U.S. healthcare: big, expensive and not very good

• Total health expenditure in 2004/05 (latest figures) was $87.3 billion or $4,319 per person and 9.8% of GDP²
• 11th highest health expenditure to GDP percentage for OECD countries²
• 7th highest government health expenditure as a proportion of total health expenditure for OECD countries
• 25 people are dying each day in Australian hospitals from preventable medical errors¹
• Life expectancy for females is currently 83.3 years and males 78.5 years³
• Chronic diseases make up > 70% of Australia's overall disease burden, expected to increase to 80% by 20202²

Private insurance

43.6% of the Australian population have health insurance4 (PHIAC, Mar 2007)

Rising costs a global problem
Public expenditure for health in all OECD countries has increased nearly 2.0 times more rapidly than economic growth.4 In Ontario, Canada's most populous province, healthcare will account for 50 percent of governmental spending by 2011, two-thirds by 2017, and 100 percent by 2026.5 In China, 39 percent of the rural population and 36 percent of urban population cannot afford professional medical treatment despite the country's economic and social reforms success over the past 25 years.⁶

1. The changing nature of disease

"A tsunami of chronic disease is hitting around the world"
-Dr. Ron Paulus, Chief Technology and Innovation officer, Geisinger Health System end background

Chronic diseases now account for 60 percent of the 58 million deaths globally each year and represent a huge economic burden on societies worldwide.⁷

As much as 75 percent of the healthcare resources of developed countries are consumed by those with chronic conditions.⁸

The prevalence of chronic disease is a major factor in developing countries.

By 2020, the WHO estimates that two-thirds of all deaths in India will be caused by chronic disease. The loss of income to China over the next ten years as a result of heart disease, stroke, and diabetes is estimated at U.S.$550 billion.⁹

At the same time, developing countries are still fighting infectious diseases-not only existing ones, but also new ones, such as multi-drug resistant tuberculosis.

2. Demographics
Overweight
52% of Australian females and 67% of Australian males are now classified as overweight. At current rates, approx 75% of the Australian population will be overweight or obese by 2020

Aging
Before the first decade of the new millennium, young people always outnumbered old people; after it, old people will outnumber young people. One impact will be not enough young workers to fund the needs of the older generation.

3. New medical technologies & treatments
Molecular diagnostics, pharmacogenomics, regenerative medicine and other technologies are changing the way we diagnose, assess risk, treat disease. Advanced IT will be needed to leverage these new capabilities.

4. Consumerism

"The average person spends more time picking out a TV than choosing his or her doctor. . .this is starting to change,"
-Dan Pelino, general manager of IBM's global healthcare and life sciences industry

Patients will start acting more like consumers, demanding information, researching options, taking control of their own healthcare.

5. Globalisation
Increased competition from abroad is forcing governments to shift resources, sometimes away from healthcare. Delivery of care is moving from local and regional sites to national and global levels.

Danish citizens manage healthcare online
In 2001, the Danish government launched the Sundhed public healthcare patient portal ( www.sundhed.dk). This portal was created to increase patient involvement in their healthcare, increase the quality of patient life, and lower overall healthcare costs.

Some of the features of the portal include self-scheduling of appointments and online interaction with healthcare providers. Patients are able to access their medical records, including information related to in-patient hospital stays, going back to 1977.

The portal also allows for the monitoring of chronic diseases, such as diabetes, by providers and patients alike. This feature helps ensure consistent care is delivered across today's complex healthcare networks.

In U.K. and U.S., healthcare moves to retail settings
Consumers are increasingly turning to nontraditional settings, such as retail healthcare-the delivery of healthcare in retail pharmacies, groceries, and mass merchants.

In 2006, the United Kingdom's National Health Service proposed to make medical care more accessible by shifting some care from the hospital and into the community. This could include retailers like Boots and Tesco establishing clinics that offer diagnostic services and even surgeries. Even a shift of approximately five percent of services from hospitals would amount to a savings of £2.5 billion (U.S.$4.7 billion) per year.¹¹

In the United States, the emergence of retail healthcare is a trend driven by cost and access. Overseen by doctors, but staffed by nurse practitioners or physician assistants, retail clinics diagnose and treat a limited number of common illnesses, such as strep throat. Lower cost clinicians and low overhead allow retail clinics to price their services at an average cost of U.S.$45-less than half the cost of a primary care office visit and at most a fifth the cost of an emergency room visit.¹²

In addition, standardised practice guidelines and technology streamlines the treatment process-usually to within 15 minutes-while aiming to maintain or even enhance quality of care through decreased variation.¹³

Examples of retail clinics in the United States include Interfit Health, MinuteClinic, and Take Care Health Systems.

