A middle class is emerging in China, and simultaneously, its population is rapidly aging. These two phenomena are impacting the country’s traditional consumer habits, including spending on healthcare. Experts say private-sector services are one important part of the future of China’s healthcare system, and perhaps also a sign of what’s to come for other countries in the region. Entrepreneurs can provide innovative services that cater widely to consumers and support a shift toward integrated care for health promotion and long-term management of chronic disease, also supplementing resources available in traditional public facilities.

Three experts visited the Walter H. Shorenstein Asia-Pacific Research Center and shared perspectives on those trends at the panel discussion, “Healthcare Entrepreneurs in East Asia: Innovations in Primary Care and Beyond,” hosted by the Asia Health Policy Program.

Historically, healthcare services in China have been almost entirely government-run. A patient would go to a public clinic, stand in a queue, and receive treatment within a few hours – being referred elsewhere if additional treatment was required.

Now, the private sector is growing, based on the promise of improved care and an enhanced experience, both removing the waiting line and ushering in new technologies. The government has also issued several policies encouraging “social capital” investment in health and fitness services.

The private sector for preventative care services now holds around fifteen percent of the entire marketplace in China, and “is expected to get much bigger over the next five years,” said Lee Ligang Zhang, the founding chairman and chief executive officer of iKang, a healthcare group based in Beijing.

Zhang oversees the company’s operation of 50 self-owned healthcare centers and an extended network of 300 affiliates. iKang is one of many groups catering to a growing consumer base of corporate workers and senior managers seeking care outside of the public system.

Comparative view

Increased development of premium healthcare facilities is not only emerging in China, but also in neighboring Taiwan. Since 1995, Taiwan implemented a national health insurance system, and has been lauded for its success in service provision.

Taiwan transitioned its healthcare market to universal coverage. Under this system, a patient can essentially “shop around” and select where to go for services, most of which are covered under the country’s insurance collective system at public or private providers.

“On average, every Taiwanese goes to see a doctor 14 times a year, compared to five times a year in the United States, and two times [a year] in China,” said Dr. Fred Hun-Jean Yang, a physician and chairman of MissionCare, Inc.

Such numbers reflect the higher availability of services compared to China, he said. Even as a small island, Taiwan has over 15,000 clinics and the price for services is generally affordable for the average citizen. Despite this availability of public and private services, Taiwan’s newer healthcare entrepreneurs seek to fill a market demand shaped by similar factors as in China. Yang says technology and the efficiency of the private sector healthcare system is attracting new consumers.

Missioncare is headquartered in northern Taiwan’s Taoyuan City and consists of four community hospitals with a larger network of clinics across the country as well as coordinated long-term care services for the elderly and those with chronic disease. The group has already expanded into China, and plans to integrate healthcare innovations, such as wearable monitoring and mobile payment.

Patient-centric service

Chinese citizens, particularly those with greater expendable income, are more willing to pay out-of-pocket for an improved patient experience, the panelists said.

“The consumer psyche is important,” said Dr. Wei Siang Yu, the founder of the Borderless Healthcare Group (BHG), a group of companies based in Singapore that focuses largely on health telecommunications.

One perspective is that consumers desire a “high-end” environment made possible by tailored design aesthetics and effective branding. Guided by this trend, Yu, a business executive and physician by training, started the “smart cities, smart homes” initiative at BHG.

BHG is now launching an incubator model in Shanghai, which combines intelligent design aesthetics with patient care, and is planning to localize such centers across China. The model is referred to as an “experience center,” rather than a hospital or clinic, and healthcare services – examinations, operations and value-added activities like wellness and education activities – are all centralized in one location.

Looking ahead, Yu said healthcare is likely to move even further away from the traditional hospital setting, and more toward experiential and home-based care models.

