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Premium Predicament

Rural residents are giving the cold shoulder to a once-lauded healthcare scheme, blaming increased premiums and not enough coverage. Meanwhile, officials face pressure to sign up reluctant payers

By Wang Yan , Zhang Xinyu Updated May.1

Volunteers help a senior activate his electronic medical insurance card in Xiugu Town, Jinxi County, Fuzhou City, East China’s Jiangxi Province, December 22,2023 (Photo by CNS)

In early January 2024, Huang Xiaoyun, working in Zhuzhou, Hunan Province, received a phone call from an official in his home village administered by Loudi City in Central China’s Hunan Province. The official urged him to pay the outstanding 2024 premium for his basic medical insurance, known as the New Rural Cooperative Medical System (NRCMS). The annual individual premium is 380 yuan (US$53), an increase of 30 yuan (US$4) from 2023.  

According to Huang, since the NRCMS was rolled out in 2006, the premium has increased from the initial 10 yuan (US$1.4) per year in 2006 to the current 380 yuan (US$53), payable by December each year to ensure health coverage for the next year.  

However, in early 2024, due to widespread delays or refusal to pay, health insurance bureaus in many parts of the country issued payment deadline extension notices.  

The length of extension varies in different cities and provinces, ranging from late February to the end of June 2024.  

Despite frequent phone calls from the village head, Huang said he had decided not to pay the premium for NRCMS this year, and he told the reporter that he may not pay it in the future.  

Zhu Minglai, director of the Research Center for Health Economics and Medical Security and director of the Institute of Pension and Health Security at the School of Finance at Nankai University in Tianjin, found that an increasing number of rural residents believe the medical insurance premium is a financial burden, which is why the deadlines have been extended.  

Experts NewsChina spoke to pointed to the increase in premiums as the primary reason for non-payment. They suggested a moratorium on premium increases and that the system should be means tested by taking family income into consideration.  

Effective Measure 
Officially, some 70 percent of China’s total population are registered as living in rural areas with their occupation listed as a farmer, according to the system of household registration, or hukou, which indicates whether a person is an urban or rural dweller. Of the 900 million official rural residents, at least 400 million live and work in towns and cities, yet they are still entitled to enroll in the NRCMS system, even if they never return to the village. Many could be registered in alternative health insurance schemes.  

Since the founding of the People’s Republic of China in 1949, China’s urban and rural health systems differed, with a strong urban bias regarding public resource allocation. Urban residents mostly received health coverage through their jobs, while rural healthcare was based on a community financing scheme called the Rural Cooperative Medical System (RCMS). By the mid-1970s, about 90 percent of China’s rural villages, then known as communes, were covered by RCMS schemes, which operated with no government funding. The communes and rural residents contributed to the RCMS system, which they considered as a savings account to be used if they got sick in the future.  

This rural healthcare system, although rudimentary, contributed significantly to China’s success in improving health in impoverished rural areas in the 1970s. However, funding was limited and remuneration for rural residents with serious illness was not sufficient. More importantly, the transition from agricultural collectives to the “household responsibility system” in the late 1970s and early 1980s weakened the financial base of the cooperative medical system. This resulted in the gradual collapse of RCMS schemes. According to statistics from the Ministry of Health, insurance coverage for rural residents had fallen to 12.8 percent in 1993. By 1998, only 9.5 percent of the rural population was insured.  

The year 2002 was monumental for hundreds of millions of rural Chinese, as the Chinese government finally decided to establish a new form of rural health insurance. The NRCMS differed from the RCMS, which was mainly composed of rural collective financing and no government funding. The NRCMS is funded through three major sources: individual premiums, village contributions through a collective welfare fund from income earned from collective agricultural production or rural enterprises, and government subsidies, which account for the better part of the funding. Support from direct government subsidies enhances the renumeration for serious illness.  

As the NRCMS developed, its benefit packages and cost-sharing mechanisms changed significantly. In January 2016, the State Council, China’s cabinet, issued the Opinions on Integrating the Basic Medical Insurance System for Urban and Rural Residents, announcing the integration of basic medical insurance for urban residents and the NRCMS to establish a unified medical insurance system for both urban and rural residents.  

Under the NRCMS, reimbursement for healthcare costs varies from 20 to 70 percent according to treatment provided in hospitals of various standards.  

