HEALTH : PURE LUXURY, SOCIAL ADHESIVE OR A MATTER OF COURSE?

Transcription

1 HEALTH : PURE LUXURY, SOCIAL ADHESIVE OR A MATTER OF COURSE? 19th February, 2013 Rob Leonardi Head of Regional Markets, APAC

2 Agenda 1. Our Expectations as Consumers 2. The State of Global Healthcare 3. Different Healthcare systems Theory & Practice 4. The Social Impact of Different Healthcare systems 5. Where to NOW? 6. Questions 2

3 Consumer Expectations I want to have access to the best experts and best medication I expect all my expenses to be reimbursed I expect that the health system takes care of prevention and of my well-being I expect that the health system supports me life-long There is strong pressure on medical cost We do not recognise the cost of these healthcare demands Source: MH 3

4 leads to health care being one of the fastest growing sectors globally Dynamics of the worldwide total health expenditure EUR billions Development total health expenditure (THE) vs. GDP 20 largest health markets Index, 1995=100, EUR-based CAGR ~ 6-7% 4,700 6,900-7, THE GDP CAGR Percent ,100 3, , e 2015e e 2015e Source: WHO, Global Insight, MH Research 4

6 In the majority of developed countries the lion s share of health expenditure is public health expenditure or social insurance Breakdown of total health expenditure by countries and types of expenditure, 2007 Percent per category 2, % 146 7% 51% % % 1,147 Out-of-pocket expenditure Private Health Insurance 12% 42% 15% 4% 13% 10% 7% 14% 11% 7% 20% 3% 15% 28% 9% 24% Government and social insurance 46% 81% 77% 79% 82% 4% 77% 72% 70% 45% 42% 63% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% USA JP DE FR UK IT CN ES BR CAN Rest of the world= 146 countries Source: WHO 6

7 10 countries account for ~80% of worldwide health expenditure Population Share of worldwide, percent Total health expenditure Share of worldwide, percent Country tiers, 2007 Total GDP Share of worldwide, percent GDP per capita EUR th US 42% Japan 7% Germany 7% France 5% UK 4% Italy 3% China 3% Canada 3% Spain 2% Brazil 2% Top Second ~50% of the world s population spends only 11% of health expenditure 11 Other Total: 100% = 6.9 bn 100% = USD 5.3 trln 100% = USD 54.5 trln 7.9 Source: WHO, Global Insight, UNDP 7

8 The richer the country - the higher the health expenditures 1 Economic development Description Wealth increase generates more financial capacity and better information access Resulting in Growing financial capacity for accessing health care services Patient awareness and development of information flow Health care expenditure per capita, 2007 USD 8,000 7,000 US Norway Switzerland Iceland 6,000 Belgium Holland Denmark 5,000 France Luxembourg 4,000 Germany Sweden Ireland New Zealand Australia UK Italy 3,000 Greece Finland Japan Slovakia Spain 2,000 Argentina Hungary Israel Brazil Chile 1,000 Czech Rep. Russia Mexico 0 India Turkey 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90, , ,000 GDP per capita, 2007 USD Source: OECD, WHO, Global Insight, MH 8

9 Ageing population and changing life-styles lead to higher health expenditure 2 Demography and lifestyles Description Aging population Increasing longevity leading to more/more complex medical diagnoses Life-style induced illnesses Annual health spending per capita in USA by age group, 2004 USD th per capita Resulting in New diseases or development of diseases linked with age (Alzheimer, some cancers) and life-style (e.g., diabetes, cardiac diseases) Growing therapy costs, longer stay in hospitals Unbalanced solidarity among generation: less young more old people ~ 50% of total health expenditure x US average = 5.3 Source: CMS, MH 9

10 Supply drives demand developed market Examples from 4 Swiss cantons, 2008 Medical doctors per residents Number Health expenditure CHF / resident Basel Geneva Zurich Appenzell Source: BAG 10

11 Supply drives demand developing market Examples from 2 Indian Provinces RSBY program Medical doctors /10,000 enrolled families Health expenditure Hospital incident rate (%) RSBY Bihar District Patna Pashchim RSBY Gujarat District Mahesana Kheda Ahmedabad

