves the redistribution of government financial responsibilities. The current practice where local governments of the registered residence fund about two-thirds of resident medical insurance will shift to the local government of the permanent residence. Survey results indicate reluctance from both regions with population outflows and inflows due to financial implications.
Addressing how non-local permanent residents can enjoy equal medical insurance benefits in their current residence is a crucial issue to resolve as part of the comprehensive reform of the resident medical insurance system.
Strengthened Coordination among Medical Insurance, Medical Services, and Pharmaceuticals is Needed
From centralized drug procurement to negotiations for inclusion in the medical insurance drug list, to payment method reforms, and to ongoing efforts to combat fraudulent claims, the medical security system effectively acts as a strategic purchaser. This approach helps control the overpricing of drugs and medical consumables, ultimately enhancing the value of medical services provided by healthcare institutions and aligning medical insurance, pharmaceuticals, and healthcare services.
However, a true collaborative synergy among medical insurance, healthcare services, and pharmaceuticals has not yet fully materialized. Medical insurance institutions are under growing pressure to maintain fund balance, while healthcare institutions and pharmaceutical companies are dissatisfied with the compromises they must make. The lack of coordinated reforms among these sectors significantly diminishes the positive impact of medical insurance reform. This situation reduces the efficiency of the medical insurance fund, diminishes the cost-effectiveness of healthcare services for the public, and results in dissatisfaction with the medical insurance system.
Therefore, establishing genuine synergy and mutual benefit among medical insurance, healthcare services, and pharmaceuticals is another major challenge in comprehensively deepening medical insurance system reform.
In summary, the ongoing deepening of the medical insurance system reform presents significant challenges. The ability to effectively address these challenges will ultimately determine the success of establishing the envisioned medical security system with Chinese characteristics.
Future Outlook for the Deepening Reform of the Medical Insurance System
Over nearly three decades of development, China's medical security system has made remarkable progress by achieving universal medical insurance coverage and meeting the basic healthcare needs of the public. Looking ahead, reforming the medical insurance system should focus on addressing the shortcomings and imbalances that have arisen during its evolution. The key objectives include enhancing equity and sustainability within the medical insurance system and introducing innovative approaches to medical insurance governance.
Enhance the Fairness of the Medical Insurance System
Enhancements to the basic medical insurance benefit policy are essential. It's crucial to meticulously address key elements such as cost-sharing mechanisms, benefit protection mechanisms, and regulatory early warning systems. These measures can help ensure fairness in healthcare access among urban and rural areas, different regions, and various demographics.
Furthermore, establishing realistic and effective standards and regulations, such as cost-sharing ratios, benefit lists, medical service directories, payment methods, scope criteria, and procedures, can translate the principles of basic protection into quantifiable, controllable, and auditable "mechanisms." This approach would help address issues related to both excessive and insufficient coverage effectively.
Promote the Sustainability of the Medical Insurance System
Firstly, achieving comprehensive insurance coverage is imperative. This entails the implementation of a universal insurance plan, increased central fiscal support for medical insurance development in less economically developed regions, continued government fiscal policies to subsidize insurance for urban and rural impoverished populations, enhanced policy support for micro and small enterprises to facilitate their participation in insurance, and the establishment of insurance payment policies tailored to the characteristics of workers in new business forms.
Secondly, it's essential to strike a balance in funding responsibilities among individuals, employers, and the government. Following the "Opinions on Deepening the Reform of the Medical Security System" issued by the CPC Central Committee and the State Council in 2020, which specifically stipulated "balancing funding and payment responsibilities among individuals, employers, and the government, optimizing the structure of individual payments and government subsidies, and exploring multi-channel funding policies to address the healthcare needs of an aging population," a phased implementation approach is necessary.
A potential path for future reforms could include:
Reconfiguring the structure of urban employee medical insurance payments, possibly increasing the individual's contribution share while reducing the employer's portion.
Transitioning URRBMI from the current fixed per capita payment system to a model linked to an individual's or family's disposable income.
Establishing a payment policy for retired individuals, where new retirees use their basic pension as a foundation and pay basic medical insurance premiums at rates similar to those of active employees. In the case of retirees, assistance in meeting their payment obligations might involve appropriately increasing their pension levels.
