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 challenge of “one person becoming unable to care for themselves, and the whole family losing balance,” 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 CPC Central Committee and the General Office of the State Council issued the “Opinions on Accelerating the Establishment of the Long-Term Care Insurance System” (hereinafter referred to as the “Opinions”), clarifying the establishment of a long-term care insurance system that suits China’s basic national conditions and features coverage for all people, coordinated urban-rural implementation, fairness and unity, safety and standardization, and sustainability. Against the backdrop of deepening population aging, the comprehensive establishment of long-term care insurance may become an important hub connecting social security and the senior-citizen economy, with its impact gradually becoming more apparent over time.

Coverage for all people, no distinction between urban and rural areas

The long-term care insurance system is known as the “Sixth Social Insurance” scheme under social security. It is a social insurance system that provides services or funding protection for basic living care and closely related medical and nursing care for persons with disabilities. It is an important component of China’s social security system and a key part of implementing the national strategy of actively addressing population aging.

At present, China’s long-term care insurance system is shifting from local pilot programs to nationwide implementation. The “Opinions” proposes that, over about three years, institutional arrangements for coordinated urban-rural coverage will be basically established; funding-raising mechanisms for shared responsibility will be gradually improved; fair and appropriate benefit-protection mechanisms will be progressively strengthened; scientific and standardized management and operation mechanisms will be basically formed; and a long-term care insurance system suited to China’s basic national conditions will be essentially established.

When discussing the necessity of establishing a long-term care insurance system, Wang Wenjun, Vice Minister of the National Healthcare Security Administration, said that establishing such a system is a major institutional arrangement to address people’s urgent needs and worries and to improve the social security system. It can be said that this is a truly warm-hearted measure.

In Wang Wenjun’s view, for persons with disabilities, long-term care insurance is a “must-have” need. Through professional nursing care, it can greatly improve the quality of survival for persons with disabilities. Taking a bath, getting a haircut, eating meals, and getting medication changed would no longer be a “luxury” on a hospital bed, but instead careful care right at the bedside—within reach. For the families of persons with disabilities, long-term care insurance is a “relief” measure. With institutional protection, it can reduce the dual burden—both economic and caregiving-related—for families. Through professional nursing care, it can ease the dilemma of “one person becoming unable to care for themselves, and the whole family losing balance.” With socialized and professional services, other family members can also be freed from heavy caregiving responsibilities and devote themselves to normal work and life. For industries, long-term care insurance means “boosting demand.” It can be said that the establishment of this system is generating new business formats and new models—for example, research, production, and leasing of assistive devices, assessment of disability levels, and involvement by social forces in handling services. These can all form new points of economic growth. According to preliminary statistics, since the pilot began in 2016, long-term care insurance has pulled over 600 billion yuan in social capital investment into related industries.

Liu Chunsheng, Associate Professor at the Central University of Finance and Economics, said in an interview with Beijing Business Daily that, with China’s population aging deepening and the number of disabled elderly people being large, long-term care insurance can effectively address the pain point of “one person becoming unable to care for themselves, and the whole family losing balance,” fill gaps in the social security system, cover the basic living and nursing care bottom lines for the disabled group, and demonstrate social fairness and the warmth of people’s wellbeing.

Under the requirements of the “Opinions,” the construction of the long-term care insurance system will adhere to five principles: coverage for all people, coordinated urban-rural implementation, unified fairness, safe and standardized operation, and sustainability. Within the same coordinated area, there is no urban-rural distinction. Regardless of whether insured persons come from rural areas or urban areas, they reimburse expenses from the same fund pool and receive benefits.

Multi-channel fundraising, earmarked funds used for designated purposes

Which groups need to pay into long-term care insurance? Unlike medical insurance, retired people also need to pay.

The “Opinions” states that the long-term care insurance premium rate will be uniformly controlled at around 0.3%. The premium rate for unit employees is shared by the employer and the individual in proportion to each other. The employer’s payment base is the total wages of employees, while the individual’s payment base is the individual’s wage income. Both the employer and the individual pay jointly. The premium rate for retirees is the same as the individual premium rate for unit employees; the payment base is linked to the pension level, with individuals paying and the original employing unit not paying. For unemployed urban and rural residents, the financing of long-term care insurance will be reasonably shared by individuals and the government. Individuals pay premiums, and the government provides subsidies according to regulations. Government subsidies are jointly borne by the central and local finance. Fully considering differences between urban and rural areas, localities can, based on actual circumstances and actuarial calculations, use the per-capita disposable income of urban and rural residents in the previous year in the coordinated area as the payment base; they can also, in rural areas, determine the payment base based on the per-capita disposable income of rural residents in the previous year. It is encouraged to explore and improve a more scientific and precise capacity-based fundraising mechanism.

