In Mainland China, the healthcare system that involves billions of people is becoming less accessible. Faced with financial crises in various regions, the authorities are making cuts to the healthcare system, gradually reducing the disposable portion in individual accounts, imposing restrictions on reimbursements, and introducing inequalities, leading to more people being unwilling to participate.
Unemployed Cannot Use Healthcare Benefits
Not long ago, a Chinese female blogger revealed online that after becoming unemployed, she could no longer use the healthcare benefits paid by her previous employer, calling it a scam.
She mentioned that you could only enjoy healthcare benefits by paying into it through your job. However, once you are unemployed, you can no longer access the healthcare benefits that your previous company paid for. Isn’t this policy a form of deception? Moreover, one can only enjoy lifetime healthcare benefits after contributing to healthcare for 25 years.
In recent years, due to financial constraints at the local government level, various policies have been introduced that set up barriers and increase out-of-pocket expenses for the public, leading to a rise in social discussions and protests related to healthcare issues.
In 2020, the Chinese National Healthcare Administration issued new opinions stating that the portion paid by the employer for healthcare would no longer be transferred to individual accounts. Previously, the regulation from 1998 indicated that around 30% of the employer’s contribution would enter the individual’s account.
Analysts believe that the “zero-COVID” policy during the pandemic drained the coordinated fund in the healthcare system, prompting authorities to target individuals’ healthcare accounts across various regions. By 2022, the cumulative balance in individual healthcare accounts had reached 1.3713 trillion yuan.
Subsequently, regions started implementing new regulations to reduce the transfer ratio of funds into individual accounts, leading to dissatisfaction among the public.
In February 2023, retired individuals in Wuhan gathered in front of the municipal government’s office to protest the reduction of their monthly healthcare subsidies from the individual account, which dropped from over 260 yuan to just over 80 yuan. Moreover, retirees had to reach a threshold of 500 yuan for outpatient visits to be eligible for reimbursements, resulting in significantly increased out-of-pocket expenses over a year.
Wei Zhen, who is familiar with healthcare topics and works at a certain internet company in mainland China, stated to a journalist that healthcare is deducted from salaries by employers, with additional contributions based on the system’s performance. If you leave your job and do not find new employment, your healthcare benefits are frozen starting from the second month after leaving, effectively losing access to healthcare.
She mentioned that if you need healthcare coverage after becoming unemployed, you have two options: flexible employment healthcare and urban and rural resident healthcare, both requiring self-pay contributions. However, the reimbursement rate for these two options is significantly lower compared to that for employee healthcare.
Wei Zhen emphasized that many people in China cannot actually benefit from the healthcare they contribute to. Payment into healthcare is deducted directly from salaries, and the return on contributions is not necessarily proportionate to the amount paid.
Using Beijing as an example, Wei Zhen pointed out that initially, individuals could use the money in their personal accounts when seeking medical treatment and could withdraw funds. However, starting from 2022, the money in personal accounts became non-withdrawable, leading to freezing of those funds upon resignation.
Davy J. Wong, an American economist, mentioned to a reporter that the portion paid by the employer does not enter the individual’s account but is pooled in a citywide or nationwide fund for broader use.
For example, if you pay 500 yuan for healthcare, the employer contributes the same amount. Initially, the employer’s contribution was not transferred back to the individual but was later partially transferred, say 30%, or 150 yuan, giving a total of 650 in the personal account. However, after 2020, the employer’s contribution is no longer transferred to the individual account but is rather utilized within the city’s healthcare system collectively. Basically, it’s shared among everyone, and you won’t directly benefit from it.
With diminishing healthcare funds, hospitals face increasing pressure and begin to restrict reimbursements.
Wei Zhen explained that each hospital now has quotas for healthcare expenditure, and exceeding these quotas is not permissible.
She shared an example where her grandfather and a friend’s grandmother were hospitalized at the same time in the summer of the previous year. However, they could only stay in the hospital for fourteen days as exceeding this period would deplete the hospital’s healthcare quota, necessitating them to be discharged to seek treatment elsewhere. This led to a practice where many elderly patients would switch hospitals every fourteen days.
Another unethical practice Wei Zhen highlighted was that healthcare reimbursements do not cover expenses related to childbirth; instead, a separate maternity insurance scheme is required. Maternity insurance has two prerequisites: one must contribute for either nine or twelve months, and the individual must be married.
Moreover, facing healthcare budget constraints, hospitals might prescribe traditional Chinese medicine, which essentially equates to unproven treatments, at high costs that are not reimbursable through healthcare.
A doctor, Li Ming, from a top-tier hospital in a major city, had previously highlighted that the coverage provided by healthcare has been diminishing, and the disparities between urban and rural areas are significant. For instance, in Beijing, the maximum reimbursement can reach 20,000 yuan, while in other cities, it ranges from hundreds to 1,500 yuan.
He mentioned that hospitals are currently facing financial difficulties as the unreimbursed healthcare costs are mostly covered by the hospitals themselves, resulting in significant financial strain.
Mr. Wen from Hunan expressed that individuals are now required to pay higher premiums for healthcare, with the latest New Rural Cooperative Medical Insurance premium standards increasing from 380 yuan to 400 yuan. To ensure prompt payment, each region has been exploring tactics beyond traditional means, even using students to meet the desired goals.
