The World’s Largest Healthcare Umbrella

By staff reporter LI WUZHOU

EARLIER last summer, 65-year-old farmer Song Guicai of Xinwan Village, Punan Town, Lianyungang City in coastal Jiangsu Province, made the 10-kilometer journey from her village to the towns central hospital. At the end of diagnosis and checkup in the air-conditioned facility she headed toward the counter with a bill showing RMB 119.37. But when the cashier swiped her card for the New Rural Cooperative Medical Care System, the computer screen showed the amount she would actually pay – RMB 62.83.

There are 832 million cardholders like Song in China who are entitled to subsidized medical services under the New Rural Cooperative Medical Care System. Their urban peers have access to a similar government-funded medical insurance, whose coverage has extended to 472 million people. So far,96 percent of Chinese are covered by the healthcare insurance. Behind this remarkable figure is lavish state spending – the Chinese government plowed RMB 1.5 trillion into healthcare over the past three years.

Recent efforts have not gone unnoticed outside of China. An article in the magazine The Lancet earlier this year lauded Chinas healthcare system as the largest in the world, saying that its remarkable achievements over just half a decade would have been impossible in any other country.

Healthcare Insurance for Rural Residents

Song Guicai suffers from esophageal cancer. Last December she had an operation at the Lianyungang Peoples Hospital, which would normally have cost RMB 31,000, a big sum for a rural family living on less than one hectare of land. Fortunately she joined the New Rural Cooperative Medical Care System earlier last year. The premium of merely RMB 30 (less than US$5) entitled her to a reimbursement of RMB 12,000. For drugs not covered by the scheme she paid more than RMB 10,000.

The amount Song paid herself was manageable for her family, and they were able to continue construction of their new home as planned and send remittances for her grandsons college education in full and on time. In the past, such health crises in the village would have plunged whole families up to their necks in debt.

According to Xu Debin, director of the Rural Cooperative Medical Care System Office of the municipal government of Lianyungang, the previous scheme was primarily funded by memberscontributions, and subsidies from the government were much lower. It sustained a lower payment ratio, meaning less relief for those needing expensive treatment. Xu was involved in the implementation of the new scheme since trials began in 2003, and worked on it in different regions in the province. Today, he is a member of the expert panel of a project to reform its payment model and promote information technology use, funded by a World Bank loan and British donations.

Xu has conducted several surveys on local residents need for medical services. Results show that they made 2.5-3 visits to the doctor every year, and that eight percent of them had experience as inpatients. The rate is lower among rural dwellers. A 2005 research found that farmers in Lianyungang saw doctors 1-1.5 times a year, and only 5 percent had been hospitalized. “This indicates that when falling sick half of rural residents would choose not to see a doctor or avoid hospitalization when their condition calls for it,” Xu said.

These rural figures edged up to be on par with those in cities after the New Rural Cooperative Medical Care System was introduced. “The increase of average rural incomes certainly plays a role, but more government funding is the biggest cause of the change. Medical services are no longer out of the reach of farmers,” Xu said.

Under the New Rural Cooperative Medical Care System every member pays RMB 60 per year and receives RMB 70 from the local government and RMB 70 from the central government for the premium, in comparison with the RMB 10 from individuals and RMB 20 from the state when the system was introduced a decade ago. The result was that payouts also soared. The maximum reimbursed sum was raised from RMB 10,000 to the current RMB 150,000 for inpatients, and no ceiling is set for those diagnosed with severe diseases. Inpatients can have 70 percent or more of their expenditures recovered. The category of severe diseases is expanding steadily, including 16 diseases such as congenital heart disease, leukemia, uremia and cancers, with another 20 diseases poised to join them by the end of this year.

In Lianyungang City 99.58 percent rural residents are enrolled to the New Rural Cooperative Medical Care System, eight percent higher than the national average. To cater to the increasing number of patients, local medical institutes are becoming better equipped and staffed. Punan Central Hospital, for instance, boasts 30-odd physicians and surgeons of a variety of specialties who have sophisticated equipment at their disposal such as an automatic radiography X-ray, a digital ultrasound scanner and an automatic biochemical analyzer. Now, its inpatient wards are furnished and equipped as well as those in larger city hospitals, but the fees are much lower.

According to National Bureau of Statistics, during the past three years the central budget allotted RMB 63 billion to improve the facilities and services of 33,000 county-level hospitals. Monitoring by the Ministry of Health confirms the reimbursement rate for inpatient costs under the New Rural Cooperative Medical Care System climbed from 48 percent in 2008 to 70 percent in 2011, equal to that of urban residents.

