A sick note

Hospitals suspended for fleecing social security fund


Elderly get 97% reimbursement

China has taken giant strides toward achieving ‘basic’ universal healthcare. Reforms introduced in the past two decades have dramatically lifted the insured population from less than 16% in the 1990s to 97% last year. The insurance rollout, however, has also created more room for fraudsters to swindle the state.

In one case reported this month two hospitals in the northeastern province of Liaoning were found to have gamed the social security system with some ingenious ruses.

“Hospitalisation is fake, diagnosis is fake, the patients are fake, only the scam is real,” reported CCTV’s Focus Report, a programme broadcast daily since 1994.

The show follows a group of elderly pensioners that were transported to a hospital in Shenyang. Without being examined, they were admitted to the hospital. One of them was labelled as having surgical needs after a phone call between the receptionist and a superintendent.

The camera then shifts to a ward that’s empty of medical staff, equipment and patients. Yet at the foot of each bed there were medical records indicating some serious illnesses such as acute suppurative tonsillitis, acute nephritis and disc herniation. The supposed patients were later found to be wandering around a wet market nearby. Silver-haired but looking healthy, the seniors would return to the hospital just in time for a lunch served in the ward.

A granny told the undercover journalist that she had ‘stayed’ in the privately-owned hospital at least six times even though she was suffering no medical complaint. In the background the cameras showed others in the ward drinking beer and wine.

In the evening the same group of elderly gathered outside the hospital again. Carrying food and vegetables they’d bought in the market in the morning (and toilet rolls from the hospital), they lined up to meet a lady, who turned out to be returning their social security cards along with some cash.

According to, retirees in China can qualify for reimbursement of up to 97% of their medical expenses under the public healthcare scheme, which is funded by mandatory monthly contributions of all working Chinese and their employers.

Assuming these elderly “patients” were to be billed Rmb1,000 for four-days of fake treatment, the hospital could pocket Rmb970 before paying each of them a fee for conniving in the scam. Scale this up across hundreds or thousands of private hospitals across the nation and the amount extorted from social security funds could represent huge annual losses to the state.

CCTV’s exposé has led to the arrest of 39 suspects and temporary closure of the two hospitals. It came amid an ongoing crackdown on health insurance fraud, as concerns over the sustainability of the country’s welfare system increase.

Discounting the government subsidies – totalling Rmb1.24 trillion $180 billion) – the healthcare security fund ran at a loss of Rmb623 billion last year, data from the Ministry of Finance showed.

Lou Jiwei, who chairs the National Council for the Social Security Fund, told a forum last week that China’s social security system is “highly fragmented” and “unsustainable” due to its overreliance on government aid. “With our population aging fast, both the pension fund and healthcare insurance system are under immense pressure”, said Lou.

His view was supported by research last year, which found that the pension funds of 13 out of 31 regions across the country would dip into the red in less than a year. Heilongjiang was under the greatest strain due to undesirable demographics. Nationally, the deficits are expected to reach Rmb256.2 billion in 2018 and Rmb533.6 billion in 2022 should there be no central government subsidies to plug the gap, according to the Chinese Academy of Social Sciences.

The hospital scam in Shenyang has been receiving widespread attention as an outrageous waste of public resources. However, there have been a number of similar shenanigans in other cities – as many as 923 reported last year, and mostly in lower-tier cities largely due to their greater share of lower-grade hospitals.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.