Thirdly, there is a requirement to increase the level of centralization of the medical insurance fund. Building upon city-level centralization, the establishment of a comprehensive provincial medical insurance fund adjustment system should follow, with a gradual and stable progression toward provincial centralization.
Fourthly, it is crucial to enhance the medical insurance payment system. While maintaining the total budget system for the basic medical insurance fund, there should be a comprehensive shift toward payment methods such as diagnosis-related group (DRG) and diagnosis-intervention packet (DIP) payments. Additionally, refining and enhancing payment mechanisms for regular outpatient services and outpatient chronic diseases are essential steps forward.
Lastly, continuous strengthening of medical insurance fund supervision is essential. Alongside the ongoing refinement of the fund's regulatory framework, there should be a significant emphasis on innovating fund supervision models, bolstering the capacity for fund oversight, effectively ensuring the security of the medical insurance fund, and diligently safeguarding the healthcare rights and interests of the people.
Enhance the Convenience of Medical Insurance Services
Firstly, advance the standardized and streamlined development of public medical insurance services, achieving one-stop service, single-window processing, and consolidated bill settlements.
Secondly, enhance the operational capabilities of medical insurance services, upgrade the functionalities of the medical insurance information system, actively pursue decentralization in medical insurance services, and aim for immediate, online, local, and one-step processing of service tasks.
Thirdly, combine traditional services with intelligent services. Accelerate the adoption of intelligent solutions and improve the accessibility of services for seniors while retaining and optimizing traditional service channels.
Strategically Purchase Through Coordinated Reforms
Firstly, create a cross-departmental coordinated governance mechanism for basic medical insurance (BMI). Establish regular cross-departmental collaboration platforms, facilitate information sharing, and enhance the capacity for coordinated governance of basic medical insurance.
Secondly, institute a multi-level medical insurance system with coordinated governance. Strengthen coordination between different tiers of medical insurance systems, among various structures of the basic medical insurance system, across different schemes, and among various components within the basic medical insurance framework. Clarify functional roles, bolster system integration, and forge a unified front within the system.
Thirdly, establish a coordinated governance mechanism for the interests of multiple stakeholders. Foster collaboration at both national and regional levels, involving stakeholders in discussions regarding medical security funding, treatment policy adjustments, formulation of medical and health service prices, and medical insurance payment methods and standards.
Legalize the Medical Insurance System
Incorporation into legal regulations and implementation in accordance with the law is a fundamental requirement of modern social security systems. Given the complexity of relationships and extensive business networks, the medical security system places even greater emphasis on the rule of law. The objective goes beyond ensuring orderly operations; it involves clearly defining responsibilities and rights, granting people the right to medical insurance, and establishing their legal obligations. Despite the participation rate in China's basic medical insurance stabilizing at over 95%, there remains a segment of the population without coverage. Most of those insured opt for resident medical insurance, which offers relatively limited payment and benefit levels. This underscores the need for achieving universal medical insurance through mandatory participation by law.
Therefore, expediting the process of legalizing medical insurance is not only a critical component of the comprehensive deepening of medical insurance reforms but also a prerequisite for modernizing the medical insurance system and its governance. In January 2021, the State Council issued the "Regulations on the Supervision and Administration of the Use of Medical Insurance Funds", marking a good start toward the legalization of China's medical security system. However, this administrative regulation alone cannot cover the entire medical insurance system. There is an urgent need to accelerate the legislation of medical insurance, with the drafting of a comprehensive Medical Insurance Law being essential. Currently, the Standing Committee of the 13th National People's Congress has identified the Medical Insurance Law as a potential legislative project for the year. The National Healthcare Security Administration (NHSA) has sought public feedback on the draft of the Medical Insurance Law, indicating an expedited pace towards its enactment. Additionally, in response to the necessity of constructing a multi-level medical insurance system and addressing related issues, other administrative regulations, including those pertaining to medical assistance, commercial health insurance, and charitable medical care, should also be developed.
In summary, under the guidance of the CPC Central Committee and the State Council, China's medical insurance system has followed a practical path of reform and development that aligns with contemporary needs. It has played a crucial role in driving economic growth, maintaining social stability, and improving the welfare of the population, achieving significant results. However, as China continues to advance economically and socially, the medical insurance system must adapt and evolve to ensure widespread benefits for the entire population.
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