This paper investigates the impact of employee medical welfare on firm productivity in China, offering new insights into how organizational caregiving affects firm outcomes. Unlike prior studies that rely on policy variation or ESG raking based indicators, we use actual firm-level medical welfare expenditure data from Chinese listed companies to measure the real financial commitment to employee health and present strong evidence that employee medical welfare significantly increases firm productivity. Our results propose a novel mechanism - the psychological security channel - drawing on the ethics of care and weak protection, to explain how medical insurance enhances employee safety and, in turn, improves productivity. The evidence shows that this effect is more pronounced for firms with more low-skilled employees, firms with low R&D intensity, non-state-owned firms and firms located in low birth rate regions, where employees' sense of security is weak. We also show that regional medical facilities have a moderating effect through which employee medical welfare affects productivity. In addition, we find that firms with better employee medical welfare had stronger stock performance and higher firm value during the spread of the COVID-19 virus, underscoring the strategic role of employee health support in crisis preparedness and long-term value creation.