The Global Healthcare Crisis

By Karim Babay, CEO, HealthSapiens.

Healthcare is a major expense worldwide and is estimated to account for $3 trillion in spending in the United States, and $6 trillion globally.

Combined healthcare spending in the five major world regions is expected to reach 8.7 trillion by 2020, up from $7 trillion in 2015. Global healthcare spending is projected to increase at an annual rate of 4.1 percent in 2017 through 2021, up from just 1.3 percent in 2012 through 2016. Aging and increasing populations, developing market expansion in advanced medical treatment, and rising labor costs drive spending growth. Still, global costs will vary wildly.

Per-person healthcare spending will span from $11,356 per person per year in the U.S. to just $53 in Pakistan in 2021.

Unfortunately, higher spending levels don’t always produce better health outcomes and value. For example, the United States continues to spend considerably more on healthcare (16.9 percent of GDP in 2016) than comparable countries, but it is in the lower half of the life expectancy rankings, according to the Organization of Economic Cooperation and Development (OECD). Historically, the United States healthcare payment system has been predominantly a fee-for- service model, and this has enabled a model of healthcare whereby a large driving force is obtaining profit. This has undermined the consumer-centric nature of the healthcare field.

The U.S. healthcare system is currently perceived as experiencing a growing crisis in terms of the level of access it provides, its costs, and the quality of care provided. Globally speaking, access to quality healthcare has reached crisis levels in many developing nations.

A Global Crisis

From a global perspective, most nations on the planet are too poor, and their healthcare system too disorganized, to provide any kind of efficient mass medical care. Clearly, such systems go against human ethics and create an even greater disparity—widening the gap between rich and poor. The rich can afford healthcare, while the poor stay sick or die. Even worse, in rural regions of Africa, India, China, and South America, hundreds of millions of people go their whole lives without ever seeing a doctor. They may scratch enough money or barter to obtain some medical advice, or only have access to a village healer using home remedies that may not be necessarily effective against disease.

Ironically, only the industrialized countries—perhaps 40 of the world’s 195 countries—have established healthcare systems, consolidated within each nation (Beveridge, Bismarck, National Health Insurance, and out-of-pocket ). Almost all nations have a variant or fusion of these models, but there are still issues in every system despite the policy-makers’ best efforts.

The Beveridge Model, for example, is not in the best interest of the people. It relies on very high taxes for basic healthcare, without providing access or incentives for preventative care, thus raising the bar of healthcare expenditure. The lack of individualization forces healthier people to be charged the same amount as the fatally sick. Canada is a highly cited example of a nation using a Beveridge Model.

The Bismarck Model, on the other hand, uses an insurance system which is usually financed jointly by employer and employees through payroll deduction. This system causes higher costs of healthcare and diminishes efficiency. Cost issues are often addressed by raising premiums instead of controlling prices. While the fixed price for procedures helps to control costs, the quality of healthcare from different providers varies. Most healthcare services are covered by a mandatory health insurance; beyond that, the patient co-pays for a portion of care at the time of treatment. This system, utilized in Germany, is flawed as it offers no alternative to compensate individuals for the rising costs implemented by the government, pharmaceutical, and private insurance companies.

More democratically, the National Health Insurance Model, such as in Britain or Cuba, uses a government-run insurance program that every citizen contributes to. Citizens can use both public and private-sector providers. Despite the low costs of the National Health Insurance Model, there are several drawbacks. In an effort to control costs, there is a longer wait time for patients to be treated.

Lastly, the out-of-pocket model applies to a majority of the nations on the planet who lack an organized healthcare system. This system is clearly unregulated—healthcare costs are high and resources are limited. Patients are eligible for medical care only if they can afford the bill at the time of treatment. Otherwise, they get sick enough to warrant a visit to public emergency hospitals where the government has to cover all the costs. Patients struggle to find the right doctors, and due to high costs are forced to seek physicians overseas who have competitive prices for otherwise expensive local medical care. Areas like Cambodia, Burkina Faso, and rural India default to this method of care.

Strikingly, the U.S. national healthcare apparatus is rather fragmented; it maintains separate systems for separate classes of people, and has incorporated elements of all of the above models. When it comes to treating veterans, it’s like Britain or Cuba. For Americans over the age of 65 on Medicare, it’s like Canada. For working Americans who get insurance on the job, it’s like Germany. And for the 15 percent of the population who have no health insurance, the United States is like Cambodia or Burkina Faso, with access to an available doctor if you can pay the bill out-of-pocket at the time of treatment or you’re sick enough to be admitted to the emergency ward at the public hospital.

In our view, creating an open market in medicine will help answer many the major healthcare problems faced internationally.