Is the 0.3% long-term care insurance rate worth it? Expert Q&A in ten questions and answers

Ten years of pilot programs have finally become institutionalized.

On the 25th, the “Proposal on Accelerating the Establishment of a Long-term Care Insurance System” was officially released. Known as the “sixth social insurance,” long-term care insurance has moved from local exploration to nationwide implementation.

Is a rate of 0.3% expensive? Who can benefit? How do they benefit? Focusing on the ten most important questions from the public, First Financial Journalist interviewed Professor Dai Weidong from Zhejiang University of Finance and Economics.

Why is the rate set at 0.3%?

Question 1: People are very concerned about money. Long-term care insurance operates on a “rate-based system.” How does this differ from the “fixed amount system” used in urban and rural residents’ medical and pension insurance? What are its advantages?

Dai Weidong: The core of the rate-based system is “capacity-based funding.” The contribution base for employed individuals is their own wages, while for unemployed urban and rural residents, it is the previous year’s per capita disposable income in their area. The rate is fixed (e.g., 0.3%), but the base increases over time. This means contributions naturally grow with income levels, avoiding issues like fixed contributions increasing annually and public dissatisfaction.

Because income levels vary across regions, contribution amounts differ accordingly. For example, residents in Hainan have lower incomes and pay less; residents in Zhejiang have higher incomes and pay more. This is fair because service costs also differ. For instance, in Zhejiang, a one-hour home visit might cost around 100 yuan or more, while in Hainan, it might be 50 yuan or less. Therefore, we shouldn’t just look at absolute contribution differences but whether the system effectively addresses local service needs for disabled individuals.

Question 2: Why is the rate set at 0.3%? How was this number calculated?

Dai Weidong: The 0.3% rate is based on data from ten years of pilot programs. Long-term care insurance targets a low-probability event—disability—with an incidence rate of about 3%. This means not everyone will benefit from this coverage. Because it’s a low-probability event, the rate can remain low. This rate is comparable to the contribution rate for low-risk industries in workers’ compensation insurance and is one of the lowest social insurance rates, fully considering the capacity of various stakeholders to bear the costs.

Question 3: Will the funding for long-term care insurance increase the burden on businesses and individuals?

Dai Weidong: This needs to be viewed dialectically. From international experience, Germany and Japan established long-term care insurance during economic downturns. It is a system designed to address social crises, demonstrating that it is a pragmatic choice to solve social issues within limited resources. The 0.3% rate provides families with disabled members a sense of security without financial strain.

Currently, many pilot regions fund it by reallocating from medical insurance funds, with employer contributions coming from the overall medical insurance account, and individuals from their personal medical accounts—without additional cash burden. But this is only a temporary measure. Moving forward, long-term care insurance must become an independent “sixth insurance” with its own funding channels; otherwise, relying on the medical insurance fund long-term could create significant pressure. This doesn’t mean costs will increase; rather, resources need to be re-integrated. Currently, departments like civil affairs and the Disabled Persons’ Federation also provide various subsidies for disabled seniors. If these funds are integrated into long-term care insurance, their effectiveness can be greatly enhanced.

What’s new about the “sixth social insurance”?

Question 4: Long-term care insurance is called the sixth social insurance. How does it fundamentally differ from the familiar pension and medical insurance? What kind of risks does it address?

Dai Weidong: The key lies in the concept of “risk.” Insurance exists because of risk—without risk, there is no insurance.

Pension insurance addresses income risk after workers leave the workforce. For example, if you earn 10,000 yuan monthly, after retirement, your income might drop to 5,000 or less, affecting your quality of life. Medical insurance covers health risks—treating illnesses with high-precision medical services provided by doctors and nurses in hospitals.

Long-term care insurance, however, deals with “disability risk”—the risk that due to aging, illness, or injury, a person loses or partially loses their ability to care for themselves. This isn’t a health problem per se but a functional issue. Once disabled, generally, it cannot be reversed. Therefore, the purpose of long-term care insurance isn’t treatment but improving quality of life and maintaining dignity.

Question 5: Many confuse “long-term care” with “medical care.” What is the difference between the “care” provided by long-term care insurance and the “nursing” covered by medical insurance?

Dai Weidong: Medical insurance covers “professional nursing” (Nursing care), prescribed by doctors and carried out by nurses, mainly addressing disease treatment during hospitalization. After recovery, patients usually need to be discharged within the prescribed treatment period.

Long-term care insurance provides “basic daily living assistance” and “basic medical care.” Basic medical care isn’t high-tech; it includes common services for chronic diseases, post-surgical or post-hospital rehabilitation, such as tracheal intubation, catheterization, wound care, etc. These can be provided at community health centers, grassroots hospitals, or through home visits. Service providers include not only professional nurses but also family members, community volunteers, and trained caregivers or long-term care specialists.

