China’s Covid wave raises consumer interest in health insurance

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Chuiyangliu hospital, in January 2023 in Beijing, completed in the last few years a renovation that allowed a sixfold increase in daily patents to 5,000 per day, according to official estimates.

Yin Hon Chow | CNBC

BEIJING – At the top of the shopping list for anyone in their late 20s or older in China are health, sports and wellness. That’s according to an Oliver Wyman study late last year, as China finally began to end its Covid controls.

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

“Health concern is much higher after this latest wave, but after the pandemic the Chinese consumer’s health awareness has increased significantly,” said Kenneth Chow, a principal at Oliver Wyman.

Even for people in their early twenties, health is only second in their plans to spend more on food, the survey found. The survey ranked the categories by the percentage of respondents who said they planned 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 China’s situation – especially as Covid cases rose in December – revealed the gap between the local public health system and the country’s global economic situation as second only to the US

The US ranks first in the world in terms of health spending per person, at $10,921 in 2019, according to the World Bank. For China, the same figure was at $535, similar to the one in Mexico.

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

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Extreme pressure on public hospitals — including a lack of capacity — sent many new patients for Covid and non-Covid care to facilities run by United Family Healthcare in China, founder Roberta Lipson said. She said that her company has 11 international level hospitals and more than 20 clinics in the main cities of China.

“Growing awareness of the importance of guaranteed access to health care, as well as UFH as an alternative provider, is driving increased demand for our services from patients who can afford self-pay care,” she said.

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

New Frontier Health, of which Lipson is vice chairman, acquired United Family Healthcare from TPG in 2019.

In early December, mainland China abruptly ended its strict Covid contact tracing measures. Infections rose, with hospitalizations reaching a high of 1.6 million across the country on January 5, official data showed.

Between December 8 and January 12, Chinese hospitals saw nearly 60,000 Covid-related deaths – most of them elderly, according to Chinese health authorities. By January 23, the total number exceeded 74,000, according to CNBC estimates from official data.

Although new deaths each day have fallen significantly from the peak, the numbers do not include Covid patients who may have died at home. News reports show a public health system overwhelmed with people at the peak of the wave, and long waiting times for ambulances. Doctors and nurses worked overtime in hospitals, sometimes while they themselves were sick.

Health insurance

Most of China’s 1.4 billion people have what is known as social health insurance, which provides access to public hospitals and reimbursement for included medicine. the list approved by the state. Employers and employees alike make regular payments into the government-run system.

Other health insurance penetration – including commercial plans – was only 0.8% as of 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 are seeing people’s risk awareness rise [health insurance] agents, it’s easier for them to establish conversations with clients.”

Among some of the players in China’s health insurance industry Ping An, PICC and AIA. Local authorities are also testing a low-cost insurance product called Huimin Bao.

An Oliver Wyman survey in December found that 62% of people who did not have a policy planned to buy health insurance, and that 44% of existing policyholders were considering an increase in coverage. they have

Over the past 15 years, the Chinese government has dedicated financial and political resources to improving the country’s public health system. The topic was a full section of Chinese President Xi Jinping’s report at a key political meeting in October.

Hospital funding

However, one of the obstacles to the development of China’s public health system is its fragmented funding system, according to Qingyue Meng, executive director of the China Health Development Studies Center at Peking University.

Healthcare providers in China receive funding from four sources – social health insurance, the government health budget, 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 lack of financial incentives and the significant number of regulations,” he said, “which is further isolating.[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, says more than half of its revenue comes from managed care – often company-subsidized plans that own a network of health providers – and other insurers. Most of HCA’s other revenue comes from government-affiliated Medicare and Medicaid health insurance plans.

In China, United Family Healthcare’s Lipson said being a privately held business allowed him to react more quickly. “We fund our own growth and are able to acquire talent and experience by offering competitive pay packages, so we can also move beds to the level of care required.”

“After looking at the course that pandemic compliance took in other countries, and since our patients are private payers, we were able to provide sufficient supplies of medicines, PPE etc. to order, because we started to see the numbers of Covid cases growing in China,” she said. said.

Her company was overcapacity at the start of the pandemic since it opened four hospitals in the past two years, Lipson said, noting that the public system added 80,000 unit beds. intensive care over the past three years, but that it was difficult for them to meet the demand from the increase. in cases of Covid.

There is a shortage of specialist doctors

Ultimately, the shock of the pandemic provides an opportunity for wider business changes.

China’s hospitals are not directly affected by the health care payment system, as most are directly under government supervision, said George Jiang, director of consulting at Frost & Sullivan.

But he said that macro events can lead to systemic changes that need to be managed, such as tripling ICU capacity in a month.

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

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

There are many more factors behind the development of China’s healthcare, and why local people often go 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 that the Asian country can be the most promising market for medical digitization.

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

— CNBC’s Dan Mangan contributed to this report.

Correction: This story has been updated to reflect that Roberta Lipson is the founder of United Family Healthcare and vice chairman of parent company New Frontier Health.

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