China has released its first special regulation on medical insurance supervision. It covers the timely settlement of medical bills and the prompt allocation of insurance funds. In light of the growing demand for COVID-19 vaccination, the Chinese government has set out its plans to meet the medical needs of its population.

Have a look at our previous article on Vaccination Information for Foreigners in China

The new regulation that took effect on May 1, 2021, applies to medical insurance funds including the basic medical insurance fund, maternity insurance fund, medical assistance fund, and more. It also stipulates the rights and responsibilities of medical insurance authorities, designated medical institutions, fixed-point pharmaceutical institutions, insured persons, and other individuals and institutions involved in the medical security or insurance market. Read below to find out more!

New medical insurance regulation

Designated specifically to serve the public’s medical needs and provide lifesaving money, the usage of medical insurance funds is monitored more closely now with the effectiveness of regulations that discourage cheating, dole out stiff punishment for fraud, and safeguard the security of insurance funds. This regulation has clarified the legal responsibilities of all parties involved in the use of insurance funds and strengthened penalties for violators and their illegal actions.

Penalty for committing insurance fraud

Fraudulent medical institutions and pharmacies may be fined two to five times the amount of the money involved in the fraud and their respective license/s to practice may be revoked or suspended. Heads of institutions involved in fraud may be barred from the industry for up to five years once found guilty of committing illegal acts that result in negative societal impact or which result in considerable fund losses. Individuals (the insured or otherwise) guilty of defrauding the funds will be dealt with in the same way as institutions and may face settlement of their insurance claims to be suspended for 3 to 12 months.

The State Council throughout the country and other relevant departments within their respective areas of responsibility shall be in charge of enacting these regulations. The administrative department of medical security of the local government at or above the county level is in charge of its respective administrative region.

Significance of the new regulation on medical insurance

This first special regulation aims to secure medical funds that protect the rights of the public as well as foster the healthy development of the medical insurance system. In some areas, fraudulent activities pose a great threat, thus, undermining the Chinese government’s effective oversight and management of its social insurance system.

Have you read? Social Insurance Refund: A Takeaway Before Leaving China

In 2020, there were 815,000 medical institutions and pharmacies inspected in China, and more than half of those were found to have (in varying intensities) engaged in improper or illegal usage of insurance funds which is a low level of fraud. The government in those instances was able to recover RMB 22.3 billion or USD 3.4 billion.

More than 500 million residents (40 percent of the country’s insured population) of mainland China hold e-certificates for China’s basic medical insurance scheme. In total, more than 95 percent of Chinese were covered by China’s national basic health insurance programs in 2019.

  • 60 percent of hospitalizations were reimbursed;
  • 2 billion Chinese were planned to be covered for urban and rural residents;
  • RMB 44 trillion (about USD 346.13 billion) gained in revenues, which comprised 2.5 percent of China’s GDP in 2019; and
  • More than 100,000 designated medical institutions and 220,000 retail pharmacies in 208 cities in China.

The total amount from the medical insurance fund rose by 12.2 percent in 2019, which is about RMB 2.09 trillion. With this continuous rise in the amount, liability and accountability of the manner of spending must then be ensured by the local and national authorities in China.

Legal rights and responsibilities of relevant sectors

Medical insurance fund agencies

Medical insurance agencies are responsible to establish and improve systems of business, finance, security, and risk management. They are also accountable to regularly disclose the income, expenditure, and balance of medical security funds and accept social supervision to the public. They shall also:

  • Establish collective bargaining and consultation mechanisms with designated pharmaceutical institutions;
  • Reasonably determine the budget amount and time limit for the allocation of medical insurance funds of designated medical institutions;
  • Negotiate and sign service agreements with designated medical institutions;
  • Standardize the conduct of medical services;
  • Clarify the violations of service agreements and their responsibilities, in accordance with the needs of safeguarding public health needs and managing services;
  • Promptly publish to the community the list of designated medical institutions that have signed service agreements; and
  • Must timely settle and allocate the medical insurance fund.

The medical insurance agency may punish or sanction a designated medical institution that violates the service agreement and force medical institutions to fulfill the service agreement. Agencies may also suspend or fail to allocate the payment, recover the illegal expenses, suspend the medical services used by the relevant responsible personnel or the department involved in the medical insurance fund (until the service agreement is lifted).

Medical institutions

The medical institution where the insured persons go to for their medical attention needs, upon violation of the service agreement by a medical insurance agency, shall have the right to:

  • Demand corrective measures;
  • Request the administrative department of the medical insurance to coordinate the handling, supervision, and rectification;
  • Appeal for reconsideration of administrative decision; or
  • Initiate administrative proceedings in accordance with the law.

The (designated) medical institutions shall have responsibilities such as establishing an “internal management system” for the use of medical security funds. The specialized agencies or personnel shall be responsible for the management of the use of medical security funds and establish and improve the system of assessment and evaluation.

The specialized agencies or personnel shall also have the following responsibilities:
  • Organize training on the relevant systems and policies of the medical security fund;
  • Regularly check the use of the medical insurance fund of the unit;
  • Promptly correct the irregular use of the fund; and
  • Ensure that the expenses paid by the insurance fund meet the prescribed scope of payment.

The provision of medical services outside the scope of payment of the insurance fund shall be subject to the consent of the insured person, or next of kin or guardian (except in special circumstances such as emergency and rescue).

Fixed-point pharmacies

Fixed-point pharmaceutical institutions where the insured persons buy their medicines and other needs shall provide medical services, improve the quality of services, make rational use of medical security funds, and safeguard the health rights and interests of citizens. They are also mandated to:

  • Keep financial accounts, accounting vouchers, prescriptions, medical records, treatment examination records, cost details, medical supplies access records and other information;
  • Transmit the relevant data on the use of medical insurance funds in a timely manner through the medical insurance information system;
  • Report to the medical security administrative department the information required for the use and supervision of the funds;
  • Disclose to the public information on medical expenses, cost structures, etc.;
  • Accept social supervision; and
  • Not facilitate the resale of medicines by insured persons by taking advantage of their opportunity to enjoy medical insurance treatment, accept the return of cash (or kind), or obtain other illegal benefits.

The insured persons

As for the insured persons, the special medical insurance regulation stipulates that they should:

  • Seek medical treatment and purchase medicines with their own medical security certificates;
  • Take the initiative to present them for examination;
  • Have the right to request the designated medical institution to truthfully issue the expense documents and related information;
  • Keep the medical security certificate properly and prevent the use of it under the guise of others;
  • Provide the identity of the principal (insured) and the trustee if, for special reasons, it is necessary to entrust another person to purchase the medicine on his behalf;
  • Enjoy medical security treatment in accordance with the provisions and shall not enjoy it repeatedly;
  • Have the right to request the medical insurance agency to provide medical security consulting services and to make suggestions for improvement in the use of the medical insurance fund; and
  • Not use their opportunity to enjoy medical insurance treatment to resell drugs, accept the return of cash (in-kind), or obtain other illegal benefits.

Conclusion

The medical insurance fund seeks to improve the quality of life of the public by making sure medical needs are attended to. To discourage cheating, fraud, and illegal usage of the funds, the Chinese government stepped up to improve its management and supervision of the social insurance system. Insurance agencies, medical institutions, pharmacies, and insured persons all have rights, duties, and responsibilities to be mindful of in terms of the insurance funds. The promulgation of the regulation only seeks to better the quality and ensure that the medical insurance industry is always at its best performance.

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S.J. Grand provides advisory on China’s social insurance system and related income tax regulations for foreign-invested enterprises and foreign individual workers. Contact us to get you started.

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