The aging of the Chinese population and the cost of health care

Abstract

It is projected that by 2050 China could have a staggering 115 million elderly citizens over 80 years old. Serious planning is needed to cope with this demand. This is the direct and inevitable result of the one-child policy that came into effect in 1979, as an independent policy to the Comprehensive Economic Reform; but the complementary nature is unmistakable. In accordance with the objective of this special issue of the Social Science Journal, the modest objective of this paper presents a brief history of the health care reform which really only began in 2002. We borrow from a major pilot study (the CHARLS data set) to provide quantitative measures of the cost of medical insurance. CHARLS samples two provinces, the inland poorer Gangsu and the coastal prosperous Zhejiang. The premium was 13 and 27 Yuan for the rural populations Gansu and Zhejiang. For the urban population, the premium was 289 versus 337 for men versus women in urban Gansu. But for the urban areas of Zhejiang, the pattern is radically different; 324.3 Yuan for women and a much higher 608 Yuan for men. Urban residents have always enjoyed better health care. With the support of the central government, 90% of rural population now received some form of basic health coverage. The issue is the reimbursement rate. For outpatient care, the reimbursement rates max out at under 40% and 32% for the urban and rural patients, respectively. This is certainly not enough to cover catastrophic illness, and that is why many Chinese feel they are just one major illness away from utter poverty. Outpatient care is even worse. The reimbursement rates average around only 10%. As Chinese statistics on full medical cost (especially for the elderly) is lacking, we utilize statistics from Taiwan and try to estimate the health care cost of the aging population. We discuss potential issues observed in the Taiwan experience, and proposed an incentive scheme, Self-Motivated Health Maintenance (SMHM), to deal with moral hazards and to reduce the overall health care cost. We believe the SMHM is a win–win–win solution. China has the possibility of building this into their health insurance.