The Obama administration’s policy of “re-balance” toward Asia, that began as early as 2009, is now increasingly under stress, as those in the region question American staying power and China emerges as a challenger to U.S. dominance. As the territorial disputes in the East and South China Seas in recent months have demonstrated, China’s relations with the region and the United States have become visibly strained, bringing the U.S. re-balance policy into question and raising concerns about security tensions and the danger of conflict. 

U.S.-China relations are heading, for the foreseeable future, into “a very scratchy time,” predicted Kenneth Lieberthal, a respected senior China scholar at The Brookings Institution, in his keynote speech delivered at the annual Oksenberg Lecture on June 3 at the Shorenstein Asia-Pacific Research Center.

Lieberthal told a standing room audience in Encina Hall that while the U.S. attempt to temper its relations with China and others has “worked quite well over time,” now, “at a geostrategic level, we seem to be sliding with increasing speed toward an inflection point in U.S.-China relations.”

Lieberthal was joined by a panel of China experts, including Cui Liru of the China Institutes of Contemporary International Relations (CICIR), and Stanford’s Karl Eikenberry and Thomas Fingar, distinguished fellows at the Freeman Spogli Institute for International Studies, and Jean C. Oi, director of the Stanford China Program.

The discussion was part of the Oksenberg Lecture, an annual dialogue that functions as a policy workshop on U.S.-Asia relations, named in honor of late professor and senior fellow Michel Oksenberg (1938–2001). Oksenberg was a noted China specialist, who served as a senior member of the National Security Council and is credited as the architect of the normalization of relations with China under the Carter administration in the late 1970s.

Points of tension in the U.S.-China relationship have been increasingly visible. Senior American officials have assailed China for its aggressive actions toward its neighbors over the Diaoyu/Senkaku Islands and in South China Sea, including its latest altercations with Vietnam and the Philippines. The United States recently indicted five members of China’s People’s Liberation Army for carrying out cyber espionage against U.S. technology companies.

Incidents like these have prompted both countries to throw harsh words at each other, leading to a situation of brinkmanship. However, Lieberthal pointed out that tense relations between the United States and China are certainly not new. Most notably, relations took a nosedive in 1989 when China cracked down on democratization protests at Tiananmen Square, in 1999 after the accidental bombing of the Chinese Embassy in Serbia, and in 2008, in response to the global financial crisis.

The U.S.-China relationship has been riddled with periods of distrust in the past. But now, “the speed and scale of China’s economic growth, especially over the last two decades, has also increased concerns, on all sides, that the evolving distribution of power may create new frictions and suspicions,” Lieberthal said.

Yet, refusing to work with each other is not an option, the senior scholar, who also served in the Clinton administration, told the audience. Without the United States and China in conversation, progress in multilateral areas such as climate change and trade would falter, he argued. Given the two countries’ position as the world’s largest economies, the international system would effectively be constrained if the two were entrenched in long-term bitterness.

Lieberthal recognized the common admonition, “if we treat China as an enemy, it will surely become one,” saying this warning could be applied to both sides. China and the United States must make greater efforts to manage and mitigate tensions.

“The question is whether we can prevent bad things, not only specific conflicts, but the political tensions and politics that make cooperation on major issues very, very difficult at best.”

He then outlined a few steps that could help China and the United States sort out their disputes. His recommendations began with the need for strong determination on the part of top political leaders to move things forward and the importance of clear, consistent use of vocabulary when discussing issues.

As a final point, but one that was offered as a contingent factor to success, Lieberthal said U.S.-China relations and both countries’ roles in greater Asia will depend on “how effective each of us is in dealing with domestic reforms,” because, “that will determine how dynamic, how vibrant, how innovative, and how secure we feel.”

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During the lecture, Ret. Lt. Gen. Karl Eikenberry shared his observations from the Shangri-La Dialogue, an inter-governmental security forum held from May 30 – June 1 in Singapore. The Dialogue has in recent years become a gathering of premiere defense ministers to discuss security issues in Track I and “quasi-track” meetings.

