Addressing vulnerability in an emerging economy: China's New Cooperative Medical Scheme (NCMS)

Abstract

China's New Cooperative Medical Scheme (NCMS) is the successor of the national scheme that existed through the 1970s. Developed in response to the decline in health care services following the 1978 economic reforms, NCMS was launched in the mid-2000s. Coverage is now nearly universal, through voluntary enrolment. The implementation framework allows local governments to make adjustments for regional peculiarities. NCMS is seen as a response to poverty as well as health care disparities, with a focus on covering expenditure incurred due to shocks. Evaluations of the pilot phase highlighted lack of funding and low levels of reimbursement, inadequate management and poor access, which limit effectiveness particularly for the poorest. This article reviews recent studies to assess the extent to which these challenges are being overcome.

Résumé Le nouveau système de santé coopératif en Chine (NCMS) remplace le système national qui existait aux années 1970. Développé pour répondre au déclin de services de santé suivant les réformes économiques de 1978, NCMS a été lancé au milieu des années 2000. La couverture est presque universelle maintenant grâce à l'inscription volontaire. Le cadre d'implémentation permet aux gouvernements locaux des rajustements pour des particularités régionales. NCMS est vu comme une réponse à la pauvreté ainsi qu'aux disparités des services de santé, avec l'accent mis sur la récupération des dépenses encourue à cause des chocs. Les évaluations de la phase pilote ont montré un manque de financement, des faibles niveaux de remboursement, une gestion inadéquate et un accès insuffisant qui limitent tous l'efficacité, particulièrement pour les plus pauvres. Cette article révise des études récentes pour évaluer comment on surmonte actuellement ces épreuves.

Keywords:

• social protection
• China
• New Cooperative Medical Scheme (NCMS)
• health care
• Millennium Development Goals

Notes

The term ‘emerging markets’ was coined in 1981 by International Finance Corporation (IFC) fund manager Antoine van Agtmael, focusing on a new breed of world-class-companies (van Agtmael 2007); the transitions in public policies in these markets have become increasingly important in shaping global (social) policy.

http://www.thelancet.com/series/health-system-reform-in-china; Han et al. (2008).

This paper was prepared as background note for the 2010 European report on development, using the framework developed there on articulating lessons for success (EUI 2010); see also Giovannetti et al. in this issue.

Liu and Rao (2006) describe the research during the 1990s that did not have an impact on policy, and the reversal after that, including through the Asian Development Bank study they were involved in. Bloom et al. (2003) describe the health care challenges as they existed in Chinese cities around 2000.

A broad listing of China's social security policies is found in a white paper, “China's Social Security and Its Policy,” published in September 2004 in English by IOSCPRC (Information Office of the State Council of the People's Republic of China); see www.china.org.cn/e-white/20040907/index.htm.

Wagstaff et al. (2007); see Zhang et al. (2010c) for a description of these practices in various sectors.

Yuan and Jiang (2009). Yip and Hsiao (2009b) argued that the reforms fail to address the inefficiencies and the incentives to over-provide expensive tests.

MoH (2010a).

MoH (2010a).

MoH (2010a).

MoH (2010a). Payment on pooling reimbursement for outpatient costs is about 12.18 billion RMB, 13.2 per cent of the annual expenditure, and 1.19 billion RMB (1.3%) for catastrophic outpatients; both increased about 50 per cent over the 2008 levels.

An additional political incentive for the health sector reforms and NCMS is the government's goal of stimulating domestic consumption in order to bolster the national economy, and reducing dependence on exports to foreign countries, especially given the global financial crisis (Meng 2009). This is based on the understanding that many households in China have high savings rates, among the highest in the world (Sun et al. 2010). Fear of medical impoverishment is one of the top three reasons given for high savings rates, so increased coverage by medical insurance schemes like NCMS would increase the amount of disposable income, and thus increase domestic consumption (Wen 2009).

Reimbursement rates for catastrophic expenses were lower than non-catastrophic expenses (Zhang et al. 2010a).

MoH (2010a).

MoH (2010b, National Development Report of Health Service, http://www.moh.gov.cn/publicfiles/business/htmlfiles/mohwsbwstjxxzx/s7967/201104/51512.htm).

MoH (2010a); the subsequent data in this paragraph are from same source.

The government has also stated its intention to increase the annual reimbursement ceiling from 3 to 4 times the average wage, to 6 times, and to increase the hospitalisation expense reimbursement rate under NCMS from 38 to 50 per cent (ISSA 2009). Medical assistance programme subsidies also increased by 58.7 per cent from 2008 to 2009 (ISSA 2009).

Dumoulin-Smith (2010); Article 45 of the Chinese Constitution legally requires the state to provide social health insurance.

Wubao, tekun, and dibao programmes are three major social assistance programmes operating in rural China. Wubao (the five-guarantee programme) is a product of the collectivization period, and provides income support and services to rural old people and orphans without family caregivers or sources of income. Recipients can be cared for either separately in villages or collectively in the homes for the aged, depending on the physical condition of the elderly or the availability of beds in the homes (in 2010, there were 31,286 homes with 2.09 million beds and 1.73 million elderly residents). Dibao, the minimum living guarantee system, is co-financed by central and local governments, and provides cash assistance for households with per-capita incomes falling below the poverty line or assistance threshold, which is locally determined. The rural scheme was piloted in the mid-1990s in a few economically developed provinces, halted in the early 2000s due to economic constraints and resumed in 2007. In 2010, the rural dibao programme covered 52 million rural residents in 25 million households, accounting for 5.5 per cent of the agricultural population and providing an average cash allowance of 64 RMB yuan per person per month. Tekun (assistance for extremely poor households) provides temporary relief to households impoverished by major illness or loss of family labour, and exists because only the regions that were developing rapidly economically were able to afford the dibao schemes. The State Council and the Ministry of Civil Affairs (MoCA issued new policy guidelines in 2003, cautioning local governments not to rush into the dibao programme. In particular, dibao schemes were encouraged in places where local economic conditions would allow it, whereas in economically constrained localities the central government advised the adoption of the tekun schemes.

The three pillars refer to the three major medical insurance programmes – UEBMI, URBMI and NCMS. The one crutch is the medical assistance programme in China.

Calculated from data in Statistical yearbook of Ministry of Civil Affairs, 2010. China Statistics Press.

Calculated from data in Statistical yearbook of Ministry of Civil Affairs, 2010. China Statistics Press.

Wagstaff et al. (2007). The authors emphasised that there might be heterogeneity across income groups and implementing counties. Moreover the authors warned against generalising for China as a whole, as neither counties nor beneficiaries formed a random sample.

You and Kobayashi (2009), Wagstaff et al. (2007). Given the increased deductibles at higher administrative levels of the health care system, patients are less likely to seek medical help there. High minimum spending levels and low maximum benefits in some counties have meant the incidence of care seeking in NCMS-approved hospitals in these counties is low (Brown and Theoharides 2009). A frequent observation was that the budget was too small, and copayments too high due to low ceilings and high deductibles, meaning that the reduction of health payment-induced poverty is minimal (Sun et al. 2010).

MoCA (2010), Statistical yearbook of Ministry of Civil Affairs. Bejing: China Statistics Press.