Medical insurance reform - a challenging mission#China Newsweek#-Sino-US

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Medical insurance reform - a challenging mission

The country's reform of the healthcare sector has attracted much attention in recent years, since it is related to the interests of millions of people, public hospitals and medical institutions.

As an important change in this year’s institutional reform, a national medical security administration has been established under the State Council, or China’s cabinet.

One of the tasks of the new administration is to reform the spending of the medical insurance fund because of the chaotic situation, such as mishandling of funds and fake claims.

In the 25th issue of 2018, the China Newsweek magazine ran a cover story on the reform and measures that the country has taken to reduce the spending from the medical insurance fund.

Below is an excerpt of the article.

There are a number of media reports about cases that might have caused the shortage of money in the medical insurance fund.

In 2016, the Second Xiangya Hospital of Central South University refused to receive patients using medical insurance, saying that people could only get out-patient service by using the medical insurance of Changsha, Hunan province, and they could not get in-hospital service.

This is because Changsha has delayed the medical insurance payment to the hospital for a long time.

By the end of last year, hospitals in some places stopped using materials for treatment. Two public hospitals in Guizhou province stopped using materials for treatment, which impacted the regular treatment.

Such practices aroused public concern on the possibility of the shortage in the medial insurance fund, and the downgrade of the medial treatment because of a lack of treatment materials.

In fact, the reason is that the hospitals took such measures as a last resort to control the medical insurance spending in the hospital to meet the annual assessment from health authorities.

China completed a comprehensive medical insurance system to cover the whole population by 2007, forming the medical insurance system for urban employees, medical insurance for urban residents and new rural cooperative medical insurance.

Following the establishment of the medical insurance system covering the whole population, the medical insurance spending saw an explosive growth.

According to the statistics from Liu Junqiang, a professor from Sun Yat-sen University, and Liu Kai, associate professor from the Renmin University of China, the country’s total healthcare spending stood at 1 trillion yuan in 28 years from 1978, but the next 1 trillion yuan was spent in only four years, and the third 1 trillion yuan in less than 3 years.

In the 35 years from 1978 to 2013, the healthcare spending increased at 17.6 percent annually, much higher than the country’s economic growth rate and increase in people’s income.

Based on this trend, the total healthcare spending will reach 10 trillion yuan by 2020, 50 trillion yuan by 2030 and 252 trillion yuan by 2040. Meanwhile, the medical insurance spending covered 60 percent of the total healthcare spending.

According to their calculation, the three medical insurance funds are in a healthy financial situation, but 10 years later, their finances will become imbalanced, and all three will face deficits by 2027.

An official who declined to be named from the new national medical security administration said that the medical insurance fund has sufficient funds, and it will first secure the beneficiaries’ interests and exercise spending control.

So, even though there are enough funds, it still needs to be controlled, and the current problem is the serious waste of medical resources, the official said.

According to the official, the control is targeted at the waste of medical resources, and the long-term goal is to avoid the deficit. Authorities are looking at the payment patterns to exercise the control.

Total prepaid system

In the past, the medical insurance fund paid the hospitals according to medical items. Put simply, the medical insurance fund would pay hospitals based on medical examinations, medicines or surgeries a patient received.

Under this payment system, hospitals got the money from medical insurance after offering medical services and the insurance became a major income source for public hospitals, accounting for 60 percent of their income.

Duan Tao, former president of the Shanghai First Maternity and Infant Hospital, said that top specialty hospitals in Beijing and Shanghai relied less on medical insurance because they had more self-paid patients, but public hospitals in small cities heavily relied on medical insurance.

There was a limit on the spending in the past, but the medical insurance would still cover the excess part, said Lin Quan, director of the medical insurance office at the Shengli Oilfield Central Hospital in Dongying, Shandong province.

Wang Daguang, a doctor from a public hospital in Beijing, said that because the medical insurance offers a higher rate for in-hospital services than out-patient services, some hospitals cooperated with patients on this to get more money.

Duan said that if similar cases were found again, authorities would cap the medical insurance spending in a hospital.

In 2011 and 2012, the central authorities have issued two documents on the reform of the payment system. According to the documents, many places across the country have started to push forward the “total prepaid system.”

According to the prepaid system, the medical insurance will be offered to hospitals based on certain distribution standards, and the money will be prepaid every month.

If the actual spending is lower than the pre-determined amount, the balance can be kept by the hospitals, and the excess part will be shared by hospitals and the medical insurance fund. The budget for the following year will be based on the actual spending of the previous year.

Zhu Hengpeng, a researcher from the Chinese Academy of Social Sciences, said that under this system, hospitals would like to spend more, which means the hospitals can get more money the next year.

But due to excessive spending, hospitals have to share the burden which then forces them to reduce the doctors’ bonuses, Zhu said.

To some extent, the prepaid system has solved the deficit risk, but it has little impact on the allocation of medical resources due to bad management of hospitals. Doctors might make different choices to meet the spending standards, avoiding a reduction in their income, which can harm the patient’s interests.

Some doctors said that the new prepaid system has created the “evil side.” Zhu said the problem has occurred because the new method is too simple and hospitals have poor management.

The hospital’s management did not improve due to the new demand, said Zhu, and not only the management of medical insurance should be improved, but also that of presidents and directors of the hospitals.

Other pilots

Under the prepaid system, hospitals would calculate the medical insurance spending on items that have been priced by the pricing departments. Zhu pointed out that the prepaid system in effect amounts to advance payments on items but with a cap.

To change the simple management method, authorities have taken some steps, such as payment based on the number of patients and serious diseases. Different payment methods have been tried in different places.

Guangdong province first carried out the payment method based on the scores of a single disease. The payment would be decided on the average of medical cost in past three years, and would also consider experts’ opinions and other factors.

But doctors might choose a higher scale for a patient’s disease for higher medical insurance spending, said Fang Min, a doctor in Guangdong.

The Shengli Oilfield Central Hospital is the first in Shandong province to carry out the payment method based on the scale of diseases. Li Quan said that the system will help prevent deficit, but the method did not take the age and medical complications into consideration.

This method caused losses in large hospitals because they received patients in more serious condition, and the small hospitals would win because they receive patients with less serious illnesses, Lin said.

“In the past, the hospitals worked more for getting more investment from the government, which is a profit-centered development mode, and in the future, following the medical reform, hospitals will change to cost-centered development when the waste of medical insurance spending will be controlled,” Duan Tao said.

Duan said that the new medical insurance administration has to utilize the clinic data from hospitals comprehensively, systematically, accurately and timely in managing the medical insurance spending, otherwise it would be futile.

But the data from hospitals is hard to collect accurately, such as the same surgery is done in different hospitals under different names, Duan said, and it will take time to carry out this task.

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