Balancing the funds in the New Cooperative Medical Scheme in rural China: determinants and influencing factors in two provinces

Abstract

In recent years, the central government in China has been leading the re-establishment of its rural health insurance system, but local government institutions have considerable flexibility in the specific design and management of schemes. Maintaining a reasonable balance of funds is critical to ensure that the schemes are sustainable and effective in offering financial protection to members. This paper explores the financial management of the NCMS in China through a case study of the balance of funds and the factors influencing this, in six counties in two Chinese provinces. The main data source is NCMS management data from each county from 2003 to 2005, supplemented by: a household questionnaire survey, qualitative interviews and focus group discussions with all local stakeholders and policy document analysis. The study found that five out of six counties held a large fund surplus, whilst enrolees obtained only partial financial protection. However, in one county greater risk pooling for enrolees was accompanied by relatively high utilisation levels, resulting in a fund deficit. The opportunities to sustainably increase the financial protection offered to NCMS enrolees are limited by the financial pressures on local government, specific political incentives and low technical capacities at the county level and below. Our analysis suggests that in the short term, efforts should be made to improve the management of the current NCMS design, which should be supported through capacity building for NCMS offices. However, further medium-term initiatives may be required including changes to the design of the schemes.