The McKinsey Study and the U.S. Health Care System: First, the Bad News…

June 21, 2011 at 7:37 am 4 comments

By Mary Ludloff

If you are an old movie buff (I confess!), you may remember this famous line in All About Eve, starring the incomparable Bette Davis: “Fasten your seat belts, it’s going to be a bumpy night!” And when it comes to any discussion about the current state of the U.S. health care system, it is safe to say that it will be a very rocky ride no matter what side of the political aisle you reside on.  Before I begin with the “bad news,” in the spirit (yet again) of full disclosure, PatternBuilders is actively working on a health care analytics solution. In fact, we have been monitoring the health care industry for quite some time and while our health care system certainly has many challenges, the potential for good—as the McKinsey Study points out—is significant from a business and “greater good” standpoint, a win-win as far as we’re concerned. So, let’s get to it.

The McKinsey Study does an excellent job of “framing” the current challenges that the U.S. is facing regarding its health care system. Put simply, we (U.S. citizens) spend more on health care than any other nation in the world and twice as much as any developed country but the money we spend is wasted:

“Americans spend twice as much as residents of other developed countries on healthcare, but get lower quality, less efficiency and have the least equitable system…”

Here are some facts to think about:

  • The U.S. is the only industrialized nation that does not have a universal health care system. Instead, we offer a mix of government and private services.
  • In 2007, almost 50 million Americans did not have health insurance and 25 million were underinsured.
  • Health care expenditures exceed $2 trillion a year and the federal government accounts for about half of it.
  • By 2019, a report by the Centers for Medicaid and Medicare Services forecasts that health care spend will reach $4.5 trillion a year.

Okay, however you look at it, we spend an awful lot of money on health care. To put some context around the costs, the entire federal government’s spend for 2010 was approximately $3.5 trillion and when combined with state and local governments, it was $5.8 trillion.

A 2009 study by the OECD had this to say about the U.S. health care system:

“Documenting the gross ‘discrepancy’ between the enormous amounts that Americans spend on healthcare and the value received for that expenditure, the study found that the United States ranks poorly among OECD countries on measures of life expectancy, infant mortality and reductions in ‘amenable mortality,’ meaning deaths ‘from certain causes that should not occur in the presence of timely and effective healthcare.’”

And the amount we are spending continues to trend upwards, as a recent study by the Kaiser Family Foundation points out:

“It is reasonably well known that the United States spends more per capita on health care than other countries. What may be less well known is that the United States still has one of the highest growth rates in health care spending. Health care spending around the world is generally rising faster than overall economic growth, so almost all countries have seen health care spending increase as a percentage of their gross domestic product (GDP) over time. In the United States, which has both a high level of health spending per capita and a relatively high rate of real growth in spending, the share of GDP devoted to health care spending grew from 9% of GDP in 1980 to 16% of GDP in 2008. This 7 percentage-point increase in health spending as a share of GDP is one of the largest across the OECD.”

To sum all of this up for you, courtesy of the McKinsey study:

  • Health care is one of the largest sectors of the U.S. economy, represents more than 17% of the GDP, and employs more than 11% of the workforce.
  • Health care expenditures are growing more than 5% annually—and are a major contributor to projected high national debt levels.

Here’s the bottom line: we (the U.S.) spend “more per person on health care than any other nation without obvious evidence of better outcomes.” Ouch. Certainly, there are many different views on how to fix this problem and each fix is often met with a counterpoint (witness the current raging debate over the health care law) but however you cut it, the U.S. health care system cannot continue at its current spending rate. And I don’t know about you, but it appears that the more we spend the less quality care we receive (there is just something so wrong with this picture).

Have I managed to depress you with this bleak picture of our health care system?   Well, stick around for my next post on the good news. What’s always interesting to me (and the rest of the PatternBuilders team) is how big data analytics can have a profound impact on industries and the businesses and organizations that support it. We believe that the U.S. health care system is entering a transformative period looking to collect, centralize, and aggregate data (with HIPAA continuing to ensure privacy) so that analytics can be applied in a number of ways: from preventative medicine, to better hospital operations, to automated financial systems that monitor for fraud, to the analysis and tracking of diseases, to the accuracy of patient records. Coming soon: my post on the good news about the U.S. health care system.

Final note: usage of healthcare versus health care. You will note in this post that I used the term health care (two words) in my text and when quoting, used either health care or healthcare depending on how the term was used. For those of you questioning my sanity, read this great post on health and care and whether is it one word or two. For those of you who did not notice the “dueling” terms, good for you! I suspect that you are much saner than those of us who worry about this stuff! 

Entry filed under: Data, General Analytics. Tags: , , , , , , , .

McKinsey Study: Some Great Stats to Chew On Calling All Big Data and Analytics Companies: It’s Time to Help Change the World

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