Frost & Sullivan Chinese Healthcare Analyst Briefing


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Frost & Sullivan Chinese Healthcare Analyst Briefing

  1. 1. Chinese Healthcare System in Transition – Opportunity or Challenge for the Healthcare Industry •Somya Datta, Research Analyst •Economic Research and Analytics Division, •Healthcare Industry, •October 30, 2008 Somya Datta, Research Analyst Healthcare Industry Economic Research Analytics • © 2008 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. 12 February, 2008 No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan. 1
  2. 2. Focus Points Healthcare System Health Insurance System Healthcare Financing and Expenditure Health Condition and Epidemiology of Diseases Demographic Profile Health Information System Key Healthcare Issues Health Reform Health Reform Movement Health Reform and Impact on Chinese Healthcare Industry 2
  3. 3. China - Evolution of Present Healthcare System EVOLUTION OF URBAN HEALTHCARE SYSTEM 1998- Basic Health Insurance Scheme for 1952 - Urban Health Insurance – GIS and LIS Urban Employees (integration of LIC and GIS) LIS & GIS system collapsed as insurance became a burden for enterprises. Workers in newly emerging informal sectors were left uninsured as GIS and LIS covered formal public sector employees. EVOLUTION OF RURAL HEALTHCARE SYSTEM 1940 - Rural Co-operative Medical System 2002 -New Cooperative Medical Scheme (CMS) (NCMS) CMS financed through worker contribution into welfare funds. During economic reforms of early 1980s, cooperative health insurance system was abolished. CHANGING PHASE IN HEALTHCARE FINANCING Central government's health care funding fell over the years. Additionally, household health expenditure increased. 3
  4. 4. China - Healthcare System HEALTHCARE SYSTEM Government Private Sector Provide Majority of Health Provide Majority of Health Infrastructure Funding Health Services URBAN AND RURAL HEALTHCARE SYSTEM Urban Healthcare System Rural Healthcare System •New Basic Medical Insurance System (BIS) for urban •New Co-operative Medical Health Insurance system co- employees , co-funded by employer and employee funded by government and rural population •Launch of pilot projects to cover urban residents even •By end of 2007, NCMS covered 86 percent of rural outside workforce by 2010 population and targeted is 100% by end of 2010 4
  5. 5. China - Healthcare Financing HEALTHCARE FINANCING Government Enterprises Individuals URBAN BASIC MEDICAL INSURANCE PLAN 70% •Employer Contribution rate – 2% of average per capita disposable income Pooled Social Funds 6% of Wage/Salary •Insurance project would cover 50 to 60% of total cost of insured •Initial participation on free will 30% •Local government likely to set different contribution rate for adults and children Personal Medical Savings Account •Premiums paid by households, instead of individuals 2% of Wage/Salary •Project to mainly cover expenses for hospitalization and major illnesses RURAL CO-OPERATIVE MEDICAL INSURANCE PLAN Government 40 Yuan=$5.2 Contribution •Government subsidy - 40 Yuan ($5.2) annually per person and extra 5 subsidies to low-income families and disabled Contribution from •Farmers can get reimbursement up to 30% of medical expenses Insured Individual 10 Yuan= $1.2
  6. 6. China - Healthcare Delivery System HEALTHCARE DELIVERY SYSTEM 70% Social employer Funds Inpatient contribution and Personal Urban Citizens Urban Comprehensive Outpatient Contribution Medical Care System expenses +Enterprise Contribution 30% employer Personal contribution + Medical Employee Saving contribution Account Taxes Government Public Fiscal Budget Public Health Health Services Expense Rural Citizens New Rural Co-operative Basic medical care Medical System 6
  7. 7. China - Healthcare Expenditure Government Health Expenditure (China) 1965-2007 Resuming Healthcare 100.0% Responsibility Other Private – 2.20% of GDP 80.0% 60.0% Out of Pocket – 0.32% of GDP 40.0% Government- 1.98% of GDP 20.0% 0.0% 1965 1975 1985 1995 2000 2005 2007 Government Expenditure Out of Pocket Social Security Expenditure Health Expenditure as % of GDP (China), Per capita Health Expenditure (China), 1995-2007 2001-2007 5.6% of GDP $315 Using a poverty line measure of $1.08 per 3.7% of GDP $183 day, out-of-pocket health expenditures increased poverty rate in China to 16.2 percent from 13.7 percent 1995 2007 2001 2007 7
  8. 8. China - Healthcare Expenditure INERNATIONAL COMPARISON HEALTHCARE EXPENDITURE Health Expenditure (Select Countries), 2007 USA Russia Mexico India China Brazil •* Bubble shows per capita health expenditure •China’s Government health expenditure spending low by international standards •Per capita health expenditure low 8
