National Healthcare Security Administration interprets new regulations on medical insurance fund supervision: drawing a "red line" against insurance fraud

Medical insurance funds are people’s “medical bills money” and “life-saving money.” Safeguarding the security of medical insurance funds is of great significance. The Implementation Rules for the Medical Security Fund Use Supervision and Administration Regulations, released by the National Healthcare Security Administration, will take effect starting April 1, further clarifying the “red lines” for fund oversight.

Why issue the detailed rules? What do they cover? The National Healthcare Security Administration held a press conference on March 31 to provide an interpretation and address public concerns.

Improving the fine-grained level of fund supervision

“Over the past five years, medical insurance departments at all levels have recovered about RMB 120 billion in medical insurance funds, and the work on fund supervision has shown remarkable results.” Huang Huabo, deputy director of the National Healthcare Security Administration, said that at the same time, reforms to medical insurance payment methods, and the advancement of long-term care insurance systems have also brought new supervision issues, and problems and difficulties faced in law-enforcement practice for medical insurance fund supervision also need to be addressed.

The detailed rules to be implemented this time consist of 5 chapters and 46 articles. They make more granular provisions on areas including fund use, supervision and administration, and legal responsibilities. This is a further improvement to the Medical Security Fund Use Supervision and Administration Regulations, providing a stronger and more operational legal basis for fund supervision.

For example, in response to supervision challenges that arise in medical insurance payment method reform—such as high coding and padding, splitting hospital stays, and cost shifting—the detailed rules clarify the recognition of fund losses, the recognition of the timing of fund losses, and the calculation methods for fund losses.

Medical insurance fund supervision involves multiple links, including handling agreements, administrative penalties, and criminal accountability. Huang Huabo said that in regard to “blockages” such as overlapping responsibilities and poor coordination among related parties, the detailed rules clarify the boundaries of authority and responsibilities as well as the coordination procedures, improving the effectiveness and the rule-of-law level of medical insurance fund supervision.

Regarding penalties, the detailed rules adhere to a balanced approach combining leniency and severity, preventing a one-size-fits-all approach. They also specify standards for when minor cases may not be penalized, and handling methods for first-time violations done with caution. If it is a first-time violation, the harmful consequences are minor, and the violator promptly corrects the issue, administrative penalties may be waived.

Keyly cracking down on two major types of insurance fraud

Gu Rong, head of the Fund Supervision Division of the National Healthcare Security Administration, said that the detailed rules will focus on cracking down on insurance fraud problems involving methods such as “door-to-door pick-up and drop-off,” “reducing or waiving fees,” and “buying medicines with gifts like rice and flour/oil.” They will also crack down on issues such as trafficking in medicines and illegal buying and selling of “returned medicines.”

The detailed rules make clear that, for designated medical and pharmaceutical institutions, if they induce or guide others to seek care under another person’s name or to obtain medicines under false pretenses—through means such as persuasion, false advertising, illegal fee reductions, or providing additional money or services—it can be determined as fraud involving medical insurance.

For insured persons, if they know that others are committing insurance fraud but still participate in activities organized by them that involve the use of medical insurance funds, and accept gifts of money or goods, fee reductions, or the provision of additional services, they can be punished for fraud involving medical insurance.

Regarding the chaos involving “returned medicines,” the detailed rules provide clear definitions. For example, if insured persons resell medicines, medical consumables, medical service items, etc. that have already been paid for with medical insurance funds, it may be determined as reselling medicines.

How are criminals such as drug traffickers who resell “returned medicines” identified as fraudsters? Gu Rong said that for individuals who, over the long term or multiple times, purchase and sell basic medical insurance medicines to and from unspecified trading counterparts, it can be determined that they are acting with the purpose of committing fraud involving medical insurance.

“A single insured person holds more than ten medical insurance vouchers at the designated medical and pharmaceutical institution to seek treatment and get prescriptions. Even after the staff of the designated medical and pharmaceutical institution discovers clear anomalies, they still do not verify identity information or act as a ‘helper’—it can also be determined as fraud involving medical insurance.” Gu Rong said that medicine traceability codes can serve as a basis for law-enforcement evidence collection by medical insurance authorities.

In addition, the detailed rules further define and clarify common circumstances in which individuals illegally or in violation of regulations use medical insurance funds, including repeatedly enjoying benefits, enjoying benefits that belong to others, renting out one’s own medical insurance vouchers to obtain illegal benefits, and fabricating facts to fraudulently obtain various medical insurance benefits.

(From China Securities Journal)