What is medical inflation and how does it impact my health insurance in China?
Medical inflation is similar to general inflation and is referred to the rate at which costs of healthcare services, medical procedures, and prescription drugs rises over time. It also refers to the increase in costs of developing new drugs and technology in order to support current medical trends in China.
Key takeaways
Medical costs in Mainland China are expected to rise by 10,8% in 2025, according to BMC Public Health report. Those figures are in line with overall global trends which are slightly lower and are set at around 9-10%. There are numerous studies indicating that China has entered the era of double digit yearly increase since 2023. Rising costs of medical care continue to drive up health insurance premiums for both locals and expatriates in China.
Source: BMC Public Health
Why is medical inflation important when calculation health insurance prices?
It is crucial to understand that medical inflation often exceeds general inflation rates. This in particular the case of developing countries where more and more new drugs and medical technologies are introduced to public. To fully understand this, we have too look at what causes medical inflation in China.
Technological advancement
Healthcare worldwide is not what it used to be 50 years ago. Nor it will be in 50 years time in the future. Introduction of new technologies doesn’t only improve the quality of healthcare but also can improve patient satisfaction. Such as digital solutions now provide faster diagnostics and make lab tests analyzed within a couple of minutes. All of this comes at extra costs for hospitals and ultimately patients. Same goes for research and development of the new drugs.
Increased demand for healthcare services in China
Ever since China launched universal healthcare system (social insurance) there has been a tremendous growth in the awareness of health issues and lifestyle-related diseases. All of this can lead to higher utilization of healthcare services. Increased demand is also driven by rising prevalence of chronic diseases among the population such as diabetes and blood pressure.
Aging population
Population of people over the age of 60 in China is project to surpass 28% by 2040, according to WHO reports. As the population ages, more individuals require medical care, leading to a greater burden on healthcare resources. Moreover, older population often has more complex health needs, driving up the demand for healthcare services. With such a higher proportion of people living longer, there is also an increase in demand for continuous medical care. Such as the management of chronic diseases.
Source: WHO Aging and Health in China
Impact of medical inflation on health insurance plans in China
So none of us can hide from medical inflation. But what does it do to our health insurance policy in China?
Increased premiums
As the cost of healthcare rises, insurance companies often increase premiums to cover the higher expenses associated with providing services. This means that policyholders may see rises in their regular health insurance premiums as often as every year. When talking to our clients we always trying to educate them that every 4 out of 5 years you will be facing higher rate adjustment on your renewal date. This applies to any insurance provider on the market. Some years adjustments for medical inflation can be several %, some years it can be a double digit. While sometimes rates are kept the same as last.
Adjustment on hospital network lists
It is pretty common these days that insurance providers can adjust their own hospital networks. Such change is implemented either right away throughout the policy year, or at the end of it. In minor cases companies can revoke direct billing agreements with a particular clinic. This will force members to pay&claim all their expenses in that particular facility. Reason for that is try to discourage members going to that place and instead choose a clinic or hospital insurance company trusts more. In more severe cases medical facility can be banned. This is more for severe cases usually because of lack of transparency in pricing. Such as why there is such a big difference from patient to patient, as well as from the market average.
How can you keep your health insurance premium sustainable in China?
Consider insurance companies with better hospital networks
It is true hospitals prefer working with some insurance providers over the others. As such, you can usually see there is a special “insurance discount” at the end of your bill after each visit to a hospital. If insurance company and a hospital really like working together, such discount can be up to 30-40% compared to paying out of pocket.
Online consultations and drug deliveries
This comes in handy for management of chronic diseases. Several insurance companies already offer cover for telehealth services with designated clinics and hospitals. Rates in those are lower compared to traditional face to face consultations but they bring faster services to patients. Same goes for prescribed meds delivery where hospital can send it to patient from their end, without them coming for a pick up. Insurance companies try to encourage patient use such services as eventually they will bring less financial burden due to lower cost.