  9. 9. China - Health Condition KEY HEALTH INDICATORS Indicators 2001 2008 2010 2015 Total Life 72.5 75.2 75.9 77.5 Expectancy Birth Rate 13.4 13.7 14.3 13.8 •Between 1987-2007, China made great strides in improving health status of its Death Rate 6.9 7.0 7.1 7.3 population Population Growth 0.6 0.63 0.68 0.65 Rate Infant Mortality Rate 28.9 21.2 19.4 15.6 INTERNATIONAL COMPARISON Rank C o u n try N a tio n a l H e a lth In d ex 1 F in la n d 0 .6 5 5 •United States ranked 11th 2 D e n m ark 0 .6 5 5 3 Sw eden 0 .6 4 9 • Russia ranked 29th 4 N o rw ay 0 .6 4 5 5 A u s tr a lia 0 .6 3 7 13 C h in a 0 .5 7 6 * Conducted by Chinese Academy of Sciences (CAS) * Tally uses a Nation Health Index (NHI) combines four branch indexes measuring populations' metabolisms, immunities, nervous systems and behavior 9
  10. 10. China - Epidemiology of Diseases A GLANCE AT DISEASE PROFILE OF CHINA •Chronic diseases, non- communicable diseases Disease Profile (China), 2008 account for 80% deaths Others Cerebrovascular Chronic •Cardiovascular diseases, 35% Disease obstructive chronic respiratory Lower respiratory 18% pulmonary disease and cancer - infections disease leading causes of both 3% 14% death and burden of Ischaemic heart disease disease 8% Tuberculosis •Exposure to risk factors 3% Stomach cancer is high Trachea, 5% Self-inflicted Perinatal Liver cancer bronchus, lung injuries conditions 4% cancers •Since 1998, prevalence 3% 3% 4% of water and air pollution linked diseases has risen RECENT GOVERNMENT INITIATIVES TO IMPROVE HEALTH •Since 2003, after SARS major efforts taken to protect people from infectious diseases, including water-borne illnesses •Investment made to control water pollution in Eleventh Five-Year Plan • Initiation of first national environmental performance information disclosure program 10
  11. 11. China - Demographic Profile Demographic Structure (China), 1995-2020 100% 6.3 8.0 9.5 11.9 80% 60% 66.5 (%) 71.9 71.4 69.0 40% 20% 27.2 20.1 19.1 19.2 0% 1995 2008 2015 2020 •China’s population relatively 0- 14 years 15- 64 years 65 years and above young by international standards International Comparison- Life Expectancy, Aged Population and Total Population (Select Countries), 2007 •However, rapid aging will soon begin in China China US Japan India EU Brazil Russia •By 2050, 25.0% expected to be above 65 years •China’s ‘one child policy’ to pose serious economic and social challenges for society from aging * Bubble size represents country's total population 11
  12. 12. China - Health Information System HEALTH INFORMATION SYSTEM Routine Disease National Maternal & Child Health Supervision Health Statistic Surveillance Household Health Health Care Information Information System Services Survey Surveillance System System System Assessment Score of HIS Data Collection Methods (Select Countries), 2007 D a t a C o lle c t io n R e s u lt M e th o d s Census A d e q u a te •In 2002, China released the Guidelines for Development of V ita l R e g is tr a tio n A d e q u a te National Health Informationaization P o p u la tio n b a s e d A d e q u a te Planning, 2003-2010, which su rv e y s emphasizes resource sharing, D is e a s e S u r v e illa n c e A d e q u a te application, market-oriented, safety A c u te A d e q u a te and reliability and effectiveness C h r o n ic - H I V A d e q u a te issues related to health. C h r o n ic - T B A d e q u a te H e a lt h S e r v ic e S t a t is t ic s P re se n t b u t n o t A d e q u a te H M IS A d e q u a te H e a lth S y s te m S ta tis tic s P re se n t b u t n o t A d e q u a te N a tio n a l H e a lth A d e q u a te A c c o u n ts 12
  13. 13. China - Key Healthcare Issues Severe state of public finance Lack of funds for Rising Healthcare health care Costs Problem of Underdeveloped healthcare Health Insurance accessibility Severe State of Public System Healthcare System Critical Diseases Uninsured and SAR/AIDS Population Problems in rural Uneven cooperative health- Distribution of care system Health Resources Rural Urban Disparity 13
  14. 14. China - Health Reform Pre-Reform Era: 1949-1978 Post-Reform Era: 1978-2000 New Reform Era: 2000-2012 2000-2005 •Merger of GIS and LIS into Basic Urban Employee Health Insurance plan • Centrally Planned •Decentralization - Healthcare responsibility shifted to local •Rural co-operative medical • Health care for all bodies scheme launched •Reimbursement system •Collapse of traditional •Commercial insurers allowed to healthcare system enter market •Urban Health Insurance Plans- GIS and LIS • Out-of-pocket expenditure increased drastically 2005-2012 •Rural Cooperative Medical Scheme (CMS) • Permission granted for profit •Healthcare for all hospitals and clinics •“Face” of healthcare was •Expand health insurance barefoot doctor coverage •No private clinics/hospitals •Improve healthcare system •Focus of quality in delivery of health services 14