12 Performance of a health system is not directly linked to health spending Relationship between health care expenditures and life expectancy in OECD countries 2007 Life expectancy (years) Best in class Japan Norway United Kingdom Switzerland Netherlands France Germany Belgium Greece Worst in class 78 Chile United States Poland Mexico Turkey Estonia Slovak Republic Hungary 70 THE (% of GDP) Source: OECD 12

14 There are various ways to finance health care needs Public financing Private financing Source: Bundesarchiv Source: British Government BUPA Bismarck model - social insurance: e.g., Germany, Switzerland Beveridge model tax-financed health care: e.g., National Health Service in UK Private insurance Out-of-pocket payments Source: MH 14

15 Role of private health insurance (PHI) differs significantly across the world Supplementary model Complementary model Substitutive or primary model UK, Spain, Portugal, Italy, Finland, Greece, New Zealand Ireland, France, Belgium, Austria, Japan, Korea, Taiwan Germany, Netherlands & USA Public Health coverage (National Health System - NHS) + Private Duplicated PHI: As queue jumping or to improve quality and / or covering uncovered services. Results in double coverage Private (co-payments) + Public Health coverage (Statutory Health Insurance - SHI) Complementary PHI : Supplement cover to access services not available publicly (e.g., fertility treatment, cosmetic surgery, certain drugs etc.) Private (optional) Public Health coverage (Germany) or PHI Supplementary model + Complementary Model Private (co-payments) + Public Health coverage (Statutory Health Insurance - SHI) + Private Australia, China, Hong Kong, Indonesia, Malaysia, Thailand, Singapore, Mongolia Complementary + Supplementary PHI: To provide both gap-cover and/or duplicate cover to national health system which is mostly in poor quality and capacity PHI: complementary on specific costs (dental etc.) Substitutive PHI: Opt out option - part of population can exit SHI and enter PHI Source: MH 15

16 Level of Health Expenditures THE, 2007 % of GDP Huge disparity among countries and regions South East Asia* Eastern Europe* Latin America* x 30 more $ spent per capita per year in USA compared to China or India! Japan 8.0 Western Europe* 9.3 USA 15.7 *South East Asia: China, India, Indonesia, Malaysia. Latin America: Brazil, Colombia, Venezuela. Eastern Europe: Czech Republic, Poland, Romania, Russia, Slovakia. Western Europe: Belgium, France, Germany, Italy, Netherlands, Spain, United Kingdom UNWEIGHTED AVERAGE Source: OECD 16

17 What the regional PHI markets look like? Asia Pacific Regional Private Health Insurance Developments Private Health Insurance CAGR estimated Premium size of Private Health Insurance 2011 (estimated) with population in bracket (million) Cambodia (15) 28% 18% India (1,200) Laos (7) Korea (49) Indonesia (230) China (1,347) Philippines (92) Malaysia (28) Singapore (5) Thailand (68) Size represents 1 billion USD In Comparison, Germany (82): 46 billion USD premium; 3% CAGR; PHI as 12% of THE 8% Vietnam (88) Hong Kong (7) Australia (21) Taiwan (23) Mongolia (3) New Zealand (4) Japan (127) -2% 0% 5% 10% 15% 20% 25% PHI as % of Total Health Expenditure (2011 estimated) Source: Munich Health Research 17

18 Health Premium Growth vs. THE / GDP Growth Compound Annual Growth Rate for Year GDP Primary Health Insurance Premium Total Health Expenditure Singapore 1% 10% 10% Indonesia 4% 15% 25% India 7% 20% 33% China 8% 11% 16% * source: WHO statistics 2012, insurance authority published statistics , MH estimates 18

19 US - health expenditure are expected to grow by 80% in the next 10 years Breakdown of US total health expenditure by paying agent taking into account the effect of the health reform, e USD bn Point of time when the major health reform regulations come into force (Insurance Exchanges, growing Medicaid enrollment etc.) 2, CAGR +6 3, , CAGR, percent The total health expenditure is expected to grow by ~80% in the next 10 years The share of the public sector will grow from 56% now to 60% in 2020, particularly driven by growth in Medicaid spending Despite the growing number of elderly population, the growth rate of Medicare will decrease due to the health reform-driven savings Out-of- Pocket Other (CHIP, TRICARE etc.) Other Third Party Payers (e.g., worksite care, Indian service etc.) Medicaid Medicare Private health Insurance (incl. ESI, MA, Medicaid etc.) 1, , , Despite the number of the privately insured will rise by additional ~30m people in 2014, CMS expects the health care cost are to grow only marginally. However, the current expectation of the market players is a significant cost growth after 2014 Share of GDP Percent e 2014e 2020e Source: CMS, Health Affairs 19

