A recent expose revealed a cottage industry of private psychiatric hospitals admitting patients on false pretenses to defraud the government out of vast quantities of medical funds. While there’s nothing new about medical fraud in China, this incident also shines a spotlight on how the country is struggling to deal with its aging population.
The scandal, uncovered by the Beijing News, is shocking not only in its details but in its scale. The newspaper reported that dozens of psychiatric hospitals in the neighboring cities of Xiangyang and Yichang offered inpatient hospitalization either for a small fee or for free. This isn’t typical in China, where patients whose treatment is covered by medical insurance programs would generally be expected to pay at least a certain percentage of the cost of their treatment.
A reporter who went undercover at two hospitals was able to find the reason for this unusually generous offer. The hospitals would record treatments worth about 140 yuan per day per patient, and claim reimbursement for most of that from government-run medical insurance. However, no treatment was given. While some of these scam hospitals only had a few patients, some had well over 100 – meaning they could have been raking in hundreds of thousands of yuan per month through these schemes.
Besides the fraud, the undercover reporter found that conditions in the hospitals were poor, with physical and verbal abuse common. Patients were also coerced into cleaning the hospital, bathing other patients, and other menial work.
The article showed that some hospitals made it hard for patients to leave once they had been admitted, even if everyone involved understood that they weren’t really mentally ill. This could stretch for years. The difficultly of exiting reportedly led at least one patient to commit suicide.
These problems seem to have been well-known locally. The report included a picture of a poster in a Xiangyang public hospital that warned people to be wary of psychiatric hospitals that offer free treatment. However, as is often the case, it took outside attention to spur action.
In recent days, teams have been set up by both of the cities and Hubei Province to look into the hospitals. The national insurance administration is also set to launch a crackdown.
Given the poor conditions at the hospitals, who would agree to be the “cash cow” in this kind of fraud? The story mentions two main kinds of people. The first are alcoholics, seemingly looking for a place to dry out for a while. The second are elderly people drawn in by the prospect of free food and shelter.
This highlights the limitations of China’s current elder care system, which assumes that the vast majority of elderly people will be cared for at home, by their families. It’s often characterized as a “90-7-3” approach: 90 percent of seniors receiving care at home, 7 percent receiving community care, and 3 percent in institutional care. This approach, which is based on deeply held cultural beliefs about children’s duty to their parents, relies on a few assumptions. One is that 90 percent of seniors will have families who are both willing and able to care for them. The second is that community and institutional care facilities will be both available and affordable.
Many of the elderly people recruited for the scam came from rural areas, where pensions are particularly tiny and government services are weaker. Moreover, countless villages have been hollowed-out as working age people seek work elsewhere, leaving many rural elderly isolated from their families.
According to a nurse quoted in the Beijing News report, institutional elder care costs around 1,000 yuan per month in Xiangyang. To put that cost in context, government figures show that the average pretax wage for a rural migrant worker last year was just under 5,000 yuan. Hence, the prospect of free care, even in a scam hospital, could be appealing.
While the government is now spending billions on building elder care facilities, the size of the problem is daunting. It’s estimated that by 2040, just over 400 million Chinese people will be over 60, according to the World Health Organization. That would be an increase of about 100 million from now.
The scandal underscores how an elder care model built on family responsibility is colliding with demographic and economic reality. Unless that mismatch is addressed, abuses like this are unlikely to remain isolated cases.
