China's rural health insurance scheme has failed: costs of treatment have gone up instead of down

by Michael Woodhead
China’s New Co-operative Medical Scheme has done the opposite of what it was intended to do: it has increased costs and reduced access to health services for rural people, a study has found.
The government-subsidised health insurance program for rural residents was introduced in 2003 and was designed to reduce out-of-pocket payments for hospital treatment for rural Chinese. The scheme had been intended to make healthcare more affordable following the demise of co-operative health schemes in the 1980s that left most rural Chinese without any subsidised healthcare.
The NCMS proved to be very popular and with subscriptions costing as little as 10RMB a month it soon covered 97% of rural residents - or about 830 million people.
However, a new analysis of the scheme shows that out-of-pocket costs for treatment have actually increased under the program. It seems that rural hospitals have been using the easier availability of funds from the scheme to raise their prices for services and have not been passing savings on to patients.
An analysis by Chinese health economists working at the LSE in London has found that the average cost of outpatient treatment went up from 205 RMB in 2004 to 308 RMB in 2009.  After re-imbursement, patients ended up paying 254 RMB for treatment in 2009 under the new NCMS scheme - almost 50 RMB more than they did without insurance.
The authors of the study say the availability of funds through patients’ NCMS insurance may have caused 'cost inflation' by inducing rural hospitals and doctors to use more expensive drugs and treatments, so as to make more profits for their cash-strapped instiutions.
"Much of the government support intended to subsidise participants’ payments for health care may instead have been absorbed by the insatiable quest for revenues and cost coverage at these smaller health facilities, simply to survive," they write.
Therefore it is not surprising that "the rapid expansion of NCMS through massive injection of government subsidies has so far had limited impacts on either improving access or reducing out-of-pocket payments for outpatient care," they note.
"In fact, our analysis indicates that rural residents covered by NCMS are less likely to seek outpatient care than uninsured residents who did not subscribe to the programme. There is no evidence from our analysis that NCMS has succeeded in reducing out-of-pocket payments for outpatient care," they conclude.
Writing in the journal Health Policy and Planning, the researchers warn that: "further infusions of government subsidies aimed at covering rising NCMS expenditures may simply induce further waves of cost escalation unless NCMS can use its leverage as purchaser and third-party payer to introduce cost-saving measures in participating health services facilities."