Sealand: A Medium-term View of Healthcare Costs in China - Quantitative Analysis of the Sources and Uses of Health Insurance Funds

Sealand released a research report stating that, according to calculations, around 50% of medical institution's medical revenue in 2020-2021 came from medical insurance funds. The rules for medical insurance fund expenditures can greatly affect the behavior of patients, doctors, and hospitals. As an important party in the payment of medical expenses, the medical insurance bureau influences the price system of drugs, consumables, equipment, and medical services through various methods such as quantity procurement, price negotiation, and price monitoring. Therefore, understanding the rules of medical insurance operation helps clarify the development logic of the pharmaceutical industry. Sealand's main points are as follows: Demonstrates the operational logic of medical insurance funds from the meso and micro levels This report quantitatively breaks down the financing and payment of medical insurance funds, using data from multiple sources such as statistics from the medical insurance bureau, the Health and Health Statistical Yearbook, and industry statistics, focusing on the relatively well-documented data of 2022, to show the position of medical insurance funds in the total health expenses and medical institution revenue nationwide. Additionally, the report systematically outlines the specific ways of collecting and paying medical insurance funds, using the medical insurance rules of Bengbu City, Anhui Province as an example to demonstrate the richness of medical insurance rules. The shortcomings are driving factors for policy reform The data released by the National Medical Insurance Bureau is national aggregate data, with most regions having municipal-level pooling of medical insurance funds, with separate accounts for urban and rural residents' medical insurance and employee medical insurance in each city. When a certain city's medical insurance account faces significant pressures, it may carry out internal policy reforms or seek financial support from higher levels. For example, Sanming, Fujian began promoting medical reforms in 2012 primarily due to losses in local medical insurance funds. The reform strategy involves simultaneously controlling costs and improving efficiency By promoting centralized procurement of drugs and consumables as well as implementing a "two-ticket system," the cost of raw materials is reduced. By raising medical service prices and reforming payment methods (inpatient DRG/DIP and outpatient per capita payment), the efficiency of medical institutions is improved. The pricing of medical services, reform of the compensation system, and government subsidies collectively determine the results of cost control and efficiency improvement The efficiency of medical institutions is derived from the enthusiasm of doctors, which is determined by their incentive mechanism (i.e. compensation system). Public hospitals adhere to public welfare, with doctors' salaries mainly coming from medical service revenues and government subsidy income. For instance, the total salary amount for 22 public hospitals in Sanming increased from 3.8 billion yuan in 2011 before the reform to 11.02 billion yuan in 2017. From 2012 to 2023, the average annual growth rate of financial input for public hospitals in Sanming has been maintained at over 15%. Risk Warning: Population changes exceeding expectations, macroeconomic fluctuations exceeding expectations, disease outbreaks exceeding expectations, unexpected changes in medical insurance policies, unexpected impacts of medical reforms, and potential deviations between data calculations and actual figures.