In the coastal Chinese city of Ningbo, a group of elderly and middle-aged people figured out how to convert their health insurance into quick cash. Some 60 people were convicted of reselling drugs to middlemen, according to a Monday announcement from the city’s Jiangbei District procuratorate.

Health experts are warning policymakers to implement stricter laws to curb such fraud and reduce the strain on the country’s health insurance coffers.

The defendants were found guilty last year of illegally selling medicine they bought using their national health insurance, said the procuratorate. Most of them were middle-aged or elderly people who sold drugs to middlemen, who in turn resold them in lesser-developed inland areas at higher prices. Authorities estimated the illicit business to be worth 900,000 yuan ($142,000).

“Health insurance fraud is a big problem in China,” Xu Yucai, a prominent health care policy expert, told Sixth Tone. “Such fraud is conducted in a variety of ways and is difficult to supervise. It’s also depleting our national health insurance fund.”

Health insurance fraud is a recurring issue that has put pressure on China’s medical sector. A 2015 report by Huazhong University of Science and Technology noted that the Chinese health insurance fund is at “great risk” and will face a deficit of 735 billion yuan by 2024 if stricter regulations aren’t implemented.

In Ningbo and other cities, profit-seeking middlemen can be found loitering around hospitals, clinics, and busy public areas like subway stations and markets, tempting passersby with promises of quick cash. One man, 55-year-old Ruan Zhaode, had been involved in such dealings since 2009: He would typically wait outside a clinic in the city center with a placard that said “Collecting Medication,” according to the court document.

Li Hua, a professor specializing in health care policy at Shanghai University of Finance and Economics, told Sixth Tone that the imbalance of health resources and medical services in different parts of the country has created opportunities for unscrupulous people to cash in.

Health insurance for people in rural areas usually entails lower premiums, making certain medications more expensive than in big cities. Consequently, some rural residents turn to middlemen for drugs that might be marked up but are still cheaper than they would be at local pharmacies. And there’s often genuine need, as local hospitals and pharmacies stock fewer and lower-quality medications compared with their urban counterparts.

Li also added more generally that doctors should be wary of prescribing more drugs than a patient needs — another common problem in China.

Li Fuping, 52, visited a number of hospitals in Ningbo seeking medicine from doctors, according to the court document. He had bought drugs worth over 158,000 yuan for hepatitis, diabetes, and other ailments and resold them to Ruan. Authorities began investigating the case in 2016 after the local insurance management bureau alerted them of suspicious activity surrounding Li’s insurance claims.

In a similar case last year, a man in the eastern province of Jiangsu was found profiting from his dead brother’s health insurance: Over a five-month period, he had bought medicine worth 130,000 yuan in his brother’s name to sell to a middleman. However, he died of cancer before he could be prosecuted.

In Ningbo, meanwhile, Ruan was sentenced to five years in prison and fined 25,000 yuan, while Li was sentenced to four and a half years and fined 20,000 yuan.

Editor: Bibek Bhandari.

(Header image: Medication is displayed at the Shantou Central Hospital pharmacy in Shantou, Guangdong province, Dec. 12, 2017. Zheng Wen/VCG)