Covid wave in China boosts consumer interest in health insurance
Chuiyangliu Hospital, pictured in January 2023 in Beijing, has completed renovations over the past few years that official estimates have increased the number of patients discharged per day by six times to 5,000 per day.
Yin Hong Chow | CNBC
BEIJING. At the top of the shopping list for anyone aged 20 and over in China is health, sports and wellness. That’s according to an Oliver Wyman poll taken late last year, as China finally began to end its control of Covid.
As for people planning to spend more on this health category, 47% said in December that they intend to spend more on health insurance. That’s up from 32% in October, the report said.
“After this latest wave, health concerns have gotten a lot higher, but after the whole pandemic, Chinese consumer consciousness has gone up a lot,” said Kenneth Chow, director of Oliver Wyman.
The study found that even for people in their early twenties, health comes second to their plans to spend more on food. In the study, the categories were ranked by the percentage of respondents who said they intended to spend more on each item, minus the percentage of respondents who planned to spend less.
The pandemic has put pressure on hospitals around the world. But the situation in China – especially after the spike in Covid cases in December – has revealed a gap between the local public health system and the country’s global economic weight, second only to the United States.
According to the World Bank, the US ranks first in the world in per capita health care spending at $10,921 in 2019. For China, the same figure was $535 as for Mexico.
Households in China also pay for a higher share of their health care, at 35.2% compared to 11.3% for Americans, according to the World Bank.
The extreme pressure on public hospitals, including lack of capacity, has resulted in many new patients receiving Covid and non-Covid treatment being forced to go to facilities operated by United Family Healthcare in China, said the CEO and founder Roberta Lipson. She said that her company has 11 international standard hospitals and more than 20 clinics in major cities in China.
“Growing awareness of the importance of guaranteed access to healthcare, as well as UFH as an alternative provider, is leading to increased demand for our services from patients who can afford to pay for their own care,” she said.
“This experience is also driving increased interest in commercial health insurance, which can cover access to premium private providers,” Lipson said. “We help patients understand the benefits of commercial insurance. This will have a long-term impact on the volume of demand for private medical services.”
New Frontier Health acquired United Family Healthcare from TPG in 2019.
In early December, mainland China abruptly lifted strict coronavirus contact tracing measures. According to official figures, the number of infections has risen sharply, with hospitalizations across the country reaching 1.6 million on January 5.
Between December 8 and January 12, about 60,000 people died in Chinese hospitals, mostly elderly people, according to Chinese health authorities. By January 23, the total had surpassed 74,000. CNBC estimates from official data.
While the number of new deaths per day has dropped sharply from its peak, the numbers do not include Covid patients who may have died at home. Anecdotes depict the public health system overwhelmed with people at the height of the wave, and long waiting times for an ambulance. Doctors and nurses worked overtime in hospitals, sometimes when sick.
Most of China’s 1.4 billion people have what’s called social health insurance, which provides access to public hospitals and reimbursement for medicines on a government-approved list. Employers and their employees make regular payments to the public system.
Penetration of other health insurance, including commercial plans, was just 0.8% as of Q3 2022, according to S&P Global Ratings.
Analyst WenWen Chen expects commercial health insurance to grow rapidly this year and next. “After Covid, we see people’s risk awareness rising. [health insurance] agents, it is easier for them to establish conversations with clients.
Some of the players in China’s health insurance industry include Ping An, PICC and AIA. Local authorities are also testing a low-cost insurance product called Huimin Bao.
A survey conducted by Oliver Wyman in December showed that 62% of non-insurers plan to purchase health insurance, and 44% of existing insurers are considering increasing their coverage.
Over the past 15 years, the Chinese government has allocated financial and political resources to the development of the country’s public health system. This topic was devoted to a whole section of the report of Chinese President Xi Jinping at a major political meeting in October.
However, according to Qingyue Meng, executive director of the China Center for Health Development Research at Peking University, one of the barriers to improving China’s public health system is its fragmented funding system.
Health care providers in China receive funding from four sources – social health insurance, the state health budget, basic public health programs and out-of-pocket payments – each “managed by different authorities without effective coordination in budget management and allocation,” Meng said. . wrote in Lancet in December.
“Hospitals and clinics are reluctant to provide public health services due to a lack of financial incentives and a lot of regulations,” he said, “that further divide[s] hospitals and [specialized public health organizations such as the Centers for Disease Prevention and Control].”
For comparison, HCA Healthcarethe largest hospital operator in the US, said more than half of income comes from managed care—often company-subsidized plans that have a network of health care providers—and other insurance companies. Most of HCA’s other income comes from the state health insurance plans Medicare and Medicaid.
In China, United Family Healthcare’s Lipson said the private business allows him to respond faster. “We fund our own growth and are able to acquire talent and experience with competitive pay packages, so we can also bend beds to the level of service that is needed.”
“Watching how the outbreak of the pandemic has been happening in other countries, and since our patients are paid privately, we have been able to order enough medicines, personal protective equipment, etc., as we have started to see an increase in the number of Covid cases in China,” – she said. said.
Lipson said her company had overcapacity at the start of the pandemic as it opened four hospitals in the past two years, noting that the state system has added 80,000 intensive care beds over the past three years but has struggled to keep up with demand from – for a splash. in cases of Covid.
Shortage of specialized doctors
Ultimately, the shock of the pandemic provides an opportunity for broader change in the industry.
The medical billing system does not have a direct impact on China’s hospitals because most of them are under the direct control of the government, said George Jiang, Frost & Sullivan’s director of consulting.
But he said macro events could lead to needed systemic changes, such as tripling the capacity of an intensive care unit in a month.
China’s multi-level medical system has forced doctors to compete for a few cutting-edge intensive care units in only the largest cities, Jiang said, leading to a shortage of qualified intensive care physicians and therefore beds. He said recent changes mean smaller cities can now hire such specialized doctors, a situation China hasn’t seen in the last 15 years.
He expects that now with more intensive care beds, China will need to train more doctors for this level of care.
There are many other factors behind the development of health care in China and why locals often travel abroad for medical treatment.
But Jiang noted that the greater use of the Internet for payments and other services in China compared to the US means the Asian country could become the most advanced market for digitizing medicine.
Chinese companies already in space include JD Health and WeDoctor.
— Dan Mangan of CNBC contributed to this report.