The $25 trillion healthcare problem and how to address it

By 2040, the world will spend around $25 trillion every year on healthcare. This will represent a massive 150% increase since 2014, and will affect every region of the world. Per capita spend in some regions, such as South and South-East Asia, will increase by an average of 5% to 7% every year between now and 2040.

This high spend can place a significant burden on governments, payers and individuals trying to cover healthcare costs. The average annual cost of US healthcare insurance premiums for family coverage has increased more than 300% in less than 20 years. It has risen from approximately $6,000 in 1999 to nearly $19,000 in 2017, according to the Kaiser Family Foundation. If employers did not cover these premiums, many families could not afford them.

But what do we actually get for all this spend? Spending more does not necessarily achieve better health results. Norway spends three times as much per person on health as Greece, but both countries have about the same (health-adjusted) life expectancy. In a more extreme example, the US spends more than five times as much per person as Estonia, yet both countries have similar life expectancies.

Healthcare outcomes for patients also vary significantly, even for diseases and conditions we know how to treat and prevent. The maternal mortality rate is 13 times higher in in the worst-performing OECD country than it is in the best-performing country. The rate of amputations associated with diabetes is nearly ten times higher in the worst-performing country compared to the best-performing country.

The key challenge is that different actors in the healthcare system respond to different incentives, which often have very little do with the quality of patient care or patient outcomes.

For example:

- Providers such as hospitals and clinics, who are often paid for each service they provide (known as the fee-for-service payment model), aim to maximize the volume of patients they see and the services they deliver.

- Payers, typically insurers, aim to minimize costs. They're focused on the medical loss ratio: the percentage of a healthcare premium spent on healthcare services for patients.

- Medtech and biopharma companies aim to maximize their profits.

- Academia and research organizations aim to maximize the number of publications they generate.

As one can see, many actors in the system have different incentives focused on volume, such as the number of publications or total dollars earned. But these incentives have very little to do with value for patients. As a result, the patient gets lost in the system.

Even though every actor in the system has their own incentives, they also have a set of shared interests in strengthening the health system to drive value for patients. For example, many stakeholders have an interest in gaining access to better data about patient outcomes. Outcomes data can help pharma and medtech companies track and demonstrate how their products improve patient health. It can also help providers and researchers better understand how to organize health services. Payers can use this data to reimburse healthcare services based on outcomes, rather than on volume. Most importantly, publicly tracking and reporting outcomes can also improve care quality for patients.

Rather than waiting for policymakers to reorganize the entire healthcare system around value, individual private and public sector stakeholders can cooperate to achieve incremental changes that they have a shared interest in creating. For example, the World Economic Forum and the Boston Consulting Group (BCG) have partnered with multi-sector coalitions in the city of Atlanta and the province of Ontario to pilot new approaches for improving healthcare value. These initiatives are taking steps to change the local health system so they deliver better value for patients with specific diseases (congestive heart failure in Atlanta and type 2 diabetes in Ontario).

These and similar efforts change the status quo by bringing together organizations that normally do not collaborate with each other, such as private sector companies who compete for profits, and regulators who dictate how the private sector can operate. By cooperating in a ground-up redesign focused on a value-based health system, the public sector can encourage ecosystems that reward value and ensure the best outcomes for patients. The private sector can then compete on value, developing clinical practices and new innovations that improve outcomes for patients. Some key examples of activities that these collaborations are undertaking to reorient their health systems towards value include:

- Tracking and publicly reporting standard sets of patient outcomes.

- Experimenting with new, patient-centred service delivery models of care.

- Gathering evidence on which value-based payment models improve outcomes and reduce costs for the system.

Of course, local initiatives such as those taking place in Atlanta and Ontario won’t completely fix the $25 trillion problem facing healthcare. Reorganizing the financing and delivery of care will require difficult changes to the operating models of businesses and governments on the national and international levels. Nevertheless, public-private collaboration remains vital to transforming health systems. It gives the many players the opportunity to address these difficult changes, in order to deliver better value for patients.

As the global organisation for public-private cooperation, the World Economic Forum is currently preparing more detailed perspectives on how public and private health systems actors can mobilize through cooperation for value-based care. We look forward to sharing these insights with you in the coming months.