China’s top healthcare and finance authorities are tightening the rules on how workers spend money held in their personal medical insurance accounts, limiting pharmacy purchases to a government-approved list of products after years of documented misuse.
According to China Daily, the National Healthcare Security Administration and the Ministry of Finance released a joint notice directing provincial healthcare security agencies to establish whitelists specifying which goods may be bought at retail pharmacies using funds from employee basic medical insurance personal accounts. Provincial authorities have until the end of September 2026 to publish their respective lists. The categories of permitted goods outlined in the notice include drugs, diagnostic and monitoring equipment such as thermometers, blood pressure devices, and blood glucose meters, rehabilitation aids, and basic medical supplies including masks, wound plasters, and pregnancy test strips.
On the prohibited side, the notice draws a clear boundary between medical and non-medical spending. Staple foods, personal care products, cosmetics, and nutritional supplements are all off-limits. The ban also extends to lifestyle technology – smartwatches, fitness trackers, and massage devices – items that, while health-adjacent in marketing, fall outside the scope of what the program was designed to fund. The approved product lists are not intended to be permanent. Authorities said the whitelists will be reviewed and updated as medical technology develops and as the needs of account holders change. Goods that are excluded today may become eligible if they acquire a demonstrably medical purpose and are priced in line with coverage expectations.
The employee basic medical insurance program is one of China’s largest social programs, covering close to 389 million workers – roughly three in every 10 people in the country. Enrolled workers accumulate funds in personal accounts that they can draw on at designated pharmacies and to help pay for outpatient visits and hospital stays. Regulators have found that some account holders and pharmacy operators have been exploiting those funds for purposes far outside the program’s mandate.
The notice specifically referenced cases in Hunan and Henan provinces, where pharmacies disguised transactions for cosmetics, supplements, and everyday household goods as reimbursable drug purchases – effectively converting insurance money into general retail spending. The government said the whitelist system is designed to address this by “regulating the use of employee basic medical insurance personal accounts in a reasonable, prudent, flexible, and measured manner, preventing the inclusion of unreasonable expenses that fall outside the scope of basic medical coverage and resolutely safeguarding the security of medical insurance funds.”
The Chinese government’s move reflects concerns that are not confined to China alone. In its 2026 Global Medical Trends Survey, WTW identified fraud, waste, and abuse as one of four leading drivers of medical cost increases worldwide, cited by 38% of the 346 insurers across 91 countries that participated in the survey. Asia-Pacific posted the steepest regional medical cost increase in the survey, with costs projected to reach 14% in 2026, up from 13.2% in 2025.
China’s commercial health insurers operate in parallel with the public system and often use the same pharmacy distribution channels. Where supplementary products include pharmacy benefits, the whitelist regime could alter the claims environment – particularly as each province sets its own list, meaning eligible items may differ depending on where a policyholder is located. Beyond the immediate operational question, the reform points to a regulatory environment in which the boundaries of reimbursable spending are being defined more precisely. For insurers designing or pricing products that complement the public system, the direction of policy travel is toward narrower, more explicitly medical definitions of what qualifies for coverage.
