摩根士丹利-中国-保险行业-中国保险业：理解医疗体系变革的必要性-2020.5.19-34页.pdf

FOUNDATIONMMorgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research.Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures,refer to the Disclosure Section,located at the end of this report.+=Analysts employed by non-U.S.affiliates are not registered with FINRA,may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company,public appearances and trading securities held by a research analyst account.Asia PrimerChina Insurance:Understanding the Need for Change in the Healthcare SystemLike SARS,Covid-19 could profoundly reshape Chinas healthcare system.A push for higher healthcare spending is likely to address exposed deficiencies.The system would benefit from reforms to scale-up health workforces,increase affordable care access,and improve efficiency.May 19,2020 06:52 PM GMTFOUNDATIONMMORGAN STANLEY ASIA LIMITED+Jenny Jiang,CFAEquity Analyst+852 2848-7152Jenny.J Contributors MORGAN STANLEY ASIA LIMITED+Sean WuEquity Analyst+852 3963-0755Sean.WMORGAN STANLEY ASIA LIMITED+Green CaiResearch Associate+852 2848-5686Green.CMORGAN STANLEY ASIA LIMITED+Birlina QiResearch Associate+852 3963-4087Xiaoyue.QMORGAN STANLEY ASIA LIMITED+Yolanda HuEquity Analyst+852 2848-5649Yolanda.HFOUNDATIONMAsia PrimerChina Insurance:Understanding the Need for Change in the Healthcare SystemLike SARS,Covid-19 could profoundly reshape Chinas healthcare system.A push for higher healthcare spending is likely to address exposed deficiencies.The system would benefit from reforms to scale-up health workforces,increase affordable care access,and improve efficiency.Chinas healthcare system-Still convoluted,complicated and confusing.Chinas healthcare system contains multiple industry segments,mainly including upstream drug and medical equipment producers,healthcare providers(e.g.,clinics and hospitals),as well as social insurance funds and commercial insurers on the financing side,which transact with each other and jointly operate under a complex web of regulatory regimes managed by various levels of ministries and governments.In this report,we focus on exploring linkages and interactions among the various segments and help investors better understand how they can affect each other within Chinas rapidly evolving healthcare system.Major reforms undertaken by the government in the past decade to pursue universal coverage.Following 40 years of rapid eco-nomic growth to become an upper-middle-income country,China has been increasing its focus on social welfare and public health in recent years.The SARS pandemic in 2003 already pushed China to under-take significant healthcare system changes,and now China is halfway through its reforms and appears largely on track to build a true uni-versal healthcare system by 2030.While significant progress has been made,such as establishing a basic social insurance regime cov-ering over 95%of its population,significant issues still exist:cov-erage on critical illness is inadequate for most people under the social insurance regime,and the government still had to aid all Covid-19 patients this time around;insufficient primary care infrastructure resulted in overwhelmed hospitals and disrupted routine services during the virus outbreak;public health infrastructures still require substantial upgrades to help stem communicable and non-communi-cable diseases.Emerging stronger.We believe a push for higher healthcare spending because of Covid-19 is likely,to address areas for improve-ment and build a better healthcare system,which could spur new business opportunities.Although Chinas healthcare system will con-tinue to be serviced mainly by the public sector,because of its immense size,there is plenty of room for private insurers,healthcare providers,and producers to continue to develop,especially in seg-ments where innovation and efficiency are key.In addition,the looming funding pressure that stems from the countrys aging popu-lation may also foster a need for more private sector input,in the form of public-private-partnerships,especially in developing seg-ments such as health surveillance,information tracking,and preven-tive care.This report is Part 1 in a series of reports on Chinas health care and health insurance industry.In Part 2,we plan to focus on the“payor”side to:1)lay out current market structures for health insurance,which often have little data to track;2)analyze how the industry could develop post Covid-19 to cope with demand and regulatory changes;and 3)discuss business model evolution over the long run and identify potential winners;Chinese insurers are integrating more deeply within the health care system,and some could look quite dif-ferent in the future.Industry ViewHong Kong/China Insurance-In-Line China Healthcare-AttractiveFOUNDATIONM Contents 5Cash Flows within Chinas Healthcare System6An Introduction to Chinas Healthcare System10Role of