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China’s Covid wave sparks consumer interest in health insurance

Chuiyangliu Hospital, pictured in January 2023 in Beijing, has completed renovations in recent years that have seen the number of daily patents increase sixfold to 5,000 a day, according to official estimates.

Yin Hon Chow | CNBC

BEIJING — High on the shopping list for anyone in their late 20s or older in China is health, sports and wellness. That’s according to an Oliver Wyman survey late last year, as China finally began ending its Covid checks.

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

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

Even for people in their early twenties, health is only second to their plans to spend more on meals, according to the survey. The study ranked the categories based on the percentage of respondents who said they intended to spend more on each item, minus the percentage of respondents planning to spend less.

The pandemic has put pressure on hospitals around the world. But China’s situation – particularly since the spike in Covid cases in December – has exposed the gap between the local public health system and the country’s global economic clout, second only to the United States.

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

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

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Extreme pressure on public hospitals – including lack of capacity – has driven many new patients for Covid and non-Covid care to facilities operated by United Family Healthcare in China, founder Roberta Lipson said. She said her company has 11 international-level hospitals and more than 20 clinics in major Chinese cities.

“Growing awareness of the importance of assured access to healthcare, as well as of UFH as an alternative provider, is leading to increased demand for our services from patients who can afford healthcare. self-paid,” she said.

“This experience is also driving increased interest in commercial health insurance that could cover access to high-end 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, of which Lipson serves as vice president, acquired United Family Healthcare from TPG in 2019.

In early December, mainland China abruptly ended its strict Covid contact tracing measures. Infections have been on the rise, with hospitalizations peaking at 1.6 million nationwide on January 5, according to official data.

Between Dec. 8 and Jan. 12, Chinese hospitals recorded nearly 60,000 Covid-related deaths – mostly elderly people, according to Chinese health authorities. On January 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 depict an overwhelmed public health system at the height of the wave, and long wait times for ambulances. Doctors and nurses worked overtime in hospitals, sometimes when they themselves were ill.

Health insurance

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

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

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In comparison, Health HCAthe largest hospital operator in the United States, said more than half of its turnover comes from managed care — often company-subsidized plans that have a network of healthcare providers — and other insurers. Most of HCA’s other income comes from government-tied Medicare and Medicaid health insurance plans.

In China, Lipson of United Family Healthcare said being a private company allowed it to respond more quickly. “We fund our own growth and can acquire talent and expertise by offering competitive compensation packages, so we can also tailor beds to the level of care required.”

“Having watched the course that pandemic outbreaks have taken in other countries, and because our patients are privately paid, we were able to order enough drugs, PPE, etc., as we started to see the number of Covid cases increase in China,” she said. said.

His company had excess capacity at the start of the pandemic since opening four hospitals in the past two years, Lipson said, noting that the public system added 80,000 intensive care unit beds in the past three years, but has struggled to meet soaring demand. in Covid cases.

A shortage of specialized doctors

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

The health care payment system has no direct impact on Chinese hospitals, as most are directly under government oversight, said George Jiang, consulting director at Frost&Sullivan.

But he said macro events can drive needed systemic changes, such as tripling critical care capacity in a month.

China’s multi-tiered medical system has forced doctors to compete for a few advanced intensive care wards in only the biggest cities, resulting in a shortage of qualified intensive care doctors and therefore beds, Jiang said. He said recent changes mean smaller towns now have the capacity to hire such specialist doctors – something China hasn’t seen in the past 15 years.

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

Many other factors explain the development of health care in China and explain why people often travel abroad for treatment.

But Jiang noted that China’s greater use of the internet for payments and other services compared to the United States means the Asian country may become the most advanced market for medical digitalization.

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 indicate that Roberta Lipson is founder of United Family Healthcare and vice president of parent company New Frontier Health.

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