Consolidating the social health insurance schemes in China: towards an equitable and efficient health system

Summary

Fragmentation in social health insurance schemes is an important factor for inequitable access to health care and financial protection for people covered by different health insurance schemes in China. To fulfil its commitment of universal health coverage by 2020, the Chinese Government needs to prioritise addressing this issue. After analysing the situation of fragmentation, this Review summarises efforts to consolidate health insurance schemes both in China and internationally. Rural migrants, elderly people, and those with non-communicable diseases in China will greatly benefit from consolidation of the existing health insurance schemes with extended funding pools, thereby narrowing the disparities among health insurance schemes in fund level and benefit package. Political commitments, institutional innovations, and a feasible implementation plan are the major elements needed for success in consolidation. Achievement of universal health coverage in China needs systemic strategies including consolidation of the social health insurance schemes.

Introduction

China's social health insurance schemes—including the rural new cooperative medical scheme (NCMS; launched in 2003), urban resident-based basic medical insurance scheme (URBMI; launched in 2007), and urban employee-based basic medical insurance scheme (UEBMI; launched in 1998)—have rapidly expanded during the past decade and at present cover almost the whole Chinese population. Payroll taxes are the main funding source for UEBMI and government subsidies are the major funding sources for NCMS and URBMI. The per person annual fund contribution for UEBMI is about six and seven times higher than that for the URBMI and NCMS, respectively.¹ Government health funding increased from US$79·4 billion in 2009, to $157·6 billion in 2013, 46·4% of which was spent on social health security programmes such as social health insurance schemes and medical assistance funds (appendix).² Proportion of out-of-pocket payments in total health expenditures has been rapidly reduced after introduction of the social health insurance schemes.²

The three health insurance schemes are separately administered and operated nationally and locally. NCMS is administered by the Chinese National Health and Family Planning Commission (previously the Chinese Ministry of Health), whereas URBMI and UEBMI are administered by the Chinese Ministry of Human Resources and Social Security (appendix). After the guidelines from national government and implementation plans from provincial governments, NCMS funds are pooled at the county level (2852 rural counties in 2012, with an average population of 300 000 in one county), and URBMI and UEBMI are pooled at the municipal (prefecture) level (333 municipalities and prefectures in 2012),³ which implies that in China there are roughly 2852 NCMS schemes, 333 UEBMI schemes, and 333 URBMI schemes. The benefit packages and financial protection are not equal within and across the schemes, which is a crucial barrier to achieving universal health coverage in China.

Rural populations have more restricted access to health care than urban residents and also have a larger financial burden, mainly due to low funds for NCMS. Reimbursement was 10% lower and service coverage was smaller for NCMS than for either URBMI or UEBMI.⁴ Additionally, access to health care for the 245 million migrants is also affected by fragmentation of the health insurance schemes.³ In 2011, infant mortality in rural areas was still almost three times higher than in urban areas, and the prevalence of child cognitive disability was four times higher in rural areas than urban areas;⁵ these differences are associated with the disparities in capacities of protection mechanisms between the two areas. In China's rural region, NCMS offers much higher benefit packages in rich rural counties than in poor counties as a result of gaps in economic development. The fact that NCMS funds are pooled by counties has affected risk sharing between rich and poor counties.

To establish a consolidated health insurance system by 2020 is one of the main goals in China's health system reform agenda.⁶ Achievement of universal health coverage needs both vertical consolidation (NCMS group from county level, and URBMI and UEBMI group from municipal level to a higher level of provincial [short term] and country [long term] levels) and horizontal consolidation (merging the funding pools of the three schemes). However, progress is slow. The national government planned to merge the administrative authorities nationally in 2013, but has not started yet,⁷ mainly due to lack of agreement made on which governance structure would be suitable.⁸ A few provinces in China have piloted consolidation of the rural and urban schemes, paving the way towards a nationwide, consolidated, health insurance system.

Experience of other countries shows that consolidation of financial protection mechanisms is a crucial strategy to achieve universal health coverage. Fragmentation of funding pools leads to differential benefit packages, which is a major source of inequity accessible to needed care and financial protection9, 10—the bigger the funding pool the greater the risk protection.⁹ Fragmentation of health financing systems has resulted in ineffective coverage of the poorest settings in Latin America.¹¹ The separate funding pools can also lead to inefficient systems because of their restricted ability to negotiate with health-care providers.¹² Examples from South Korea and Taiwan show a significant reduction of administrative costs after health insurance was consolidated.13, 14 Since 2008, Turkey has integrated five health insurance schemes into a unified general health insurance to achieve an increasingly effective and equitable insurance system,¹⁵ and Indonesia has also begun to merge its five existing government risk pools since 2011, aiming to promote cross-subsidisation, decrease administrative costs, and reduce inequities in benefit packages.¹⁶ Germany, since 2009, has harmonised the available health insurance schemes (sickness funds) by establishing a Central Reallocation Pool.¹⁷

The purpose of our Review is to promote consolidation of health insurance schemes by providing evidence of consolidation practices in China and internationally. We provide an overview of the fragmented social health insurance and discuss pilot programmes and the practical application of social health insurance consolidation. We then summarise the experiences from other global examples in consolidating health financing systems and recommend strategies for China's consolidation of social health insurance.