Senior citizens angered as China cuts medical benefits!

Thousands of senior citizens in China have taken to the streets in main cities such as Wuhan since January this year against the move by the Chinese Government to cut the medical benefits of senior citizens.

The government has been forced to resort to measures such as cutting benefits as well as increasing the retirement age due to fund shortages after the government spent heavily on mass testing during the COVID-19 pandemic in the past three years.

According to analysts, enforcing the costly zero-Covid policy had resulted in deficits in public medical insurance funds which have been drained after paying for mass testing, mandatory quarantine and other pandemic controls.

The demonstrations, dubbed by Chinese media as a "grey hair movement," are another rare rebuke for authorities after widespread protests gripped the country in November against Covid lockdowns.

According to CNN, censors have removed hashtags for "Wuhan health insurance" from Weibo's hot topics section after the demonstrations began in January. They also censored photos and videos of the protests from social media.

For nearly three years, local governments bore the brunt of enforcing the now-defunct pandemic controls, resulting in soaring expenditures even as their income from revenue sources such as land sales slumped.

The concerns were sparked after Guangdong province and the city of Dalian announced in 2022 that they would tap public medical insurance funds to pay for mass Covid testing.

The issue was exacerbated when, shortly after, the National Healthcare Security Administration (NHSA) said the money shouldn't be used in this way and that local governments should fund the testing with their own budgets.

State media reported at the time that some other regions had already spent public money on mass testing. The reports triggered fears about the future sustainability of the already underfunded health insurance system, CNN reported.

It's unclear exactly how much China has spent in total on maintaining its strict zero-Covid policy, or where that money came from. But at least 17 of the country's 31 provinces have revealed the enormous sums they've spent on fighting the pandemic.

Guangdong, the richest province in China, was the biggest spender. It spent 711 billion yuan (USD 10.3 billion) in 2022 on measures such as vaccination, testing and emergency benefits for medical workers, an increase of more than 50 per cent from the year before.

Zhejiang and Beijing spent 43.5 billion yuan and 30 billion yuan respectively.

"Local governments are running short of money, or in some cases, out of money," said George Magnus, an associate at the China Centre at Oxford University, CNN reported.

"Funding zero-Covid was the proximate cause for the crunch, but local finances are deteriorating for other reasons too, notably the rising burden of expenses associated with age-related spending."

Interest costs on trillions of dollars of debt and falling revenues from land sales have also worsened government finances, he said.

China's outstanding government debts might have surpassed 123 trillion yuan (USD 18 trillion) last year, of which nearly USD 10 trillion is so-called "hidden debt," according to Chinese analysts. The debt problem has gotten so extreme that some cities are unable to provide basic services, such as heating homes, CNN reported.

China's health insurance scheme is a key part of its limited social safety net. It covers a portion of medical costs for current and retired workers in urban areas.

It consists of individual accounts, funded by mandatory payments from workers and their employers, and a pool of funds made up of employer contributions. The personal account is used to pay for medicines and outpatient costs, while the collective account is used to pay for hospital visits.

Retirees don't need to contribute and receive a monthly payment into their personal accounts from the collective pool.

After the reforms, which were introduced starting in January, payments to all personal accounts were reduced.

The elderly, who tend to have more medical needs, are more sensitive to the changes. In the central city of Wuhan, retirees saw monthly cutbacks of as much as 70 per cent.

Soon after the protests in Wuhan and the northeastern port city of Dalian, the NHSA issued a statement defending the policy, saying even though people would have less money in their personal accounts, there would be more funds flowing into the collective account as a result.

In the longer term, the "grey hair movement" is indicative of a fundamental issue facing the Chinese government, how to care for a rapidly ageing society where 400 million people, or 30 per cent of the population, will be 60 or older by 2035.

China's public health care system and other public services have come under increasing financial strain as the number of retirees outpaces the number of young people entering the workforce.

Magnus, a leading government think tank, forecast in 2019 that the state pension fund could run dry by 2035 due to a dwindling workforce.

"[The] crunch affecting health insurance is only a stone's throw away from the larger one affecting pensions, and workers could edgily become agitated over poor pension and health care security," it said.

To address the challenge, the government is making a new push to raise the retirement age.

People close to retiring expressed anger over the prospect of delayed access to their pensions. Younger people argued that they would have fewer jobs because of greater competition.

From health care to public infrastructure, local governments have many bills to pay. But they are facing an acute shortfall of cash, as three years of strict pandemic controls and a real estate crash have drained their coffers.