20 US health insurance market is highly complex: it is built up of 2 different funding types separated in 5 major business segments Segments of the US private health insurance market, 2010 Premiums/fees in USD bn Number of insured, m people General description Major sub-segments Governmental Other Medicaid S-CHIP Medicare n.a FEBA, Tricare etc. Public health insurance for the poor partially administered by private insurers Public insurance for the aged and disabled administered by private insurers Commercial MCO PCCM (Primary Care Case Management) MA Medicare D Medicare supplement S-CHIP Commercial Selfinsurance by employers (managed by ASO) Commerical individual Commercial group Pure medical claims and expenses paid by employers directly Nearly all employers use administrative services (ASO) provided by insurers to employers Value covered by stop-loss reinsurance written in this segment is ~USD 7 bn Private health insurance n.a. Major medical Short-term Limited benefit Dental Students For Medicaid and Medicare the total number of enrollees is taken, e.g., for Medicaid both FFS and MCO. For Medicare A/B, Medicare Advantage, Part D and Medsupp. Premiums are indicated for commercial segments only Source: CMS, Markfarah, Highland Data Services 20

21 Over the last years Chinese government extended the public health insurance coverage to >90% of population Chinese population split: insured by social schemes, 2011 Millions people +113% Urban employed Urban not employed Rural , Public insurance scheme UEBMI 1 mandatory insurance for urban employees. Most comprehensive scheme Funded by employers and employees (6% and 2% respectively) Annual premium ~USD URBMI 1 for urban not employed (aged, students etc.) Annual premium ~ USD NRCMS - New Rural Cooperative Medical Scheme (NRCMS) - local (at county level) voluntary insurance schemes Subsidized by the central and local government and individuals Annual premium ~USD Currently almost the total population is publicly insured. This is the result of 2011 reforms to expand the access to healthcare However, public coverage still remains insufficient and copayments and deductibles are high. There are significant regional variations in premium contributions and level of coverage The strong gap in coverage between UEBMI and other schemes will further persist due to disparities in economic development Urban Employee Basic Medical Insurance; Urban Residence Basic Medical Insurance Source: KPMG 21

22 Private Health Insurance Market in China Private health insurance premium has been growing at 27% CAGR* for the last ten years, estimated premium reaching 10 billion USD in year 2010 as compared to less than 1 billion USD in year 2000, the market still has significant potential to grow considering its 1.3 billion population and high level of OOP** (37%). In terms of premium income, group business contributes about 30% of total, however plagued with high loss ratio due to competitive pricing mainly as accommodation for group life business. Major part of PHI market still consists of simple lump sum products predominantly attached as life rider, existing complementary reimbursement products to social insurance only contain limited extra coverage, comprehensive high-end products are available but at high price Governmental health reform plans foresee an advanced role of the PHI industry in Chinese population health coverage Provision of care is still dominated by public facilities with outpatient care often being provided in hospitals, no General Physician structure in place. * Compounded Annual Growth Rate ** Out of Pocket Payment ^ Consultative Reinsurance 22

23 Government tries to revamp the provision system, but the role of public providers is still dominant System of healthcare provision Chinese healthcare provision Outpatient Inpatient Source: KPMG, Press Government health centers (CHC, MCH, THC) Governmental hospitals (90%of hospitals) Private hospitals (10% of, 7% of beds) Characteristics Disproportionate of healthcare resources coverage between rural and urban areas: Hospital beds and personnel coverage in cities is 2 times higher than in rural areas. Still, large hospitals in big cities are usually are overcrowded, which leads to long waiting times Despite waiting times overtreatment and overdrugging are big problems. Due to strong position of public hospitals ~60% of total healthcare costs are drugs, which is extremely high compared to other countries The reform plans are to establish community health centers (CHC) in urban areas and small hospitals with higher standards in rural areas. However, many of them were converted from previous category 1 and 2 (poor quality) hospitals. Local governments are investing to upgrade their facilities and make them attractive The core bottle-neck is GP shortage. Even if investment takes place, the shortage won t be resolved for a long period. That is also one of the reason of a slow development of private hospitals Cost control in public hospitals is impossible and physician-induced demand is high Private wings of government hospitals play an important role on the market they connect high expertise of public doctors with better service level Pure private hospitals (many of them are specialty hospitals, e.g., dental) Implications for private health insurance industry Current provision level in public institutions provides little incentive to purchase PHI (restricted benefits, relatively low-cost treatment etc.) Public hospitals have a monopolistic position and therefore, high bargaining power. Difficulty to control costs makes it hardly feasible for an insurer to manage profitability Waiting times are long Bribery or gifts for doctors plays a big role in provider access If there is a critical mass of private providers available, products for upper middle class / HNWI may be attractive 23

