China’s Covid wave spurs consumer interest in health insurance

The Chuyanglu Hospital in Beijing, pictured in January 2023, has finished renovations over the past few years, according to official estimates, leading to a six-fold increase in daily patents to 5,000.

Yin Hon Chow | cnbc

BEIJING – Health, sports and fitness top the shopping list for anyone aged 20 or over in China. This is according to an Oliver Wyman survey late last year, as China finally begins to loosen its Covid controls.

For those planning to spend more on that health category, 47% in December said they intend to spend more on health insurance. It is up from 32% in October, the report said.

“Health concerns remain high after this latest wave, but the health consciousness of the Chinese consumer has increased greatly after the whole pandemic,” said Kenneth Chow, principal at Oliver Wyman.

The survey found that even for people under the age of 20, their plan to spend more on health food is second only to food. The study ranked the categories based on the percentage of respondents who said they intended to spend more on each item, minus the percentage of respondents planning to spend less.

The pandemic put pressure on hospitals around the world. But China’s situation – especially since a surge in Covid cases in December – has revealed the gap between the local public health system and the country’s global economic power second only to the US.

According to the World Bank, the US ranks first in the world in terms of per capita health expenditure in 2019 with $10,921. The same figure for China was $535, the same as Mexico.

Households in China also pay for a higher share of their own health care — 35.2% versus 11.3% for Americans, World Bank data shows.

CEO and founder Roberta Lipson said extreme pressure on public hospitals — including a lack of capacity — brought many new patients for Covid and non-Covid care to facilities operated by United Family Healthcare in China. He said his company has 11 international-class hospitals and more than 20 clinics in major Chinese cities.

“With increasing awareness of the importance of ensuring access to health care, as well as UFH as an alternative provider, there is increasing demand for our services from patients who cannot afford self-pay care,” he added. Can.”

“This experience is also fueling interest in commercial health insurance, the premiums that can cover access to private providers,” Lipson said. “We are helping patients understand the benefits of commercial insurance. This will have a lasting impact on the amount of demand for private health services.”

New Frontier Health acquired United Family Healthcare from TPG in 2019.

In early December, mainland China abruptly ended its stringent COVID contact tracing measures. Official data showed infections soared nationwide, reaching a high of 1.6 million on January 5.

According to Chinese health officials, between 8 December and 12 January, nearly 60,000 Covid-related deaths occurred in Chinese hospitals – mostly senior citizens. As of January 23, the total number rose to more than 74,000, according to CNBC’s estimate from official figures.

Although new deaths per day are falling sharply from the peak, the figures do not include Covid patients who may have died at home. Anecdotes depict a public health system overwhelmed by people at wave height and long wait times for ambulances. Doctors and nurses worked overtime in hospitals, sometimes when they were sick themselves.

health insurance

Most of China’s 1.4 billion people have social health insurance, which provides access to public hospitals and reimburses for drugs included in a state-approved list. Both employers and their employees make regular paid contributions to the government-run system.

According to S&P Global Ratings, the penetration of other health insurance — including commercial plans — stood at only 0.8% by the third quarter of 2022.

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Analyst Wenwen Chen expects commercial health insurance to grow rapidly this year and next. “Post COVID, we see an increase in risk awareness among people [health insurance] Agents, it’s easier for them to establish conversations with customers.”

Some of the players in China’s health insurance industry include ping an, PICC And aia, Local officials are also testing a low-cost insurance product called Huimin Bao.

An Oliver Wyman survey in December found that 62% of non-policyholders planned to buy health insurance, and 44% of existing policyholders were considering increasing their coverage.

Over the past 15 years, the Chinese government has devoted financial and political resources to developing the country’s public health system. The topic was an entire section in Chinese President Xi Jinping’s report to a major political meeting in October.

hospital funding

However, according to Qingyu Meng, executive director of Peking University’s China Center for Health Development Studies, one of the obstacles to reforming China’s public health system is its fragmented financing system.

Health care providers in China receive funding from four sources – social health insurance, government health budgets, essential public health programs and out-of-pocket payments – each “managed by different authorities without effective coordination in budget management and allocation, Meng wrote in The Lancet in December.

“Hospitals and clinics are reluctant to provide public health care because of the absence of financial incentives and the significant number of regulations,” he added, “which further separate[s] hospitals and [specialized public health organizations such as the Centers for Disease Prevention and Control],

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for comparison, HCA Healthcare, the largest hospital operator in the US, said more than half of its revenue comes from managed care — often company-subsidized plans consisting of a network of health providers — and other insurers. Most of the HCA’s other revenue comes from the Medicare and Medicaid health insurance plans owned by the government.

In China, Lipson of United Family Healthcare claimed that being a privately managed business allowed it to respond more quickly. “We finance our own growth and can access talent and expertise by offering a competitive pay package, so we can also flex beds to suit the level of care.”

He added, “After observing the progression of the pandemic in other countries, and because our patients are on private pay, we were able to order sufficient supplies of medicine, PPE, etc. as we reported the number of COVID cases in China. Started watching it grow. Told.

His company had excess capacity at the start of the pandemic after opening four hospitals in the past two years, adding 80,000 intensive care unit beds over the past three years to keep the public system in check, but to meet demand from the surge. struggled. In Covid cases.

shortage of specialist doctors

Ultimately, the shock of the pandemic provides an opportunity for broader industry change.

George Jiang, consulting director at Frost & Sullivan, said the health care payment system does not have a direct impact on China’s hospitals, as most are under government oversight.

But he said macro events such as tripling ICU capacity in a month could bring about the necessary systemic changes.

Jiang said China’s tiered medical system had forced doctors to compete for only a few advanced intensive care departments in the biggest cities, leading to a shortage of qualified ICU physicians and therefore beds. He said recent changes mean smaller cities now have the ability to hire such specialized doctors – a situation China has not seen in 15 years.

Now with more ICU beds, he expects China will need to train more doctors for that level of care.

There are many more factors behind China’s health care development, and why locals often go abroad for medical treatment.

But Jiang noted that the greater use of the Internet for payments and other services in China versus the US means the Asian country could become the most advanced market for medical digitization.

Chinese companies already in the space include JD Health and WeDoctor.

— CNBC’s Dan Mangan contributed to this report.

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