China’s Covid wave boosts consumer interest in health insurance
Chuiyangliu Hospital, pictured in Beijing in January 2023, has completed renovations in recent years that have allowed daily patents to increase sixfold to 5,000 a day, official estimates say.
Yin Hon Chow | CNBC
BEIJING – Health, exercise and wellness top the shopping list for anyone in their late 20s and older in China. That’s according to an Oliver Wyman poll late last year, just as China was finally beginning to end its Covid controls.
Of those who plan to spend more on this health category, 47% said they plan to spend more on health insurance in December. That’s up from 32% in October, the report said.
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“After this latest wave, there are much bigger health concerns, but after the entire pandemic, there has been a surge in health awareness among Chinese consumers,” said Kenneth Chow, director at Oliver Wyman.
Even for people in their early 20s, health comes second to plans to spend more on food, the survey found. The study ranked the categories based on the percentage of respondents who said they would spend more on each item, minus the percentage who said they would spend less.
The pandemic put pressure on hospitals around the world. But China’s situation — particularly since December’s spike in Covid cases — revealed the gulf between the local public health system and the country’s global economic clout, second only to the US
According to the World Bank, the U.S. ranks first in the world in per capita healthcare spending at $10,921 in 2019. For China, the same figure was $535, similar to Mexico.
Households in China also pay for a higher proportion of their healthcare — 35.2% versus 11.3% for Americans, World Bank data showed.
Extreme pressure on public hospitals — including a lack of capacity — has driven many new patients for Covid and non-Covid treatment at facilities operated by United Family Healthcare in China, said CEO and founder Roberta Lipson. She said her company has 11 international-standard hospitals and more than 20 clinics in major Chinese cities.
“Growing awareness of the importance of secure access to health care and of UFH as an alternative provider is leading to increased demand for our services from patients who can afford self-pay care,” she said.
“This experience is also driving interest in commercial health insurance, which could cover access to private premium providers,” Lipson said. “We’re helping patients understand the benefits of commercial insurance. This will have a profound impact on the volume of demand for personal healthcare.”
New Frontier Health acquired United Family Healthcare from TPG in 2019.
In early December, mainland China abruptly ended its strict Covid contact tracing measures. Official data showed that infections were rising sharply, with hospitalizations hitting a peak of 1.6 million nationwide on January 5.
Between December 8 and January 12, Chinese hospitals recorded nearly 60,000 Covid-related deaths – mostly seniors, according to Chinese health officials. As of Jan. 23, the total exceeded 74,000, according to CNBC estimates from official data.
Although new deaths per day have fallen sharply from the peak, the figures do not include Covid patients who may have died at home. Anecdotes describe a public health system overwhelmed with people at the peak of the wave and long waits for ambulances. Doctors and nurses worked overtime in hospitals, sometimes while they were sick themselves.
Most of China’s 1.4 billion people have so-called social health insurance, which provides access to public hospitals and reimbursement for medicines that are on a government-approved list. Both employers and their employees make regular payments to the state system.
Penetration of other health plans — including commercial plans — was just 0.8% in the third quarter of 2022, according to S&P Global Ratings.
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Analyst WenWen Chen expects commercial health insurance to grow rapidly this year and next. “After Covid, we see that people are becoming more risk-aware [health insurance] Agents find it easier to pick up conversations with customers.”
Chinese health insurance industry players include ping on, PICC and AIA. Local authorities are also testing a low-cost insurance product called Huimin Bao.
Oliver Wyman’s December survey found that 62% of non-policyholders plan to purchase health insurance and 44% of existing policyholders are considering increasing their coverage.
Over the past 15 years, the Chinese government has dedicated financial and political resources to developing the country’s public health system. The subject was an entire section of Chinese President Xi Jinping’s report to a major political meeting in October.
However, one of the obstacles to improving China’s public health system is its fragmented funding system, according to Qingyue Meng, executive director of Peking University’s China Center for Health Development Studies.
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 agencies without effective coordination in budget management and allocation,” Meng wrote in The Lancet in December.
“Hospitals and clinics are reluctant to offer public health care due to the lack of financial incentives and the important number of regulations that are more divergent,” he said[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 corporate-subsidized plans with a network of healthcare providers — and other insurers. Most of HCA’s other revenue comes from Medicare and Medicaid state-related health insurance plans.
In China, United Family Healthcare’s Lipson claimed that as a privately held company, it could respond more quickly. “We fund our own growth and can acquire talent and expertise by offering competitive compensation packages, so we can also customize beds to the level of care required.”
“After observing the course of pandemic waves in other countries and our patients being paid privately, we were able to order sufficient stocks of medicines, PPE, etc. when we started to see the number of Covid cases increasing in China,” said she said.
Her company had excess capacity early in the pandemic, having opened four hospitals in the past two years, Lipson said, noting that the public system had added 80,000 intensive care unit beds in the past three years but was struggling to fill demand to cover the increase in Covid cases.
lack of specialists
Ultimately, the shock of the pandemic presents an opportunity for broader industry changes.
The healthcare payment system has no direct impact on China’s hospitals, as most are under direct government supervision, said George Jiang, consulting director at Frost&Sullivan.
But he said macro events could drive necessary systemic changes, such as B. Triple the capacity of the intensive care unit in one month.
China’s tiered medical system has forced doctors to compete for some advanced ICUs only in the largest cities, leading to shortages of qualified ICU doctors and beds, Jiang said. He said the recent changes mean smaller cities now have the capacity to hire such specialized doctors — a situation China hasn’t seen in the past 15 years.
Now with more intensive care beds, he expects China will need to train more doctors at this level of care.
There are many other factors behind the development of healthcare in China and why local people often go abroad for medical treatment.
However, Jiang noted that increased use of the internet for payments and other services in China compared to the US means the Asian country has the potential to become the most advanced market for medical digitization.
Chinese companies already active in this space include JD Health and WeDoctor.
— CNBC’s Dan Mangan contributed to this report.