Curbing excessive Drug sales

Starting from July 1, 2012, the Friendship Hospital in Beijing removes mark-ups on the prices over 1,500 drugs. Such a reform has been on trial in other areas for a long time. The move signals the end of the half-century practice whereby public hospitals are allowed to add 15 percent to the wholesale prices of the drugs sold to patients.

This practice is the major cause of expensive healthcare in China. Because registration fees were very low, ranging from a few to a dozen yuan, hospitals were forced to seek extra income from drug sales and doctors were known to over-prescribe medicine for profits. Moving away from this practice means much cheaper medical bills. Furthermore, in August 2009, China started to promote a national basic medicine system and purchasing prices of drugs have since been cut by an average of 30 percent.

This will greatly help cut the financial burden on patients. According to statistics of the China Health Insurance Research Association, in 2010 the per capita cost for outpatients was RMB 166.8 and that for inpatients was RMB 6193.9, equivalent to one third of the annual per capita income of urban residents and surpassing annual per capita income of rural residents.

“If Song Guicai has the operation this year, she will only have to pay RMB 8,100 herself,” Xu Debin tells China Today. As of this year, the payment schemes for 16 diseases, including esophageal cancer, have been included in the diagnosis-related groups (DRGs) payment system in Lianyungang City. Under the system, hospitals, in cooperation with the New Rural Cooperative Medical Care System, estimate that the maximum cost Song will have to pay for treatment including drugs will be RMB 27,000. The new rural cooperative medical insurance covers RMB 189,000. Anything above RMB 27,000 will be paid by hospitals to curb excessive prescription.

Of course the healthcare reform also takes into consideration increasing doctors incomes. A medical service fee has been introduced to replace the registration fee. The medical service fee, which will be much higher than the registration fee, will mostly be covered by government subsidies and healthcare insurance. The new fee is supposed to replace profits from medicine sales, allowing hospitals to continue to enjoy good revenues. The average monthly salary of doctors in the central hospital of Punan Town is over RMB 4,000, higher than that of local civil servants. About 60 percent of their salaries comes from government funding and 40 percent from fees for medical service and tests – not a penny comes from the mark-ups on drugs.

Deepening Healthcare Reform

In towns and cities, except for civil servants in some areas who still enjoy free healthcare, enterprise employees and urban residents enjoy the countrys basic health insurance, which covers about 70 percent of the medical costs. The reimbursement rate in big cities such as Beijing and Shanghai is higher.

Liu Jinshu is on the staff of a publishing house in Beijing. In 2010 he underwent a liver transplant at a cost of RMB 800,000. Liu, however, only paid 15 percent of that figure.

In the summer of 2012 a case of the health insurance system being conned out of RMB 170,000 of medical fees drew wide attention. Liao Dan, a Beijing resident of a low-income family, was accused of copying the hospitals seal and using it to make fake receipts for blood dialysis treatments for his wife who suffered from uremia. Liaos wife didnt have permanent residency in Beijing, which meant she did not qualify to join the public insurance scheme in the capital. The RMB 170,000 cost of the treatment left Liao with no choice but fraud.

It is imperative for China to reform its fragmented medical care systems in different regions. There are millions of migrant workers who have no permanent residency in the cities. Under the current system, policies they have taken out in their home provinces cannot be transferred when they move – they are in fact not insured.

Although the medical insurance system has been improved to give wider coverage to rural residents, children, retired people without pensions and unemployed residents, it is still riddled with problems that need to be addressed.

The government has made efforts to solve existing problems. According to the Ministry of Human Resources and Social Security, measures have been taken to create a cross-regional medical reimbursement system. The reimbursement procedures will be simplified and the Beijing municipal government is exploring solutions to extend coverage to migrant workers in the city.

On the issues of different reimbursement levels and insufficient government subsidies for severe diseases such as liver transplantation and cancer, Chinese Vice Premier Li Keqiang emphasized at a meeting on July 18 that efforts should be made to combine social medical insurance with commercial insurance for severe diseases. Zhang Xinqing, head of the Beijing Municipal Bureau of Labor and Social Security, said early this year that they are working on policies to make it possible for patients that suffer any of 11 severe diseases, including malignant tumors, renal dialysis, Leukemia and hemophilia, to receive further reimbursement from commercial insurance after they obtain reimbursement from social medical insurance.

In Lianyungang, the New Rural Cooperative Medical Care System has cooperated with commercial insurance. Rural residents who have already taken up the new rural cooperative medical insurance can choose to pay an extra RMB 10 to cover accidental injury. They will be able to not only receive reimbursements from commercial insurance but also be reimbursed 70 to 80 percent of the remaining sum of treatment from the new rural cooperative medical insurance. Currently over 200,000 rural residents have opted for the commercial accidental injury insurance.

