Home World The Covid wave in China is increasing consumer interest in health insurance

The Covid wave in China is increasing consumer interest in health insurance

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Chuyangliu Hospital, pictured in January 2023 in Beijing, has completed renovations over the past few years, increasing the number of daily patents sixfold to 5,000 per day, according to official estimates.

Yin Hong Chou | CNBC

BEIJING — At the top of the shopping list for those over 20 in China are health, sports and well-being. That’s according to a survey by Oliver Wyman at the end of last year, when China finally started to lift its Covid control measures.

For people who plan 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.

“There have been a lot more health issues since this last wave, but after the whole pandemic, Chinese consumer awareness has increased significantly,” said Kenneth Chow, managing director at Oliver Wyman.

Even for people in their twenties, health comes second to plans to spend more money on dining out, the survey found. The study 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 squeezed hospitals around the world. But the situation in China – especially after the number of Covid cases increased in December – revealed a gap between the local health system and the country’s global economic power, second only to the US

According to the World Bank, the United States ranks first in the world in health care spending per person at $10,921 in 2019. For China, the same figure was $535 as in Mexico.

Households in China also pay a higher share of medical services – 35.2% compared to 11.3% for Americans, data from the World Bank showed.

Extreme pressure on public hospitals — including a lack of capacity — has led many new patients for treatment of Covid and other illnesses to facilities run 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 cities in China.

“Growing awareness of the importance of guaranteed access to care, as well as NFH as an alternative provider, is driving 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 can cover access to premium private providers,” Lipson said. “We help patients understand the benefits of commercial insurance. This will have a lasting impact on the volume 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 strict Covid contact tracing measures. The number of infections rose, with hospitalizations reaching 1.6 million across the country on January 5, official data showed.

Between Dec. 8 and Jan. 12, Chinese hospitals recorded nearly 60,000 Covid-related deaths — mostly the elderly, according to Chinese health authorities. By January 23, their total number exceeded 74 thousand, according to CNBC estimates from official data.

​​​​​​While the number of new deaths for the day fell sharply from the peak, the figures do not include Covid patients who may have died at home. Anecdotes depict a health care system overwhelmed with people at its peak and long wait times for ambulances. Doctors and nurses sometimes worked overtime in hospitals while they themselves were ill.

Medical insurance

Most of China’s 1.4 billion people have so-called social health insurance, which provides access to public hospitals and reimbursement for drugs on a state-approved list. Employers and their employees make regular payments into the government system.

As of the third quarter of 2022, penetration of other types of health insurance — including commercial plans — was just 0.8%, according to S&P Global Ratings.

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Analyst WenWen Chen expects rapid growth in commercial health insurance this year and next. “After Covid, we see that people’s awareness of the risk is increasing [health insurance] agents, it’s easier for them to set up conversations with customers.”

Some of the players in the Chinese health insurance industry include Ping An, PICC and AIA. Local authorities are also testing a low-cost insurance product called Huimin Bao.

A December Oliver Wyman survey found that 62% of the uninsured plan to purchase health insurance, while 44% of existing policyholders are considering increasing their coverage.

Over the past 15 years, the Chinese government has allocated financial and political resources to develop the country’s public health system. The topic was part of a speech by Chinese President Xi Jinping at a major political meeting in October.

Funding of hospitals

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In comparison, HCA Healthcarethe largest hospital operator in the US, said more than half of their income comes from managed care — often company-subsidized plans that have a network of health care providers — and other insurers. Most of HCA’s other revenue comes from the state health insurance plans Medicare and Medicaid.

In China, United Family Healthcare Lipson argued that being a private company allows it to respond more quickly. “We fund our own growth and can acquire talent and experience while offering competitive pay packages, so we can also flex the beds to the level of care that is needed.”

“Following the progress of the pandemic in other countries, and because our patients pay privately, we were able to order sufficient supplies of medicines, personal protective equipment, etc., as we started to see the number of Covid cases in China increasing,” she said. said.

Her company had excess capacity at the start of the pandemic because it opened four hospitals in the past two years, Lipson said, noting that the state system has added 80,000 intensive care beds in the past three years but has struggled to meet demand because of the surge. in cases of covid.

Shortage of specialist doctors

After all, the shock of the pandemic provides an opportunity for broader changes in the industry.

The health care payment system has no direct impact on Chinese hospitals because most are under state control, said George Jiang, director of consulting at Frost&Sullivan.

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

China’s multi-tiered medical system has forced doctors to compete for the few advanced intensive care units in only the biggest cities, leading to a shortage of qualified intensive care doctors and therefore beds, Jiang said. He said the recent changes mean smaller cities are now able to hire such specialist doctors – a situation China has not seen in 15 years.

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

There are many other factors that contribute to the development of healthcare in China and that is why local residents often go abroad for treatment.

But Jiang noted that China’s greater use of the Internet for payments and other services compared to the U.S. 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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