Driving new opportunities for the silver economy: Long-term care insurance to be rolled out nationwide over three years

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Source: Beijing Business Daily

To solve the problem of “one person losing ability leads to the whole family being unbalanced,” by the end of 2028, the long-term care insurance system will basically achieve full coverage nationwide. On the evening of March 25, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued the “Opinions on Accelerating the Establishment of a Long-term Care Insurance System” (hereinafter referred to as “Opinions”), clearly establishing a long-term care insurance system that is suitable for China’s basic national conditions, covering everyone, coordinating urban and rural areas, equitable and unified, safe and standardized, and sustainable. Against the backdrop of deepening aging, the comprehensive establishment of long-term care insurance may become an important link between social security and the silver economy, and its impact will gradually become apparent over time.

Covering everyone, regardless of urban or rural

The long-term care insurance system is known as the “sixth social insurance,” which provides services or financial guarantees for the basic life care of disabled individuals and the medical care closely related to it. It is an important component of China’s social security system and a key aspect of implementing the national strategy to actively respond to population aging.

Currently, China’s long-term care insurance system is transitioning from partial pilot programs to nationwide implementation. The “Opinions” propose that within about three years, the institutional arrangements for coordinating urban and rural areas will be basically established, the funding collection mechanism with shared responsibilities and the fair and moderate benefit guarantee mechanism will gradually improve, and the scientific and standardized management and operation mechanism will be basically formed, leading to the establishment of a long-term care insurance system that fits China’s basic national conditions.

Regarding the necessity of establishing the long-term care insurance system, Wang Wenjun, Deputy Director of the National Medical Insurance Administration, stated that establishing a long-term care insurance system is a major institutional arrangement to address the urgent needs of the public and improve the social security system. It can be said that this is a genuinely heartwarming initiative.

In Wang Wenjun’s view, for disabled individuals, long-term care insurance is a “necessity.” Through professional care, it can greatly improve the quality of life for disabled individuals, making bathing, haircuts, meals, and dressing changes no longer “luxuries on the hospital bed,” but rather careful care that is right at their bedside and within reach. For families of disabled individuals, long-term care insurance is a “burden reduction.” With institutional guarantees, it can alleviate both the financial and caregiving burdens on families. Through professional care, it can ease the predicament of “one person losing ability leads to the whole family being unbalanced.” With socialized and professional services, other family members can also be liberated from heavy caregiving tasks and engage in normal work and life. For the industry, long-term care insurance means “stimulus.” It can be said that the establishment of this system has fostered new businesses and models, such as the research and production of assistive devices, disability level assessments, and participation by social forces in management, all of which can create new economic growth points. According to preliminary statistics, since the pilot began in 2016, long-term care insurance has driven social capital investment in related industries exceeding 60 billion yuan.

Liu Chunsheng, an associate professor at Central University of Finance and Economics, stated in an interview with Beijing Business Daily that as China’s aging population deepens, the number of disabled elderly people is large, and long-term care insurance can effectively address the pain point of “one person losing ability leads to the whole family being unbalanced,” fill the gaps in the social security system, and safeguard the basic living and care bottom line for disabled groups, reflecting social fairness and the warmth of people’s livelihoods.

According to the requirements of the “Opinions,” the construction of the long-term care insurance system adheres to five principles: covering everyone, coordinating urban and rural areas, fairness and unity, safety and regulation, and sustainability. Within the same coordinated area, there is no distinction between urban and rural; insured individuals, whether from rural or urban areas, reimburse expenses and enjoy benefits from the same funding pool.

Diverse financing, earmarked funds

Which groups need to pay long-term care insurance? Unlike medical insurance, retirees also need to contribute.

The “Opinions” mention that the long-term care insurance rate is uniformly controlled at around 0.3%. The employee rate is shared by employers and individuals in the same proportion; the base for employer contributions is the total wage amount of employees, while the base for individual contributions is their own wage income, with both employers and individuals contributing together. The rate for retirees is the same as that for employed individuals, and the contribution base is linked to the pension level, with individuals paying and their former employers not contributing. For unemployed urban and rural residents, the financing of long-term care insurance is reasonably shared by individuals and the government, with individuals contributing and the government providing subsidies as stipulated, funded jointly by the central and local finances; fully considering urban-rural differences, localities can calculate the contribution base using the previous year’s per capita disposable income of urban and rural residents or determine the contribution base in rural areas based on the previous year’s per capita disposable income of rural residents, encouraging exploration of a more scientifically refined financing mechanism.

