Access to healthcare – more important than ever

Inclusive Capitalism

Healthcare is part of our Sustainability Research Theme of Inclusive Capitalism³ at AllianzGI. Inclusive Capitalism aims to reduce inequality. We define access to healthcare as a life essential, as it is core to existence, alongside food, water, clean air, energy, safety and housing.

The COVID-19 crisis underscored underinvestment in protecting against pandemics, but also highlighted how a targeted and collaborative global approach could be effective. In a relatively short period of time, vaccinations were developed, rolled out and strategies put in place to minimise the global impact.

There is a risk of rising incidence of pandemics with rising populations, loss of biodiversity and resource constraints in healthcare systems.

Despite the ability to mobilise at the company and government level, this does not translate into broader availability or reach of healthcare.

There is a significant divide in COVID-19 vaccination rates between the West and developing economies – while in early 2022 just under 60% of the global population has received at least one vaccine dose, it was only 9.5% in low-income countries.⁷ There is a strong link between a country’s wealth and its vaccination rates. Delayed vaccinations are set to impact the global economy by trillions in GDP, but will be particularly impactful in developing economies.⁸

While very evident in COVID-19, it would be a mistake to view this an exceptional case of healthcare inequality. Access to quality healthcare is often a function of wealth at the sovereign or individual levels.

Long term impacts of this virus could still arise over time. For example, Long Covid is becoming better understood and could become relevant for the longer-term labor market and productivity trends.

In addition to the direct impact of COVID-19, lockdowns impact mass vaccination campaigns for measles, polio, meningitis and other deadly but preventable diseases.⁹ More recently, rising cases of monkeypox in an increasing number of countries can be linked to routine smallpox vaccinations having stopped.

Separate but possibly aligned to wealth, is education, especially in the developed world. Chronic diseases¹⁰ such as heart disease, cancer and diabetes remain among the leading causes of disability and death in US.¹¹ – while these occur more frequently in an aging population, they are correlated with the level of education.¹²

A combination of both education and wealth lead into lifestyle choices, and these can play a major role, especially from an early age. Lifestyle factors can include nutrition, exposure to alcohol and tobacco and physical activity, which can have meaningful implications for both physical and mental welfare.¹³

There is a real risk that climate change and reduced biodiversity could worsen the problem. Emissions and pollution could raise the incidence of respiratory diseases, heavy rains and higher temperatures could raise occurrence of fevers (e.g. Dengue, West Nile), while challenges to food availability and affordability could impact healthy nutrition.

Historically there has been a focus on the link between health and mortality, but there is now a heightened awareness of multimorbidity which is defined as the presence of two or more long-term health conditions. Multimorbidity is a major contribution of the sustained increase in healthcare costs as a share of GDP in OECD countries. Among OECD Member countries, the United States has the highest percentage of GDP spent on healthcare – 16.8% in 2020. For context, US Military expenditure was 3.7% of GDP in the same year. While lower than US, the figures for UK, France and Germany are still above 12%.¹⁴

While life expectancy has risen in recent decades, this has not been aligned to higher life quality or health, but an ability to address or delay terminal disease. Age is a driver of health spending which is partly due to the prevalence of multimorbidity also rising with age.¹⁵

A combination of an ageing population and an increase in long-term conditions means multimorbidity is set to rise. Costs increase significantly with each additional condition and a near exponential relationship between the number of conditions and costs will play out.¹⁶

According to the OECD, pharmaceuticals are the third largest healthcare expenditure item after in-patient and out-patient care, accounting for 16% of average health spend, even before including in-hospital pharmaceuticals costs¹⁷. These are costs predominantly covered by government financing or compulsory insurance schemes. However, the WHO estimates that over 800 million people are spending over 10% of household budgets on health for themselves, a sick child or family member – these can result in “catastrophic expenses” that can lead to severe poverty.¹⁸

The situation is particularly acute for innovative remedies and solutions. A survey by our Grassroots Research® team showed around 40% of US diabetes educators surveyed highlighted that new oral (not injected) diabetes drug were very attractive but could be prohibitively expensive without insurance.

The UK is an example of where private health insurance is not standard due to its broad and free access to healthcare. However, the UK Healthcare system is underfunded, preventing every new therapy being supported and a divide has developed where those with better financial means can go externally for better or quicker treatment.

Investors could play a critical role by contributing to Inclusive Capitalism via investing in health. In the US alone health spending is projected to grow at an average annual rate of 5.4 percent for 2019-28 and to reach USD 6.2 trillion by 2028.¹⁹

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¹ Extreme temperatures and health — European Environment Agency (europa.eu)
² More species means less disease | Nature
³ Unlocking the “S” in capitalism (allianzgi.com)
⁴ IDF_Atlas_10th_Edition_2021.pdf (diabetesatlas.org)
⁵ Microsoft PowerPoint - 02 Dengue Adams Oct 2022 (updated)_to post (cdc.gov)
⁶ The Role of Alcohol, Drugs, and Deaths of Despair in the U.S.’s Falling Life Expectancy - PMC (nih.gov)
⁷ Coronavirus (COVID-19) Vaccinations - Our World in Data. Pandemic exposes a world of healthcare inequalities | Financial Times (ft.com)
⁸ Delayed vaccination timelines will cost the global economy US$2.3trn - Economist Intelligence Unit (eiu.com)
⁹ How COVID hurt the fight against other dangerous diseases (nature.com)
¹⁰ Chronic diseases are defined broadly as conditions that last one year or more and require ongoing medical attention or limit activities of daily living or both (About Chronic Diseases | CDC)
¹¹ About Chronic Diseases | CDC
¹² Health Disparities | DASH | CDC
¹³ Global Risks Report 2022 | World Economic Forum (weforum.org)
¹⁴ Health expenditure as share of GDP by country | Statista
¹⁵ Ageing and health expenditure - UK Health Security Agency (blog.gov.uk)
¹⁶ The health and social care costs of a selection of health conditions and multi-morbidities (publishing.service.gov.uk)
¹⁷ Home | OECD iLibrary (oecd-ilibrary.org)
¹⁸ World Bank and WHO: Half the world lacks access to essential health services, 100 million still pushed into extreme poverty because of health expenses
¹⁹ NHE Fact Sheet | CMS
²⁰ Take Action for the Sustainable Development Goals - United Nations Sustainable Development
²¹ The climate crisis and COVID-19—A major threat to the pandemic response – C-CHANGE | Harvard T.H. Chan School of Public Health