China's National Healthcare Security Administration Implements New Regulations: Precisely Cracking Down on Inducement-based Insurance Fraud with "Free Rice, Flour, and Oil," Solving DRG/DIP Supervision Challenges

Author: Wu Yinggang, Li Bingyu

2026On April 1, the seventh order of the National Healthcare Security Administration —— "Detailed Rules for the Implementation of the Regulations on the Supervision and Administration of the Use of Medical Security Funds" (hereinafter referred to as the "Detailed Rules") officially came into effect. Recently, the National Healthcare Security Administration held a press conference to comprehensively interpret this regulation, which is crucial for the safety of the "medical expenses" of 1.4 billion people.

According to the introduction, the "Detailed Implementation Rules" consist of 5 chapters and 46 articles, providing a more operationally focused legal framework for fund supervision work, building upon the "Regulations on the Supervision and Administration of the Use of Medical Security Funds" implemented in 2021.

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Huang Huabo, Deputy Director of the National Healthcare Security Administration, told participating media outlets including VCBeat that since the implementation of the Regulations nearly five years ago, regulatory work has achieved remarkable results. Healthcare security departments at all levels in China have recovered approximately 120 billion yuan of healthcare security funds through methods such as agreement handling and administrative penalties. Intelligent supervision has saved 9.5 billion yuan in fund losses; the previously "lenient and soft" passive situation in healthcare security fund supervision has been preliminarily reversed. Healthcare security has eradicated the long-standing issue of "drug reselling," collecting over 100 billion drug traceability codes.

However, Huang Huabo further pointed out that there are still some issues in the supervision work that need to be clarified: the rights and responsibilities of all parties need to be further clarified; the identification of illegal acts needs to be further refined; and new situations in the reform need to be further clarified. The Implementation Rules aim to further facilitate the "last mile" implementation of the Regulations.

According to the introduction, the "Implementation Rules" provide a stronger legal weapon for cracking down on insurance fraud, with a focus on combating fraud issues involving methods such as "shuttling people by car, reducing or waiving fees, giving kickbacks, and giving away rice, flour, and oil."

For designated medical institutions, the Implementation Rules stipulate that enticing or guiding others to seek medical treatment or purchase medicine under false names or through deception by means of persuasion, false advertising, unauthorized fee reductions or exemptions, or providing additional property can be identified as insurance fraud. For individuals, the Implementation Rules stipulate that those who knowingly participate in insurance fraud and accept gifted property, fee reductions or exemptions, or provide additional services may be penalized for insurance fraud.

At the same time, the "Detailed Implementation Rules" will focus on cracking down on the resale of "recycled drugs."

The relevant person in charge of the National Healthcare Security Administration introduced that the "Implementation Rules" emphasize that organizing others to use medical insurance fraudulently to purchase medicines and medical consumables for illegal acquisition and sales, as well as knowingly assisting others who engage in fraudulent medical treatment or medicine purchases under false names or identities, can be identified as medical insurance fraud.

For drug traffickers, the Implementation Rules clearly stipulate that individuals who repeatedly or over a long term purchase and sell medical insurance drugs to unspecified parties may be deemed to have the intent to defraud medical insurance funds. For insured individuals, the Implementation Rules indicate that reselling medicines or other items already paid for by medical insurance funds can be identified as the act of selling medicines. Drug traceability codes can serve as evidence for law enforcement.

In addition, the "Implementation Rules" also detail scenarios of individual insurance fraud.

The Implementation Rules stipulate that providing false materials or concealing facts to obtain benefits such as medical assistance, outpatient care for chronic and special diseases, residence in different places, and maternity allowances can be penalized as insurance fraud; long-term provision of one’s own medical insurance credentials to others for use, accepting cash, goods, or other illegal benefits can be considered as having the intent of insurance fraud; using other insured persons' medical receipts or prescriptions to seek medical treatment or purchase medicine and actually enjoying medical insurance benefits can also be deemed as having the intent of insurance fraud.

In addition, the "Implementation Rules" also set up an inspection mechanism before exiting the designated status, stipulating that if a designated medical institution applies to terminate the agreement or not to renew the agreement, the handling agency may conduct a comprehensive review of the medical insurance fund settlement fees.

In addition to fraud, with the deepening of payment reform, it is also necessary to promote the transformation of fund supervision from item supervision to collaborative supervision of items and diseases.

It is reported that the reform of the medical insurance payment method has been continuously deepened, and its effectiveness has been increasingly demonstrated. The financial burden of patients' medical expenses has been reduced, and the convenience of medical treatment has been constantly improved; the operation of medical institutions has shifted towards refinement; and the efficiency of the use of medical insurance funds has been continuously enhanced.

With the deepening of payment reform, higher and more comprehensive requirements have been put forward for the supervision of fund utilization. In response to this change, to address regulatory challenges such as over-coding, excessive bundling, split hospitalizations, and cost shifting under the DRG/DIP payment system, it is necessary to promote the transformation of fund supervision from item-based oversight to collaborative oversight of items and disease types, with timely responses at the legal and institutional levels.

In past practices, determining the nature of illegal acts and calculating fund losses under the DRG/DIP payment system has always been a challenge: What constitutes illegal behavior under the DRG/DIP payment method? Is the amount of non-compliance considered a loss? How are losses calculated under DRG/DIP payments? When is a loss deemed to have occurred? Without resolving these issues, effective supervision remains difficult to implement.

The "Implementation Rules" provide clear solutions to these "technical challenges" that have long troubled frontline law enforcement officers.

Regarding the determination of the nature of actions under the reform of payment methods, the "Implementing Rules" stipulate that under the diagnosis-related group (DRG) payment system, actions such as over-coding or under-coding of disease categories (groups) in violation of medical insurance payment management regulations can be identified as "other illegal acts causing losses to the medical security fund."

Secondly, regarding the identification of fund losses under the reform of payment methods. It is clearly stipulated that "the portion of additional fund expenditures caused by illegal acts" shall be identified as fund loss, reflecting the principle of proportionality between offense and penalty. Based on practical experience, the Implementation Rules provide three methods for calculating fund losses under diagnosis-related group (DRG) payments, allowing regions to make their own determinations.

In addition, regarding the determination of the time point of fund loss. The time point at which designated medical institutions and insured individuals cause a loss to the medical insurance fund is standardized. Designated medical institutions use a "declaration + disbursement" dual-element approach to determine the time point of fund loss. For individuals, there are two scenarios: online settlement and manual reimbursement. For online settlement of medical expenses, the time point of fund loss occurs when the handling agency informs the designated medical institution of the amount the medical insurance fund should pay, and the individual completes the settlement with the designated medical institution. For manual reimbursement of medical expenses, the time point of fund loss occurs when the handling agency pays the medical insurance fund to the individual.

In terms of the calculation method for fund losses, the "Detailed Implementation Rules" clearly state that "if the total amount of medical insurance fund losses can be accurately calculated, the loss amount should be calculated precisely on a transaction-by-transaction basis and then totaled."

As the "Implementation Rules" are enforced, the "last mile" of medical insurance fund supervision will be further打通. In the future, any form of fraudulent insurance claims will face more precise legal打击. Safeguarding the people's "medical funds," this endless defensive battle has taken a solid step forward.