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China’s New Rural Cooperative Medical Scheme

Evolution, Design and Impacts


Dan Liu

The New Cooperative Medical Scheme (NCMS) was implemented in 2003 in response to the poor state of health care in rural China. It holds the primary objective of insuring rural residents against catastrophic health expenses, protecting them from impoverishment caused by medical expenses. The objective of this study, therefore, is to explore variation in the determinants of household enrolment in this scheme and the impact of enrolment on health care utilization and medical expenditures in three large geographic regions in China and further to simulate the reimbursement package design in order to achieve better financing protection and policy effectiveness.
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Ever since the collapse of the once successful Cooperative Medical Scheme (CMS) in rural China in early 1980s, rural people have been excluded from the social security system, with many obstacles impeding the poor in trying to access health services. As a result, health shocks and poor healthcare are correlated with increases in poverty. In order to solve the problems of unaffordable access and illness-led impoverishment, the Chinese government announced a new rural health financing policy to provide health insurance for its rural populations in 2002, henceforth, the New Cooperative Medical Scheme (NCMS), financed by a matching fund with contributions from central and local governments as well as individual households.

With huge government commitment and the injection of subsidies, this scheme represents the hope for achieving a harmonious society. Meanwhile, improving health equity between urban and rural is also a key determinant of further economic growth. Scaled-up from 2003 to September 2009, there are 2,716 counties (including suburban villages, accounting for almost 95% counties in China) executing the New Cooperative Medical Scheme, with 833 million rural people enrolled. Nationwide, the enrollment rate stands at 94%. It is worth noting that for the past decades, this is the first time for Chinese government provided financial support to the purchase of health care services for rural farmers. This policy represents a historic breakthrough and a fundamental shift towards a more equity-oriented social policy.

The success or failure of such a public-private partnership model for financing rural health...

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