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 issue of “one person’s disability leads to family imbalance,” by the end of 2028, the long-term care insurance system will be basically implemented 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 a Long-term Care Insurance System” (hereinafter referred to as the “Opinions”), which clearly establishes a long-term care insurance system that adapts to China’s basic national conditions, covers all citizens, coordinates urban and rural areas, ensures fairness and unity, is safe and standardized, and sustainable. Against the backdrop of deepening aging, the comprehensive establishment of long-term care insurance may become an important hub connecting social security and the silver economy, and its impact will gradually become evident over time.

Universal Coverage, Regardless of Urban or Rural Areas

The long-term care insurance system is known as the “sixth social insurance,” providing services or financial guarantees for basic living care and closely related medical care for disabled individuals. It is an important component of China’s social security system and a significant part of implementing the national strategy for actively addressing population aging.

Currently, China’s long-term care insurance system is shifting from pilot programs to nationwide implementation. The “Opinions” propose that within about three years, the institutional arrangements for urban-rural coordination will be basically established, the shared funding mechanism and fair and moderate benefit guarantee mechanism will be gradually improved, and the scientific and standardized management and operation mechanism will be basically formed, thereby establishing a long-term care insurance system that adapts to China’s basic national conditions.

Regarding the necessity of establishing a long-term care insurance system, Wang Wenjun, deputy director of the National Healthcare Security 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 truly heartwarming initiative.

In Wang Wenjun’s view, for disabled individuals, long-term care insurance is a “necessity.” Through professional care, it can greatly enhance the quality of life for disabled persons, making bathing, haircutting, eating, and changing dressings no longer “luxuries on the hospital bed,” but rather attentive care that is right by their side and within reach. For the families of disabled individuals, long-term care insurance is a “burden reduction,” as it can alleviate the dual economic and caregiving burdens through institutional guarantees. With professional care, it can alleviate the dilemma of “one person’s disability leads to family imbalance.” With socialized and professional services, other family members can also be freed from heavy caregiving duties to 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 spawned new businesses and models, such as the research, production, and rental of assistive devices, disability assessment, and participation of social forces in management, all of which can create new economic growth points. According to preliminary statistics, since the pilot program began in 2016, long-term care insurance has driven social capital investment in related industries to exceed 60 billion yuan.

Liu Chunsheng, an associate professor at Central University of Finance and Economics, stated in an interview with Beijing Business Daily that with the current deepening aging in China and a large number of disabled elderly individuals, long-term care insurance can effectively address the pain points of “one person’s disability leads to family imbalance,” fill the gaps in the social security system, ensure the basic living and care safety net for disabled groups, and reflect social equity 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: universal coverage, urban-rural coordination, fairness and unity, safety and standardization, and sustainability. Within the same coordinated area, there is no distinction between urban and rural residents, and insured individuals, whether from rural or urban areas, will reimburse expenses and enjoy benefits from the same funding pool.

Diverse Funding, Designated Use

Which groups need to pay for long-term care insurance? Unlike health insurance, retired individuals also need to contribute.

The “Opinions” mention that the long-term care insurance rate is uniformly controlled at around 0.3%. The rate for employees is shared equally between employers and employees, with the employer’s contribution based on the total employee wages, and the employee’s contribution based on their own wage income, with both parties contributing together. The rate for retired individuals is the same as that of employed individuals, with the contribution base linked to the pension level, paid by the individual, and the original employer does not contribute. For unemployed urban and rural residents, the funding for long-term care insurance is reasonably shared by individuals and the government, with individuals paying and the government providing subsidies according to regulations, which are jointly borne by central and local finances; fully considering urban-rural differences, localities can calculate based on the per capita disposable income of urban and rural residents from the previous year as the contribution base, or for rural areas, determine the contribution base according to the previous year’s per capita disposable income of rural residents, encouraging exploration to improve a more scientific and refined funding mechanism.

Guo Yang, director of the Social Security Department of the Ministry of Finance, revealed that previous pilot programs have accumulated experience, and the Ministry of Finance, in cooperation with the National Healthcare Security Administration, has guided pilot areas to improve policy design and explore a funding mechanism with reasonable shared responsibilities. The insured scope in pilot areas started with the employee population and has been further expanded to residents in eligible areas. To support the enrollment process, pilot regions have developed relevant financial subsidy policies in conjunction with their actual situations, including subsidies for insured residents and assistance for those facing difficulties, all of which have accumulated valuable experience for formulating national policies.

“The ‘Opinions’ clarify a unified rate of around 0.3%, stabilize the expectations for contributions, and establish a diverse funding mechanism involving employers, individuals, the government, and society, addressing the core issues of inconsistent funding standards, unstable sources, and insufficient sustainability in the past,” Liu Chunsheng stated.

Regarding the management and supervision of the long-term care insurance account funds after contributions, Guo Yang pointed out that the long-term care insurance fund, like other social insurance funds, must have separate accounts and be managed separately, with designated use of funds. It is also required to include the long-term care insurance fund in the budget preparation for social insurance funds, mandating a scientific preparation of fund income and expenditure budgets and strengthening budget performance management. “Currently, we are working with relevant departments to formulate financial management methods for the long-term care insurance fund and management methods for financial subsidy funds, which will further enhance the financial budget management of the fund, clarify the specific processes for the allocation, distribution, and use of financial subsidy funds, and reinforce supervision and management requirements, ensuring accountability at all levels and providing institutional guarantees for the safe, standardized, and efficient use of funds.”

Initial Stage to Protect Severely Disabled Individuals

Who can enjoy the protection of long-term care insurance? In the initial stage of the system, the beneficiaries are the severely disabled individuals who are in greatest need and whose families bear the heaviest burdens, primarily those who are bedridden for a long time and cannot take care of themselves.

Zhang Xifan, head of the Benefit Guarantee Department of the National Healthcare Security Administration, explained that any insured individual who has undergone disability assessment and meets the conditions for receiving benefits can enjoy corresponding care services and reimbursement. According to the current assessment standards, disabilities are divided into three levels: mild, moderate, and severe. In the initial stage of the system, the beneficiaries are the severely disabled individuals who are most in need and whose families bear the heaviest burdens, primarily those who are bedridden for a long time, cannot take care of themselves, and require care from others. In the future, as the economy develops and the level of protection increases, the national level will uniformly study expansion to include moderately disabled individuals.

“To ensure fairness in benefits and fund security, all localities will use a ‘common standard’ in disability assessments, employing a nationally unified assessment standard. Regardless of which coordinated area one is in, the assessment criteria are the same. This is to minimize interference from human factors as much as possible and ensure that every penny is spent on those who truly need it,” emphasized Zhang Xifan.

How will reimbursement work specifically? Zhang Xifan stated that there is no threshold for long-term care insurance, and in terms of reimbursement ratios, there are differences between urban and rural residents and employees in areas with significant discrepancies in actual contribution levels, reflecting a balance of rights and responsibilities. To ensure the sustainability of the long-term care insurance fund, the annual maximum payment limit for the fund does 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 long-term care insurance system’s initial stage prioritizes the protection of severely disabled individuals, accurately aligning with the positioning of “ensuring the basics and safeguarding the bottom line.” Beyond basic protection, it is very necessary to build a multi-tiered long-term care protection system, where commercial insurance can play a role in 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