If the activity was unknown to the local healthcare insurance department before the report, informants could receive a percentage of the amount involved in the fraud after it is proved, reported Xinhua News Agency citing the circular.
Rewards should not exceed CNY100,000 ($14,480), it added.
The circular was made public last Saturday after being released earlier to provincial-level healthcare security administrations.
Members of the public can report fraudulent practices by operators of healthcare insurance funds, medical institutions and pharmacies and their employees, as well as by individual insurance subscribers, the circular said. Fraudulent practices include fabricating medical services and documents, fake invoices, lending a healthcare security card to others or receiving medical services with another person's card to profit from the fund.
Whistleblowers can use their names or make anonymous reports, but they must confirm their identity before they can collect any reward. Healthcare insurance authorities at various levels should protect the privacy of informants, the circular said.
The National Healthcare Insurance Administration vowed to intensify its fight against insurance scams across China, focusing on hospitals, pharmacies and subscribers. It released telephone numbers for making reports in all 31 mainland provinces, municipalities and autonomous regions.
"Healthcare insurance authorities face severe challenges in supervision of the insurance fund, and fraudulent practices of various sorts continue to occur, which seriously affect the security of healthcare insurance funds," said Mr Huang Huabo, an insurance fund supervisor with the administration.
"We hope intensifying public supervision will help authorities discover problems in a timely manner and prevent insurance scams," he said.
China's healthcare authorities have punished a number of violators since September, when a national campaign was launched to fight scams.
Last month, a China Central Television report accused two hospitals in Shenyang, capital of Liaoning province, of fraudulent practices. Police detained at least 37 suspects after the report.
In Changchun, capital of Jilin province, 761 medical institutions were penalised for fraud. In addition, government agencies refused to reimburse more than CNY10m of insurance claims.
More than 95% of the Chinese population are covered by state-run basic healthcare insurance programmes, which are heavily subsidised by the government. Reimbursement policies vary with different groups.
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