Health Care for All? China Has It But Needs More

Paying for their health care won't be easy. China's state-sponsored insurance system provides near-universal coverage and reimburses 60% to 90% of medical expenses. But it generally covers only treatment at government hospitals, and only for basic services and the most common diseases.

Meanwhile, resources are growing scarcer. In 2018, state health plan spending rose 22.1%, while revenues only increased 17.9%. Long-term, both numbers are headed in the wrong direction. Deficits — and cutbacks — are inevitable.

That's placing a growing burden on ordinary Chinese. In 2015, out-of-pocket expenditures accounted for around 35% of all Chinese health payments (compared to 11% in the U.S., and 15% in the U.K.). For Chinese outside of the biggest cities, government payments are even smaller and health care outcomes are generally much worse. The anxiety is even making its way into mainstream entertainment: Last summer, Chinese flocked to theaters to watch a black comedy about a leukemia patient who imports affordable generic cancer treatments for himself and others.

Thus far, Chinese policymakers have had little luck promoting commercial insurance as a supplement to state coverage. Today only 6.7% of Chinese have private insurance; in 2016, private payouts accounted for a mere 3.3% of income at Chinese medical institutions. Consumers are wary of high premiums and delays in paying claims. Insurers, in turn, struggle to control their costs: Government-run medical facilities lack price transparency and don't generally share patient data, which makes it difficult for actuaries to control risk.

The vast amounts of user data available to China's tech platforms doesn't necessarily reveal health histories. But it can help pinpoint creditworthy customers, who presumably will be less likely to engage in medical insurance fraud. That, at least, is the thinking behind Xiang Hu Bao and similar platforms.

For now, mutual aid isn't a replacement for commercial insurance. Not only do such plans cover far less than traditional private insurance, their relative youth and lack of regulation make it unclear whether they'll be able to meet their obligations over the long-term. Indeed, the Chinese government wisely prohibits such plans from being described as "insurance."

Nevertheless, their near-instant popularity should remind the government that its best option for dealing with China's looming health insurance crisis is to open markets to the innovative forces that have transformed other parts of the Chinese economy. Like patients, policymakers need all the help they can get.

— For more columns from Bloomberg Opinion, visit http://www.bloomberg.com/opinion.

Adam Minter is a Bloomberg Opinion columnist. He is the author of "Junkyard Planet: Travels in the Billion-Dollar Trash Trade" and the forthcoming "Secondhand: Travels in the New Global Garage Sale."

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