Anyway, government funding is still playing the key role in providing affordable medical care. Currently the Chinese government plans to progressively increase its healthcare budget, complete the national basic medicine system, increase the maximum reimbursement amount and focus on covering the medical costs for treatment of severe diseases and common mild illnesses. It will extend the medical reimbursement rate to 70 percent for both inpatients and outpatients by 2015, reaching the same level of Western developed countries.

A few decades ago, only employed people, provided with pensions by their employers, could enjoy a carefree old age in China. Now, as welfare for the elderly has been improved, you can choose a public pension plan that suits your needs, whether you are a rural resident, an unemployed urban resident or a migrant worker. With this change, the country has been moving away from the old-fashioned view that a couple needs to have at least one son to support them when they grow old.

Pensions for Rural Residents

Since the second half of last year, Li Zhentian and his wife from Weijiajishan Village, Junan County, Linyi City in Shandong Province have each been able to draw a basic pension of RMB 55 per month. This is part of the new old-age insurance plan for rural residents that has been in place on a trial basis in several counties since last year.

According to the plan, rural residents aged 60 and above can claim a basic pension provided by the central government without making personal contributions. “In the past I never expected that farmers like me could have pension,” Li Zhentian says, who, thanks to his pension, was able to give each of his grandchildren RMB 5 as a Chinese New Year gift for the first time.

“For my parents, a 100-yuan monthly allowance is enough,”says the couples daughter Li Xingxia, who is working in Beijing. She says that her parents only need to spend a little on meat and daily necessities, as they grow grain and vegetables themselves and their hospital expenses are covered by the New Rural Cooperative Medical Care System.

Under the plan, rural residents under 60 can choose to pay contributions to their personal pension accounts ranging from RMB 100 to 1,000 every year. Li Xingxia says that all the residents in her village choose to pay and Li herself has chosen the lowest payment of just RMB 100 per year. After paying contribution for 15 years she is entitled to a monthly pension based on her own contributions plus the government funding once she turns 60. This means that her pension will be a little higher than that of her parents. “All the villagers are happy with the current policies,” says Li.

Li is also entitled to a slightly higher pension because she is a mother of two daughters. This is thanks to a government policy that adds an extra RMB 50 to 60 to the monthly pension of families with only one child or two daughters. Traditionally, parents relied on their sons for support in old age, and having at least one son was deemed a necessity for thousands of years. As such, it hasnt been easy to implement the family planning policy in rural areas. “Policies about the pension for rural residents have improved a lot. Fewer and fewer rural families have the old determination to have a son,” says Li.

Li admits that she was under great pressure from her family when she decided not to have any more children. But now she feels she made the right choice. “I dont have heavy burden. I just need to pay for them until they finish their schooling,” says Li. In the future she wont need to rely on her daughters, now 8 and 16, because her pension will be enough.

From 2009 when trials of the new pension plan for rural residents commenced to the end of 2011, over 320 million rural residents participated in the scheme. The new pension plan will be available to every rural resident by the end of 2012. Over 100 million senior citizens in the countryside will cost the central treasury RMB 66 billion per year.

Besides personal contributions and central government subsidies, local governments are also required to give subsidies to each participant in the plan. In economically developed areas such as Beijing and Shanghai, local government subsidies are tied to the contributions paid by residents. Those registered as rural residents in those areas enjoy relatively high incomes, so they choose to pay higher contributions and will thus receive much higher pensions compared to rural residents like Li Xingxia in Shandong Province. In Shanghai, pension plans are already available to every rural and urban resident, with the former entitled to a pension of RMB 497 per month. Li Xingxia hopes that by the time she turns 60, Shandong will be rich enough to offer similar pensions to rural residents.

Wider Coverage in Urban Areas

After graduating Mrs. Cheng started her own business. For the past two years she has been working for a private real estate company in Beijing. This means that until recently she was excluded from the public urban pension plan. Since she was previously self-employed and now her employer doesnt pay her endowment insurance, for a long time Cheng was not guaranteed an income after retirement.

This had given Cheng cause to worry as she grew older. However, in 2005 her fears of old-age poverty were mitigated when the State Council decided to improve the pension plan for private employees. The new pension plan for urban employees has been expanded to cover the selfemployed and contract workers. Under the plan Cheng can pay pension insurance contributions herself. She chooses the lowest payment of RMB 300 to 400 per month. After 15 years of payments, she will be entitled to a monthly pension of RMB 700 to 800 when she reaches the retirement age. “I dont expect this money will be sufficient to support me, but I feel relieved that I will at least have that income after I retire,”says Cheng. “Employees of big private enterprises only need to pay eight percent of their salaries into their individual account every month and their employers pay 20 percent. However, people like me who are employed by small companies have to pay the premium by ourselves,” she says. She has also considered earning extra income by renting out the apartment she owns, which would supplement her pension.

