Chinese medical inflation estimated at over 100%

A recent release from MediCare International discussed key challenges facing China’s healthcare system: mainly a long history of traditional medicine and rapid medical inflation.

Trying to introduce a new healthcare system that borrows from western ideas in a country which has relied on its own 2,000 year old traditions isn’t easy. Most Chinese use traditional medicine, and the marriage of Western style medicine with traditional Chinese medicine has not always been ideal. Practitioners are usually experts in one field or other and advice can often be conflicting.

This is compounded by a widespread perception that Western medications are overpriced. Research by The Economist‘s Intelligence Unit found medical costs were the top concern for 84% of rural Chinese, and multinational corporations operating in China are expected to raise wages 8.4% this year. Yet despite these obvious warning signs the Chinese government insists medical prices have risen only 2.8% so far in 2011 (the figure does not account for the “gifts” patients often give doctors to ensure quality care). Insurers paying bills in China peg the true rate of medical inflation at over 100%.

In a recent editorial in The Financial Times, Chinese premier Wen Jibao wrote

There is concern as to whether China can rein in inflation and sustain its rapid development. My answer is an emphatic yes. Rapid price rises pose a common challenge to many countries, especially other emerging economies and China. China has made capping price rises the priority of macroeconomic regulation and introduced a host of targeted policies. These have worked.

Chinese citizens, expats and insurers alike have good reason to fear the impact of medical inflation. As MediCare observed: “the lack of competition in the market means fewer options for patients and it has left insurance companies more-or-less unable to negotiate discounts, giving the medical community the upper hand there.”

A new expat insurance tax may complicate matters further in coming months – to date few details have been released. Key points such as how aggressively the tax will be collected and whether certain expats may be eligible to opt out remain murky. One thing is certain, however: expats and their health insurers should keep a close eye on Chinese policy over the coming months.

Companies mentioned

Medicare International is a division of LONMAR Global Risks, an independent Lloyd’s broker. It is known for innovative products (MediCare was one of the first health insurers to offer expatriates chronic illness cover and warzone insurance) and quick turnaround on its claims. The company usually settles agreed medical claims within two days. MediCare has clients of more than 86 nationalities living in 114 countries.