Guo Yang, Director of the Social Security Department of the Ministry of Finance, revealed that experience has been accumulated through previous pilot explorations, and the Ministry of Finance, in cooperation with the National Medical Insurance Administration, is guiding pilot areas to improve policy design and explore a reasonable financing mechanism that shares responsibilities among all parties. The insured scope in pilot areas started with employees and has further expanded to residents in regions with conditions. To support the insured work, pilot areas have developed relevant fiscal subsidy policies based on their actual situation, including subsidies for insured residents and assistance for insured individuals facing difficulties, which have accumulated valuable experience for national policy formulation.

“The ‘Opinions’ clarify a unified rate of about 0.3%, stabilize payment expectations, and establish a multi-source financing mechanism involving employers, individuals, the government, and society, addressing the core issues of inconsistent financing standards, unstable sources, and insufficient sustainability in the past,” Liu Chunsheng stated.

Regarding the management and supervision of long-term care insurance account funds after payment, Guo Yang pointed out that the long-term care insurance fund, like other social insurance funds, must be accounted for separately, managed separately, and used solely for the intended purpose. It is also explicitly required to include the long-term care insurance fund in the budget preparation scope of social insurance funds, demanding a scientific preparation of the fund revenue and expenditure budget and strengthening budget performance management. “Currently, we are working with relevant departments to develop financial management methods for the long-term care insurance fund and management methods for fiscal subsidy funds, which will further strengthen fund financial budget management, clarify the specific processes and supervisory requirements for the distribution, distribution, and use of fiscal subsidy funds, and ensure accountability at all levels, providing institutional guarantees for the safe, regulated, and efficient use of funds.”

Initial phase guarantees for severely disabled individuals

Who can enjoy the long-term care insurance coverage? In the initial phase of the system, the target of protection is the severely disabled individuals who are in the most urgent need and have the heaviest family burdens, mainly those who are bedridden for a long time and cannot take care of themselves.

Zhang Xifan, head of the Benefits Guarantee Department of the National Medical Insurance Administration, introduced that all insured individuals who have undergone disability level assessments and meet the conditions for benefits can enjoy corresponding nursing services and reimbursement. According to the current assessment standards, disabilities are divided into three levels: mild, moderate, and severe. In the initial phase of the system, the focus is on those in urgent need and with heavy family burdens, specifically severely disabled individuals who are bedridden for a long time, cannot take care of themselves, and require assistance from others. In the future, with economic development and improvement of guarantee levels, the national level will research and expand the coverage to include individuals with moderate disabilities.

“To ensure fairness of benefits and safety of the fund, all regions will use ‘the same standard’ for disability level assessments, employing a nationally unified assessment standard. No matter which coordinated area, the assessment will be the same, in order to minimize human interference and ensure that every penny is spent on those who truly need it,” Zhang Xifan emphasized.

How to reimburse specifically? Zhang Xifan stated that long-term care insurance does not set a threshold for payment. In terms of reimbursement rates, for regions where the actual payment levels for residents and employees differ significantly, there are differences for the two groups, reflecting equivalence of rights and responsibilities. To ensure the sustainability of the long-term care insurance fund, the annual maximum payment limit shall not exceed 50% of the previous year’s per capita disposable income of urban and rural residents in the coordinated area.

Liu Chunsheng pointed out that the initial phase of the long-term care insurance system prioritizes the protection of severely disabled individuals, accurately aligning with the positioning of “basic protection and bottom-line safety.” Beyond basic protection, it is also very necessary to build a multi-tiered long-term care protection system, as commercial insurance can focus on high-end care services, excess cost compensation, and personalized care plans, meeting diverse and high-quality care needs.

Beijing Business Daily reporter Li Xiumei

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Editor: Gao Jia