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March 2018

The key to keeping healthcare affordable

By shifting the focus from curing diseases to preventing them we can reduce healthcare cost as well as improve our quality of life.

Expenditure on healthcare accounts for more than 10%1 of the European economy of EUR 14,800 billion2. Population growth and ageing are making it a challenge to keep a lid on ever increasing healthcare costs. Worldwide, these expenditures are set to rise to over EUR 7.000 billion in 2020 according to estimates from consultancy firm Deloitte3.

That is a huge amount.

Prevention instead of treatment

Marie-Laure Schaufelberger, product specialist of the Pictet-Health fund, warns that the cost of medicines are only a small part of total expenditures: ‘The United States is by far the largest market for healthcare services and products. Only ten percent of the total expenditure goes to prescription drugs4. Hospitals, physicians and clinics account for more than half of the health budget. But the main takeaway from these kind of figures is that 80% to 90% of total spending is aimed at treating people who are already sick or disabled. In shifting the focus to preventing these ailments, there are obvious benefits.’

Why companies could lead the way

Prevention can take many shapes. ‘It starts with a healthy lifestyle’, explains Schaufelberger. ‘That includes common-sense approaches such as quitting smoking, maintaining a healthy weight and keeping cholesterol in check. The challenge is in providing incentives for people to do so. In this respect, corporations have an important role to play.’

Cutting costs with healthy staff

In the United States, it is quite common for companies to offer wellness initatives that provide monetary incentives for maintaining a healthy lifestyle. During a recent testimony for the U.S. Senate Committee on Health, Education, Labor and Pensions, the CEO of Burd Health said his company was able to lower its healthcare costs by about 40 percent and employees’ cost by 10 percent as a result of a wellness program. Only 15 percent of the employees did not opt into the program.

Awareness of one’s lifestyle may contribute to lowering costs of treatment and brings about a higher quality of life.

Avoiding expenses

According to Schaufelberger, governments should make more attempts to prevent diseases. ‘For example, approximately 40% of the patients suffering from Alzheimer’s disease also have a hearing problem. Because of this, they are more vulnerable of becoming isolated, which speeds up the disease process. By identifying this issue early on and improving the availability of hearing aids, patients might manage longer with less intensive - and therefore less expensive – care. In addition, this would also improve the wellbeing of these patients. A growing focus on prevention instead of treatment would be a positive development for everyone. Of course the financial savings would be enormous. However, the biggest gain would be a higher quality of life for a large part of the population.’


This is one of a series of articles investigating the themes driving our healthy living thematic funds – four actively managed global equity funds.
Focusing on the structural forces shaping our world, our investment managers seek to deliver a compelling risk-adjusted return over the long run.

Discover more on our range of healthy living strategies.