According to a recent Wharton School and World Bank study, developing countries share a common issue: widespread failure to provide adequate insurance coverage for their citizens. The problem is exacerbated in China, where most people have to pay out-of-pocket for their health care expenses and often exhaust their life savings in the process.
Even worse, many choose not to visit doctors simply because medical care is unaffordable. The government estimates that 70% of the population has no form of health insurance, with those living in rural areas most disadvantaged.
Chinese policy makers are examining reforms. The National Development and Reform Commission (NDRC) has set the ambitious target of providing all citizens with basic health care by 2010. However, the government may have insufficient resources to fund it all.
According to the Wharton and World Bank Study, voluntary private health insurance is critical to achieve financial protection against the cost of illness in developing countries.
But in China, is the expansion of private health insurance possible?
Let’s examine the current situation. China offers Basic Medical Insurance (BMI) but provides very limited coverage, while private health insurance (PHI) is available but covers less than 3% of the population.
Although PHI is growing rapidly, with over 50 commercial firms already offering medical coverage packages, there are numerous roadblocks that stand in the way of its expansion.
First of all, there are economic and cultural barriers, principally the notion that health care should be state-sponsored in China. On the regulatory front, only life insurance companies are permitted to sell PHI packages, while international firms hoping to participate have yet to pry open the door.
China’s insurance system is also immature, offering little in terms of product selection, differentiation and promotion. Products primarily consist of health insurance packages that cover only critical diseases. On top of that, there is a lack of cooperation between insurers and hospitals to optimize the delivery of health care – insurers do not have their own hospital networks and lack the volume of clients to bargain effectively with hospitals.
Unless the Chinese government takes action, the market for PHI and supporting infrastructure will take too long to develop, since accelerating PHI will help the government direct more health care resources to the poor. There are four key areas of focus:
The adoption of PHI should be a major plank in upcoming health care reform proposals.
Currently, an inter-ministerial Chinese agency, led by the Vice Premier Wu Yi, is in charge of the complex reform project – and is soliciting policy blueprints from eight institutions, including the World Bank, Peking University and government think tanks. Components of Chinese health care reform should include economic and tax incentives for individuals to purchase PHI.
China needs to encourage international firms with experience to build local know-how and expertise.
The government must provide regulatory support and reduce systemwide corruption. The loopholes in today’s insurance sector mean that insurance is open to abuse, deterring new investors in private medical insurance. “In China, it’s not unusual for a policyholder to go into the hospital to get a prescription that is not his own,” a PHI multinational company executive said.
The government needs to address key enablers to develop PHI, including devising a roadmap for the separation of prescribing from dispensing.
Prescribing is a major source of income for hospitals and clinics in China today, and results in “overprescribing,” especially with antibiotics. This leads to higher costs and public health problems, including increasing rates of antimicrobial resistance and mortality. Without the separation of prescribing from dispensing, private insurers will be challenged by system-wide inefficiencies.
We need to enlist the support of key stakeholders to promote PHI.
Compelling messages must be relayed to the NDRC and the Ministry of Health to spur the development of PHI. One such message is that expanding PHI will help address diminishing BMI funds. Although BMI has historically shown a surplus, this is diminishing, and is expected to decline as the ratio of employees to retirees decreases.
Ultimately, the Chinese government must proactively intercede to make health care more accessible. The case for expanded PHI is a strong one. China can’t afford to subsidize universal coverage, and it is a worthwhile endeavor to ensure more of its citizens receive proper health care.
Hill is the global consulting general manager of IMS Health, the global source for pharmaceutical market intelligence, providing critical information, analysis and services for the industry’s decision-makers.
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