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Creating a "socialist harmonious society in the countryside": Towards universal health insurance in rural China

In 2003, the government launched a New Rural Cooperative Medical Insurance (NRCMI) with an ambitious objective of covering all rural residents by 2010. The new health insurance system is seen as a central pillar of the government's plan to improve the working and living conditions of the country's huge agricultural workforce and eliminate poverty in the countryside. Will it be feasible?

Article | 30 January 2007

BEIJING (ILO Online) - In rural areas of China, only around 20 per cent of the rural population had insurance cover before the launch of the New Rural Cooperative Medical Insurance (NRCMI), because the old Rural Cooperative Medical Insurance eventually collapsed following the disappearance of the rural collective system in the early 1980s.

"In recent years we have seen an increase in the number of farmers impoverished because of illness. Studies have shown that illness is a major cause why people fall into poverty. This is a big social problem", says Ms. Aidi Hu, social security specialist for Asia in the ILO's Social Security Department in Geneva, in a recent ILO publication.

To reverse this trend, the Chinese government has started the NRCMI on a pilot basis in 2003. Since then, the NRCMI has been expanding rapidly: from 179 million rural dwellers insured by the end of 2005 to 406 million only nine months later, covering more than 45 per cent of the rural population, according to a report published by the Chinese Ministry of Health on 11 January 2007.

The rapid expansion of the new system is attributed, partially, to the direct and increasing financial support from the government. For instance, of the total annual revenue amounting to 16.4 billion yuan ($ 2.1 billion) that the NRCMI generated in 2006, about 10.9 billion ($ 1.4 billion) or 66.5 per cent was contributed, in one way or another, by the government. In an address to the National People's Congress - China's legislature - Prime Minister Wen Jiabao recently announced a doubling of the state's contribution to the NRCMI.

What's more, more health funds will be channelled into the rural areas during 2006-2010 in line with the 11th National Development Plan. This month, the Chinese Minister of Health, Gao Qiang, announced at a conference in Beijing that a total of 30 billion yuan ($ 3.8 billion) would be invested in the rural health infrastructure and another 26.9 billion ($ 3.4 billion) in the National Disease Prevention and Control System.

At the same time, China is heading for improvements in public health services, state-regulated basic pharmaceutical supply and public hospitals, which, together with the above-mentioned measures, will create a more favourable environment for a sustainable development of the NRCMI throughout the country.

In order to assist in achieving the strategic goal of basic health care for all, the NRCMI remains one of three priority tasks for the Ministry of Health in 2007 with its own work plan: to be set up in all rural counties by 2008 and to cover all rural inhabitants by 2010.

According to Hu, the NRCMI has some fundamental merits. "The funds are strictly managed and supervised. After three years of trial running, the basic result is rather good. And the problems are generally 'operational' rather than 'fundamental'", she says, adding that "the scheme is welcomed by most farmers, and has benefited them, though the level of benefit should still be improved".

Daunting challenges ahead

Of course, there are challenges as well. "For example, some farmers do not understand the concept of risk. If they bought the insurance for one year, but did not get sick that year, they would feel they had spent 10 yuan ($ 1.3) for nothing and would be reluctant to join the insurance next year", explains Hu.

Due to the narrow scope of reimbursable services, hospitals and medicines, the actual reimbursement rate for catastrophic illness and in-patient treatment related costs is only around 20 per cent on an average. This implies that the insured have to pay the remaining 80 per cent of the total cost of their medical treatment.

"Given this prospect, some of the insured may be reluctant to seek timely treatment, or may not even seek it at all if they are too poor to pay their own share. As a result, some of those who have received treatment may be pushed below the poverty line", explains Hu.

The inadequate level of benefit is, of course, rooted in the low level of the financial capacity of the new system in general. Considerable portions of China's rural areas are still quite underdeveloped. The local governments of those areas have very limited financial ability to appropriate more funds for local healthcare.

According to Hu, there is large room for the improvement of the NRCMI at this early stage while a wide range of conceptual and managerial issues still need to be addressed.

"Clearly, some of them, for instance, the health insurance for rural migrant workers, are beyond the capacity of the NRCMI. They demand a high level of coordination and strong leadership. Nevertheless, the NRCMI is the first concrete step towards an universal access to basic health care for all", she concludes.


Note 1 - Aidi Hu, China: Towards universal coverage by the New Rural Cooperative Medical Insurance, from the publication: Social protection and inclusion: Experiences and policy issues, International Labour Office, Geneva, 2006, ISBN: 978-92-2-119196-4.