Key Players21Chinas Healthcare System in a Global Context23Strengths and Weaknesses of Chinas Healthcare System25OutlookFOUNDATIONMCash Flows within Chinas Healthcare SystemExhibit 1:*Based on FY17 dataSource:CBIRC;NHDRC,China Healthcare Statistics Yearbook;Morgan Stanley ResearchFOUNDATIONM6An Introduction to Chinas Healthcare SystemProviders:China runs large public-owned hospital networks,but commercial mechanisms gained a significant foothold in this arena during the countrys opening-up and reform period so that hospi-tals are now mostly operated on a self-sufficient basis with not much in the way of government subsidies introducing a key hurdle in todays healthcare reforms.Private hospitals have been allowed since 1988,with private beds reaching 1.7mn as of end-2018(20%of total hospital beds),albeit largely in specialty hospitals covering both low-and high-end customers.Producers:The pharmaceutical and medical equipment manufac-turing segments are mostly dominated by private enterprises,either local or global players,numbering over 7000 such enterprises.To achieve better cost savings,governments are hoping to consolidate the market and speed up the process to have domestic production of essential drugs and medical equipment in lieu of imports.A convoluted system:Key playersPatients:China offers greater choice than tends to be available in most other countries in terms of healthcare access.Referrals are often not required to see specialists,and people are free to use hospi-tals for consultations,check-ups and operations.However,patients do complain that wait times can be long for tertiary hospitals,and that reputable doctors and medical resources are not evenly distrib-uted between rural and urban areas.Payers:Chinas medical costs are paid mainly by government-run social insurance schemes.The countrys commercial health insur-ance market has taken off in recent years,but still more as a supple-mentary pillar to help close gaps in the public system.With accelerating medical cost inflation,both the public and private sides are,to an increasing extent,aiming to curb spending and improve effi-ciencies in the use of insurance funds.Exhibit 2:Key stakeholders in Chinas healthcare system:Patient-Payer-Provider-Producer modelPatientProvidersPayersGovernment/employers/individuals/commercial insurance/philanthropyHospitals/Primary care/Physicians/PharmaciesOnline healthcareFiscal supports/insurance paymentsProducersPharmaceuticals/Biologics/Medical devices/HISDistributorsHealthcare servicesSource:Morgan Stanley ResearchFOUNDATIONMMORGAN STANLEY RESEARCH7The iron triangle of healthcare still unbalanced in ChinaThe iron triangle of healthcare.Academic research often evaluates a healthcare systems efficiency based on three aspects:ensuring access to healthcare,promoting the quality of healthcare,and con-trolling the cost of healthcare aiming to achieve three ultimate policy goals:public satisfaction,positive health outcomes,and finan-cial protection.Improvement in care access can be achieved through more comprehensive insurance coverage,but opening up access often drives up demand,utilization and costs.Improvement in care quality can be enabled by technology advancement,but it is also more costly to use new drugs and the latest technologies.These are inherent trade-offs in the healthcare system,and policy reforms are typically facing contradictory goals,prompting the need for a bal-ancing act.Still unbalanced in China.China,like many other countries,is also facing significant challenges in pursuing all three goals at the same time.In the past 10 years,Chinas healthcare reforms seem to have achieved more in“broadening access”by establishing new social insurance regimes and putting 1.35bn members of its population back onto a public coverage system,despite the still-high disparity between rural and urban populations.However,the quality and cost sides of the equation are still far from satisfactory.China still lacks effective laws and regulations on care providers,treatments,and medical products,and faces greater variations in the training and edu-cation of doctors,and suffers a likely overuse of drugs,tests and treatments all creating room for improvement in quality of care delivery.In terms of cost,China has seen rapid growth in healthcare spending(emulating the trajectory of that in western countries),insufficient protection for individuals(still high out-of-pocket expen-diture and low coverage on critical illness),and a problematic fee-for-service hospital payment model(leading to overprovision and inefficiency).Exhibit 3:Trade-off in universal coverageSource:WHO;Morgan Stanley ResearchExhibit 4:Chinas healthcare spending is projected to reach Rmb15trn by 203022333445566678891011121314155555556666677778888889024681005101520252009201020112012201320142015201620172018201920202021202220232024202520262027202820292030Health