Opportunities for our healthcare system
By Prof. Roland Berger
Talk about healthcare and, sooner or later, the subject usually turns to financing problems. When is the last time you heard someone mention the opportunities in this sector, both human and financial? Yet this market is our largest industry. It is a growth market, and the jobs it creates can be offshored to a limited extent only.
For the past decade, our healthcare sector has been expanding 1% faster than Germany's GDP. According to a study by Roland Berger, it will grow by around 70%, to more than EUR 450 billion per year between now and 2020. Healthcare already provides jobs for one out of every ten gainfully employed people in the country. Nor is there any sign of an end to this growth. First, our population is aging and staying healthy for longer – two factors that will add EUR 22 billion to the national healthcare bill by 2020. Second, people today spend more on prophylactic care and wellness offerings. Third, innovations in medical technology will increase the volume of this market segment by EUR 133 billion over the next 15 years.
As in other industries, innovation often makes existing processes more economical. In the past, a patient with a torn cruciate ligament had to spend up to two weeks in the hospital. Today, minimally invasive surgery gets most such patients discharged within three days. Staying in the hospital thus costs less and the scars are less conspicuous. In addition, patients recover more quickly and suffer less pain. Admittedly, developing and deploying a constant stream of new and better treatments – from coronary stents to heavy-ion therapy for cancer – costs billions. In terms of both the human and economic benefits, however, such innovations are unquestionably worth the investment. People enjoy longer, healthier lives as a result, and more and more diseases can now be cured. Medical progress is thus at once the biggest cost driver and the greatest benefactor – one that also creates and preserves jobs!
It is therefore undeniably worthwhile continuing to promote innovation and research in the healthcare industry. To keep medical innovations affordable for all in the future, inefficiency must be eliminated at every link in the value chain. Competition and transparency must be encouraged. The ultimate point of pain for our healthcare system, however, is the financing model. Our existing model places the financial burden primarily on employees who pay social insurance contributions, and their numbers are continuously diminishing. At the same time, it inflates labor costs, which only exacerbates the first trend. The logical way to change the current model would thus be to introduce risk-adjusted healthcare premiums and link these to selective tax breaks. This approach would avoid social hardship while keeping labor costs down.
(This column was published in "Rheinischer Merkur" on May 25, 2006)
