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

• $2.0 trillion (16 percent of GDP) was spent in 2005
• $4.0 trillion (20 percent of GDP) will be spent in 2015
• Highest per capita spend among Organization for Economic Cooperation and Development (OECD) countries
• 49 percent more than Norway in 2004, with 3rd highest spend
• 2.4x the OECD average per capita spend

• 98,000 to 195,000 people killed per year by medical mistakes
• 57,000+ dying from inadequate care (NEJM / NCQA)
• Ranked 37th in overall health system performance by WHO
• 22nd in life expectancy among the 30 OECD countries. ²

Despite U.S. spending, many remain uninsured
46+ million uninsured, 16 million under-insured, most of whom are working.³

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
There are now more overweight people in the world than there are underweight. In 2005, it is estimated that 1 billion people are overweight. By 2015 it is estimated that 1.5 billion people will be overweight.¹⁰

More than 50 percent of adults are now defined as being overweight in ten of the 30 member countries in the OECD.

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. Globalization
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, standardized 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 from episodic, acute care to the enhanced management of chronic diseases and the life-long prevention of illness.
• Consumers assume personal responsibility for their health and for maximizing the value they get from the healthcare system.
• Payers and health plans help consumers remain healthy, get more value from the system and assist organizations in delivering higher value healthcare.
• Suppliers collaborate with care delivery organizations, clinicians, and patients to produce products that improve outcomes and lower costs.
• Societies make realistic, rational decisions regarding lifestyle expectations, acceptable behaviors, and how much healthcare will be a societal right versus a market service.
• Governments provide the leadership 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. Employee Benefit Research Institute (EBRI Notes), Nov 2006

2. Sources: World Health Organization. 2000. The world health report 2000: health systems: improving performance. Geneva: World Health Organization.; Borger, Christine, Sheila Smith, Christopher Truffer, et al. 2006. Health spending projections through 2015: changes on the horizon. Health Affairs (22 February): W61-W73, http://content.healthaffairs.org/cgi/content/abstract/hlthaff.25.w61 (accessed 1 June 2006). Organisation for Economic Co-operation and Development. 2006. OECD health data 2006: Statistics and indicators for 30 countries (15th edition). Paris: OECD Publishing.

3. Center on Budget and Policy Priorities, April 29, 2006 http://www.cbpp.org/8-30-05health.htm

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.

7,9. World Health Organization. 2005. Preventing chronic disease: a vital investment. Geneva: World Health Organization.

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.

10. Beckham, Mike and Richard Dale, directors. 2005. Rx for survival - a global health challenge WGBH/NOVA Science Unit and Vulcan Productions, Inc.

11. Grice, Andrew. 2006. Private firms to supply GP services in deprived areas. The Independent 30 January: 30.

12,13. IBM Global Business Services and IBM Institute for Business Value analysis.

14. 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).

15. Singapore Medicine. General news. http://app.singaporemedicine.com/asp/new/new0201b.asp?id=1 (accessed 1 June 2006).

16. Bumrungrad Hospital. Fact sheet. http://www.bumrungrad.com (accessed 1 June 2006).

17. Williamson, Hugh. 2005. Medical tourism keeps hospital budgets healthy. Financial Times 1 March.