Services generated in hospitals are covered by medical insurance; those in communities or homes are covered by long-term care insurance. This delineates responsibilities. Many grassroots and community hospitals are shifting focus because they can’t compete with top-tier hospitals on advanced procedures, so they are providing basic care and home services—areas covered by long-term care insurance.

Question 6: The design of long-term care insurance emphasizes “urban-rural integration.” Is this an advanced feature compared to other social insurance systems?

Dai Weidong: Yes. Long-term care insurance is a “newly established” system without historical baggage, allowing it to be designed from scratch under new rules. Unlike traditional pension and medical insurance, which inherited the old urban-rural dual structure, long-term care insurance covers both urban employees and rural residents uniformly. This is a significant progress.

While benefits may differ between employed and resident groups—higher contributions and benefits for employees, lower for residents—this is “formal inequality, substantive fairness.” Social insurance is a “cooperative insurance,” emphasizing equal rights and obligations. Forcing benefits to be equal regardless of contribution levels would be unfair to high-contributors.

Question 7: Are beneficiaries of long-term care insurance divided by age? For example, does it only cover the elderly?

Dai Weidong: Absolutely not. Eligibility is determined by disability level assessments. Regardless of age—whether young, middle-aged, or elderly—if due to illness or injury, a person is assessed and reaches the required disability level, they qualify. Of course, given aging demographics, seniors are the main group, but young people disabled by accidents or rare diseases are also covered.

Last September, the national government issued a unified set of 36 service packages, establishing standards and rules. Previously, regions like Shanghai or Zhejiang set their own standards—now, a unified national standard is being implemented, forming the foundation for regulation and standardization.

What are the challenges in nationwide rollout?

Question 8: Besides funding, what is the biggest challenge in implementing long-term care insurance?

Dai Weidong: I am most concerned about “service” issues. Funding can be managed, but if the service supply system can’t keep up, money will be wasted or ineffective.

First, the professionalization of frontline caregivers. There are only about 300,000 licensed eldercare workers nationwide, and the long-term care specialist profession is just starting. According to international standards, one caregiver should support 3–4 severely disabled individuals. With 12 million severely disabled people in China, at least 3 million caregivers are needed. Currently, most are middle-aged, rural women or men with inconsistent training. We can’t treat domestic helpers as professional caregivers—they mainly do chores like cleaning or cooking, not medical or rehabilitative care such as medication management, turning, or psychological support.

Second, the professionalization of caregiving staff. To attract young people, there must be clear career advancement paths and decent pay. Their income should be at least comparable to local service industry wages, not just minimum wages. Zhejiang has policies offering tuition reimbursement for undergraduates working in public eldercare institutions for five years—an excellent example.

Question 9: As the nationwide implementation approaches, what key areas should local governments focus on?

Dai Weidong: I see four priorities. First, ensure smooth transition between old and new systems. Many regions already have pilot programs—some national, some local. When the nationwide system is launched, how to transition smoothly without creating unfairness or instability among beneficiaries is crucial.

Second, government departments must coordinate. Long-term care insurance involves multiple agencies—civil affairs, health, disability, human resources, finance, public security. Without clear responsibilities and cooperation, the system risks becoming “insurance without services,” diverging from its original purpose.

Third, properly address funding concerns. Don’t overreact to funding issues. The contribution rate is low—comparable to workers’ compensation. Besides individual contributions, sources include lottery funds, charitable donations, and even state-owned asset allocations. Funding is a short-term issue; the key is effective utilization.

Fourth, and most importantly, build a robust service supply system. This is more urgent than funding. Promote private sector-led service providers, with government setting standards and implementing digital oversight. Most importantly, prioritize the professionalization and career development of caregivers—without a stable, skilled workforce, long-term care insurance cannot succeed.

Question 10: From an ordinary person’s perspective, how should we understand the value of long-term care insurance?

Dai Weidong: To understand long-term care insurance, grasp the core concept of “intergenerational responsibility transfer.” Today, young people pay into the system not for themselves but for current disabled elderly. When they grow old and become disabled themselves, the next generation will bear the responsibility. It’s not an immediate benefit but a transfer of responsibility across generations.

Medical insurance treats illnesses; long-term care protects people. With a rate of 0.3%, “broad participation, narrow beneficiaries,” and financial support from the government for low-income families, long-term care insurance can uphold the dignity of disabled families and prevent the “family imbalance” caused by a single person’s disability.