24 Co-ins. Examples of Funding Systems Singapore MSA Plan Singapore: Central Provident Fund (CPF) Insurance cover Out-of pocket / self-insurance High risk cover MediShield (national low-cost CAT. scheme), Integrated Private Medical Insurance Scheme (IPMIS) & PHI Premiums can be funded by MSA (MediSave) account, but subject to an annual limit MediShield only open to citizens and permanent residents, covers till 85 years old, opt-out scheme. With 0.9 million insured in 2008 IPMIS is a top-up scheme that supplements MediShield, with life time cover and higher benefits. With 1.9 million insured in 2008 PHI with higher benefits (as riders to IPMIS) than MediShield and IPMIS Deductible Deductibles are paid out of pocket. Medical Savings Account MediSave (since 1984) Mandatory national healthcare scheme 4-8% of salary contribution payable from both employee and employer Cannot withdraw money except for paying medical bills and health insurance premiums Till 2008 there has been 2.9 million MediSave enrollees (70+% of population), with around S$ 42.4 billion assets pool Average balance in the MediSave accounts of employees is S$ 19,500 (USD 13,800) and around S$ 25,000 (USD 17,700) at age 55 (in 2008) 24

25 Singapore s Example: MSA s contribute to restrained growth in health expenditure Indicators\Year A THE in million S$ ,312 3,545 6,079 Annual Growth Rate 9% 12% 10% 6% B GDP in million S$ 2,150 5,805 25,091 39, , ,680 Annual Growth Rate 10% 16% 12% 4% Population in million Annual Growth Rate 3% 1% 2% 4% C D THE/GDP in % 3.95% 3.50% 2.53% 3.34% 2.93% 3.50% Per capita THE in S$ , ,380.4 Annual Growth Rate 6% 11% 8% 2% A. Total Health Expenditure growth rate was effectively restrained since 1986 and is on a declining track. B. THE expands slower than GDP from 1986 to 1995, and has been kept at approximately the same growth pace as GDP from 1995 to C. The ratio of THE to GDP has been kept stable around 3.5% for the last 20 years, while OECD average amounted to 8.8% in 1985, 10.4% in 1995 and 9.5% in 2005 (where US peaks at 15.7%, NZL 8.8%) D. Significant declining trend observed after introduction of MediSave. 25

26 Singapore s Example: lower and stable public health expenditure input Indicators\Year E Public Health Expenditure ,142 1,939 Annual Growth Rate 9% 11% 11% 5% Total Health Expenditure ,312 3,545 6,079 Annual Growth Rate 9% 12% 10% 6% GDP 2,150 5,805 25,091 39, , ,680 Annual Growth Rate 10% 16% 12% 4% F PHE/THE 38.82% 39.90% 35.12% 31.55% 32.21% 31.90% PHE/GDP 1.53% 1.40% 0.89% 1.05% 0.94% 1.12% E. Public Health Expenditure growth rate was kept as low as 5% since F. PHE as percentage of THE was stabilized at around 32% after introduction of MediSave, which is significantly below OECD average of 73%in 2005 (NZL :77%). 26

27 Medical Trend measured by Insurers in the region Gross Medical Trend* is a survey based index developed by Tower Watson to illustrate the percentage increase in medical cost (trend) for selected insurers portfolio** in each of their representative countries. Medical Trend Estimates 2012 Gross Medical Trend Development Gross Medical Trend 2012 Medical Trend net of general inflation China 14% 14% 13% UK US 11.8% 10.6% 7.4% 9.9% 12% 10% 8% 6% 4% 2% 0% 9.3% 6.0% 4.4% 4.8% 5.5% 6.2% 8.4% 13.0% India 7.5% Indonesia 14.0% 12% 11% 10% 9% 8% 7% 6% China India Indonesia Singapore France UK US France Singapore 5% * This index reflects the increases in both price inflation and utilization, and is only one component (medical insurance) when measuring medical inflation **The survey was conducted for the past four years among 170 leading health insurers that provide medical insurance solutions to employers in 37 countries throughout Asia, Africa, Europe and the Americas. 27

