Transcript Slide 1
To your health: diagnosing the state of healthcare and the global private medical insurance industry Lukas Steinmann Mexico 10. June 2008 Introduction: USD 5 000 bn spent on healthcare (2007, estimated) Rest of World 23% USA 43% Brazil 2% Spain 2% Canada 2% China 3% Italy 3% UK 4% France 5% Germany 6% Lukas Steinmann Mexico 10. June 2008 Slide 2 Japan 7% Note: Estimates based on WHO National Health Accounts 2004 and Swiss Re estimates of GDP 2007. Only the top 20 markets are shown here. Numbers refer to health spending funded by PMI (not PMI premiums). When compiling NHAs, researchers of different countries might use different methodologies. Source: Swiss Re Economic Research & Consulting Financing healthcare: expenditure is outpacing GDP growth OECD countries that define the upper and lower spending band 16 % Health expenditure/GDP 14 12 10 8 6 4 2 0 1960 Lukas Steinmann Mexico 10. June 2008 1965 1970 1975 1980 1985 1990 1995 2000 2005 Canada Denmark South Korea Luxembourg Portugal Spain Sw eden Turkey United States Mexico Slide 3 Source: OECD Ever growing healthcare costs? Lukas Steinmann Mexico 10. June 2008 Slide 4 1. Strong preferences for health as wealth increases drives demand. The attitude towards health, lifestyle and demographic aging also influence demand for health. 2. On the supply side, advances in medical technology and infrastructure are the main cost drivers. 3. Healthcare delivery is a complex process that is prone to inefficiencies: – a lack of coordination and standardisation drives costs and reduces quality – asymmetric information allows medical service providers to induce demand – price-quality competition is rare because information about prices and outcome-quality is scarce A healthcare financing system Insurance premiums / tax Population Lukas Steinmann Mexico 10. June 2008 Risk carriers, including the governmen t Direct payment State funding / reimbursement Medical service providers Services Slide 5 Source: Swiss Re Economic Research & Consulting Private Medical Insurance: limited role in healthcare financing in Mexico India China Mexico Honduras Brazil Poland Argentina Chile USA Colombia 0% Lukas Steinmann Mexico 10. June 2008 20% Out of pocket 40% Private Insurance 60% 80% Government & Social Insurance 100% Other Slide 6 Source: World Health Organization Financing healthcare: largest global PMI markets USD bn USA France Germany Brazil Canada Netherlands South Africa Australia Spain Switzerland Argentina United Kingdom Russian Federation Austria Chile China Republic of Kore Italy Belgium Mexico Lukas Steinmann Mexico 10. June 2008 Slide 7 0 5 10 15 20 25 30 35 // 750 Note: Estimates based on WHO National Health Accounts 2004 and Swiss Re estimates of GDP 2007. Only the top 20 markets are shown here. Numbers refer to health spending funded by PMI (not PMI premiums). When compiling NHAs, researchers of different countries might use different methodologies. Source: Swiss Re Economic Research & Consulting Financing healthcare: potential PMI markets USD bn 0 10 20 30 40 50 60 70 80 90 100 // USA China Japan Germany India Italy Brazil Mexico United Kingdom Spain France Russian Federation Canada Republic of Kore Australia Switzerland Greece Belgium Iran Lukas Steinmann Mexico 10. June 2008 Slide 8 Turkey Out-of-pocket Prepaid Note: Estimates based on WHO National Health Accounts 2004 and Swiss Re estimates of GDP 2007. Only the top 20 markets are shown here. Numbers refer to health spending funded by PMI (not PMI premiums). When compiling NHAs, researchers of different countries might use different methodologies. Source: Swiss Re Economic Research & Consulting Evolution of medical insurance business Lukas Steinmann Mexico 10. June 2008 Slide 9 Source: Swiss Re Economic Research & Consulting Running PMI profitably: a value chain approach Sales and marketing Customer acquisition Lukas Steinmann Mexico 10. June 2008 Slide 10 Product / benefit design Administration Underwriting Customer service / retention Claims mgt (adjudication) Medical management Payment processing Building provider network Provider cost mgt Pharma. cost mgt Case / disease mgt It is essential for PMI to acquire local know-how as well as a deep understanding of how each country’s health infrastructure works. Insurers must anticipate regulatory, market and medical changes. Product design: insurers must strike a balance between providing cost-effective care and providing patients with adequate choices. This may be achieved through product design by offering a good blend of coverage, deductibles, co-payments and attractive premiums. Products need to promote incentives for policyholders to be cost-conscious. Underwriting: actuarial rate making is a prerequisite for sustainable PMI. Guaranteed renewable coverage, together with premium adjustments on a collective basis, are a fair alternative to tight premium regulation. Administration: PMI is a high frequency, low severity business. Small savings in the administration have a significant impact on profitability. IT and outsourcing may help to reduce unit costs. Running PMI profitably: medical management Lukas Steinmann Mexico 10. June 2008 Slide 11 A value proposition for PMI is to recover inefficiencies in healthcare delivery through medical management. Medical management: 70 to 90 percent of premiums are used for medical treatment. While operational costs have been lowered, medical treatment steadily increases. Medical management is about influencing clinical decisions and channel treatment into a network of cutting edge medical service providers. Medical management improves quality while reducing costs. Conclusions: opportunities and challenges Lukas Steinmann Mexico 10. June 2008 Slide 12 Healthcare is a substantial and fast growing business. Governments and social health insurance will be under financial pressure – cost containment may reduce costs, but will most likely fail to reverse cost trends or reduce demand for health. The business volume for private medical insurance is thus set to grow. Private medical insurance is a highly country specific business, which usually coexists with social health insurance, is highly regulated and prone to political influence. Market participants must know the “local rules”. Questions? Lukas Steinmann [email protected] +41 43 285 4687 Lukas Steinmann Mexico 10. June 2008 Slide 13