The construction of compact county medical consortia is a critical lever for deepening the reform of the medical and health system, in which medical insurance policies perform core functions of providing incentives and allocating resources. Based on field investigations of three compact county medical consortia in Guangde City, Jingde County, and Wangjiang County of Anhui Province, this study comparatively analyzes the county-level practices and practical dilemmas of medical insurance policies in supporting the development of traditional Chinese medicine (TCM) across four dimensions: pricing mechanisms, payment methods, performance assessment orientation, and inter-departmental coordination. The study finds that institutional arrangements such as the imperfect pricing mechanism for TCM clinical services, the unreasonable inclusion of Chinese herbal decoction pieces in drug-and-consumable ratio assessments, and the adjustment of county-level outpatient reimbursement policies have constrained the development of primary-level TCM services, while the three counties exhibit differentiated characteristics in preferential payment for TCM-advantaged disease categories, the operation of smart shared TCM pharmacies, and primary-level incentive allocation. Accordingly, policy recommendations are proposed, including improving the price formation mechanism for TCM clinical services, optimizing medical insurance payment design for TCM, establishing specialized incentive mechanisms for primary-level TCM services, and strengthening provincial-level coordination of medical insurance policies for TCM.