Afterward, Eikenberry talked with Shorenstein APARC about key highlights and implications that emerged from the Dialogue:

Shangri-La Dialogue

Photo credit: Flickr/The International Institute for Strategic Studies 

Media reported a tense environment overlaid the Dialogue. What was the general atmosphere there?

The remarks at the Shangri-La Dialogue by Japanese Prime Minister Abe and U.S. Defense Secretary Hagel on the one hand, and Chinese General Wang Guanzhong, made clear very different views on the causes for tension surrounding various maritime sovereignty claims in the East and South China Seas. Still, if you read the full text of all three speeches and the Q&As that followed, there is still great emphasis placed on dialogue and common interests. And in the many meetings that took place between national delegations on the margins of the conference events, the emphasis was on cooperation. 

What revelations at the Dialogue were surprising?

I think the degree to which dissatisfaction with China’s assertive behavior in pursuing its maritime claims was expressed by many of the participants – not just the United States and Japan. Vietnam, the Philippines and India were explicit. Analysts have said the only China (through threatening behavior) could contain China by catalyzing a counterbalancing response. From the results of the Dialogue, I think this is correct.   

Japanese Prime Minister Shinzo Abe emphasized values and international law throughout his keynote speech. What is your take on this?

The Prime Minister did emphasize both democracy and rule of law during his prepared remarks and answers to questions from conference participants. He was drawing an obvious distinction between Japan’s and China’s political systems and commitment to approaches to resolving territorial disputes. I think the Prime Minister is trying to establish Japan as a leader in East and Southeast Asia, and wanted to make clear what he views as important differences between the Japanese and Chinese “models.” 

U.S. Defense Secretary Chuck Hagel referenced China’s suspension of the U.S.-China Cyber Working Group. What direction do you think the cybersecurity dialogue will go now?

It was unfortunate that China suspended its participation in the U.S.-China Cyber Working Group after the U.S. Government’s indictment of five People’s Liberation Army officers for alleged cyber theft. The U.S. Government has been providing the PRC Government with evidence of cyber theft being conducted by entities in China and has failed to receive any meaningful response so the indictments seem warranted. It would seem that the Cyber Working Group is precisely the forum to discuss this matter and the many related to managing the cyber domain with agreed rules and procedures. Working Groups provide a forum to address disagreement and disputes. I think China’s response was counterproductive and hope the government will indicate a willingness to resume the dialogues in the near future.

Where do you see the regional security conversation heading next?

The risk is that security dialogues will be divided into two camps – one led by the United States and its close allies and partners, and the other by China – somewhat isolated at this time but seeking to entice Asian nations to bandwagon to its side. Perhaps further regional economic integration can facilitate a more common approach to security, but this year’s Shangri-La Dialogue is perhaps a warning that trends, for now, are not heading in a positive direction.

Nearly forty-four percent of Indonesia’s population is living on less than $2 a day, making it near impossible for some to seek proper health treatment. One way to improve this situation is through Indonesia’s conditional cash transfer (CCT) programs, Margaret Triyana says.

The CCT program, first piloted by the World Bank in 2007 and expanded from 2009–10, encourages Indonesia’s most destitute to pursue health-seeking behaviors by reducing barriers to health care through cash incentives. Payment is given for receiving treatments at a local clinic. Essentially, the poor are reimbursed simply for “showing up” for health services.

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She plans to produce multiple papers that focus on issues related to CCT interventions and its impact on mothers and children. Triyana will continue this research after leaving Shorenstein APARC this July, accepting an academic teaching position at Nanyang Technological University in Singapore. 

Recently, Triyana discussed her research with Shorenstein APARC. 

What types of health initiatives does the CCT program sponsor, and for whom?