  15. 15. China - Government’s Healthcare Achievements (2004-2008) RECENT HEALTHCARE ACHEIVEMENTS IN CHINA •Increase in disease covered under state plan for immunization and prevention from 7 to 15 • AIDS, tuberculosis, schistosomiasis and other major communicable diseases now treated free of charge • Improvement in healthcare infrastructure • Improvement in health indicators and significant drop in infant and maternal mortality rates • Increase in average life expectancy •Further progress made in family planning programs, and birthrate remained stable at a low level 15
  16. 16. China - 11th Five Year Plan (2006-2011) MAIN GOALS of 11th FIVE YEAR PLAN Target 1 Efficient Resource Allocation Target 2 Boost Rural Economy Improve Public Services Target 3 Target 4 Shift to Efficient Growth Model Target 5 Balanced Spatial Development Target 6 Upgrade and Optimize Industrial Structure 16
  17. 17. China - 11th Five Year Health Plan (2006-2011) MAIN GOALS of 11th FIVE YEAR HEALTH PLAN Increase investment in health sector Cover all rural residents under cooperative healthcare network by end of 2010 Spend more funds on building and upgrading clinics in rural areas Emphasis on introducing new facilities and training local medical staff Health authorities to dispatch more doctors from cities to countryside to bridge medical gap Encouragement to private sector to run non-profit health and medical institutions in counties and villages Government to encourage individuals and non-government organizations to participate in health services Efforts to tighten drug supervision and develop study of China's traditional medicine 17
  18. 18. China - Government’s Healthcare Goals (2008-2012) INITIATIVES TO REFORM HEALTHCARE SYSTEM •Establish universal basic health care system •Improve family planning programs • Ensure medical access in both urban and rural areas •Tighten government control over medical fees in public hospitals •Key areas for investment - public health, rural health, city community health services, basic medical insurance and •Encourage private medical institutions primary care •Entrusting of domestic and overseas organizations to •Implement policies and measures to prevent and treat conduct independent research on medical reforms major diseases •Government inviting public opinions on medical reform INITIATIVES TO REFORM HEALTHCARE FINANCING •Government commitment to increase its health funding by 1–1.5 percent of GDP in next couple of years •Government to double its rural co-operative medical health insurance funding •Government considering use of public welfare lottery to contribute in healthcare funding •Proposal for creation of Private Health Account 18
  19. 19. China - Demographic Challenge and Government Policies Government Initiatives To Meet Elderly Society Other Government Initiatives Supporting Elderly Challenge Society • Implementation of various chronic-disease prevention •In 2007, Government spending on social security was programs at national level $3.3 billion more than the year before. •Local government agencies training laid-off workers in •Eligible beneficiaries of basic social security plan have long-term care increased from 18.6 % of the population in 2000 to 90% in 2008. • Provision for geriatric medical training at undergraduate level and set up more geriatric units •Increase in private and government-sponsored elderly homes •Community-based long-term elderly care services have started to emerge especially in urban areas •Government has started to allocate more funds towards elderly care 19
  20. 20. China - Expected Impact of Healthcare Initiatives in China until 2012 Basic Increased Prevention and Healthcare Primary Care Insurance for All Enrolment Efficiency in Rural Areas Service Increased Insurance Delivery Enrolment Urban Areas Public Assistance to Bridge Rural Urban Poor Healthcare Disparity Initiatives Increase in Government Private Responsibility Insurance Expensive Medical Treatments Rise in Type of Diseases Eliminate Over Eliminate medication by doctors corruption 20
  21. 21. China - Health Reform and Opportunities in Health Industry Segments Healthcare System Ongoing Change Initiative Opportunities Components Pharmaceuticals, Biotechnology, Urban Healthcare Cover even non-employees under Drug Discovery and Medical Devices System insurance plan Companies Health Infrastructure, Telemedicine, Rural Healthcare Cover all rural citizens by 2010 Pharmaceuticals, Biotechnology, Systems and Medical Devices Companies Private Health Encouragement to commercial Insurance Commercial Health Insurance healthcare insurance Pharmaceuticals, Biotechnology, Increased government participation Healthcare Financing Drug Discovery and Medical Devices in healthcare financing Companies Healthcare Information Establish e-healthcare system Healthcare IT Companies Systems
  22. 22. China Health Reforms and Opportunities for Healthcare Industry 2012 Long Term Elderly Care Improved Centers Healthcare Management Demand for Health Personnel Demand for Healthcare Infrastructure Demand for Advanced Technologies Improved Demand for Demand for Rural Health Innovative Medical Services Drugs Devices 2008 22
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