It is generally believed, higher the per-capita expenditure of healthcare, better is the overall ‘healthcare performance’ of a nation.
However, this myth has recently been busted by a new study, the take-home message of which would be quite relevant for India too. It flags a very important point, just as too low per-capita expenditure on healthcare fails to deliver an optimal healthcare performance to the target population, higher health expenditure, on the other hand, does not have any linear relationship with commensurately better healthcare performance either.
The question, therefore, comes up: What then would be the optimal per-capita spending on healthcare to offer quality healthcare performance in a country like India?
According to this recent Commonwealth Fund report , per-capita expenditures on healthcare in 2011 of eleven wealthy nations were as follows:
Per-Capita Healthcare Spend in 2011
Against the above spend, the ‘Healthcare Performance’ rankings of the same 11 nations were as under, showing no linear relationship between higher per-capita healthcare expenditure and better healthcare performance:
Performance of Healthcare System
The basis of ranking:
Interestingly, though the healthcare expenditure of the United States of America at 17.4 percent of Gross Domestic Product (GDP) is the highest in the world, according to this report, America ranks worst among all these nations, namely, France, Australia, Germany, Canada, Sweden, New Zealand, Norway, the Netherlands, Switzerland and the United Kingdom.
The ranking was made based various factors, which include quality of care, access to doctors and equity throughout the country.
The U.K. ranked best, with Switzerland following a close second, though their respective per-capita expenditures on healthcare were much less than the United States.
Holds good in BRIC perspective too:
Coming to the BRIC nations’ perspective, though India’s per-capita healthcare spend has been the lowest among these 4 countries, the following quick example would clearly establish that here also the healthcare performance does not have any linear relationship with the per-capita healthcare spend:
Per capita Healthcare expenditure in 2011: Country Comparison
|Country||US $||World Rank||Physician/1000 people||Hospital/1000 people||Life expectancy at birth (years)|
(Source: WHO data)
Taking the United States as an example:
To illustrate the point further, let me take the US details as an example, as it incurs the highest per-capita expenditure on healthcare. When that is the fact, does high healthcare spending of the US help the patients commensurately?
Going by these reports, it does not appear so, as:
- The Commonwealth Fund report also states, “Moreover, US patients were the most likely to find it very difficult to get after-hours care without going to an emergency room – 40 percent said it was very difficult, compared with only 15 percent in the Netherlands and Germany, the lowest rates of any country on this measure.”
- The 2008 Commonwealth Fund survey, of 7,500 chronically ill patients in Australia, Canada, France, Germany, the Netherlands, New Zealand, the UK and the USA, reportedly also found that: “More than half (54 percent) of the US patients did not get recommended care, fill prescriptions, or see a doctor when sick because of costs, compared to 7 percent – 36 percent in other countries. About a third of the US patients – more than in any other country – experienced medical errors or poorly-coordinated care, while 41 percent spent more than US$ 1,000 in the past year on out-of-pocket medical costs, compared with 4 percent in the UK and 8 percent in the Netherlands.”
The study also highlighted the following for the United States with the highest health expenditure:
- Lesser number of doctors and hospital beds among developed nations:
The US has fewer physicians per 100,000 populations than any of the other countries apart from Japan, and the fewest doctor consultations (3.9 per capita) than any except Sweden. Relative to the other countries in the study, the US also had few hospital beds, short lengths of stay for acute care and few hospital discharges per 1,000 populations.
- Highest rates of potentially preventable deaths from asthma and amputations due to diabetes:
While the US performs well on breast and colorectal cancer survival rates, it has among the highest rates of potentially preventable deaths from asthma and amputations due to diabetes, and rates that are no better than average for in-hospital deaths from heart attack and stroke.
- Individual payers negotiate prices with health care providers:
In the US, individual payers negotiate prices with health care providers, a system that leads to complexity – and varying prices for the same goods and services, says the study.
Where is the high healthcare spending of US going?
High health costs in the United States are mostly due to higher prices driven by free-market economy and not quality of care, says the study. Some of the key characteristics of the US healthcare space in the areas under discussion are as follows:
High and totally decontrolled drug prices:
The drug prices are totally decontrolled in the US, unlike most other developed nations, where price negotiations for reimbursed drugs are the common norms.
The above study highlights that US prices for the 30 most commonly-used branded prescription drugs are more than double the prices paid in Australia, France, the Netherlands, New Zealand and the UK, and they are a third higher than in Canada and Germany. In contrast, prices of generic drugs are lower in the US than in any of the other 12 nations due to very high competition. This reinforces the point that any delay in the entry of generics after patent expiry would impact the patients and the payor very adversely
Expensive hospital stays:
US hospital stays are far more expensive than in other countries, at more than US$18,000 per discharge compared with about US$13,000 in Canada and under US$10,000 in Sweden, Australia, New Zealand, France and Germany.
In 1999, according to a WHO Study, per capita healthcare expenditure in India was just US$ 18.2. The figure rose to US$ 28.7 in year 2004 and US $ 59.1 in 2011, which reflects a double digit Compounded Annual Growth Rate (CAGR) in per capita healthcare expenditure of the country from the 2004 study to 2011. The absolute numbers may be far from adequate; nevertheless, the trend is ascending. This needs to be accelerated, possibly by the new health minister with the prime minister’s direct help and intervention.
There is a lot to learn from the US healthcare model too, especially from its pitfalls and regulatory structure, as deliberated above.
Finally, taking a cue from all these, India should decide at what per-capita spend, with all necessary regulatory measures being firmly in place, the country would be able to ensure quality ‘access’ to healthcare for all its citizens.
Mere comparison of per-capita healthcare spend of each country, I reckon, may not mean much now. India needs to ‘reinvent the wheel’ in this area, as it were, to arrive at its own health expenditure model for quality healthcare service delivery to all in the country. This is more important than ever before, as higher healthcare spends do not necessarily mean commensurately better healthcare performance.
By: Tapan J. Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.