The CCT program targets Indonesia’s most poverty-stricken by selecting approximately the bottom 30 percent of the poorest households, with preference toward households with pregnant women or school-aged children. Eligibility depends on socioeconomic factors per district such as expenditure, education and asset ownership. The program stretches the rural-urban divide, covering people in and off Java (this is the main island where 60 percent of the population resides). Many initiatives in the household CCT program are focused on child and maternal health. For mothers, they include a series of prenatal care visits, an iron tablet prescription, childbirth assistance and postnatal care. For children, they cover vaccinations, monthly height and weight measurements at the clinic and vitamin A pills. Overall the CCT program is a combination of poverty reduction and human capital investments, attempting to induce good behavior that instills long-term health in low resource settings.

Who is the typical primary care provider in Indonesia?

The primary care provider is often a midwife. This is because Indonesia doesn’t have enough trained doctors to support the growing demand. Clinics operate at the sub-district level, which comprise of 10-15 villages each. Every village is assigned one midwife. Midwives can perform most procedures just short of surgery. For example, midwives offer typical delivery services but refer patients to a district-level hospital for a Caesarean section. This system, for the most part, functions well, but midwives do have an expanded scope of care that can be unsettling. Children have their cuts taken care of by midwives; adults can get antibiotics through them. This diffused system is perhaps more efficient, but it can call into question the legitimacy of their authority. Midwives receive only three years of training for their certification. This is something the Indonesian government intends to inspect and will likely restructure.

What behavior changes do you see as a result of the CCT program?

My initial findings show there is increased utilization of health care programs. The CCT program incentivizes certain behaviors – attending the clinic for a test or retrieving medication – which then, in theory, leads to better health. “Showing up” doesn’t automatically correlate with improved health, but if we think about the population at hand, it would in most cases. People who weren’t using health services before now are. Everyone that was offered the program signed up. Monthly attendance to CCT-linked programs is reported at a rate of 85 percent. In particular to maternal health, I noted a 10 percent increase in delivery fees. This trend follows what we would expect to see – because of increased utilization, there is a natural rise in price for the service. On the demand-side, I found a 40 percent increase in the use of midwives, and a rise in fees paid to providers for maternal and child services. These factors indicate with a high level of certainty that the CCT program lowers barriers to health care. 

Since health is effectively its own market, will increased demand for services cause a rise in price?

Yes, health care is its own market so the supply-demand relationship is relevant. My research looks at the local market because it depends upon the price being offered at the local clinic. Indonesia’s health care system is a public-private mixture, therefore public fees are regulated while private fees are less so. Indonesia now offers universal care, but people can pay a few for services beyond basic coverage. I saw a change in the private domain in terms of demand for services. The “demand shock” caused a bit of a higher price for services. It costs about $80 to meet all of the program requirements. Payment to midwives increased, while a slight decrease occurred for traditional birth attendants. I find no significant change in birth outcomes, and the quality provided by midwives does not appear to be affected by the program. These outcomes are exactly what we’d expect to see; it is consistent with the puzzle in the literature and economics, showing more women and children in the CCT program are seeking care from health care providers, but no change in health outcomes.

Can we expect increased utilization of health services in the long-run?

I anticipate there will be long-term increased utilization. The CCT program seeks to create habit formation by focusing on youth and pregnant mothers. For example, we can see this when expectant mothers attended the clinic for prenatal care, delivery assistance and postnatal care. With cost and travel barriers eliminated or reduced, participants should find it easier to initially come and then return. I did see repeat visits in my research as a positive outcome of the CCT program. A technique used to encourage commitment is a public education program as part of the program. Participants get a group briefing on how the program works, so that they are fully introduced to the incentives and guarantees of the program. 

Does Indonesia plan to extend this into a national program?

Yes, the CCT program is planned to go national later this year. The research shows that the benchmark of high attendance was met, program participants did “show up.” Next steps are to analyze health outcomes in maternal and child health, and then look at policy implications. Indeed, the Indonesian government is seeking ways to better target and deliver health services; it will be interesting to see the long-term effects of this program.