The "New Rural Health Cooperatives" (NRHC) in China

by on 週三, 28 五 2008 評論
a) Operation, recent development and government of the NRHC.
Aware of the failure of the health reform and the disastrous position of access to health in rural areas, the Chinese government tried to remedy it from 2003 on by launching the new rural health cooperatives (NRHC). The aim was to offer health insurance to the peasants who wanted it so that they could have better access to care and treatments.

These NRHC were originally financed as follows:
- rural households were to contribute at the rate of 10 RMB (1 euro) per person, on a voluntary basis;
- the local governments were to contribute an additional 10 RMB per person;
- the central government also allocated 10 RMB per person.

Thanks to this insurance system which was based on a sum of 30 RMB per villager who was willing to pay, the peasant who joined a NRHC could obtain reimbursement of his medical expenses if he were admitted to hospital. However, the rate of reimbursement varied with the reasons for hospital admission and the government declared that it could reimburse only a maximum of 65% of the medical costs of rural residents.

Since 2003, supported by well orchestrated government propaganda, NRHC have been set up in an increasing number of counties and have then covered an increasingly large number of peasants.

In 2003, this NRHC project was running in more than 300 Chinese counties.

In 2004, according to a study carried out jointly by the University of Beijing, the CASS and the Ministries of Agriculture and Health in 2006, of 70,769 peasants, in 257 pilot counties in 29 provinces, the NRHC helped to reduce the proportion represented by medical expenditure in relation to annual average income of farmers from 89% in 2003 to 65% in

In 2005, NRHC had been set up in 671 counties, and this enabled 177 million peasants to get cover. At that time, a study carried out of 10,000 families in 32 counties from 17 provinces showed that 57% of rural families who had registered for the NRHC programme had applied for reimbursement and had been reimbursed 25.7% of their total medical
expenditure, 731 RMB (73 euros) on average.

Since Wen Jiabao’s speech in March 2006, on the occasion of the 4th session of the 10th National People’s Congress, the government has doubled its financial contribution to the NRHC. Thus, under the new system, a peasant who intends to join the NRHC pays 10 RMB a year, while the central, provincial, municipal and county governments jointly
provided 40 RMB for this rural resident. The NRHC therefore now has 50 RMB per peasant. As to the maximum rate of reimbursement, it is still set at 65% of medical expenses.

At the end of 2006, according to the Ministry of Health, 46.7% of the total rural population (396 million people) had joined a NRHC and the latter were up and running in 1399 Chinese counties. As to the amount granted to the NRHC by the government, it rose to 4.23 billion RMB (423 million euros).

At the 5th session of the 10th National People’s Congress, in March 2007, Wen Jiabao confirmed the government’s commitment when he announced that by the end of 2007, the NRHC would be available in 80% of Chinese counties, that the central budget allocated to the NRHC would be 10.1 billion RMB (1.01 billion euros) in 2008 and that, finally, in the next four years, the government would spend 20 billion RMB (2 billion euros) on improving the infrastructures and equipment of rural clinics and hospitals.

According to the Chinese central authorities, the NRHC should cover 100% of the rural population by 2010.

Compared to the traditional cooperatives which operated in the villages and cantons (xiang) with a small base of contributors, the NRHC have more contributors and are often run by the county’s Health Office. Each county can set up three organisations: the Group responsible for the NRHC which concerns itself with coordination of the NRHC’s operations in the county and supervises the programme in the cantons, the Management Committee of the canton NRHC, and the Supervisory Committee of the canton NRHC. As for the management of the NRHC, it is often entrusted to the county health office and the canton health centre. A special NRHC account is opened by the committee in the local bank. Unlike rural pension funds, which can be invested to generate financial resources, the NRHC funds just stay in the bank, bringing in a small amount of interest. The NRHC Management Office under the responsibility of the NRHC Management Committee manages all the financial transactions. Because of a lack of resources, this office is often on the premises of the canton health centre or county health office. In most cases, the manager of the health centre is also the manager of the NRHC office, and the health centre accountant is also the person who manages the NRHC reimbursements. This traditional practice seems to have continued with the NRHC.

Although the principle of the NRHC remains an important and essential initiative, a number of questions emerge and several challenges will have to be taken up by the Chinese authorities, if the latter want the NRHC to improve the poorest peasants’ access to care and to health in general, in an efficient and sustainable manner.

b) Persisting questions and challenges concerning the NRHC
From international experience and from previous attempts to resuscitate the old rural health cooperatives in China, questions and challenges are emerging which the health authorities will have to resolve so that the NRHC are not just a waste of time.

Following this initiative, a first question which emerges concerns the sustainability of the NRHC, which depends above all on the viability of their three different sources of financing.
Doubts again arise as to the ability of each of the parties to contribute collectively since March 2006 at the rate of 40 RMB per villager registered. One may reasonably think that central government will be capable of pursuing its financial commitment particularly because of tax income, which is rising, and a genuine will to improve the condition of the poorest regions in China.

