China’s Covid wave drives up consumer interest in health insurance

BEIJING — Health, sports and wellness top the shopping list for Chinese late 20s and older. This is according to a study by Oliver Wyman late last year, when China finally began to end its coronavirus measures.

Of those planning to spend more on that health category, 47% said they planned to spend more on health insurance in December. That’s up from 32% in October, according to the report.

Kenneth Chou, Principal at Oliver Wyman, said: “Health concerns are much higher after this latest wave, but after the pandemic as a whole, Chinese consumers are significantly more health conscious. I’m here.

The survey found that even among people in their early 20s, health was only the second most common plan to spend more on food. , minus the percentage of respondents who plan to pay less, to rank the categories.

The pandemic has put pressure on hospitals around the world.But the situation in China, especially since Covid cases surged in December, has revealed that the gap between the local public health system and China’s global economic burden is second only to the United States.

According to the World Bank, the United States has the highest per capita health care spending in 2019 at $10,921 in the world. For China, the same figure is $535, similar to Mexico.

According to World Bank data, Chinese households also pay higher medical bills, at 35.2% compared to 11.3% of Americans.

Extreme pressure on public hospitals, including capacity shortages, has pushed many new patients needing Covid and non-Covid care to facilities run by China’s United Family Healthcare, said founder Roberta Lipson. said. Her company has her 11 international-standard hospitals and her more than 20 clinics in major cities in China, she said.

“Growing awareness of the importance of reliable access to healthcare and UFH as an alternative provider are driving increased demand for our services from patients who can afford out-of-pocket care.” she said.

“This experience has also raised interest in commercial health insurance, which can cover access to premium private providers,” said Lipson. “We are helping patients understand the benefits of commercial insurance, which will have a lasting impact on the volume of demand for private health services.”

New Frontier Health, of which Lipson is Vice Chairman, acquired United Family Health Care from TPG in 2019.

In early December, mainland China abruptly ended strict Covid contact tracing measures. Infections surged, with a national high of 1.6 million people hospitalized on January 5, according to official data.

According to Chinese health officials, about 60,000 people died in hospitals in China from December 8 to January 12 related to the new coronavirus, most of them elderly. By Jan. 23, the total he surpassed 74,000, according to CNBC’s estimates from official data.

The number of new deaths per day has dropped sharply from its peak, but this number does not include Covid patients who may have died at home. It depicts being overwhelmed by people and long waits for ambulances. Doctors and nurses worked overtime in hospitals, sometimes 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 on a state-approved list. Employers and their staff regularly make payments to government-run systems.

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

Analyst WenWen Chen expects corporate health insurance to grow rapidly this year and next. “Following Covid, we can see that people are becoming more risk-conscious,” he said. [health insurance] It makes it easier for agents to establish conversations with clients. ”

Players in China’s health insurance industry include: peace, PICC When AIALocal governments are also testing a low-cost insurance product called Huimin Bao.

A December survey by Oliver Wyman found that 62% of uninsured policyholders plan to purchase health insurance, and 44% of existing policyholders are looking to expand coverage. I was.

Over the past 15 years, the Chinese government has invested financial and political resources into developing the country’s public health system. The topic was an entire section of China’s President Xi Jinping’s report to a major political conference in October.

But according to Qingyue Meng, executive director of the China Health Development Research Center at Peking University, one of the barriers to improving China’s public health system is its fragmented financial system.

Healthcare providers in China receive funding from four sources: social insurance, government medical budgets, basic public health programs, and copayments. Each of these funds is “managed by different authorities without effective coordination in budgetary control and allocation,” Meng said. In December he contributed to The Lancet.

“Hospitals and clinics are reluctant to provide public health care due to lack of financial incentives and a significant number of regulations,” he said.[s] hospital and [specialized public health organizations such as the Centers for Disease Prevention and Control].”

For comparison, HCAHealthcareAs the largest hospital operator in the United States, most of HCA’s other revenue comes from government-affiliated Medicare and Medicaid health insurance plans.

In China, United Family Healthcare’s Lipson argued that being a privately held company would allow it to respond more quickly. “We fund the growth of our company and offer competitive salary packages that allow you to acquire talent and expertise, so you can also tailor your bed to the level of care you need. ”

“Observing how the pandemic surge in other countries has gone, and because our patients are at their own expense, as the number of Covid cases started to rise in China, there is not enough medical supplies, PPE, etc. We were able to order the right supply,” she said.

Her company had overcapacity at the start of the pandemic after opening four hospitals in the past two years, Lipson said, adding that the public system had replaced 80,000 intensive care beds in the past three years. added, but said it struggled to meet demand from the surge. For Covid.

Ultimately, the pandemic shock presents an opportunity for broader industry change.

According to George Jiang, consulting director at Frost&Sullivan, the medical payment system has no direct impact on Chinese hospitals as most hospitals are under direct government oversight.

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

China’s stratified healthcare system has forced doctors to compete for several advanced intensive care units only in big cities, leading to a shortage of qualified ICU doctors and shortages of beds, Jiang said. said. He said recent changes mean small cities have the ability to hire doctors with such expertise – a situation China hasn’t seen in the last 15 years.

With the number of ICU beds now increasing, he expects China will need to train more doctors to provide that level of care.

There are many more factors behind China’s healthcare development and why locals often travel abroad for treatment.

However, Jiang said the growing use of the internet for payments and other services in China compared to the US could make the Asian country a leading market for healthcare digitization. It means that

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

— CNBC’s Dan Mangan contributed to this report.

Correction: This article has been updated to reflect that Roberta Lipson is the founder of United Family Healthcare and Vice Chairman of its parent company, New Frontier Health.