Although health care expenses impose a heavy financial burden on family budgets, there are few studies on household medical debt or the long-term financial burden of medical debt in China. Compared to other medical debt research, there are two characteristics of medical debt of Chinese households. The first is the low incidence. Our analysis found that the medical debt incidence of middle-income families was only 2.42% of all middle-income families and 3.92% for low-income families. Second, once medical debt occurs, medical debt brings serious financial and long-term negative impacts on families with medical debt representing 6-month household income for middle-income families and 2.5 years’ household income for low-income families.
In comparison with medical debt studies in America[1], Britain[2], India[8] and Cambodia[10], medical debt incidence of Chinese households was low. We took a narrow measure of medical debt, defined as debt incurred by outside borrowing for medical expenses.[15, 33] Using household savings and disposal of assets to pay for medical expenses were not included, resulting in a lower bound estimate of the incidence of medical debt. With the largest per capita savings rate in the world, Chinese families’ frugal habits would have seen them dispose of their assets or use their accumulated savings to pay medical expenses before seeking external borrowed funds. We can get some measure of households selling assets to meet medical debt by comparing the household assets of debt and non-debt households. The average household assets of medical debt households was US$34157.60 compared to US$86998.18 for non-medical debt households, which suggests assets were sold before borrowing to pay off medical debt. These non-borrowing debt payment strategies should be categorized into a broader definition of medical debt. Since data on non-borrowing for medical debt strategies were not covered in existing CFHS surveys, new surveys need to be undertaken to measure these alternative strategies, especially using accumulated saving and assets dispersal for covering medical debt. Also, the Chinese government has a scheme of Medical Financial Assistance and CII, providing part medical financial support for impoverished households due to illness, which would reduce the medical debt of low-income families to a certain extent. These schemes should be promoted, expanded and made accessible to a large share of Chinese households.
Not surprisingly, medical debt was one of the most common debts for middle- and low-income families, which is similar to finding from other Chinese and international studies. Although the overall incidence of medical debt in China is low, once medical debt happens, it had a long-term negative impact on the financial sustainable development of middle- and low-income families. This contrasts with an American study that found most medical debts were relatively modest in size[25] with more than 50% of them less than $600 annually.[40] According to other US surveys, the average debt load per person was about half of their annual reported income[41, 42]. However, low-income families in China required several years’ annual income to repay their medical debts, and even medium-income households medical debt accounted for roughly half their yearly income. Given the need to use part of annual household income for day-to-day living expenses, medical debts took many years to be repaid, indebting households for years as medical cost repayments were made. Therefore, further studies need to investigate medical debt as a powerful long-term financial burden on families and to expand the definition of medical debt from borrowings to broader definitions of medical debt.
Such high medical debt to family income ratios were likely to have irreversibly damaged Chinese household finances. Some families with medical debt were condemned to years of medical debt repayment, while other families were impoverished by their inability to pay their medical debts. This health-induced poverty is a global phenomenon, where medical debt was an important cause of family bankruptcy in the United States.[4] Although there is no system of family bankruptcy in China, the study of extreme poverty caused by medical debt requires attention.
CHE, which was often used to measure the medical financial burden based on family income, had a significant impact on medical debt and on family financial wellbeing. We found that 62.55% of households with medical debt suffered from CHE, with only 30.21% of households without medical debt suffering CHE. The greater the CHE’s affect, the higher the medical debt relative to household income for both middle- or low-income families. Similar to previous studies,[43, 44] we found that medical debt and CHE run in parallel. When CHE occurs, nearly 10% of meddle- and low-income non-poverty households were tipped into poverty and households in poverty sunk deeper into poverty. For households in poverty, further medical treatments will significantly increase the risk of incurring additional medical debt, reducing the likelihood that families will seek needed medical attention. Considering the possible long-term impact of CHE and medical debt on families, including poverty, reduced health access and poorer health status, health insurance policymakers should aim to structure insurance schemes to attenuate OOP expenses, reducing both CHE and medical debt. From 2015 to 2017, the proportion of OOP medical expenses to total medical expenses did not change significantly, so long-term medical debt and CHE is an ongoing problem for many Chinese families.
In addition to CHE, health status, working conditions, hospitalization and medical insurance of middle-aged people were the crucial factors determining medical debt for middle- and low-income families. Under China’s existing insurance schemes, the OOP medical expenditure of hospitalization services posed a large financial burden for low-income families, which lead to a US$45.90 promotion in household medical debt when it occurred on students. Similar to other empirical studies, we found that hospitalization was one of the leading factors to medical debt, no matter in China[15] or the US[4].
Unfortunately, China’s basic health insurance schemes played a limited role in protecting against medical debt. We found that only middle-aged people insured by the URBMI effectively reduce their medical debt, while people insured by the NCMS or UEBMI increased their exposure to medical debt. The reimbursement policies of the NCMS and UEBMI were inadequate and need to be revised. In particular, URBMI reimbursement policies for children under 5 years old and NCMS reimbursement policies for children and students should be further revised to effectively improve health insurance protection for low-income households. Further, the basic medical insurance schemes do not take into account the family income and economic status of the insured, which forced low and middle-income families to borrow to pay-off high medical expenses. In spite of the 2009 health reforms, further health reform, including health insurance reform, remains.
We suggest that medical insurance and other income relief funds should identify existing medical debts when compensating patients for new medical expenses. By providing appropriate financial support to families with medical debts, access and equity in health will be improved and families further relieved from the economic burden of disease caused debt. Awareness of existing medical debt and household health-related impoverishment will also help to minimize the likelihood that policy reforms create unintended consequences on these vulnerable groups. Policymakers should define low-income households as a sub-population “at risk” of financial catastrophe from CHE and medical debt and implement insurance scheme support. Further, “at risk” families require safety nets to increase access to healthcare without incurring additional medical debt.[44]
This study has a number of limitations. We used a narrow definition of medical debt, which did not include using savings and disposal of assets to pay-off medical expenditures, leading to a lower bound estimate of medical debt. A study of households in western China found households in these provinces were likely to incur medical debt, but the CHFS did not cover two western provinces, Tibet and Xinjiang. Since CHFS is a retrospective survey, the recall bias and reporting bias of debts are inevitable in the survey. Finally, the database used cross-section data, and longitudinal population-based studies are warranted to improve the understanding of the magnitude and extent of financial hardship among middle- and low-income families.