Over the past decade, the rate of growth of health care spending globally has outstripped the rate of growth of total economic output. While a longstanding reality in most Western industrialized nations, this phenomenon has now reached across all nations--regardless of size and relative prosperity. The recent global economic recession notwithstanding, the demand by the world's 6 billion citizens for more and better health care grows unabated. The ancient adage "if you don't have your health you don't have anything" is now widely embraced across all nations, cultures or any other grouping one wishes to explore.
This is certainly a good thing--from a humanitarian view, from a societal view and, certainly, from an economic view. Regarding the latter, unhealthy labor (or, in more modern parlance, human capital) - viewed as an input to production--is intuitively less efficient than healthy labor. Accordingly, any economic entity that entails labor as an input to its production has a vested interest in ensuring the health of its human capital. But this comes at a cost.
Likewise, any modern society values the health and well-being of its citizenry. It is a public good of the highest order. And it is so regardless of the relative wealth of the society. It simply differs in matters of degree as to what constitutes health and what resources will be allocated to ensure that the society's threshold expectations for it are met. In the world's poorest nations, this might mean surviving infancy, while in a wealthy nation extending the quality of life for octagenarians.
What is common across countries is that when it comes to health and the care required to maintain it, people's demand for it is increasing. Treatments that heretofore were the exclusive purview of "western" medicine--from the basic to the complex--are now in increasing demand in Asia, for example. Less-developed countries are ramping up primary care to combat basic health needs. The supplier side of the equation has not been resting, either. Hospital, clinic, and outpatient lab construction across emerging economies is taking place at a breathless pace. Medical schools and nursing schools are putting out doctors, nurses and other health care practitioners at unprecedented rates. U.S. health care systems are opening "branch offices" in the Middle East, Asia and South America. So who is going to pay for it? And, how will risk be rationalized?
Putting aside the obviously contentious and politically charged issue of funding, consider that regardless of whether a nation's care is funded through tax levies or from private sources, the tried and true insurance principle of spreading the risk is at play. A government-sponsored "universal health plan" is most typically funded by across-the-board taxes on its citizens. This is, in essence, spreading the risk, or at least funding the risk universally. Some citizens pay in more than they take out in services, while others consume more services than a lifetime of their individual taxes would cover. The country, in essence, is one large risk pool. The same principle, of course, holds true in the world of private health insurance, whether it's the pooling of individual policies, group rating for employer-sponsored plans or self-insured plans that generally include some type of stop-loss or reinsurance coverage. These approaches are well-established and well-organized in much of the developed, industrialized world, and, for the most part, serve their constituencies well.
But what about the emerging economies? What we know is that within their populations demand is increasing and supply is increasing. We also know that their wealth--both public and private--is growing dramatically. And these economies/countries comprise half of the world's population. These facts are givens. But, we also know that long-range solutions to financing health care have yet to be worked out. It is likely safe to surmise, then, that over the next several decades, there will be an emerging demand for the tools of health care management, risk assessment and insurance/reinsurance. We can further anticipate that these tools will need to be flexible and to work in ways and in combinations that might not yet be in practice. This will be dependent on the nature of the economy, public policy, and the preferences of a country's citizens. In some situations, this will entail the direct provision of something as simple as private health insurance.
Another foreseeable scheme is along the lines of public financing of health care--spreading the risk--with delivery of care through a private system. Given the large number of moving pieces, from the complexity of care, to public policy, to private investment, the permutations of how a system can be most efficiently organized and financed are many.
This will require innovation, sustained effort and investment on the part of those of us who possess these capabilities today. But, it is an opportunity, indeed, perhaps an obligation, given the nature of the topic at hand, to participate in developing systems that will do the most good for the most people. This is a form of the "pay-forward" concept who's time is upon us.
(The above piece is part of our continuing Perspectives series designed to highlight key products and services to our readers. This paid-for Perspectives was written and edited by Risk & Insurance®
in conjunction with our marketing partner. Additional Perspectives can be found on our Web site at www.riskandinsurance.com/.)
October 15, 2010
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