medical insurance

Health care in China has been largely segmented between urban and rural populations. Among the urban population, for over four decades since the early 1950s, there were two major programmes: the Labour Insurance Programme (LIP) and the Government Insurance Programme (GIP). LIP was an employer-based programme, primarily for urban employees and retirees, covering around one-third of the urban residents or 10 per cent of the total population. GIP was a government-financed programme mainly for people working in public sectors, including about 2 per cent of the total population. Along with China’s market-oriented economic reform, both GIP and LIP were critically challenged by some fundamental problems: low coverage, poor risk pooling and the lack of accountability for economic efficiency. This led to a fundamental reform of the old system beginning in 1996 with a community-based insurance programme, mandating the participation of all community-wide employers and employees with their joint premium contributions through the Individual Savings Accounts and Social Pooling Account.

In 2002, most of the large cities have started to implement the new programme, currently covering about 80 million employees.

In contrast, rural residents, accounting for over 70 per cent of the total population, have never been eligible for the publicly financed insurance programmes. The rural population must either pay out of pocket for health care, or join the so-called ‘cooperative medical plans’ (CMP) operated with the voluntary contributions of the local residents at the village or township level. CMPs were once popular back in the 1960s and 1970s, covering the majority of the rural population, but mostly collapsed in the early 1980s when the rural collective economy was replaced by the individual household responsibility system. Currently, it is estimated that CMPs cover no more than 10 per cent of the rural population. Given the current Chinese economy and population size, it is unlikely that the uninsured status of the rural population would change with public financing in a foreseen period. Looking ahead, the significant urban-rural differential in health insurance seems to be one of the most challenging issues facing Chinese policy-makers in the twenty-first century.

GORDON LIU