Evolution of New Cooperative Medical Scheme and Its Impacts on

Farmers in Rural China

Hongmei Yi Center for Chinese Agricultural Policy, Chinese Academy of Sciences

Nov. 10, 2013, New Delhi, India

Motivation

• Health is an important factor in the process of economic development … It can affect:

– Economic growth (Schultz and Tansel, 1993; Fogel, 1994; Schultz et al., 1997;

Bloom et al., 2001;…)

– Supply of Labor (Mitchell and Burkhauser, 1990; Fan Ming, 2002;… )

– Productivity (Mirrlees, 1975; Stiglitz, 1976;Thomas and Strauss, 1997;…)

– Income (Schultz and Tansel, 1997; Lindelow and Wagstaff, 2005; Wei Zhong, 2004; Liu et al., 2004;…)

– Poverty Reduction (Jalan and Ravallion, 1999; Smith, 1999; Wu, 2003;…)

BUT, in some places in rural China … in recent past it has been documented that: use of medical services in rural areas has declined

Data sources: (1) http://health.sohu.com/s2004/nongminkanbing.shtml；

(2) China Health Statistical Yearbook 2006。

In 2003, 46% of farmers did not seek medical service although they needed, (when asked why not … 50% said: “because of we are too poor”)

In western China, 60% to 80% of farmers died at home … in part because they could not afford the expenditure for health care.

Why did the use of medical services decline？[There are a number of possible reasons, but most of studies suggested that one of major reasons] Decreased coverage of Cooperative Medical Scheme

Data sources: (1) World Bank, “Rural Health in China: Briefing Note No. 6” ;

(2) China Health Statistical Yearbook 2006。

Although China made an unprecedented success in economic development since 1980s, the coverage of medical insurance declined dramatically (may be negatively affecting development in the future).

Government’s response:

• New Cooperative Medical System （ NCMS）

• First pilot program in 2003

• Main goals：– Cover all rural population by 2010– Provide financial protection for the famers who suffered

from catastrophic medical payment

Certification of NCMS enrollment

What is NCMS?• it is a heavily subsidized health insurance program for

rural population in China

• It is run at county-based

• It focuses on the protection of catastrophic medical payments

• Enrollment is on a voluntary basis

Data source: Ministry of Heath, Ministry of Finance and Ministry of Agriculture. Proposals on Establishing New Cooperative Medical System, January 10, 2003

By now, NCMS has experienced three stages in the past decade

数据来源：（ 1）新型农村合作医疗试点工作评估组 .发展中的新型农村合作医疗 . 北京 : 人民卫生出版社 . 2006,12.

（ 2）卫生部统计信息中心 . 2005-2008年中国卫生事业发展情况统计公报 , http://www.moh.gov.cn/12.htm ;

(3) 卫生部， 2008年我国卫生改革与发展情况。 http://www.moh.gov.cn/publicfiles/business/htmlfiles/mohbgt/s6690/200902/39109.htm 。

95% of counties

Year Covered counties

Enrollment （ 100 million）

Enrollment rate （ %）

2003 304 0.43 74.0

2004 333 0.80 75.2

2005 678 1.79 75.7

2006 1451 4.10 80.7

2007 2451 7.26 86.2

2008 2729 8.15 91.5

2009 2716 8.33 94.0

2010 2678 8.36 96.0

2011 2637 8.32 97.5

By now

First Stage ： Pilot

Second Stage ： Expansion

Third stage ：Improvement of policy design

So how effective has NCMS been in meeting the government’s goals?

We did a nationally representative follow-up survey2005/2008/2012 China Public Investment Survey … 25 NCMS county offices…100 sample villages … 2000 households …8000 individuals…

JilinHebei

Jiangsu

Shanxi

Sichuan

5 Provinces

25 counties

50 townships

100 villages

2000 households

≈ 86% of the households are true panel households … observations for 3 yrs

National-representative in economy and geography

Funding: Per capital funding level increased over time, and the vast majority of additional funding

originated from government. CNY

In 2004, per capita funding level is 35 yuan. Of which, the government funded 54% (19yuan) of this amount. With the advancement of NCMS, 85% of per capita funding came from governments in 2011.

Benefit Package: Nearly 80% of funding were used for reimbursement

for inpatient services

Characteristics of Reimbursement Policy for Inpatient Services

• the higher the level of health facilities, the greater deductibles are.

• the nominal reimbursement rate is lower in higher-level health facilities

• the nominal reimbursement rate rises with medical expenditures.

• The reimbursement policy becomes more generous over time. In 2011, the nominal reimbursement rate for inpatient services is 80% at THC, 70% at county hospital, and 30% at provincial hospitals

Coverage of NCMS

% of NCMS-covered villages

In 2004, 24% of villages had NCMS, but since 2007, NCMS has expanded to all villages. This is truly remarkable progress

100%100%

Enrollment in NCMS% of rural residents’ Enrollment in NCMS-Covered areas

Meanwhile, The enrollment rate also rose over time and enrollment rate among female are significantly higher than male. If our survey in 2008/2012 is truly representative, this implies that more than 90% of China’s 900 million farmers (or > 800 million people) now have some form of health insurance. This supports the government report

of nearly universal population coverage.

Although the real reimbursement rate is much lower than the nominal reimbursement rate, it

has increased over time.

Real reimbursement rate of annual medical expenditure , inpatients

With the rise of real reimbursement rate, NCMS significantly reduce the incidence of

Catastrophic Medical Payment in 2007 and 2011

But at the same time, because medical expenditure increased rapidly in the past decade

Annual medical expenditure, Inpatients

Even after reimbursement from NCMS, the OOP of inpatients is still much higher than the local per capital

rural net income in 2011

Although the rise of medical expenditure may be a result of the release of unmet demand , it is more likely to be induced by inappropriate incentive to health care providers.

This a world-wide difficult situation to control the cost of medical care, China government has been trying to deal with this problem in the most recent reforms.

Provider payment reformFFS>>DRG and other quota payments

• 2007: only two sample counties piloted Diagnosis related group payment (DRG)

• 2011: half of sample counties piloted DRG 4

76

0

20

40

60

80

100

2007 2011

%

% of counties who started Provider Payment Reform (Any of DRG, capitation, global budget, etc.)

National Essential Medicine Scheme• Four key components of NEMS– National Essential Drugs list; Zero-mark-up policy; Public

procurement ; Reimbursement for drugs on the list

• Two goals:– improve medicine availability, affordability and safety– cut the profit link between health care providers and

medicineBy this policy, grassroots health care providers can only sell drugs on the NEDL with zero profit. The loss of medicine sale will be subsidized by governments.

In our sample, all THCs already has been covered by this program by the end of 2011. And the reform among village clinics is ongoing.

Thank you!