INTERNATIONAL HEALTH CARE
China’s Healthcare System
Tom’s Comments:
The article noted below provides the reader with some interesting insight into China’s health care system and the expanding role of health insurance. China is a country of contrasts, with one foot entrenched in the past and one foot firmly planted in the future. There is no better example of this phenomenon than the world of health care.
Chinese traditional medicine, which is based on thousands of years practice, continues to play a major role in health care within both their rural and urban settings. Western medicine has also played an increasing role in China, especially in the major urban venues. If fact, integrative medicine, which is a combination of Chinese traditional medicine and Western medicine is becoming more common throughout China.
Interestingly, as the U.S. debates the expanding role of government in health care, China is looking to the expanded role of private insurance in their health care market.
It is obvious, as noted below, that the introduction and expansion of the role of health insurance in China will mean increased profits for health insurance companies, the open question is how it will impact the Chinese people. China addressed many of the basic health care needs of their people living in rural areas during the Mao years by the use of “Bare-foot Doctors.” These dedicated providers would travel throughout China, caring for the needy. Some fear that the expanded role of health insurance would have a major negative impact on the poor in China.
There is a role for health insurance in China, but it is also important that it is part of an overall national health care program that focuses on health care cost, quality and access to care for all of its citizens.
The Role of Health Insurance in China
With one of the fastest-growing economies in the world, a growing affluent customer segment, a high savings rate and rapidly expanding consumer spending, the People’s Republic of China has become an attractive market for U.S. health insurers.
Aetna Inc. is the latest insurer to enter the market, opening a representative office in Shanghai a few months ago. Wellpoint, Inc. opened its representative office in Beijing this year, while UnitedHealth Group opened its office in Beijing last year. CIGNA Corp. has been in the China market since 2003 and is already turning a profit.
To do business in China, a company must first open a representative office and partner with a Chinese company. The office must be open for two years before the company can apply for a license to sell products and services. Insurers typically use that time to conduct research, explore strategic options and identify a joint-venture partner. CIGNA and others say that finding the right partner is crucial for success.
Aetna is looking at the group insurance market, while Wellpoint and United are exploring opportunities in health administration, risk management and care coordination. CIGNA is focusing on selling individual accident and hospital indemnity products along with life insurance.
According to the U.S. Department of Commerce, the Chinese government is interested in developing its health care and pension insurance sectors in order to sustain announced reforms and provide for the nation’s aging population.
U.S. health insurers say they are focusing on three primary business lines: health insurance products and services for employees of multinational and other companies doing business in China; direct sales of health insurance products to Chinese nationals; and administrative, care coordination, medical management and related services to health care providers and other entities. (“U.S. Health Insurers Go for the Gold in China, but Could Face Hurdles in Complex Emerging Market,” AIS Health.com, August 15, 2008) http://www.aishealth.com/Bnow/hbd081508.html
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Medical Tourism
Tom’s Comments:
The link below will connect you to an article that discusses Medical Tourism. The demand from U.S citizens for Medical Tourism services is relatively small but it continues to grow for a number of reasons:
- The number of the uninsured and underinsured continues to expand in the U.S.
- The growth of large deductible Consumer Driven Benefits incent consumers to evaluate options for healthcare services
- Americans have increasingly recognized that other countries are able to meet and sometime exceed the U.S. in producing products and services outside the healthcare arena (automobiles, computers, etc.)
- The awareness by Americans that healthcare services are being increasingly outsourced to other countries by U.S. healthcare providers (egg. radiology, transcription, etc.)
- International travel relating to cosmetic surgery (egg., Brazil) has had a relatively long history for Americans
- The increased cost of healthcare services in the U.S. tied to the economic challenges that are being faced by our employers and our citizens
- Sophistication of the delivery system infrastructure in the U.S. that acts as middleman for Medical Tourism (egg., managed care organizations such as Aetna, some Blue Cross and Blue Shield plans and a number of niche players (egg, IndUSHealth, etc.)
- An acceptance in the U.S. that many of our finest doctors are both born and educated out of the U.S.
A report published in July of 2008 by Deloitte Consulting, predicts that the number of Americans traveling abroad for treatment will soar from 750,000 in 2007 to 6 million by 2010 and reach 10 million by 2012. Its authors reckon that this exodus will be worth $21 billion a year to developing countries in four years’ time. The average price at good facilities abroad for a range of common medical procedures is, by Deloitte’s reckoning, barely 15% of the price a patient would have to pay in the United States.
Not everyone would buy-in to the above predictions, but there is a widespread recognition that the trend is continuing. Regina Herzlinger of Harvard Business School, stated in the article below that “The medical travel market is a bit over-hyped today, but economics dictate why it will be huge over time: If a supplier has very high prices and erratic quality, it creates an opening for nimbler rivals.”
As the authors of this article state, as far as America is concerned, there will be limits to the impact of medical tourism. Many medical procedures cannot be done abroad safely, concerns about legal liability and malpractice will always linger, and the medical lobby may yet try to blunt this trend. (“Globalization and Healthcare: Operating Profit,” Economist.com, August 14, 2008) http://www.economist.com/business/displaystory.cfm?story_id=11919622
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