Impacts of Provincial Central Pooling of Basic Medical Insurance on China's Healthcare Ecosystem
During the March session of the 14th National People's Congress, China's Government Work Report emphasized "promoting the provincial central pooling of basic medical insurance."
By February 2023, nine provinces had already adopted this approach. Since late last year, Sichuan and ten other provinces have been planning to enhance their provincial central pooling of medical insurance.
Increasing the level of central pooling for basic medical insurance is crucial for reducing regional disparities and improving fund management efficiency.
To understand the full impact of this policy, it's important to grasp what "central pooling" truly means.
Central Pooling of What?
First and foremost, elevating the level of risk pooling focuses on structural risks rather than management risks. Structural risks refer to the health risks faced by the population insured under basic medical insurance.
A financial imbalance in a risk-pooling region typically arises from two main causes. The first is a discrepancy between the insurance and structural risks, where the revenue from the insurance fund falls short of the expenditures needed to mitigate these risks. This might occur in areas with a disproportionately high number of elderly, disabled, or high-risk individuals, surpassing the fund's financial capabilities.
The second cause relates to managerial risks, such as ineffective oversight leading to excessive medical treatments at designated healthcare facilities, resulting in high fund expenditures.
To address structural risks, a viable approach is to widen the scope of risk diversification, adjusting risks across a broader area to boost the fund's resilience. This involves increasing the pooling level to distribute risks more extensively. Provincial-level pooling, in comparison to city-level, significantly improves risk adjustment capabilities within the province.
Conversely, risks due to poor management cannot be pooled or elevated; instead, they must be strictly managed through a clear system of performance evaluation and monitoring to enhance the accountability of lower-level departments.
Two Unique Policy Implementation Challenges Facing China
China's provincial central pooling reform encounters two distinct challenges: insufficient consideration of health risks in fund allocation and the development of benefit standards in the face of uneven distribution of medical resources.
Inadequate Consideration of Health Risks in Fund Allocation
Elevating the level of risk pooling focuses on spreading structural risks associated with the health risks of the insured population.
However, China's prevailing risk adjustment strategy emphasizes management risks over actual health risks. Analysis reveals that provinces are paying considerable attention to expanding the scope of the medical insurance fund, improving revenue collection, managing expenditures, and controlling medical costs, directly linking these factors to the way funds are allocated.
Nonetheless, the lack of adequate consideration for the changing health risks of the insured population suggests that this risk adjustment approach may not facilitate a scientific and objective assessment of the financial risks of funds in various regions, nor does it ensure a fair distribution of resources at the provincial level.
Internationally, established methods and experiences are available for calculating and separating structural risks. Traditionally, risk estimations relied on factors like age, gender, and disability status. Recently, advanced techniques like regression analysis have been used to assess disease risks in specific regions and guide the allocation of funds to lower management levels based on these risk profiles.
It's important to highlight that China's unified medical insurance information system has established a strong data foundation for measuring and segregating structural risks, which should aid in their continued development and enhancement.
Uneven Distribution of Medical Resources
Unlike other countries, China encounters a significant challenge in raising the level of risk pooling due to the uneven distribution of medical resources, which are largely concentrated in major cities and lack an effective tiered diagnosis and treatment system.
In countries such as Germany, the initial step towards higher risk pooling involves standardizing benefit packages, which ensures that no benefit discrepancies exist among various sickness funds.
In areas with a well-balanced distribution of medical resources, the treatment outlined by policies corresponds to what insured individuals can realistically obtain. However, in regions where medical resources are unevenly distributed, uniform benefit policies can lead to substantial differences in the actual benefits received across different areas.
For instance, with a province-wide uniform reimbursement ratio policy, the actual reimbursement and treatment levels in resource-rich areas could be markedly higher than those in resource-poor areas.
This necessitates designing benefit levels that are in tune with the actual medical service conditions of various regions, including the scope of medical services available, medication accessibility, and price variations of services.
Consequently, in the context of China's considerable regional differences, achieving uniformity in benefits when raising medical insurance pooling remains a formidable challenge.
Ecosystem Implications
Enhancing Access to Medical Services and Technologies
Raising the level of medical insurance pooling boosts the fund's risk resilience and mutual aid capacity. This also promotes the standardization and integration of the medical insurance drug list, diagnostic and treatment items, and medical service standards, enhancing the fairness and accessibility of medical services.
Shen Yupeng analyzed provincial-level data from 2011 to 2018 to examine the effects of pooling levels on the operational efficiency of employee medical insurance, discovering that provincial-level pooling markedly enhances protection levels.
However, it is acknowledged that due to the uneven distribution of medical resources across China, the process of unifying medical insurance policies in different regions is inherently gradual.
For example, starting in 2015, Hainan advanced beyond city-level pooling to establish a provincial basic medical insurance adjustment fund model. It took an additional five years for the province to fully standardize the treatment policies of medical insurance throughout the region.
Advancing "InternetPlus" Healthcare
Since the National Healthcare Security Administration released the 'Guidance on Improving the Pricing of 'Internet Plus' Medical Services and Medical Insurance Payment Policies' in 2019, significant progress has been made. This policy successfully integrated internet medical services into medical insurance, covering everything from service pricing to reimbursements. By the end of 2023, China had 414 million users of internet medical services, a number that continues to grow.
However, while internet hospitals can treat patients nationwide, medical insurance coverage is typically region-specific, benefiting only local patients.
Raising the level of medical insurance pooling can reduce geographical barriers, allowing internet hospitals to serve insured patients across a broader region.
Fostering Opportunities for Supplemental Commercial Health Insurance
China's provincial central pooling reform faces significant challenges due to large regional disparities. Variations in dependency ratios and economic strength across regions lead to substantial differences in employee medical insurance revenues and expenditures, as well as the government's ability to cover funding shortfalls for urban and rural residents' medical insurance.
This situation creates an opportunity for supplemental commercial health insurance to bridge the gap left by basic medical insurance and reduce benefit disparities between urban and rural resident medical insurance and employee medical insurance.
For example, a supplemental commercial health product tailored for farmers could receive government subsidies to cover part of the premiums. This approach would not only increase rural enrollment rates but also significantly improve coverage for severe and critical illnesses.
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