Millions drop out of China’s state health insurance system

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China’s state health insurance system has lost tens of millions of subscribers, as higher costs have put one of the world’s largest healthcare schemes out of reach for many people already struggling in a post-pandemic economic downturn.

Enrolment across China’s state-subsidised health insurance system, which covers more than 1.3bn policyholders across multiple programmes, fell by an unprecedented 19mn people in 2022, according to official data.

Enrolment could fall further this year, officials and analysts have warned. Of the eight provinces that have reported enrolment data for the first nine months of 2023, seven showed a drop from a year earlier.

Government officials and healthcare analysts have attributed the jump in cancellations, which followed years of growth, to rising premiums and co-payments, limited coverage and declining household incomes, which have put the costs of health insurance beyond many Chinese residents, particularly farmers and migrant workers who lack access to better urban and private benefit schemes.

This has raised concerns for the recovery of the world’s second-largest economy, which has failed to revive consumer sentiment as it contends with a long-running property sector slowdown and weaker exports.

“A lack of social safety net, led by strong health insurance coverage, has forced Chinese people to save a significant portion of their income to prepare for external shocks like serious diseases,” said Dan Wang, chief economist at Hang Seng Bank China. “That has undermined government efforts to boost consumption, which holds the key to China’s recovery from the post-Covid economic downturn.”

China established one of the world’s largest state healthcare systems more than a decade ago. But in recent years, premiums have surged, far outpacing slow or even negative income growth, while local governments, lacking funds to contribute to insurance schemes, have passed rising healthcare costs on to policyholders.

The minimum premium for the main health insurance policy has more than doubled since 2018, compared with a 24 per cent increase in migrant workers’ average wages over the same period, according to the National Bureau of Statistics.

Rural policyholders also face more onerous co-payments — sometimes as high as 50-70 per cent — at big city hospitals, which boast better-trained staff and more sophisticated equipment needed to treat serious diseases.

This has led many to question the value of the coverage. Yuan Lixia, a 45-year-old migrant worker in the southern Hunan province, decided this year to withdraw from the main health insurance policy, which covered less than 40 per cent of a Rmb20,000 ($2,800) back surgery he underwent in March.

“The insurance hasn’t done much to ease my medical burden,” he said. “I might as well spend more money on high-quality food to stay healthy.”

Li Weihao, a 55-year-old former rural construction worker in the central Hubei province, stopped paying the Rmb380 annual premium this year after being unemployed for several months. “I need to make the best use of my limited savings,” said Li. “Health insurance is not my top priority.”

Despite authorities’ efforts to keep the scheme’s rolls from shrinking further, “it is getting harder and harder to persuade farmers to join the programme”, said a health official in Anhui, a rural central province that reported a 3 per cent decline in enrolment for the local scheme over the first ten months of this year, following a 4 per cent drop in 2022.

“A lot of people have chosen to become uninsured,” said Xu Yucai, a former health official in the north-western Shaanxi province.

Scholars including Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology, have called for Chinese authorities to invest to improve coverage.

“It is a perfect opportunity for the government to come in and help reduce those costs, which would . . . improve the health of the rural population and also give China some much-needed macroeconomic stimulus,” he said.

But most officials do not expect Beijing to act when policymakers are focused on reducing public health expenditure to weather the economic downturn. “We are under constant pressure to keep healthcare bills down,” said the Anhui health official. “We have to charge people more if the government doesn’t want to fill the funding gap.”

The rise in insurance cancellations could pose a “serious health risk” in under-developed areas, where the population tends to be older, a person close to the finance ministry warned.

The person added that rural and migrant families had in some cases stopped paying for coverage for their teenage children, whom they hoped were healthy enough to forgo regular care.

“For the time being, these parents just want to save money,” the person said. But the onset of a serious disease “could cost a fortune to treat, which could bankrupt a family”.