Impacting the Healthcare Market

By Inga Louisa Stevens, Contributing Writer

The Gulf Cooperation Council (GCC) has one of the fastest-growing populations in the world. With the GCC population estimated to reach 53.5 million in 2020 - a 30% increase from 2000 – and with the majority of these peoples living in the region’s cities, healthcare spending is also expected to increase to keep up with the growing pressure on the social infrastructure and changing healthcare demands.

At present, the public sector mostly funds the health expenditure in the GCC. However, this balancing act between supporting the rising healthcare needs of the population with the need to rationalise healthcare investments and spending is likely to bring about continued changes in the way healthcare is funded in the GCC.

According to Jeremy Panacheril, Partner, Healthcare and Life Sciences Transaction Advisory Services, EY, healthcare payers, providers, policy makers and investors need to consider the shifting demographic profile of the GCC when considering their strategic choices. 

Panacheril believes that the main demographic factors likely to impact the GCC healthcare system through 2050 are (1) significant increases in the absolute number of people over the age of 65, (2) advancing chronic disease in working-age people, which is likely to result in increased incidence of health problems requiring acute care, and (3) the increasing opportunity to use technology to increase wellness and improve health outcomes for millennials (people born after 1980), and technology savvy middle-aged people. In this article, Panacheril explains this in more detail and delves deeper into the implications and opportunities associated with this demographic shift.

The Elderly

Standard & Poor (S&P) has forecast the Saudi Arabian population to expand rapidly to 46 million through 2050, with the proportion of elderly people rising to 15% of total inhabitants from 3% today. An S&P analyst has suggested that age-related government expenditure on pensions and healthcare could rise to as much as 14% of GDP by 2050 from 6% today. In Kuwait, the ratio between people aged 65 and over and the 15-64 age group was 2.6 in 2015, with this projected to be closer to 20 in 35 years’ time.

“The heaviest users of healthcare – the elderly – are becoming an ever-larger portion of the GCC population,” says Panacheril. “Many estimates suggest that the population above 65 is set to more than double through 2050, as people live longer.”

 

In Singapore, the population segment over 65 is referred to as the “Pioneer Generation” referring to the role they played in the creation of the modern state, and the Government has implemented new programmes to cater to their needs. 

“In a similar way, elderly GCC nationals are a key part of the population segment, having played pivotal roles in the development of the region, and being key anchors for most families,” Panacheril explains. “The health and wellbeing of this population segment is of paramount importance, but the complexity, frequency and cost of their healthcare needs, both in acute and sub-acute care settings, will grow dramatically.”

The distribution of healthcare costs is strongly age dependent, he continues. After the first year of life, healthcare costs are lowest for children, rise slowly throughout adult life, and increase exponentially after 50. Some estimates suggest that the healthcare costs of the over 65 population segment is 4 to 5 times those of people in their early teens.  Ageing populations in many developed countries have shown that as much as four-fifths of healthcare spending is post-retirement.

“Both the public and the private sector in the GCC will need to build the capacity to meet these changing healthcare needs in an environment of increasing fiscal constraint,” he says. “The scale of this cost inflation could increase the share of GDP spent on healthcare in many GCC nations by a percentage point or more, and public and private payers will need to determine how best to deal with these escalating costs - easier said than done.”

The Working Age

Meanwhile, for the working age population, Panacheril believes that both GCC nationals and non-nationals appear likely to encounter more severe health problems as a result of many years of living with advancing chronic diseases. The main causes of premature mortality before the age of 65 among GCC residents across nationalities are cardiovascular diseases and stroke, cancer, and external causes of death, most notably road traffic accidents. 

According to Panacheril, lifestyle-related diseases have not escaped non-nationals, who have similar incidence and prevalence of diabetes, cardiovascular disease and cancer as GCC nationals. And, without any meaningful change in lifestyle choices, diabetes prevalence appears likely to grow unabated, he explains. 

“People who suffer from the daily struggles involved with being diabetic in this population segment will have had this condition for many years, over the next decade, and will increasingly face advanced co-morbidities such as heart failure, retinopathy and so on, as their condition advances,” says Panacheril. “This working-age population is likely to increase their healthcare demand as the complexity of their needs increases over time.”

This, he says, appears likely to increase the demand for clinic and hospital-based treatments, but is also likely to increase demand for wellness solutions, innovative diagnostics, and more cost-effective preventive solutions.

Millennials

Despite the rapid growth in the number of elderly people across the GCC, millennials account for an equally large percentage of the population. Several analysts suggest that about one-third to one-half of the GCC’s population is under the age of 25 and, by 2050, 54% of the population is expected to be below 36 years of age.

“GCC countries today have relatively young populations which, on average, are kept young in part due to the high proportion of expatriate workers,” Panacheril explains. “This has created many new commercial opportunities across a variety of industries and healthcare is no exception.” 

“Even as the high cost of healthcare remains a major issue, people are becoming a lot more conscious about their health and willing to invest in maintaining it. Technology, social media and the vast amounts of data available to millennials and tech-savvy middle-aged people, creates an opportunity to improve the delivery of healthcare and improve overall wellness.”

Individuals are more aware of their health and wellness needs, are more able to discern higher quality healthcare, and have the potential to collaborate more effectively with care providers across the treatment pathway in entirely new ways. The practice of just going to the hospital only when you absolutely need to is changing, and there are more opportunities for care providers to cost-effectively intervene at different stages and in different ways, Panacheril says.

“Policy makers have an opportunity to tap into this growing awareness of health and wellness to leverage technology and data to influence better lifestyle, health and wellness choices and to cost-effectively improve the delivery of care across health networks,” he adds.

The Challenge

According to Panacheril, meeting these needs will require a variety of solutions from proactive and innovative policy, to payer incentives, to wellness solutions and many more. 

“But the incentives are not just about containing rapidly escalating costs,” he explains. “Across health economies, there is a growing realisation that even when more is spent on healthcare, that does not necessarily result in corresponding improvements in health. The challenge can only be solved by a well-coordinated approach between all players and a transformation of healthcare away from the old fee-for-service model of care delivery to one focused on health outcomes and value-based reimbursement across all elements of the treatment pathway.”

Some argue that the traditional fee-for-service model and episodic care has led to an explosion in medically unnecessary procedures that do not improve health outcomes.
Voltaire, perhaps cynically, said “Doctors are men who prescribe medicines of which they know little, to cure diseases of which they know less, in human beings of whom they know nothing”.

“Patients increasingly want more from clinicians and other care providers. Determining which practitioners and clinical interventions deliver the best outcomes will require the development of detailed standards for what constitutes a good outcome in each major disease group. This will require the implementation of a new IT infrastructure to collect data and apply methodologies to compare risk-adjusted data,” Panacheril says.

As a result of these factors and so many more, healthcare will need to go through a transformation, Panacheril concludes. Distinct boundaries between sectors – payers, providers, life sciences and medical technology – will need to increasingly blur as the industry becomes more integrated. Increasingly, healthcare is conceived of as a value-based service, in which clinical interventions are evaluated and perhaps, for the GCC, in the not too distant future, reimbursed depending on their contribution to health outcomes. And, as demographics shift, healthcare payers, providers, investors and policy makers will need to adapt their strategic choices to cost-effectively deliver against changing patient needs. 

As Hippocrates said: “Healing is a matter of time, but it sometimes also is a matter of opportunity.”