Health & Care – Are they going in different directions?

Health is an indicator of well -being that has implications not only on the quality of life of an individual but also for an entire society in terms of the production of economic goods and services.

On an average, the developed world has pledged about 14-20 percent of its annual GDP to healthcare while the developing countries have pledged anywhere from 3-20 percent of the annual GDP, most of them at the lower end of the scale.
Cases in point - The United States spends 16.5% percent of its GDP on health care expenses. Mexico uses 11.8 percent and Morocco spends 4.8 percent. The health care of South Africa is 9.1 percent of GDP. In India, health care spending is 5.2 percent. Thailand spends 11.3 percent of its money on its health care while Indonesia sends 6.2 percent.

Now, let’s take a closer look at healthcare in 2 countries - India, an emerging economy which currently spends a humble 5.2 percent of its GDP on healthcare and USA, a country that spends the most on healthcare than any other country in the world. Of course, they are two very different countries with their own varied population matrices, epidemiology and political/social strategy as to how these healthcare dollars are spent. These two provide an interesting glimpse into healthcare of the world in general.

The Indian healthcare industry is growing and is poised to become a US$280 billion industry by 2020.[1] The Indian healthcare market is expected to reach over US$70 billion by 2012 and US$145 billion by 2017.[2] According to the Investment Commission of India, the healthcare sector has grown at 12 percent per annum in the last 4 years.[3]  This growth comes from several sources such as rising income levels in a growing economy, a growing elderly population, changing demographics, endemic disease profiles and the shift from chronic to lifestyle diseases.[4]

Despite efforts in the direction of improving healthcare in the country, India continues to have high levels of morbidity, especially among children, women and elderly. There is also the issue of poor infrastructure leading to low levels of sanitation, public and personal hygiene. These contribute to a higher incidence of diseases. Infrastructure to support a billion plus people is not easy to build. Slowly but surely, India is ramping up on its infrastructure which will help manage the issues associated with health. More important is the fact that a majority of the billion plus population is under the poverty line and there are things such as education, awareness etc. that need to be worked on to help people improve their lives which again will ultimately show an improved effect on healthcare. One more fact to note about India’s growing healthcare economy is that a part of it is attributed to the rise in private players that cater to a population that demands a higher quality of care no matter the cost. The opportunity remains huge for insurance providers entering into the Indian healthcare market since 75% of expenditure on healthcare in India is still being met by ‘out-of-pocket’ consumers.[5] Even though only 10% of the Indian population today has health insurance coverage, this industry is expected to face tremendous growth over the next few years as a result of several private players that have entered into the market. Health insurance coverage among urban, middle and upper class Indians, however, is significantly higher and stands at approximately 50%.[6] In summary, India’s healthcare spending is poised to grow but there is still a long road of health improvement to be worked on while addressing care in order to ensure that root causes to improve the health standards of the population are worked on which will eventually ensure that all the spending is geared more towards health improvement rather than just care improvement.

Ironically, USA is a country with the highest % of its GDP spent on healthcare but US Life Expectancy is ranked at 50th place in the world.[7] It faces conditions of escalating healthcare spending and poor health conditions similar to India.
According to a CMS published report, U.S. healthcare spending in 2009 was at 17.4% of GDP at $2.47 trillion and is projected to reach $4.5 trillion by 2019. This equates to approximately one fifth (or 19.5%) of the gross domestic product (GDP). Hospital spending is expected to increase and gradually slow down through 2017, going from $696.7 billion in 2007 to more than $1.3 trillion in 2017. Prescription drug spending is expected to slow down initially and then start to accelerate through 2017. Drug spending will increase from $231.3 billion in 2007 to $515.7 billion in 2017.

How is the U.S. health care dollar spent?

As shown in the figure below, hospital care and physician/clinical services combined account for half (52%) of the nation’s health expenditures. That shows that a majority share of healthcare spending finds its way into hospital coffers and physician pockets. The question remains, is this high percent of spend due to the need of a larger number of people visiting physicians and hospitals and/or on a more frequent basis because their health demands it or is it that the physicians and hospitals get to charge what they deem fit per their corporate policies and are operating as free economy private enterprises.

The answer is out there since the US has the highest incidence of lifestyle diseases and despite the spending, health of the population in general is not improving. Moreover, the country is not acing other countries in mortality, morbidity etc. What’s ironic is that there is a 10% spend on Rx programs (it doesn’t show how much of it is on research) but definitely, there is a heavy spend on Rx advertising and push to get consumers to avail these drugs. Eventually, there is more spending around care than prevention, whether prudent or not. As a result, spending as well as healthcare costs go up each year while the insurance carriers are out scouting to support the providers that give the most discounts. This just goes to show that it’s again cost that is impacting service decisions and not the quality of care.

Forbes released their report in February 2010 of the most expensive drugs in the US. It talks about expensive drugs costing a few thousand dollars per year to as much as 350K to 400K per year. These costs are being attributed to advances in technology but more than that, its basically for rare diseases for which patients have no other option but to buy these drugs. According to Forbes, “Alexion Pharmaceutical’s Soliris, at $409,500 a year, is the world’s single most expensive drug. This monoclonal antibody drug treats a rare disorder in which the immune system destroys red blood cells at night. The disorder, paroxysymal nocturnal hemoglobinuria (PNH), hits 8,000 American.Folotyn treats a rare type of lymphoma and costs $30,000 per month. Myozyme, which inspired the Harrison Ford movie Extraordinary Measures, costs up to $100,000 for a child. But according to Genzyme, the average cost of adult treatment is $300,000 per year.”[8]

These costs are guaranteed to constantly increase as time goes on and more technology is developed. There is nothing being done to lower the costs. Technology to drive advancement of drugs is great but some of the healthcare dollars need to be used to subsidize this research, thus enabling these drugs reaching the needy for a much reasonable price. There is also the need for more stringent regulation  to curb the drug manufacturers from profiteering. This is a true example of where the healthcare dollars could support health and not just care.