A trip to the doctor? Take a plane
Medical tourism-patients traveling across national borders primarily for medical, surgical, and dental care-is beginning to subject healthcare delivery to global competitive pressures.

India currently attracts 150,000 foreign patients each year,¹⁴ while 375,000 patients travel to Singapore.¹⁵ Thailand's Bumrungrad Hospital treats 350,000 patients from 150 different countries each year alone.¹⁶ Medical tourist destinations are by no means limited to Asia.

In fact, Europe's medical tourist market is estimated at €1.0 billion (US$1.3 billion).¹⁷

Healthcare 2015: an IBM vision for the future
We think there can be a more positive vision of healthcare; it is a future that will require new levels of accountability, tough decisions, and collaboration on the part of all stakeholders.

Specifically, we recommend:

• Healthcare providers expand their current focus on episodic, acute care to encompass the enhanced management of chronic diseases and the life-long prediction and prevention of illness.
• Consumers assume personal responsibility for their health and for maximising the value they receive from a transformed healthcare system.
• Payers and health insurers help consumers remain healthy and get more value from the healthcare system and assist care delivery organisations and clinicians in delivering higher value healthcare.
• Suppliers work collaboratively with care delivery organisations, clinicians, and patients to produce products that improve outcomes or provide equivalent outcomes at lower costs.
• Societies make realistic, rational decisions regarding lifestyle expectations, acceptable behaviours, and how much healthcare will be a societal right versus a market service.
• Governments address the unsustainability of the current system by providing the leadership and political will power needed to remove obstacles, encourage innovation, and guide their nations to sustainable solutions.

If these stakeholders can work together to transform the system, healthcare will become a national asset rather than a liability. Citizens can lead healthier, more productive lives. Countries can compete in the emerging global healthcare industry.

1. Van Der Weyden, Martin B. (2005) The Bundaberg Hospital scandal: the need for reform in Queensland and beyond. Medical Journal of Australia 183(6): 284-285
2. Australian Institute of Health and Welfare, http://www.aihw.gov.au (accessed 2 July 2007)
3. Department of Health and Aging, http://www.health.gov.au (accessed 2 July 2007)
4. Organisation for Economic Co-operation and Development. 2005. OECD health data 2005: Statistics and indicators for 30 countries (2005 edition). Paris: OECD Publishing.
5. Skinner, Brett J. 2005. Paying more, getting less 2005: measuring the sustainability of provincial public health expenditure in Canada. Vancouver: The Fraser Institute http://www.fraserinstitute.ca/admin/books/files/PayingMoreGettingLess2005.pdf (accessed 1 June 2006).
6. Ando, Gustav. 2004. Over one-third of Chinese population priced out of medical treatment. World Markets Research Centre Daily Analysis 23 November.
7. World Health Organisation. 2005. Preventing chronic disease: a vital investment. Geneva: World Health Organisation.
8. Centers for Disease Control and Prevention. 2003. The power of prevention: reducing the health and economic burden of chronic disease. Atlanta: Department of Health and Human Services, Centers for Disease Control and Prevention.
9. Beckham, Mike and Richard Dale, directors. 2005. Rx for survival - a global health challenge WGBH/NOVA Science Unit and Vulcan Productions, Inc.
10. Grice, Andrew. 2006. Private firms to supply GP services in deprived areas. The Independent 30 January: 30.
11. IBM Global Business Services and IBM Institute for Business Value analysis.
12. Gentleman, Amelia. 2006. India's healthy appeal: modern (and cheap) services promoted. International Herald Tribune 30 August, http://www.iht.com/articles/2006/08/30/yourmoney/med.php (accessed 1 September 2006).
13. Singapore Medicine. General news. http://app.singaporemedicine.com/asp/new/new0201b.asp?id=1 (accessed 1 June 2006).
14. Bumrungrad Hospital. Fact sheet. http://www.bumrungrad.com (accessed 1 June 2006).
15. Williamson, Hugh. 2005. Medical tourism keeps hospital budgets healthy. Financial Times 1 March.
16. Private Health Insurance Administrative Council, http://www.phiac.gov.au (accessed 2 July 2007)