Fostering Medical Innovation: How China's Social and Commercial Insurance Can Work Together
Funding for high-value medical technologies has long been a critical concern for China's innovative medicine market. Innovation, a key driver of progress, is unsustainable without adequate financial support.
However, China's current basic medical insurance (BMI) system is built on the foundation of the generic drug industry, with the primary goal of providing "basic, low-level, widespread coverage."
Additionally, challenges such as slowing GDP growth, an aging population, and declining birth rates are expected to worsen the dependency ratio. This will place a significant burden on the BMI fund's pay-as-you-go system, where the working population funds the healthcare needs of the previous generation.
To address these issues, the 14th Five-Year Plan for Universal Medical Security outlines the need to "gradually include new medical technologies, new drugs, and new devices into the coverage of commercial health insurance" and to "place greater emphasis on the role of commercial health insurance."
Despite high-level policy support, the commercial health insurance (CHI) sector recorded a premium income of 982.5 billion yuan (US $151 billion) in 2021, accounting for merely 5.4% of the country's total health expenditure (THE).
Moreover, most commercial health insurance products in China currently focus on cost-sharing for BMI-covered services and BMI personal account expenses, offering limited coverage for high-value medical technologies beyond the BMI scope.
Commercial health insurance should play a crucial role in supplementing basic medical insurance, bridging coverage gaps, and driving high-value, high-risk, innovative medicines.
The question remains: Why is China's commercial health insurance struggling to effectively complement basic medical insurance? How can China's commercial and social medical insurance systems better integrate to enhance access to innovative medical technologies?
Clear Positioning of Basic Medical Insurance
To promote the growth of commercial health insurance, it is essential to define clear parameters for basic medical insurance coverage and precisely outline what constitutes "basic protection." This clarity will facilitate the expansion of commercial health insurance offerings.
For example, China's resource-rich regions have enhanced basic medical insurance coverage, which has, to some extent, crowded out certain commercial health insurance products.
In another instance, in 2022, the National Healthcare Security Administration (NHSA) introduced the concept of the Basic Medical Insurance reimbursement rate. This implies that the restrictions on insurance payment ratios may not limit BMI reimbursement rates, allowing commercial health insurance to cover the portions not covered by BMI.
However, considering the budget impact at the product level, a consistent annual cost limit of 500,000 RMB serves as the threshold for a drug to enter National Reimbursement Drug List (NRDL) negotiations, with a further limit of 300,000 RMB for successfully negotiated drugs.
These cost limits overlook the supplementary role of commercial insurance in supporting social insurance's payment capacity, restricting the growth of commercial health insurance, and preventing many high-value innovative therapies from being included in the national reimbursement drug list.
Data Sharing
A key feature of advanced healthcare markets is the establishment of comprehensive, standardized data environments and coherent medical records. This infrastructure enables insurers to offer customized insurance, manage underwriting risks, make informed decisions during claims and reimbursements, and even oversee the health of the insured population.
However, Chinese commercial insurers have been excluded from Class 3 public hospitals, and the entire insurance sector lacks information interconnection with public medical institutions. Without access to comprehensive medical data, commercial insurers are unable to manage medical risks and control hospital costs effectively. This deficiency also hampers accurate pricing and actuarial calculations for commercial insurance products.
To address these issues, China has implemented high-level policies to encourage information sharing between basic medical insurance and commercial health insurance.
Currently, 12 cities in China are piloting the authorization and use of personal medical insurance information. In these pilot cities, insured individuals can access their personal medical insurance information through various online and offline channels. Once authorized, this information is made available to commercial insurance companies, facilitating smoother processes for commercial insurance enrollment and claims applications.
It is worth noting that the current data sharing between basic medical insurance and commercial insurance does not involve direct access to medical institutions. Instead, the National Healthcare Security Administration (NHSA) provides static data for interactive sharing.
Despite this progress, a significant challenge remains: the limited value of historical data from China's public institutions due to long-term distortions in cost structures and medical practices. However, with rate/weight adjustments as part of DRG/DIP reform and the overhaul of medical service pricing, the quality of this data is expected to improve.
Start with Outpatient Care: The Low-Hanging Fruit
The development of commercial health insurance in any country is inherently influenced by its healthcare infrastructure and social security framework.
In China, the healthcare system is predominantly controlled by public institutions, with regulated prices for medical services and a tightly managed physician workforce. This situation leaves limited room for commercial insurance to negotiate payments within the healthcare market.
However, there may be an emerging opportunity.
Data from China's Basic Medical Insurance indicates that the growth rate of outpatient care for chronic diseases far exceeds that of general outpatient services, reflecting a shift in the disease spectrum. Chronic disease management involves services that differ from those traditionally provided by Chinese public hospitals, such as disease prevention and continuous post-onset health management. These services are also challenging to incorporate into the BMI benefit design.
This has created a significant opportunity for commercial health insurers, innovative life sciences manufacturers, and private medical institutions to collaborate, particularly in the areas of expensive outpatient specialty drugs and cutting-edge medical devices.
In this context, the commercial insurance catalog acts as a crucial link for dialogue and cooperation between the insurance and manufacturer sectors. The success of this catalog relies on the actual payment capacity of medical insurance and the support for innovative medical technologies. For new medical technologies that have high clinical value and are safe and cost-effective but cannot be fully covered by basic medical insurance right away, commercial insurance should aim to consolidate its payment volume and increase its market share.
Furthermore, the effectiveness of disease management is influenced by individual health conditions and the nature of the disease, making short-term measurement difficult. Therefore, the growth of long-term health insurance is essential for commercial health insurance to effectively support and stimulate medical innovations.
References:
- 商业保险能否成为滋养中国创新药的甘霖？同写意, 2024.04.02, http://www.phirda.com/artilce_34627.html?cId=1&module=trackingCodeGenerator
- Closing the Affordability Gap: Can China’s Commercial Health Insurance Deliver?, 2024.1.17, NRDL+ Newsletter, https://www.nrdlplus.com/closing-the-affordability-gap-can-chinas-commercial-health-insurance-deliver/
- Former CFDA Head Bi Jingquan: Challenges and Solutions in China's Innovative Medicine Market, 2024.4.10, NRDL+ Newsletter, https://www.nrdlplus.com/former-cfda-head-bi-jingquan-challenges-and-solutions-in-chinas-innovative-medicine-market/
- Fair Pricing of Pharmaceuticals: Insights into China's NRDL Negotiation, 2024.1.3, NRDL+ Newsletter, https://www.nrdlplus.com/fair-pricing-of-pharmaceuticals-insights-into-chinas-nrdl-negotiation/
- How China’s Provider Payment Reform Will Impact Key Healthcare Stakeholders, 2023.5.10, NRDL+ Newsletter, https://www.nrdlplus.com/how-chinas-provider-payment-reform-will-impact-key-healthcare-stakeholders/
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- China's Basic Medical Insurance Data: Three Key Trends and Ecosystem Implications, 2024.3.13, NRDL+ Newsletter, https://www.nrdlplus.com/chinas-basic-medical-insurance-data-three-key-trends-and-ecosystem-implications/
- Policy Push for Long-Term Huiminbao: The Impact on Innovative Medicine, 2024.2.28, NRDL+ Newsletter, https://www.nrdlplus.com/policy-push-for-long-term-huiminbao-the-impact-on-innovative-medicine/