Decreased Coverage 
According to data from the National Healthcare Security Administration (NHSA), over the last four years, the number of urban and rural residents covered by medical insurance including NRCMS has declined since 2019, by 0.3 percent, 0.8 percent, 0.8 percent and 2.5 percent in 2019, 2020, 2021 and 2022 respectively. From 2021 to 2022, the total number of urban and rural residents covered by medical insurance dropped from 1008.66 million to 983.49 million. 
Speaking on Nong TV, an online video program on China’s rural affairs in November 2023, Xie Zhangshu, deputy director of the Planning, Finance and Regulatory Division of the NHSA, attributed the reduction to two main reasons. In some cases, urban employment provides access to the healthcare system, so these people drop out of the rural scheme. Some move to different places and enroll in a different scheme. But some rural residents and officials told NewsChina that a significant number of rural residents have dropped out of the NRCMS entirely as they are no longer willing to pay the increased premium.  

In some villages in Hunan Province, up to 30 percent have dropped out, officials told NewsChina. Li Wei, a village official from neighboring Hubei Province, told NewsChina in January that as the insurance premium deadline draws near, he faces pressure from his superiors, who give performance targets on how many residents they persuade to pay up, and issue lists of villages showing how well they rank. It makes no difference whether the people actually reside in the village, so long as they are registered there.  

Villagers are cajoled to pay, facing a barrage of phone calls, WeChat messages or exhortations through the village loudspeaker system. In December 2023, a document circulating online claimed the government of Dayang Town in Anhui Province had publicly disclosed the performance of villages in collecting premiums, and imposed fines of 200-500 yuan (US$28-70) on officials who failed to meet the requirements. Also in December 2023, an online rumor claimed a village official from Baoding, Hebei Province tried to coerce parents to pay up, claiming non-payment of the premiums would hinder their children’s chances of getting a civil service role in the future.  

Ren Dapeng, director of the Center for Agricultural and Rural Legal Studies at China Agricultural University, told NewsChina that if the proportion of medical insurance contributions for urban and rural residents is used as an index to asses village officials, it can easily lead to problems like overreach on the part of officials.  

Wang Chaoqun, an associate professor at the School of Public Administration at Central China Normal University, published an article titled “Who Is Not Insured? Study on the Population Characteristics of Urban and Rural Residents in China” in 2023. He wrote that prior to the integration of the medical insurance system for urban and rural residents in 2016, there were performance appraisal requirements for village officials to enroll people into the NRCMS, which is why there was such a high participation rate at the time.  

According to a field study by Professor Liu Yiqiang from Jinan University in Guangzhou, Guangdong Province, the proportion of rural residents retreating from the NRCMS was 6 percent in 2023, and the number would rise if reluctance to pay for the program spread.  

Soaring Premiums 
While the NRCMS has alleviated the medical burden once shouldered by rural populations, residents in many rural places told NewsChina that the continued annual cost increases is the main deterrent to paying their premiums.  

“I always paid the NRCMS every year since it started until last year,” said Huang Xiaoyun, who added that the higher 380-yuan premium was a burden for farmers like him. “Our only income is from farming. In my family, the total cost for four elderly people, me, my wife and our three children can be as much as 3,000 yuan (US$417), which is a big expense for us,” Huang said. “Ten years ago, our [combined] monthly income was about 4,000-5,000 yuan (US$556-695), but now it’s about 6,000-7,000 yuan (US$834-973) a month. Our income hasn’t risen much, but the cost of the NRCMS keeps going up.”  

Zheng Fengtian, director of the Rural Development Institute at the Renmin University of China in Beijing, told the reporter that a significant number of farmers complained about the high price of NRCMS to him during his field research. “This has become a widespread phenomenon,” he said.  

In Zhu Minglai’s opinion, the 2010s saw widespread and significant income increases for both the rural collective economy and migrant workers, so they could afford the increased cost of health insurance. But lately, many rural economies are suffering, and there is rising rural and urban unemployment. It is a challenge for both individuals and local government administrations to pay for health insurance.  

According to Xie Zhangshu, the financing methods of medical insurance for urban and rural residents is dynamically adjusted every year. With economic and social development, the wide application of new medicine and new technology has resulted in greater public demand for medical insurance, including the demand for higher compensation and reimbursement of medical expenses, and the expanding scope of medical insurance.  

The government funds about 64 percent of the NRCMS, and its portion rises annually. In 2006, the central government provided over 20 yuan (US$3) per capita subsidies for NRCMS, with a 10-yuan (US$1.5) contribution from individual households. In 2010, the central government provided over 120 yuan (US$17) per capita subsidy to rural residents matched by 60 yuan (US$8) from rural residents. By 2023, the subsidy was 640 yuan (US$89), with 380 yuan (US$53) paid by residents.  

At the same time, the list of diseases covered in the scheme has expanded, with more treatments, diagnostics and medications covered, as well as a higher rate of reimbursement for out of pocket expenses.  

