Summary of Key Points
In 2025, the growth rate of medical insurance expenditures reached a historic low (1% for employee insurance and 0.2% for resident insurance), surpassing the income growth rate for the first time, ending the previous two years of deficits. The main reason for this is the negative growth in hospitalization costs. This is due to the DRG/DIP (Diagnosis-Related Grouping/Disease-Intervention Packaging) reforms, which have led hospitals to reduce the number of inpatient admissions and control hospitalization expenses, while shifting some of these costs to outpatient services. However, the growth rate of medical insurance revenue also fell to single digits (only 1% for resident insurance). In the future, cost control will become a long-term policy, and the healthcare market is expected to undergo structural changes, with out-of-pocket expenses likely becoming the primary source of funding outside of medical insurance.
I. Medical Insurance Revenue and Expenditure: From Deficits to Surpluses, but with Slowing Income Growth
From 2023 to 2024, the growth rate of medical insurance expenditures far exceeded revenue (for example, 16% for employee insurance versus 10%). However, in 2025, the situation reversed: the income growth rate (4% for employees and 1% for residents) finally surpassed expenditure rates (1% for employees and 0.2% for residents). This is not because revenue increased significantly but because expenditures decreased too rapidly. What is more concerning is the persistent low growth rate of revenue: employee insurance revenue dropped from 10% in 2023 to 4% in 2025, and resident insurance revenue even fell to a mere 1% in 2025. If expenditure growth rates do not slow down, medical insurance will have to rely on previous reserves, which could be depleted quickly.
II. Reduction in Hospitalization Costs: DRG/DIP Makes Hospitals Less Willing to Admit Patients
The negative growth in hospitalization costs is at the core of the slowdown in medical insurance expenditures. This is due to the impact of DRG/DIP reforms:
- Decreased number of inpatient admissions: The growth rate of inpatient admissions for employee insurance dropped from over 7% before 2020 to 1% in 2025; for resident insurance, there was a nearly 10 million reduction in admissions (a decrease of 4.8%).
- Lower average costs per admission: The average cost per inpatient admission for employee insurance decreased from 12,900 yuan in 2021 to 11,100 yuan in 2025, showing a four-year decline; for resident insurance, the cost also decreased in 2023 by 6%.
- Shorter hospital stays: The average length of stay for employee insurance patients was reduced from 10 days to 8.6 days, with the most significant change at tertiary hospitals (from 9.1 days to 7.6 days).
Why is this happening? DRG/DIP systems pay hospitals based on disease groups—meaning the hospital receives a fixed amount for treating a patient, regardless of the length of stay or costs incurred. To avoid losses, hospitals are incentivized to admit fewer patients and shorten their stays, shifting more patients to outpatient services.
III. Increase in Outpatient Costs, but Not Enough to Compensate for the Drop in Hospitalization Expenses
As hospitals shift hospitalization costs to outpatient services, outpatient expenses have increased:
- For employee insurance, the growth rate of general outpatient and emergency services was 6% in 2025, while chronic disease outpatient services grew by 12%; for resident insurance, these rates were 6.4% and 18%, respectively.
- The proportion of costs also changed: the share of hospitalization expenses in total medical insurance decreased from 61% in 2013 to 53% in 2024 for employee insurance, and increased from 29% to 36% for resident insurance; the share of outpatient expenses rose from 83% to 76% for employee insurance and from 10% to 14% for resident insurance.
However, the cost per outpatient visit is much lower than that of hospitalization, so even with higher growth rates, outpatient expenses are not sufficient to offset the decrease in hospitalization costs. For example, if a hospitalization costs 10,000 yuan, an outpatient visit might only cost a few hundred yuan, resulting in an overall reduction in medical insurance expenditures.
IV. Secretive Measures to Control Expenses: Lowering Reimbursement Rates
In addition to reducing hospitalization costs, medical insurance authorities are also lowering reimbursement rates:
- The reimbursement rate for employee insurance hospitalizations decreased from 86% in 2019 to 84.1% in 2025;
- For resident insurance, the reduction was even more significant, from 69% to 66%.
This means that for the same condition, patients are receiving less reimbursement from medical insurance, meaning they will have to pay a larger portion of the costs out of their own pockets—a another strategy to control expenses.
V. Future Trends: Long-Term Cost Control and Changes in the Healthcare Market
Since low revenue growth rates have become the new norm, cost control will remain a focal point for policies:
1. Hospitals will place more emphasis on outpatient services and out-of-pocket expenses: Since hospitalization is less profitable, hospitals will focus on outpatient services (especially those for chronic diseases) or offer self-funded services not covered by insurance (such as premium health check-ups or specialized outpatient treatments).
2. Out-of-pocket expenses will become the primary source of funding: It will be difficult for commercial insurance to play a significant role in covering healthcare costs, so patients will need to bear a larger portion of their medical expenses.
3. Reconfiguration of the healthcare market: Large hospitals may reduce general inpatient services and focus on treating complex cases; grassroots hospitals (community and township clinics) will take on more outpatient and rehabilitation services.
In summary, cost control in medical insurance is not a short-term initiative but a long-term trend. For individuals, this means more outpatient visits and higher out-of-pocket expenses in the future, so it's important to prepare accordingly. For hospitals, the era of making profits solely from hospitalization revenues is over, and they will need to adapt their business models.