expenditure(LHS)Health expenditure as%of GDP(RHS)Rmb,trn%Source:NHDRC;Morgan Stanley ResearchFOUNDATIONM8A recap of recent reforms Chinas path to universal coverage1949-1978.Chinas healthcare system has come a long way as com-pared with where it started,and the countrys modern healthcare system was built through three major stages.The initial phase fol-lowed the establishment of new China in 1949,a period when health-care was delivered through government-owned hospitals and supplemented by community services(known as barefoot doctors).Nearly 90%of the rural population was covered by a cooperative medical scheme(CMS),and nearly 90%of the urban population was covered by labor security insurance and free public medical services for civil servants.A near universal coverage system was built under the planned economy,and life expectancy almost doubled from 35 in 1949 to 68 in 1978(Exhibit 5).1978-2003.However,as China opened up and transitioned toward a market-based economy from 1978,government support for hospi-tals,community services,and social insurance plans fell materially,resulting in a shortage of coverage.Exhibit 5:Life expectancy further improved to 77yrs old356468697175770102030405060708090194919541959196419691974197919841989199419992004200920142019AgeSource:National Statistics Bureau,China Government,Morgan Stanley ResearchOnly the urban population had access to health benefits provided by governments or state-owned enterprises,leaving most of the rural population uncovered.Hospitals,although remaining state owned,became more profit-oriented,as they were allowed to generate profit from markups on drugs and medical consumables,in order to survive financially amid significant government subsidy cuts(50%during the 1980s to just 10%in the 1990s for hospitals).2003-present.Another round of major reforms was officially launched in 2009 to rebuild the healthcare system,but policy research and debates had begun,in fact,from 2003,spurred by a SARS outbreak,which exposed flaws and problems in the healthcare system.After 10 years effort,China now has successfully put 1.35bn citizens(95%of population)back under its new basic social insur-ance plans,with out-of-pocket spending down to 29%in 2018(vs 60%in 2001,Exhibit 6).The health delivery system is also under-going changes to make drugs/medical consumables more affordable by removing markups,and to make healthcare more accessible through primary care systems,although reforms here appear to be more difficult.Still,China is aiming to achieve universal healthcare again by 2030.Exhibit 6:Out-of-pocket health expenditure dropped to 29%206029010203040506070197819801982198419861988199019921994199619982000200220042006200820102012201420162018%Source:National Health Commission,Morgan Stanley ResearchFOUNDATIONMMORGAN STANLEY RESEARCH9Exhibit 7:Key healthcare reform time lineSource:The State Council,CBIRC,NHC,NHSA,Morgan Stanley ResearchFOUNDATIONM10Role of Key PlayersChronic illness.China also faces the challenge of an ongoing rise in chronic illness.The nations disease spectrum has started to becomes similar to that of developed countries,with over 300mn people having hypertension or diabetes.At the same time,China has the highest drinking and smoking population(Exhibit 11).Research shows that lifestyle is a critical factor in determining peoples health(30%,Exhibit 10),and a change in patient behavior is urgently needed to help make Chinas healthcare system more sustainable.Exhibit 9:Per capita healthcare cost spending,by age group2472451903263864797351,0722004006008001,0001,2000-45-1415-2425-3435-4445-5455-6465+RmbSource:2019 Health Insurance Development Report,Morgan Stanley ResearchExhibit 11:Chinas smoking/Chronic disease patients270114300050100150200250300350Hyper-tensionDiabetesSmokingmn peopleSource:NHC,China CDC,Morgan Stanley ResearchPatients-Demographic and disease spectrums becoming similar to that of DM countriesAging population.China has 18%of its population above age 60,and this level will increase to 25%by 2030(Exhibit 8).This will likely exacerbate the medical cost trend,as seniors,on average,spend twice the level that young people spend on healthcare(Exhibit 9).Exhibit 8:Population at age 60 will reach 25%by 20303434292839333332311920222436131316182502040608010020052010201520182030E0-2525-4545-6060%Note:2030 forecasts by the State CouncilSource:National Statistics Bureau,State Council,Morgan Stanley Research Exhibit 10:Determinants of personal health*Genes and Biology,10Environment,10Clinical Care,10Health behaviors,30Social and Economic Factors,40%*Health behaviors include smoking,obesity,stress,nutrition,blood pressure,alcohol,drug useSource:2014 research conducted by Minnesota department of healthFOUNDATIONMMORGAN STANLEY RESEARCH11The latter is funded mainly by various levels of government subsidies(Rmb520 per person)and the individual pays the rest(Rmb25