Caixin Online: Inadequacies of China’s health insurance system

By Lan Fang

BEIJING ( Caixin Online ) — As He Jin prepared herself for the process of dying, she did it alone. Diagnosed with the final stages of liver cancer, the 24-year-old woman from Angkang of Shaanxi Province died in April this year, receiving basic treatments from the hospital on a charitable basis.

She lost touch with her parents long ago, and when her boyfriend learned of her illness he quietly walked away, leaving 1,000 yuan ($158) in cash.

The emotions that unfolded in public as her story circulated in nationwide media outlets indicated that something is deeply amiss in the health care system.

What does it take to die well? For Huang Nichao, another 24-year old woman, who was diagnosed with systemic lupus erythematosus (SLE) as a teen, peace of mind was tied to relieving her family of financial burdens for treatment.

Huang attempted to supplement the cost of her university tuition and medical expenses through part-time jobs. In her online diary she wrote: "The more I work, the worse the disease gets and the more I have to spend on my treatment. My family only becomes poorer. This is what compels me to work harder to earn more money." Her diary postings attracted media attention and Net users opened a relief fund for her, raising 200,000 yuan in donations. Huang died of SLE on March 18.

When the onset of death is quick, the terms between the patient and society appear to be simpler. But more discussion on terminal deaths has raised questions over the current state of medical institutions.

While the health care insurance system for urban residents kicked off in 2010, basic insurance coverage for the entire population has yet to be implemented.

According to Caixin estimates, between 2009 and 2011 the total investment from all levels of governments in the medical insurance system reached 732.6 billion yuan. But such payments fail to cover the terminally ill.

Urban vs. rural dwellers

The Insurance Association of China and the Chinese Medical Doctor Association jointly define "major illness" including altogether 25 types of illnesses in which malignancy, coronary artery bypass surgery, major organ transplants or hematopoietic stem cell transplants are compulsory in the commercial insurance coverage.

A survey by China Health Promotion Foundation shows that the cost of a single hospitalization of a patient with chronic illness can amount to about half of the per capita annual income of an average urban resident and more than 1.5 times of a rural resident's per capita annual income.

Xia Yang, a doctor at Beijing Shijitan Hospital, has worked as a trauma relief volunteer for many years. He said that even the major illnesses covered by the commercial insurance policy cannot cover all major serious clinical illness. Some common illnesses may also trigger infections and complications, which may ultimately end up in astronomical medical bills.

The Lancet magazine, an internationally leading medical journal, published an article in March that said in 2011 alone, 173 million Chinese citizens incurred catastrophic medical expenses, accounting for 12.9% of the population.

The current health care insurance system has ceiling coverage for medical expenses of all diseases covered in the system. But for urban residents, insurance covers up to about four times the local average per capita annual income worth of the medical cost, roughly 150,000 yuan, while for rural residents the maximum coverage has just been lifted from 30,000 yuan to 50,000 yuan.

But the cost of treatment for the vast majority of serious illnesses is far more than the cap, which means that the risk of having serious illness is borne by the patients regardless of locale, instead by the social security system.

In addition, only treatments and medicines listed on the health care insurance directory can be reimbursed. On average, the reimbursement ratio is around 60% to 70%. However, the most effective drugs, most of which are imported, are not in the essential drug list, which means the vast majority of these patients can claim back far less expense from the insurance than the average level.

Professor Liu Guoen, director of the China Center for Health Economic Research (CCHER) at Guanghua School of Management at Peking University, said that based on his findings, the New Rural Cooperative Medical Scheme (NRCMS) today can only cover 40% to 50% of the rural patients' medical costs, far lower than the 70% as claimed by the authorities.

This is mainly because the drugs doctors prescribed to the patients are not included in the insurance coverage list, while some severe disease relies much more heavily on those imported drugs which results as an intolerable burden for the patients.

What makes the situation worse is the fact that the distribution of medical resources is extremely uneven in China. Apart from the first-tier metropolises, such as Beijing, Shanghai and Guangzhou, almost all serious illness insurance in other areas must first be paid in cash by the patient before reimbursement by the state.