Evolution of New Cooperative Medical Scheme and Its Impacts on Farmers in Rural China

1. 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

2. 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;…)

3. BUT, in some places in rural China … in recent past it has been documented that: use of medical services in rural areas has declined 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. Data sources: (1) http://health.sohu.com/s2004/nongminkanbing.shtml； (2) China Health Statistical Yearbook 2006。

4. Whydid 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 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). Data sources: (1) World Bank, “Rural Health in China: Briefing Note No. 6” ; (2) China Health Statistical Yearbook 2006。

5. 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

6. 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

7. By now, NCMS has experienced three stages in the past decade First Stage：Pilot 95% of counties Second Stage：Expansion Third stage：Improvement of policy design 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。

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

9. We did a nationally representative follow-up survey 2005/2008/2012China Public Investment Survey … 25 NCMS county offices…100 sample villages … 2000 households …8000 individuals… Jilin Hebei Shanxi Sichuan Jiangsu 5 Provinces 25 counties 50 townships 100 villages 2000 households National-representative in economy and geography ≈ 86% of the households are true panel households … observations for 3 yrs Data Source: CCAP.

10. 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.

11. Benefit Package: Nearly 80% of funding were used for reimbursement for inpatient services

12. 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

13. Coverage of NCMS % of NCMS-covered villages 100% 100% In 2004, 24% of villages had NCMS, but since 2007, NCMS has expanded to all villages. This is truly remarkable progress

14. 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.

15. 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

16. With the rise of real reimbursement rate, NCMS significantly reduce the incidence of Catastrophic Medical Payment in 2007 and 2011

17. But at the same time, because medical expenditure increased rapidly in the past decade Annual medical expenditure, Inpatients

18. Even after reimbursement from NCMS, the OOP of inpatients is still much higher than the local per capital rural net income in 2011

19. 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.

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

21. 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 medicine By 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.

22. Thank you!