Health Management

Insight, Knowledge-Center

This article was published in Full Cover magazine, issue number 4

Striking a difficult balance between rising life expectancy and increasing health costs

Health is a complex, passion-driven subject. We’ve noted in the past how the increase in life expectancy can be explained by (among other root causes) the scientific development that permeates new medical technology. Such development is fueled in turn by the benefits it generates – which reflect on increased life expectancy – and also by a personal wish for good health. As a consequence, we face the high cost of maintaining a healthy life or healthful living standards, and financing difficulties. How can we solve this problem without giving up on past gains?

Life expectancy for the world’s population soared from 48 years in 1955 to 68 in 2009 (WORLD HEALTH STATISTICS 2011 – WHO) and is expected to reach 73 years by 2025. 2009 data show that 19 countries already boast a mean life expectancy above 80 years.
This increase in life expectancy can be found in the following factors:

  • Socio-economic development
  • Better sewage and sanitation, general improvement of water for human consumption
  • Creation and expansion of healthcare services, new therapies, new diagnostic tools and processes, development of existing procedures for treatment of new conditions, new customer service proceduresand other innovations. These items are often included in the more general term, “medical technology.”

Economic development and sanitary conditions, lead to reduced mortality from infectious disease. These most often stem from public health policies with a strong emphasis on prevention. Technological development is present in almost every field of medicine – medical specialty care, service providers, health plans & health insurance, medical research & clinical trial companies, public health policymakers, among others – and is an important factor in diagnostic and treatment innovation. On the flipside, technological development does increase health costs.

In 2008, per capita health costs in the world were US$ 854,00 against US$ 458,00 in the year 2000. Of that total, governments bore 60% of expenses, private organizations bore 40%. It is interesting to note that, in the year 2000, governments were responsible for 56% of health expenditures. (WORLD HEALTH STATISTICS – 2011 – WHO) Individual medical premiums grew by 147% in 13 years, from US2,196,00 in 1999 to US$ 5,429,00 in the United States. (Employer Health Benefits – 2011 – The Kaiser Family Foundation – AND -Health Research & Educational Trust) The variation in health costs has systematically achieved larger volumes than other economic sectors. Average annual growth for such costs has been 9,8% in the US since 1970, which is 2,5 points above the growth of GDP in the US.

Outside the United States, other countries have also devoted a larger percentage of their GDP to health expenditures. However, significant health expenditures do not necessarily mean good service provision. The same procedures will represent different costs from one country to another, maybe even from one intra-national region to another, although less expensive procedures may deliver similar or even better results. As a result, there is a heated debate to determine causes and solutions to rising health costs. Such a debate is urgent, as the number of people without access to healthcare is on the increase. A few factors have come to the fore thanks to such debates:

  • medical services focus on treatment, rather than prevention.
  • rendering of medical services which are unnecessary, insufficient or inefficient.
  • medical services are expensive.
  • high administrative cost.

Preventative services were, for a long time, limited to the improvement of sanitary conditions. With increased life expectancy, the focus shifted to chronic conditions and the prevalent model was centered on treating such conditions – the most frequent among them being chronic heart conditions stemming mostly from high blood pressure, diabetes and obesity. The need to establish early diagnostic methods for such conditions became apparent, and thus arose population screening. However, such screening focuses on finding patients for early treatment, not on preventative measures. Even that process has been influenced by technological innovation and its efficacy is hotly debated (Over-Diagnosed – Making People Sick in The Pursuit of Health – DR. H.Gilbert Welch – 2011).

Efforts to improve prevention (changing diets in schools and daycare centers, anti-smoking campaigns, advocacy of physical exercise, among others) match the common sense belief that it is better to prevent. Self-generated demand – demand for diagnosis and treatment – creates a positive incentive that may bolster inadequate use or overuse of available technologies. Also, hospitals focus only on servicing market demand and staying competitive while they disregard a fully integrated vision of their users’ health. Finally, specialties for which demand is lower at a given hospital facility must be at the beginning of a learning curve and elicit more resources for adequate diagnosis and treatment. To minimize the problems posed by that cycle, external controls are put in place: Service quality certificates, internal and external audits, accountability to government and health plans, detailed forms ensuring warranties from all service providers, double-checks of the payer, and others. This administrative cost is encapsulated in the cost of services rendered. We believe a few items are important in this universe we call Health Management:

Service must be guided by the strictest ethical principles.

Ethics must guide every step, from choosing the best treatment available to health advocacy programs which will in fact bring tangible benefits to a given swath of the population. Only through the lens of principle can existing incentives be properly analyzed.

Special attention must be given to the ends of the risk curve – serious cases and health advocacy programs.

Patients with serious conditions can greatly improve their quality of life if they are treated according to the best available practices in specialty units for the treatment of said patients’ conditions. There are also major benefits to cases beyond clinical help, where the patients’ and their relatives’ comfort becomes the key factor. On this matter, the uncomplicated lens of general medicine creates a hub for all the information necessary to quick, effective decision-making. Health advocacy programs are important to diminish risk and the number of people who might reach the ‘serious’ end of the curve. Within that group, people must be adequately monitored and made aware of their own responsibility with regards to their health.

Employment of insurance risk analysis techniques within healthcare.

Risk analysis techniques widen the focus on population segments. By doing that our analysis factors in the collective best interest of a given group in order to determine the best service provision for a given individual. Although the problem is complex, timely efforts can change things for the best. It is not easy, but perfectly achievable.

Author: Rildo Silva, Director at MDS Brazil

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