Refusing to Pay for Mass COVID Testing, China’s Medical Insurance Fund Shifts Responsibility to Local Governments

Residents line up to be swabbed for the COVID-19 testing during citywide testing in Tianjin, China on Jan. 9, 2022.Chinatopix Via Associated Press

As of today, at least 10 Chinese metropolises, each with a population of over 10 million people, have required regular nucleic acid testing for COVID-19 of their citizens. The public is now questioning the cost incurred as well as who should pay those costs.

Nucleic acid tests for COVID-19 are also known as PCR tests. The regular testing, as required by China’s Zero-COVID policy, now mandates that residents must present a negative PCR test completed within 48 or 72 hours to ride the subway or enter a public facility. In other words, most people have to do 1 to 3 nucleic acid tests per week in order to maintain a normal life.

There has been chatter on Chinese social media that China’s medical insurance fund has been covering the cost. However, China Business News revealed in a May 25 article that National Healthcare Security Administration recently issued an official notice to provincial and municipal medical insurance administrations, saying that the practice of covering mass COVID-19 testing using medical insurance funds does not comply with the current medical insurance policies, and needs to be rectified immediately.

Insiders told China Business News that in certain regions, where the medical insurance fund has a sufficient balance, local authorities allowed the medical insurance funds to pay for the testing cost for those who are covered by the insurance, and for those individuals who are not covered, the cost would be the financial responsibility of the local government.

Similarly, mass COVID vaccination in China has been covered by medical insurance funds and government treasury, according to Xinhua News Agency.

Official data shows that by the end of 2021, the cumulative balance of basic medical insurance (including maternity insurance) is 3,612 billion yuan (approx. $542 billion). The balance is mainly concentrated in relatively wealthy provinces and regions with a population influx.

Huge Cost When Mass Testing Becomes the Norm

Zhongxin Jingwei, a financial media affiliated with the China News Agency, recently used Beijing numbers to calculate how much regular nucleic acid testing would cost when the public relies on a negative test result to go about a normal life.

On May 3, the price of a single-sample COVID test was reduced from 24.9 yuan (about $3.72) to 19.7 yuan ($2.94). For mixed-sample tests, the authorities have capped the price at 3.4 yuan (about $0.51), according to the article.

By the end of 2021, excluding migrant workers, Beijing had a population of 21.886 million. In the case of a weekly test requirement and a mixed testing scheme—with samples from ten people in one test-tube—Beijing would need to test at least 320,000 samples per day, and the total expense would be as high as 298 million yuan (about $44 million) a month. In the case of single-sample testing the total cost would be 862 million yuan (about $129 million) per month.

A recent research report released by China’s Soochow Securities Research Institute also estimated that, if all first- and second-tier cities in China (with a total population of 505 million in 2021) implement regular testing in the future, based on population data in 2021, the total monthly cost for the 505 million people in these cities would be 121.2 billion yuan (about $18.1 billion), and the annual cost would be roughly 1.45 trillion yuan (about $220 billion).

Medical Insurance Funds Drying Up

The medical insurance fund is “life-saving money” for the Chinese people. With Chinese cities requiring regular mass testing one after another, the public is very concerned that the medical insurance pool will soon be drained.

The Health Literacy Bureau, an information platform in China’s medical and health field, revealed in a May 26 article that there is a risk of exhausting the medical insurance funds in many provinces and cities.

Although the National Medical Insurance Administration issued a new document on May 25 limiting the price for mixed-scheme testing to no more than 3.5 yuan (about 52 cents) per person, the Health Literacy Bureau pointed out that not all provinces have the money to cover regular mass testing.

For Beijing and Shanghai, the medical insurance balances can cover the cost for more than 600 days; while in provinces with large populations such as Shandong and Henan, the current balance can only support about 70 days of testing, according to the Health Literacy Bureau.

“That is to say, in these places, if the medical insurance funds that were painstakingly accumulated through centralized procurement, price negotiation, etc., are used to cover regular large-scale nucleic acid testing, they will be exhausted in a little more than two months,” the article said. “According to the internationally accepted medical insurance fund reserve standard, the medical insurance fund must be sufficient to cover at least 15 months of expenditures to be considered a stable fund. If all of the funds are used for nucleic acid testing, it deviates from the original intention of establishing the medical insurance fund system.”

Huge Profits for Companies Involved in COVID Testing

Though a nightmare for the general public, the pandemic has turned out to be a golden opportunity for those involved in sampling and testing for COVID. Shortly after PCR testing became a routine mandate, companies producing test kits and personnel with sampling skills were in high demand.

As of May 11, 2022, there were approximately 2,400 entities involved in COVID testing in China, of which nearly 40 percent were established within the past three years. The biggest players include Shengxiang Bio, Zhijiang Bio, Jinyu Medical, Mingde Bio, Wanfu Bio, Daan Gene, BGI, Oriental Bio, and Mike Bio.

Shengxiang Bio, a COVID test kit manufacturer, achieved a whopping 65.3 fold increase in net profits from 2019 to 2020, and quickly landed on the Science and Technology Innovation Board within 177 days of the listing process  launching. According to the 2020 Forbes China’s 400 Richest list, Shengxiang Bio chairman Dai Lizhong ranked 210 with a net worth of 17.62 billion yuan (about $2.645 billion).

The revenue of Adicon Medical Laboratory Co., Ltd. reached 2.742 billion yuan (about $412 million) in 2020 and 3.38 billion yuan (about $507 million) in 2021. PCR testing accounted for 2.157 billion yuan (about $324 million) of its revenue in those two years.

Wanfu Bio’s revenue in the first quarter of this year was 2.625 billion yuan (about $394 million), with a net profit of 904 million yuan (about $136 million), a year-on-year increase of 4.8 times.