In response to growing social pressures, China’s central government announced last year a series of health care reforms. Its goals are ambitious: to establish a basic, universal health care system that can provide safe, effective, convenient, and low-cost services to all of the country’s more than 1.3 billion citizens. The reforms therefore affect most facets of health care delivery, including insurance, primary care, hospital management, medications, and public health.
These reforms—and the $125 billion the government has committed to support them—will probably improve the quality of care and enhance health outcomes for the Chinese people. They will also stimulate China’s health care market and create opportunities for private payers, providers, and IT vendors.
The size of that market—which we estimate at $240 billion, about 5 percent of China’s GDP—could exceed $600 billion within ten years. If China’s health care spending simply keeps pace with projected GDP growth, it will increase to $480 billion by 2018. We, however, believe that it is likely to rise faster than GDP, as a result of better insurance coverage, improved access to high-quality care, and rising demand (tied to aging, urbanization, and lifestyle shifts). If health care spending hits 6.5 percent of GDP by 2018, the market could increase by an additional $150 billion.
Because the reforms’ primary objective is to ensure broad access to basic health care services, the government will continue to dominate the market, especially from a delivery standpoint. Nevertheless, the changes make it more attractive for private companies to enter, by clarifying the roles public payers and providers will play, identifying niches for private players, and making the operating environment more transparent and fairer for them.