Does China's Health Insurance Favor the Rich? A Data‑Driven Fairness Analysis

In 2023, the lowest‑income 20% of Chinese families accounted for about 37% of health needs but received only 6.8% of medical insurance reimbursements; the highest‑income 20% accounted for 7.8% of needs yet received 43.7% of reimbursements. These figures come from a 2026 Lancet Regional Health – Western Pacific study that used three waves (2013, 2018, 2023) of the China Household Income Survey to examine financing and benefit gaps.

The authors caution that the data do not mean the system subsidises the rich. Reimbursement occurs only after treatment, and income influences whether a person can seek care, where they receive it, what treatment they obtain, and whether they can afford out‑of‑pocket costs.

Two dimensions of fairness are distinguished: financing fairness (the share of income paid for insurance) and benefit fairness (the actual coverage received relative to health need). Resident insurance uses a fixed contribution: in 2025 the per‑person total was 1,100 CNY (700 CNY government subsidy, 400 CNY personal). For a household earning 20,000 CNY, the 400 CNY equals 2% of income; for a 200,000 CNY household it is only 0.2%, a ten‑fold difference in relative burden.

The study employs the Kakwani index, where a positive value indicates progressivity and a negative value indicates regressivity. From 2013 to 2023 the index fell, showing that China’s medical financing became more regressive. Personal income tax and employee insurance contributions are progressive, while resident fixed contributions, indirect taxes, and out‑of‑pocket expenses are regressive. The out‑of‑pocket component’s index declined sharply, becoming a key driver of inequity.

Reimbursement can be broken down into four stages: health need × care‑seeking conversion rate × per‑visit cost × effective reimbursement rate. Low‑income families often have higher health need but are constrained in the latter three stages.

Care‑seeking conversion is limited by deductibles, co‑pay ratios, non‑catalogue fees, and ancillary costs such as travel, accommodation, and lost wages. A high‑income family can absorb a few tens of thousands of yuan in out‑of‑pocket expenses; a low‑income family may need to borrow, sell assets, or forgo treatment altogether, which reduces recorded medical expenses and thus reimbursement.

Per‑visit cost also differs: wealthier households can access secondary and tertiary hospitals and receive more comprehensive diagnostics and treatments. Even with the same reimbursement percentage, a 20,000 CNY bill reimbursed at 60% yields a larger cash benefit than a 2,000 CNY bill reimbursed at 70%.

Occupational differences feed the system: in 2025, employee insurance covered about 3.89 billion people, while resident insurance covered 9.42 billion. Employee insurance pays 84.1% of inpatient catalog costs versus 66.0% for resident insurance. Stable employment leads to enrollment in the better‑benefited employee scheme; unstable or unemployed individuals rely on the resident scheme with lower benefits.

This creates a reinforcing loop: higher income → stable job → employee insurance → timely care → maintained health and earnings; low income → delayed or avoided care → worsening health → reduced labor capacity → lower income.

The notion that “pay more, get more” does not capture the full picture. Basic insurance also provides risk‑pooling and poverty‑prevention, so fairness must consider both payment ability and health‑need alignment.

The authors simulated three reform options: (1) tie resident contributions to household ability, easing the relative burden on low‑income families; (2) set a family out‑of‑pocket ceiling, shifting excess costs to insurance, fiscal funds, or medical assistance; (3) narrow the benefit gap between employee and resident schemes, prioritising catastrophic, chronic‑disease, and out‑of‑pocket caps before further convergence. Strengthening primary‑care capacity is also essential, as without it patients still travel to large cities for complex care, incurring additional costs.

China’s basic insurance now covers about 95% of the population, solving the “no coverage” problem. The next challenge is converting nominal coverage into effective protection: ensuring that people can detect illness early, afford any remaining costs, receive appropriate treatment, and avoid catastrophic financial loss. Only then does universal coverage become genuine, equitable health security.