When we discussed the contents for the very first 2020 new year issue of our newsletter, I was naturally being asked by my colleagues, as the company’s expert on China, to write something about “what’s going on in China that our MedTech customers would be interested in”. My short answers are: “Price reduction” and “DRGs”. Something that I touched upon in previous newsletters, which will continue to haunt the industry players and shape the industry landscape as the Chinese government’s reform advances.
But before I report the progress on those fronts, I’ve noticed an official statistical report of the 2018 national social health insurance fund, which provides high-level data for an outsider to try to grasp the essential characteristics of China’s healthcare funding and delivery system and understand the challenges an industry player as well as the Chinese government payer are facing with in terms of the funding constraints.
A Brief Overview of China’s Evolving Social Health Insurance Scheme
China’s government-led, national social health scheme (called Basic Medical Insurance, BMI) was introduced approximately 20 years ago in the late 90s.
Understandably the employee scheme has always been the main cornerstone of the BMI and the most well-funded scheme given that the contributions are coming from both the individuals and their employers. But that only covers less than 1/3 of the total population in China as there is a huge rural population who do not have any formal employment arrangements for various reasons, plus those unemployed city residents such as the dependent family members.
Similar to the Obamacare, one of the healthcare reform goals, which started from 2009 in China, is to ensure that every Chinese would have access to affordable care. The focus, since then, has been switched to look after the previously ignored or poorly-insured populations such as the farmers as the government is trying to tackle the inequality issue in health care.
And starting from 2016, the government has taken a more aggressive approach to integrate the rural scheme with the city resident’s scheme in the context of eliminating the inequalities between urban and rural residents. The structural change has resulted in a sharp increase in the number of covered lives whereas the BMI funding source itself has remained the same.
It is now not difficult to understand why the Chinese government is not really interested in the industry’s lobbying messages to try to improve coverage and be friendly with newer but often more expensive medical technologies when they are struggling with allocating the same amount of health care budget with 1.3 billion people instead of 300 million.
Now let’s look at the 2018 BMI statistics.