Source: http://www.cms.gov/NationalHealthExpendData/

Health and Healthcare are two separate entities divided by a very fine line. The former deals with the betterment & maintenance of health of the people (which can be very personal at an individual level) while the latter deals with the nature of offering care to the population. Often times, these are used synonymously.
The Health Care Reform Bill that came out about a year ago professes to expand coverage to millions of uninsured Americans. It deals with establishing health insurance exchanges to help self employed and uninsured buy insurance with subsidies, details helping Medicare and Medicaid programs and insurance reforms to provide better coverage to children and adults with or without pre-existing conditions and keeps illegal immigrants from benefiting from health insurance exchanges.

Basically, healthcare reform is not about improving the healthcare we get.  It's more about re-shuffling how the care is provided and how the money to support the system is obtained and allocated. When it talks about millions of uninsured getting coverage, it’s also ensuring that more money flows through the system to support it. The amount of care provided across our entire population will increase because the number of patients will increase.  But that doesn't mean that the care will be any faster or better - unless you are among the millions who had no insurance and will now have access.

The healthcare system cannot dictate the type of care one needs. It will be up to the individual to self educate and make decisions on the type of care they want/need. The system is geared to steer everyone towards more care whether needed or not. Physicians, Hospitals and Drug manufacturers are all part of a major public/private enterprise and the system is trended to run as a private enterprise. Hence, hospitals want beds filled, physicians want to prescribe tests, do procedures and prescribe drugs, some you may need; some you can do without. It’s always up to the patients to make smart decisions, whether it is to choose the right insurance plan, the right doctor, and the right hospital or understanding the drugs they are prescribed. In today’s healthcare system, education and empowerment is a crucial factor for individuals to get the care they need and deserve than what is given.

Having said that, there are still certain things that can be done within the system to contain/decrease the speed with which the costs are escalating.

Prevention & Screening - Emphasis on prevention and proactive health management will ensure that individual health improves and there is minimal care needed later in life due to the proactive measures taken initially. Timely screenings and checkups will ensure that any health issues are caught at the outset and are easier to treat and manage. In some cases, ongoing disease management can be minimized or totally eradicated.

Healthcare Quality Improvement - Focus on specific diagnoses, accurate and needed tests, timely and right treatment, less invasive procedures, etc will ensure that unnecessary or outliers in health management that are based on the principle of “more is better” are minimized and enhances accuracy in treatment as well as paves way for more focused health management.

Integrated Care Management - Integrated health centers where all the needed specialties that care for a patient from diagnosis, screening and treatment are under the same roof are needed.  The current system of sending the patients out to various specialties/centers based on doctor recommendations only add to the pain and administrative burden for the patient.

Clinical Analytics - This is a crucial part of the entire healthcare strategy as no amount of work is useful until we are able to measure the outcome. Value based information comes from analyzing the data obtained from various sources that provide insight into medical conditions, treatments, patient outcomes, provider results etc. This will help patients make informed decisions about where they want to seek care and can be assured of best results. Also, this can help health plans better negotiate services with providers and ensure that the best are signed up to support patients.

Employer backed wellness strategy - To foster value towards employee health benefits, employers must come forward as leaders in the wellness arena. Employers need to spearhead healthy living by spreading the word of healthy choices; in food, entertainment, activities etc.  Employers must advocate an aggressive approach to wellness, prevention, screening, and active management of chronic conditions. Many employers in the United States are already treading in this direction. Some companies have advocated healthcare consumerism and health plans associated with it. As a part of health strategy, some companies cover the costs of smoking cessation and weight loss programs, reward participation in health and risk assessment screenings with incentives in health plans. Some offer fitness programs and healthy menu choices in company cafeterias, some support local farmers markets to provide produce to their employees’ right at the place of work. Further, companies are tracking the ROIs of these investments in health with great results, thus showing that it is a win-win situation for the employees and the employers.

Employers need to influence healthcare execution - Employers need to directly engage in improving the structure of health care delivery, and thus its quality. This begins with redefining relationships with health plans away from cost reduction and discounts to quality and value. Employers must expect health plans to direct patients to excellent providers, not those provider networks that offer the biggest discounts.

A lot more needs to occur in addressing the base question of improving health. Improving health will eventually result in the need for less care. All the dollars spent today on care can infact, be aligned with an improved health strategy and how efficient would it be if the economy is health based than healthcare based.
We should move from an economy that sustains sickness and then, cares for it to an economy that sustains health and cares for the sick to turn them healthy. We thrive today on providing more and more expensive care when we could make a few strategic and tactical changes and move into an economy based on growing and improving health. A health based economy will promote health among people. There will be less need for care after the fact that one is sick but there will be a lot more to do to ensure that everyone is healthy and to keep it that way.

About the Author:

Rajeev Mudumba works with SHPS, a leading, independent provider of integrated health solutions that improve personal health and reduce spending. Rajeev has over 16 years of leadership experience in the HRO, Healthcare and Technology consulting industries. His distinguished record of accomplishment and innovation includes high level strategy and ideation, precise execution and enhanced focus on efficiencies through the use technology in business across various verticals. He can be contacted at rajeevsagar@gmail.com.