China’s Covid wave is driving consumer interest in insurance after health system shortcomings

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Photographed in January 2023 in Beijing, Chuiyangliu Hospital has completed renovations in recent years that official estimates have enabled a six-fold increase in daily patents to 5,000 a day.

Yin Hon Chow | TUSEN

BEIJING — At the top of the shopping list of everyone in their late 20s or older in China is health, sports and wellness. That’s according to a survey by Oliver Wyman late last year, when China finally started to end Covid controls.

Of people who plan to spend more on that health category, 47% said in December they plan to spend more on health insurance. That’s up from 32% in October, the report said.

“There is a much greater concern about health after this latest wave, but after the whole pandemic, the health awareness of the Chinese consumer has increased enormously,” said Kenneth Chow, director of Oliver Wyman.

Even for people in their early 20s, health is second only to their plans to spend more on food, the survey found. The study ranked the categories based on the percentage of respondents who said they plan to spend more on each item, minus the percentage of respondents who plan to spend less.

The pandemic put pressure on hospitals around the world. But the situation in China – especially since the surge in Covid cases in December – revealed the gap between the local public health system and the country’s global economic weight, behind the US.

According to the World Bank, the US ranks first in the world in health spending per person, with $10,921 in 2019. For China, the same figure was $535, similar to Mexico’s.

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

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, CEO and founder Roberta Lipson said. She said that her company has 11 international standard hospitals and more than 20 clinics in major Chinese cities.

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“Growth in awareness of the importance of guaranteed access to healthcare, as well as UFH as an alternative provider, is driving increasing demand for our services from patients who can afford self-paid care,” she said.

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

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

In early December, mainland China abruptly ended strict contact tracing measures against Covid. Infections surged, with hospitalizations peaking at 1.6 million nationwide on Jan. 5, official data showed.

Between Dec. 8 and Jan. 12, Chinese hospitals saw nearly 60,000 Covid-related deaths — mostly seniors, according to Chinese health authorities. As of Jan. 23, the total was over 74,000, according to TUSEN estimates based on official data.

While the number of new deaths per day has plummeted from its peak, the figures exclude Covid patients who may have died at home. Anecdotes show a public health system overwhelmed with people at the peak of the surge, and long ambulance wait times. Doctors and nurses worked overtime in hospitals, sometimes while they were sick themselves.

Health insurance

Most of China’s 1.4 billion people have so-called social health insurance, which provides access to public hospitals and reimbursement of medicines on a state-approved list. Employers and their staff both contribute periodic payments to the government-run system.

According to S&P Global Ratings, the penetration rate of other health insurance plans — including commercial plans — was just 0.8% as of Q3 2022.

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Analyst WenWen Chen expects commercial health insurance to grow rapidly this year and next. “Following Covid, we do see that people’s risk awareness is increasing [health insurance] agents, it’s easier for them to establish conversations with customers.”

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Some of the players in China’s health insurance industry include Ping one, PICC and AIA. Local authorities are also testing a cheap insurance product called Huimin Bao.

Oliver Wyman’s December survey found that 62% of non-policyholders were planning to purchase health insurance and 44% of existing policyholders were considering an increase in their coverage.

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

Hospital financing

However, according to Qingyue Meng, executive director of Peking University’s China Center for Health Development Studies, one of the barriers to improving China’s public health system is the fragmented funding system.

Healthcare providers in China receive funding from four sources: social health insurance, the government’s health budget, essential public health programs and out-of-pocket payments — each “administered by different authorities without effective coordination in budget management and allocation,” Meng wrote in December in The Lancet.

“Hospitals and clinics are reluctant to provide public health care due to the lack of financial incentives and the sheer number of regulations,” he said, “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 with a network of healthcare providers — and other insurers. Most of HCA’s other revenue comes from government-related health insurance for Medicare and Medicaid.

In China, United Family Healthcare’s Lipson claimed that being a private company allowed it to respond more quickly. “We fund our own growth and can acquire talent and expertise by offering competitive pay packages, so we can also flex beds to the level of care needed.”

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“Having followed the course of pandemic peaks in other countries, and because our patients are privately paid, we were able to order enough medicines, personal protective equipment, etc., when we started to see the number of Covid cases grow in China,” she said . said.

Her company had excess capacity at the start of the pandemic since it opened four hospitals in the past two years, Lipson said. in Covid cases.

A shortage of specialized doctors

Ultimately, the shock of the pandemic offers the opportunity for broader changes in the industry.

The healthcare payment system has no direct impact on China’s hospitals, as most of them are directly overseen by the government, said George Jiang, consulting director at Frost&Sullivan.

But he said macro events could trigger necessary system changes, such as tripling ICU capacity in a month.

China’s tiered medical system forced doctors to compete for a few advanced intensive care units in only the largest cities, leading to a lack of qualified ICU doctors and therefore beds, Jiang said. He said recent changes mean that smaller towns now have the capacity to hire such specialist doctors – a situation China has not seen in the last 15 years.

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

There are many more factors underlying the development of health care in China 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.

— TUSEN’s Dan Mangan contributed to this report.

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