Guo Yang, Director of the Social Security Division of the Ministry of Finance, revealed that, previously, experience had been accumulated through pilot exploration. The Ministry of Finance, in coordination with the National Healthcare Security Administration, guided pilot areas in improving policy design and exploring the establishment of a funding mechanism with reasonable shared responsibility among various parties. Pilot areas’ insured coverage started with employee groups, and in areas with conditions, it was further expanded to residents. To support insured enrollment, pilot areas, based on their own realities, studied and formulated relevant fiscal subsidy policies, including providing subsidies to insured residents and financial assistance to groups with difficulties in obtaining coverage. All of these have accumulated useful experience for the development and issuance of policies at the national level.

“ The ‘Opinions’ has clarified a unified premium rate of around 0.3%, stabilizing people’s expectations for premium payments, and has established a multi-channel fundraising mechanism involving units, individuals, the government, and society. It addresses the core difficulties in the past—unequal fundraising standards, unstable sources, and insufficient sustainability.” Liu Chunsheng said.

When asked about the management and supervision of funds in long-term care insurance accounts after payment, Guo Yang said that, just like other social insurance funds, the long-term care insurance fund must have its own books established separately, be managed separately, and use earmarked funds for designated purposes. It is also clarified that the long-term care insurance fund will be included within the scope of budget formulation for social insurance funds, requiring scientific preparation of fund income-and-expenditure budgets and strengthening budget performance management. “At present, we are working with relevant departments to study and formulate financial management measures for the long-term care insurance fund and management measures for fiscal subsidy funds. We will further strengthen financial budget management of the fund, clarify the specific procedures for allocation, issuance, use, and supervision and management requirements of fiscal subsidy funds, and compact responsibilities at all levels, providing institutional guarantees for secure, standardized, and efficient use of funds.”

In the start-up phase, priority protection for people with severe care needs

Who can receive long-term care insurance protection? In the initial stage of the system, the protected targets are severely disabled people with the most urgent care needs and the heaviest family burdens—mainly those who are bedridden for the long term and cannot take care of their own daily lives.

Zhang Xifan, head of the待遇保障 (benefit protection) division of the National Healthcare Security Administration, said that any insured person who has undergone disability-level assessment and meets the conditions for receiving benefits can receive corresponding nursing services and obtain reimbursement. According to existing assessment standards, disability is divided into three levels: mild, moderate, and severe. In the initial stage of the system, the protection target is severe persons with disabilities who have the most urgent needs and the heaviest family burdens—mainly those who are bedridden long-term, cannot take care of their own lives, and need others to provide care. In the future, as economic development and the level of protection improve, the national level will uniformly study and expand coverage to persons with moderate disabilities and others.

“To ensure fairness of benefits and the safety of funds, during disability-level assessments, localities will use a ‘common ruler,’ meaning they will apply nationwide unified assessment standards. No matter which coordinated area the assessment is conducted in, the assessment ruler is the same. Doing so is to reduce, to the maximum extent, interference from human factors, so that every dollar is used for the people who truly need it.” Zhang Xifan emphasized.

How exactly are reimbursements handled? Zhang Xifan said that long-term care insurance does not set a deductible line. Regarding the reimbursement ratio, for areas where actual premium contributions differ significantly between residents and employees, the two groups differ accordingly, reflecting equality between rights and responsibilities. To ensure the sustainability of the long-term care insurance fund, the fund’s annual maximum payment limit shall not exceed 50% of the per-capita disposable income of urban and rural residents in the previous year in the coordinated area.

Liu Chunsheng pointed out that, in the initial stage of the long-term care insurance system, priority protection will be given to severely disabled people, precisely aligned with the goal of “providing basic coverage and safeguarding the bottom line.” Beyond basic protection, it is necessary to build a multi-tier long-term care protection system. Commercial insurance can focus on advanced nursing services, compensation for excess costs, personalized care plans, and more, to meet diverse and high-quality care needs.

Beijing Business Daily reporter Li Xiumei

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