Total healthcare costs in India are projected to increase by 12.3% annually to USD214 billion by 2020 – Swiss Re Study

David Alexander Director Head of Business Development, Asia  Swiss ReThe Health Protection Gap in the Asia-Pacific region could reachUSD197 billion in 2020, according to Swiss Re’s latest study, entitled Health Protection Gap: Asia-Pacific 2012. This study is the first of its kind whichpresents and compares the Health Protection Gap across 13 markets in the Asia-Pacific region: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Thailand, Taiwan and Vietnam. 

The Health Protection Gap is defined as the difference between the level of healthcare costs which would be required to meet consumer needs, versus the amount that would be available to cover those costs, if society’s total healthcare expenditure remained a constant percentage of GDP.

“This study compares the Health Protection Gap across the region and highlights trends over time. This shows the developing need for more health and medical insurance across Asia-Pacific,” says David Alexander, Head of Business Development Asia, Swiss Re.

According to the study, the biggest Health Protection Gaps by 2020 are in China, India, Japanand South Korea. “The wide range in Health Protection Gaps across Asia-Pacificis partly due to the differences in the size of both the population and the economyfrom market to market. To filter out this factor, we also computedthe gap per capita,” Alexander continues.

Even in the more developed economies, which are perceived to have more mature insurance markets, the Health Protection Gap per capita can be substantial, which is at least partly explained by the demand for higher quantity and quality of health andmedical services.

India healthcare costs to reach USD214 billion by 2020The breakdown of healthcare expenditure varies across Asia-Pacific markets . In2010, more than half of the regional governments had to bear over 40% of the total healthcare expenditure, with Japan covering the highest proportion (83%). The other main funding source was out-of-pocket expenses, which ranged from a low of 14% (Thailand) to 61% (India) of total healthcare expenditure.

Private prepaid plans contributed less than 10% of the total healthcare expenditure for all the markets covered in this report, with the exception of Taiwan which came in at 19%.The totalhealthcare costsin Asia-Pacificareprojected to increase to USD2.7 trillion by 2020, from USD1.2 trillion in 2010.While the total healthcare costs in India will reach USD214 billion by 2020 from USD63.9 billion in 2010.

This figure is based on projections of economic growth, medical inflation and population growth in the 13 Asia-Pacific markets covered. However, there will be faster growth in emerging markets, which currently have lower healthcare expenditure as a percentage of GDP.

Based on Swiss Re’s projections, the average real GDP growth rate from 2014 to 2020 for Asia-Pacific will be about 5%. Robust economic growth, especially in the emerging Asian countries, will bring additional demand to the health and medical industry.

“People and countries tend to spend more on health and medical as they get wealthier. With economic growth in Asia-Pacific, especially in emerging markets, rising household income will lead to higher spending on health and medical care,” says Clarence Wong, Head of Economic Research & Consulting, Asia-Pacific, Swiss Re.

Insurance industry needs to work together to better manage the Health Protection GapIn more than half of the markets covered in this study, the growth of medical costs has outpaced inflation. This means that people will need to grow their spending on healthcare or invest at a rate of return higher than inflation in order to cope with rising medical costs, which does not seem possible at such a scale.

“We would suggest the health and medical insurance sector to re-think how to best educate and guide the general public, by working together as an industry to promote greater awareness of the benefits of insurance protection for the general public. It will be essential to develop new products to be sold via new and existing distribution channels and to provide efficiencyin client and product services, in order to better manage the Health Protection Gap across Asia-Pacific”, says Alexander.