Mr. Cheng from Guangdong noted that the rural cooperative medical insurance has seen a steady rise in premiums, with rates starting at ten yuan and escalating to four hundred yuan currently. For a family of four, this amounts to 1,600 yuan annually, a significant sum for rural households. Besides, unlike life insurance or pension funds, unused healthcare funds expire at the end of each year.
Wei Zhen explained that the continuous rise in healthcare premiums is primarily due to shifting demographics and high youth unemployment rates. This results in increasing individuals utilizing healthcare services annually, while the contributors to healthcare funds decrease each year.
She elaborated that due to population control policies like the one-child policy, the Chinese population now showcases an inverted pyramid structure. Individuals born in the 1960s and 1970s typically had several siblings, whereas those born in the 1980s and 1990s are mostly single children.
Wei Zhen pointed out that individuals from the 60s and 70s cohorts far outnumber those from the 80s and 90s cohorts, and they are currently at the age where healthcare benefits are utilized the most. However, the 80s and 90s cohorts are bearing the brunt of severe unemployment, while the 2000s cohort is struggling to find employment. Even during times of full employment, there aren’t enough funds to cover healthcare and social security contributions.
Furthermore, there is a practice termed as equivalent payment for healthcare and social security, where individuals who previously enjoyed public healthcare benefits within the government and state-owned enterprises without contributing to healthcare or social security were retroactively considered as having made contributions during the initial implementation of the healthcare system.
As healthcare costs continue to rise, many individuals find it increasingly challenging to afford the escalating expenses, leading to a trend of opting out of healthcare coverage. The number of participants in the Rural and Urban Resident Medical Insurance decreased by 25.17 million in 2022.
Mr. Cheng indicated that currently, very few individuals pay several hundred yuan per month for healthcare; only those with some illnesses or those aged over fifty opt-in. He mentioned how individuals in the age group of twenty to fifty who are healthy generally don’t purchase healthcare coverage.
Wei Zhen stated that young people are abandoning healthcare coverage due to its inadequacy. In places like Beijing, individuals often find that their healthcare benefits are virtually useless when they visit hospitals. For instance, in Beijing, one has to spend 1,800 yuan before receiving any reimbursement, and costs below this threshold have to be self-financed. Unless one encounters a severe illness, the annual healthcare expenses usually remain below 1,800 yuan, requiring self-payment for most services.
She opined that China’s compulsory healthcare system has made individuals skeptical of investing in healthcare as employees dutifully pay into social security but often find themselves unable to reap the promised benefits. Wei Zhen emphasized that Beijing residents, especially non-locals, suffer the most as Beijing has a sizable number of retired officials and state-owned enterprise retirees, thereby straining the social insurance system due to an insufficient investment in social security in China.
Another glaring issue with the Chinese healthcare system is the high out-of-pocket expenses for citizens, leading to significant healthcare disparities. A 2019 CSIS report pointed out that at the beginning of the century, self-funded medical expenses were as high as 60% in China; however, currently, around 29% of medical costs are borne by individuals. In contrast, Japan’s out-of-pocket expenses accounted for only 12.9% in 2015, while Germany and France had 12.7% and 9.8%, respectively.
According to former Deputy Minister of Health, Yin Daqiu, in 2006, around 80% of the healthcare expenditure by the Chinese government went to approximately 8.5 million government officials.
Despite the streamlining of retirement pensions since 2015, there are implicit subsidies still prevalent in the system.
Wei Zhen mentioned how her father received a lump sum increase in his salary during the pension streamlining, to offset the deductions for healthcare and retirement funds, allowing him to maintain an equivalent take-home pay. However, she highlighted how this bump in salary essentially represented a financial outlay by the government, effectively subsidizing the social security benefits of civil servants.
Li Ming pointed out that inadequate financial allocations and unfair distribution of resources have resulted in reduced healthcare benefits for common citizens. He pointed out that a significant portion of resources is allocated to retired senior officials, leading to limited healthcare benefits for the general public.
Recent media reports have highlighted the widespread salary reductions in Chinese hospitals, with economically advanced cities like Guangzhou and Shenzhen witnessing nearly a 50% decrease in doctor’s incomes. Analysts attribute this to a lack of government funding, prompting them to extract funds from hospitals.
Davy J. Wong explained that local governments are financially strained and are borrowing funds from hospitals, creating a genuine scenario where hospitals are being stripped of their funds. Reports from financial management personnel at hospitals during the pandemic indicated that the costs for essentials like masks and medicines were borne by hospitals as the government failed to provide funding, effectively depleting the hospital trust funds.
Wei Zhen pointed out how different sectors like museums follow public servant management guidelines, where finances are allocated through government grants. In contrast, hospitals operate on a for-profit model, wherein the healthcare costs directly impact the revenue and expenses of the hospital.
Wei Zhen noted that during the anti-corruption campaign in 2019, areas like poverty alleviation, scientific research, and hospitals were left relatively untouched. However, presently, with dwindling financial resources, hospitals have become a target for reallocation of funds.
Effectively, since July 2023, there has been a significant drive towards medical anti-corruption within the Chinese healthcare system.
A doctor from a hospital in Southwest China, Dr. Qi, analyzed that the medical anti-corruption campaign is not merely for rooting out corruption but serves to compress the grey areas in the healthcare industry, reining in irregular income and profits that were previously tacitly approved by the authorities and reintroducing those funds into the national treasury to fill the deficit caused by the pandemic response in healthcare funds.