Healthcare Reforms In The US : A Multi-Billion Opportunity For Indian Firms

Abstract

The US health care industry is a complex entity with significant contrasts. Despite its leadership position in health care spending and medical research, over 45 million of the US population continue to be uninsured and cannot afford even basic medical care. To understand this paradox, one needs to take a look at the history ofhealth care in the US. As early as in the l 920's, US hospitals evolved into modern scientific institutions and along with this development came the beginning of health insurance, as a prepaid hospital plan, for covering sickness. This model was quickly embraced by the large workforce based organizations such as the auto and the railroad companies and employer sponsored health insurance plans became the de facto health benefit operating model in the US. During the I 960's, as medical research began to cover a range of illnesses, cost of medical care increased, thereby making health insurance also unaffordable to the public. To address this, the US government created the Medicare and Medicaid social programs in 1965. Medicare extended health coverage to almost all Americans aged 65 or older and Medicaid provided access to health care services for low income and poor persons and people with disabilities. Over the last few decades ( 1970-20 I 0), due to the country's stress on private capital, medical research, innovation and risk taking management approach, US became the leader in various fields of health care. Further, with constant industry consolidation, the landscape is currently being dominated by large private sector health care entities, such as health insurance firms, hospitals, pharmaceutical companies, biomedical devices and equipment companies. Due to this level of corporatization and limited competition, the sector is characterized by high costs and profit maximization.As a net result, the US is currently the world's largest and most expensive health economy with an annual spend of$2.3 Trillion. Even when compared to other deve loped nations, US's health expenditure at 16% of its GDP is much higher than the OECD average of 10%. And unlike other OECD countries, majority of the health expenditure (53%) in US is borne by private which includes private insurance and member out-of-pocket funds. US healthcare today is an interlinked system of care delivery, care financing, care management and care products, controlled by health care regulatory bodies, as shown below in Figure I.