In my last post I introduced Chapter 2 on Fostering Human Flourishing with the four spheres of transformation arising from the age-old formulation “healthy, wealthy, and wise”. This post discusses the first sphere based on “healthy” but extended to health & wellbeing.
This is easily the largest sphere of the Transformation Economy, and note below all the types of companies that are in it, including those that provide commodities, goods, services, and experiences that support transformations. In fact, I have one subscriber (you know who you are) who strongly suggested I call them “spheres of flourishing” in part because of the fact that all five genres of economic offerings can be included in them.
I’ll be asking that question in the feedback form for a later post in this chapter. In the meantime, I will have a couple of questions on each of the four spheres. Thank you to all who respond.
Joe
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Health & Wellbeing
Healthcare comprises perhaps the most down-the-plate set of companies in the transformation business. Expenditures on it have been growing astronomically around the world (albeit at a higher rate in the US) for at least five decades, far outpacing increases in the Consumer Price Index (CPI) and Gross Domestic Product (GDP) growth across the rest of the economy.[i] In 2022, in fact, spending in healthcare was almost $13,500 per person in the US, making up 17.3% of GDP.[ii] Much of this growth is due to what I think of as the “original sin” of the healthcare business, that who should be the customers – patients – are not in fact the ones paying the money; rather, it’s insurance companies and governments. This screws up price signals and incentives, offering precious little motivation to improve the quality-to-cost ratio – or, rather, the outcome-to-cost ratio, which would happen if people had more control over what happens to them.
Healthcare comprises perhaps the most down-the-plate set of companies in the transformation business.
Nonetheless, even as costs have risen over the past fifty years efficacy has as well (with some notable exceptions in certain areas, and some stalling in progress more recently). This is largely due to new medicines and new technologies, as unevenly distributed they may be. Another factor, though, is the increased focus hospitals and other healthcare companies have placed in the past few decades on the experiences patients have within and without their four walls. For research shows that the better the experiences patients have, the better the outcomes, which is what patients desire.[iii] The chances people recover, are cured, or otherwise restored to health goes up, while the time it takes to go (generically) from sick to well goes down with better experiences. And of course, the less time spent in the “healthcare system”, the lower the costs.
Unfortunately, too few healthcare organizations understand this, and so we still see large increases in healthcare spending on the supply side of hospitals, clinics, doctors’ offices, and so forth. But there’s also a significant demand-side effect with healthcare consumers. Over the past fifty years or more the value people place on being healthy has grown more than the value they have for other economic offerings. Increased healthcare costs (even outside of government intervention) are not primarily about inflation as we commonly think of it, as an increase in prices due to a rise in underlying costs such as raw materials, labor, and equipment. It’s valueflation, an increase in price because of the higher value customers place on transformations relative to others.[iv] That’s a big reason spending on healthcare as a percent of GDP increased from 6.2% in 1970 to 16.6% in 2021, and in comparable developed countries from 4.9% to 11.2% in that same period.[v]
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Health & Wellbeing
This sphere encompasses all of healthcare, including hospitals, clinics, doctors, pharmaceuticals, medical devices, and everything else involving the diagnosis, treatment, and care people need to deal with, recover from, and even prevent illnesses, injuries, or other such issues. It also includes activities having nothing to do with illnesses or injuries, but that contribute to the ongoing condition of people across factors physical and mental, emotional and social, life quality and contentment. Such wellbeing offerings that facilitate human flourishing include spas, fitness centers, classes, coaches, and mind-body practices such as meditation, mindfulness, yoga, and tai chi.
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And why has the value of healthcare increased so much? Again, it’s about time.