The government has also extended the pension insurance to cover unemployed urban residents. According to Zhu Hongjun, who is responsible for public insurance affairs at the Donggaodi Community Service Station in Beijing, now unemployed individuals can choose to pay pension contributions ranging from RMB 960 to RMB 7,420 per year. She elaborates that if she pays RMB 960 per year, or RMB 80 per month, she will receive RMB 280 per month after reaching 55 years of age. Now, in the community where she serves most unemployed residents that participate in this pension plan are women who have followed their husbands to Beijing, and their numbers are small. In Donggaodi so far only two residents have started to receive old-age pension for the unemployed.

The pension insurance plan for unemployed urban residents has been implemented on a trial basis since July of 2011. According to Zheng Bingwen, director of the Research Center for World Social Security at the Chinese Academy of Social Sciences, the new pension plan for rural residents and the pension plan for urban residents both feature low payments and have not been a heavy burden on the government. Since the campaign to provide full coverage of pensions to all rural and urban residents was launched, more than 380 million urban and rural residents have come under the plan.

In Pursuit of Fairness

In recent months, the possibility of extending the retirement age because of the pension accounts deficit has been much debated. Such discussion was provoked by a proposal made by He Ping, director of the Social Security Research Institute under the Ministry of Human Resources and Social Security(MHRSS). He suggested extending the retirement age from 2016, by one year every two years. The retirement age should be raised to 65 years old for both men and women by 2045, he said. Currently the retirement age is 60 for men and 55 or 50 for female workers.

The delay of the retirement age will directly affect those urban employees who are paying their pension contributions. According to statistics of the MHRSS, 284 million urban employees participated in the pension plan by the end of 2011. The proposal drew strong oppositions from the public. A survey launched by major Chinese websites show that over 95 percent of netizens are against the delay of the retirement age.

Currently private enterprises are required to pay contributions towards their employees pensions and medical care insurance. However, under the pressure of the high cost of recruitment, some small enterprises refuse to pay. Mrs. Cheng says that the company she serves is an example. “I can understand their difficulties. The company hasnt started to make a profit and the expenditure would be 40 percent higher if the company paid their contribution for all of its employees to various insurers,” says Cheng.

The situation is same when it comes to migrant workers, whose number is enormous. The government stipulates that migrant workers and their employers should both pay part of the pension. However, both parties lack the motivation to pay the money. According to statistics of the MHRSS, among the 284 million urban residents who have joined the urban employee pension plan, only 41.4 million of them are migrant workers, less than one sixth of migrant workers in urban areas. Jin Weigang, deputy director of the Social Security Research Institute under the MHRSS, said that it is difficult to raise the pension plan participation rate of migrant workers under the current system due to inconsistent policies for different pension plans. They prefer cash to depositing the money into an account.

To fulfill the governments goal of universal coverage of the pension plan the current system must be improved to encourage people to join voluntarily.

One major feature of the current pension system is that workers of government institutions and enterprise employees have been treated differently under the dual system that has been implemented since the 1990s. Government employees receive a much higher pension than employees of enterprises, an inequality that has been an object of public condemnation.

Mrs. Chengs husband works for a government institution, where he receives a monthly salary of RMB 6,000. Under the current system, an enterprise employee with the same salary would have to pay eight percent of their salary to their personal account to receive a pension of RMB 3,000 every month. Mrs. Chengs husband, however, is not required to pay any contributions out of his salary, and will receive RMB 5,000 after retirement.

In order to narrow the gap between workers of government institutions and enterprise employees, the Chinese government has raised the per capita monthly pension for retired enterprise employees for eight consecutive years at an annual increase of 10 percent. The Outline of the 12th Five-year Plan for Social Security released in June included reform of the pension plan for government institution employees. One director of the Human Resources Department of a government institution told China Today that several public institutions under the conglomerate she serves have been transformed into enterprises and they and their staff have both started to pay pension contributions.

Professor Chu Fuling of the School of Insurance under the Central University of Finance and Economics says that the basic framework for Chinas pension system has been established, but that it needs to be improved step by step.

The ultimate goal of the reform is to make the system fair for everyone. Now almost every rural and urban resident has access to pension plans, though pensions are still low. However, with Chinas continual economic development and accumulation of wealth, it is inevitable that people will see the benefits filter through to their golden years.