According to the NHSA, the annual growth rate of total national medical expenses is around 8 percent. In 2021, compared with 2011, the average national cost of hospitalization increased from 6,632 yuan to 11,003 yuan (US$922-1,529), an increase of about 66 percent in a decade. 

And funds are tight, with an overall deficit from insurance schemes. From January to November 2023, combined funds from all sources for rural and urban medical insurance was 886.32 billion yuan (US$123.17b), but outgoings were 920.41 billion yuan (US$127.91b), a deficit of 34.09 billion yuan (US$4.74b) in the first 11 months of 2023.  

Liu Yiqiang believes rural dissatisfaction with the rise in medical insurance premiums is because they are unaware why overall healthcare costs are rising and what more benefits have been brought by the improved coverage. “If policymakers can’t effectively communicate with the public why they need to increase premiums in an accessible and accountable way, it will be hard to operate the system properly,” Liu said.  

Rural residents visit a township health center in Nanjing, Jiangsu Province, May 10,2005 (Photo by VCG)

Staff of Langfang Municipal Medical Security Bureau helps rural residents activate their electronic medical insurance card in Langfang, Hebei Province, November 6, 2023 (Photo by VCG)

Future Optimization 
Many social insurance experts have started to join the discussion on reform of the insurance mechanism.  

Professor Li Yaqing from the School of Finance at Guangdong University of Finance and Economics pointed out that the medical insurance funds for urban and rural residents are fixed payments from both the insured and the government. This mechanism, however, “is relatively unfair,” because compared with high-income groups, it is a much heavier burden for low-income groups.  

Ren Dapeng found during his field research that low income rural residents often choose cheaper but less effective forms of treatment. “For example, if their medical bill is about 100,000 yuan (US$13,897), they may regard it as a burden even if they only need to personally pay 10,000 yuan (US$1,390).” They fixate on their ability to pay the larger bill, not their actual contribution. The equality of paying premiums leads to inequality, Ren said, as it ignores the difference between urban and rural residents in their ability to pay.  

For some years, Li Zhen, a professor at the School of Public Administration at the Renmin University of China, has called for a means tested system of medical insurance. “Taking the individual premium standard of 250 yuan (US$35) in 2019 as an example, it accounted for 3.39 percent of per capita disposable income of the lowest income group, and only 0.33 percent for the highest income group. The payment burden of the low-income population is tenfold that of the high-income population,” Li Zhen said.  

NewsChina learned that the NHSA has begun to study and improve how it calculates premium levels. During the two sessions, China’s top annual legislative meetings, in 2022 and 2023, some lawmakers suggested that increases in healthcare premiums should occur every three to five years, not annually. The NHSA has publicly responded twice to such suggestions, admitting the existence of the problem and claiming that it will consider linking adjustments to residents’ medical insurance contributions with the level of social development and per capita disposable income.  

Zheng Fengtan and Liu Yiqiang both suggested a moratorium on premium increases from 2025. 

Mao Xianglin, a representative from Chongqing participating in the two sessions this year proposed that apart from a moratorium on premium increases, an incentive mechanism for NRCMS is needed. Residents who paid continuously for 5-10 years would be entitled to a higher percentage of reimbursement for hospitalization. Mao also suggested a zero premium and a low premium level should be provided as options for rural residents.  

While Huang Xiaoyun opted out of the NRCMS this time, he decided to buy commercial insurance for his family, including accident insurance and minor illness insurance. In Huang’s view, it covers much more than the rural scheme, even though the premium is higher. Other rural residents told NewsChina that cost is not the only reason why they opt out of the NRCMS, and that the treatments and medications it covers are too limited.  

Some rural residents said they still have to pay a lot if they are hospitalized, even under the NRCMS. Zhang Qing, 52, from Jingzhou, Hubei Province said her mother was hospitalized in 2011, and she only got 40,000 yuan (US$5,559) back out of the total cost of 100,000 yuan (US$13,897). According to NRCMS regulations, insured residents can get different deductibles for inpatient care at different levels or types of hospitals. For example, in Jingzhou, inpatient care reimbursement at lower-level facilities might receive 85 percent of the cost, but only 60 percent for inpatient care at a higher-level facility. There are also complaints that some hospitals prescribe more expensive treatment, which has offset the higher reimbursement ratio that the NRCMS offered in recent years.  

Given all this, Ren Dapeng cautioned that improving medical services in rural areas will be the next key issue to tackle, and Zhu Minglai called to address the issue of doctors prescribing excess levels of treatment to bump up hospital income.