28 Imbalances between health care demand and funding lead to the growing role of private health insurance Imbalances in the health sector Growing role of the private health insurance Medical cost and needs strongly grow due to: Economic development Demography and lifestyles Supply and demand factors Health systems design (low incentives for cost reduction) Available financing is often not sufficient due to: Overall worsening of public finances (debt crisis, slow economic growth) Size of health expenditure reaching critical size of >10% GDP in many countries Slow population growth In Beveridge markets Public investment in medical facilities will be constantly below population needs Government can not indefinitely increase taxes In Bismarck markets Government will accelerate transfer of costs to private insurers through benefit cuts and co-pays increase In emerging markets Economic development will lead to constant increase of customer expectations Economic development will generate capacity for purchasing private health insurance Out-of-pocket Private health insurance Public-funded expenditures Source: MH 28

29 Vicious circle of health care demand and supply drives cost 1 Economic development Demand 2 generates strong demand growth for health care services 4 which leads to increasing demand 3 which leads to development of supply Supply The challenge is to ensure equal access and quality of health care but to keep it affordable both for the patients and for the government Source: MH 29

31 Mini public health Comfort Beyond the comfort Economic development influences the design of health systems Customer expectations to health system Well being I want to be healthy Sophisticated health systems combined with over supply Customers and providers drive the market Only in developed countries Generalized health insurance systems Mature/ developed level of healthcare supply Mainly in emerging and developed countries I want to survive Poor quality and limited healthcare delivery market Primary health systems, if any Mainly in poor countries Healthcare supply & insurance system are a consequence of economical development and drive customer behavior Source: MH 31

32 Current design of Publicly financed health systems provides little incentive to reduce costs Europe, Japan, Korea, Taiwan Strengths Universal coverage Social benefit Solidarity principle Free or nearly free and unlimited access to care Comprehensive benefits Relatively high patient/ consumer satisfaction Perceived as high quality of delivery of care (excluding performance). Threats & Challenges Huge and growing financial deficits, with current intent focusing on reducing coverage Aging population Uncontrolled medical inflation Focus on payment of services, no (or limited) role in quality, prevention etc. Limited integrated approach No monitoring of quality and performance Huge perceived fraud/overservicing Limited (or no) competition Inefficient (e.g. long inpatient length of stays) Adverse customer incentive: consumers of services (patients) not affected by costs Political/ Medical/ Pharmacy lobbying Source: MH 32

34 There are several sources of growth of private health insurance Medical inflation Premium adjustment Economic development Membership development Source of PHI Growth Product innovation/ broader coverage New customer expectations Increase of PHI market share due to systems shift and new business models (e.g. PPP) System reform Source: MH 34

35 Private health insurance market development offers new growth opportunities Examples of growth opportunities for private health insurance Spain "Privatization" of system in dedicated regions offering opportunities for PHI under prepaid medicine models (close from staff model HMO). Germany Recent decision to not introduce Bürgerverischerung and stabilisation of system should accelerate development of PHI complementary products Russia New regulation (improve solvency of PHI players) potentially open door for foreigner investors. Huge need for private inpatient / primary care hospitals / clinics China Huge economic boom leading to growing customer expectations in health care. Government supports development of PHI to improve access and quality of health. Development of private supply. USA Ownership society/ medicare modernization act opens up a large segment of the population for private plans WORLDWIDE Explosion of health care expenditures leading to urgent reforms, new public / private partnership opens opportunities for business ventures. GCC Demographic boom. Increasing health care spend forces government to implement an efficient health care system with external support shifting health care from to private insurance India Huge economic boom leading to growing customer expectations in health care. Policy changes with respect to capital requirements, solvency norms, investment guidelines, and other regulatory measures for growth of standalone health insurance companies expected to come up Australia Privatization of key PHI players (Medibank) or demutualisation of other PHI. Increase of fiscal incentive to purchase PHI Source: MH 35

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