RISING COSTS LIMITS ACCESS (in Brazil and around the globe)
The health care sector is one of the most prone to digital disruption and it is also one of the sectors where consumers are the ones with most to benefit from its democratization and increase in accessibility. This becomes more important when global health spending is expected to rise over the next years (3.9% CAGR between 2020-2024, according to Deloitte’s latest Global health care report) and even more important when health care spending per capita increased more than 131% over the last two decades. The main drivers for the continuous growth of spending are related with population aging, increasing demand for care, and technological and clinical progress. However, more than expenditure amounts, the most important feature to analyze is the real access to treatment and the health care coverage in each country given that it varies from country to country.
HEALTHCARE ACCESS TO ONLY 1/3 OF AMERICANS
In US, for example, despite being the country where health expenditure per capita is the highest – overall health expenditure represents almost 18% of the country’s GDP - lag behind European fellow countries by far when it comes to access to treatments. In spite of the efforts to increase the access and affordability of healthcare, the universal health system in place hasn’t bridged the needs of the population. The programs implemented by the government such as Medicare and Medicaid cover only 14%, and 21% of the population respectively. This means that only 1/3 of the US citizens are protected by an affordable universal health system, while the rest are dependent on their insurers, employer-sponsored plans, or most importantly, out-of-pocket expenses.
At the same time, per capita Out-of-Pocket spending has grown substantially during the last decades, reaching 1150$ USD per year in addition to the amount individuals contribute towards health insurance premiums. In comparison, European Union countries per capita out-of-pocket spending averaged 548$ USD, and this difference can be explained by the wide coverage of universal health systems in the majority of European Union country’ members, which provides a greater safety net for individuals. On the other hand, the combination of private health plans with the National Health Insurance Model and the Out-of-Pocket Model seen US, have just augmented the complexity of an already complex sector, generating lower consumption rates and worse general outcomes for the population.
3/4 OF BRAZILIANS DEPENDING ON SUS
Similarly, the Brazilian healthcare sector is marked by all sort of particularities and over-complexity on top of lack of funding, altogether hampering the access to treatment to millions of Brazilians. SUS (Sistema Único de Saúde, or in English, Unified Health System) the backbone of Brazilian healthcare network and one of the biggest and most ambitious health programs in the world, provides to nearly three-quarters of the country’s population – 150 million Brazilians, since most does not possess the available means to access private health providers. And, similarly to US, there is plenty room for improvements. For example, in many places across Brazil, public healthcare does not meet the needs of the population, given the insufficient resources deployed – either number of doctors, outdated equipment, or long waiting lines for appointments and treatments.
This difficulty in accessing the public healthcare system makes room for health insurance providers to assist more than 50 million Brazilians - the second biggest private insurance market around the world, most of subsidized by big corporations and S&MEs. According to the World Bank database, total health expenditure in Brazil amounted to 9.5% of the GDP in 2018 (latest data available), with government expenditures covering only 42% of total healthcare expenditures, Out-of-Pocket comprising 27% of the overall and the remaining 31% being supported by private spending (healthcare and insurance plans). Preserving respective proportions, when we compare the complexity, expenditure structure, and the lack of access, we began to identify significant parallels between the health sector in the US and Brazil, and this is where similarities between the both countries can start to be explored from a business point of view.
HEALTHCARE DISRUPTION IS ALREADY TAKING PLACE IN BRAZIL
Not accidentally, during the last decade, after loosening restrictions on foreign investment on the segment, the healthcare market has spiked major interest from overseas investors resulting in deals which include US-based UnitedHealth Group acquiring Amil Participações (Brazil's biggest private health insurer) for US$4.9bn, and US private equity group Bain Capital buying insurer Notredame Intermedica for US$851m. And, more recently, in the end of 2020, hospital network Rede D’or raised over US$ 1.7bn via IPO, making it one of the biggest Brazilian IPOs in the last years, in 2021, both Rede Mater Dei de Saúde and Kora Saúde entered an IPO, each raising US$ 200m and US$ 120m respectively.
Adding up to this consolidation trend is also the investment in health tech companies, following increasing pressure from consumerism to shift the industry towards an ecosystem-based model of care, centered in the consumer. Great advances in the healthcare sector should be seen in the next years through (i) major changes in ecosystem business models, following international healthcare verticalization moves, and (ii) the development of new business models such as: home and self-care (patient engagement, self and virtual care, remote monitoring), social care (community networks) and financing support, adding new payment and financing solutions to help with healthcare accessibility. More on that subject can be seen here: Mckinsey Articles.
On the next article we will dive deeper on the HealthTech and FinTech scenarios in Brazil and US, focusing on (i) healthcare disruption moves similarities, (ii) recent developments on the tech side, (iii) huge possibilities for the Brazilian healthcare scenario, as well as (iv) successful cases that have disrupted the industry incumbents in US.
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