The current situation shows that the households’ contribution (10 RMB per person) is still feasible, at least for most of them, given that in 2005 this sum represented 0.3% of the average annual rural income (3254.9 RMB)(1). It has to be said that it will on the other hand be a much larger proportion for the poorest households who live below the poverty threshold. However, the government is considering the possibility of support for these most disadvantaged households through its Medical Assistance Programme administered by the Ministry of Civil Affairs. In all, financing problems appear today to come more from
local governments. Whether the local governments can spend 10 RMB or even more per person is even more unclear. As the local governments depend on their own income to finance their activities, they generally have health spending which varies considerably depending on how rich the provinces are and even more depending on the counties. For poor counties where population density is high, even 4 RMB per person may be a large proportion of their health spending per capita. Furthermore, the NRHC initiative comes at a bad time for local authorities: China has recently abandoned several agricultural taxes, which is tantamount to a large reduction in the income of the cantons and counties.

One may then wonder about how willing households will be to pay 10 RMB as a contribution to this NRHC programme. Although the peasants’ willingness to share in the financing of the NRHC depends on numerous factors, one of the main reasons is their perception of the level of reimbursement of medical expenses.
It is first of all important to bear in mind that even collecting 50 RMB per person can cover on average only between 25 and 35% of annual health expenditure in rural areas.

In other words, as observed in a study carried out by Professor Wu Ming, from Beijing University Department of Medicine in 2007, the rate of reimbursement of hospital costs is on average of the order of 27.5%, which means that financing of serious and terminal diseases in peasants is inadequate.(2) Thus, today, despite the NRHC, a lot of expenditure is still not covered.

This is important in the sense that the people responsible for this programme then have every interest in not promising too much if they do not want to see the rapid collapse of this initiative, while retaining the beneficial consequences of joining the NRHC in the eyes of the peasants.

Some recent studies have shown that many households consider that, all in all, this programme gives them little with which to reduce their exposure to the risk of high medical costs. In this case, support for the NRHC could gradually fall. Indeed, according to a number of international experiments, it has been found that it is young people and people in good health who may well leave the NRHC first, and it will then start to make losses and will require other contributions. The latter will lead to an additional exodus of young people and people in good health, the spiral will begin and the programme will collapse. This situation is known in public health as adverse selection.(3)
The question of the impact of the NRHC on the reduction of poverty equally arises today.

In other words, given the current level of contribution, will the NRHC make it possible to reduce the poverty related to heath spending. In 2004, on the basis of the 2003 China National Health Services Survey, Chinese researchers made the following observations:
there are 25,764 rural households in the west and mid-west regions. Their average per capita income is 2062 RMB and their annual per capita health spending is 225 RMB. The per capita income of 14% of households is below the rural poverty line (865 RMB). In 21% of poor households, this is due to medical costs. They then concluded that the 30 RMB proposed by the NRHC will reduce by 27% the number of households which have become poor because of their health spending. They therefore considered that the level of financing was not capable of reducing significantly the increase in cases of people being reduced to abject poverty because of illness. They then calculated that, for the NRHC to make it possible to halve these situations of impoverishment, a total of 54 RMB per person was needed.(4) In 2007, per capita financing of the NRHC is still below that (50 RMB).

According to the estimates of Dr. Ge Yanfeng, from the RCD, for the Chinese health system to be available to all today, it would cost between 150 and 200 billion RMB (between 15 and 20 billion euros), which represents between 5 and 7 times the country’s national income or 1 to 1.5% of GNP in 2005.(5)

The question of confidence between peasants and NRHC managers should not be neglected. This is essential so that country people will join the NRHC, that is to say there can be no doubts about corruption. It is not inappropriate to mention here that numerous attempts at rural health cooperatives have failed in the past because of corruption.
Engaging the beneficiaries in the mechanism of supervision of the NRHC may help to reduce attempts at corruption. It is a solution which is as yet rarely adopted and which is nonetheless being developed at the moment by Harvard University in Kaiyang (Guizhou) and Zhenan (Shaanxi) counties, where villagers sit on the committee which runs the NRHC.
Finally, the question of the portability of this cooperative health system becomes extremely important when one considers the position of migrants.160 Migrants from rural regions moving into the towns (150 million in 2005) continue today to find themselves in no-man’s land where health insurance is concerned. Ineligible for the urban health insurance system because they have no official residence, they are in theory obliged to return to their villages for treatments reimbursed by the NRHC. In practice, if they stay in a town only a tiny part of their expenditure will be reimbursed. For the NRHC to become more portable in
order to improve the access to care of millions of Chinese migrants appears to be a major and urgent challenge for those in charge of health in China.

(1) National Bureau of Statistics of China, China Statistical Yearbook 2006,
(2) “Chinese government under pressure to make rural healthcare system work”, Xinhua, 21 April 2007.
(3) This is why health insurance in industrialised countries is nearly always compulsory. On this point see: Liu Y. L., “Development of the rural health insurance system in China”, Health Policy and Planning, 2004, 19 (3), 159-165.
(4) Y. Liu, Z. Mao, B. Nolan, “China’s Rural Health Insurance and Financing: A Critical Review”, September 2004, p. 8. Available on:
(5) China’s Failing Health Care System Searching for Remedy, Xinhua News Agency, 6 October 2006.

Vincent Rollet

Vincent has been conducting doctoral research on reactions to SARS in China and Taiwan.





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