Healthcare Will Never Be the Same

Healthcare is one of the largest global industries, with a 2018 spend of $8.3 trillion. During the pandemic, the focus on healthcare is greater than ever. From everyday consumers to the governments of developed countries, everyone spent more time thinking about their health and that of their families. That has set the stage for a period of unmatched healthcare innovation and growth. 

Governments spent big in response to the threats posed by COVID-19. Japan, for example, provided a fiscal stimulus package equal to 56% of GDP. 

The social change around healthcare is equally important but harder to measure. Attitudes towards physical and mental health shifted dramatically as more people decided to focus on maintaining a more balanced lifestyle. 

Demographic Changes Driving Healthcare Demand

Demand for healthcare will continue its ascent as the global population ages. The care needed by older people differs significantly from what younger people need, as older people are more likely to suffer from chronic illnesses. That means more frequent and more serious visits to healthcare providers.  

Regions with a greater proportion of older people will see more drastic changes in the needs of their population. To prepare for this, nations like Japan, Italy, and Portugal will need to enhance their healthcare systems fast.

The shortage of qualified doctors and nurses heating up, creating conditions for increased labour costs within clinics and hospitals. Not to mention the shortage of facilities and equipment facing some nations. In the UK there are fewer available hospital beds today than during 2000. 

The other huge demographic change is a surge in life expectancy over the past 60 years. In 1960, life expectancy was 52.6 years, while in 2019 it was 72.7. That shift is massive. This shift has been the result of significant medical innovations, but it is also going to put more pressure on the existing healthcare infrastructure. More older people will visit hospitals and clinics for a longer period of the elderly parts of their lives. 

Medical Innovations in Abundance

The healthcare space is ripe for disruption. Telehealth is a simple example of how much more efficiently healthcare services can be delivered. Instead of traveling to a clinic and waiting in a physical waiting room we can log in to a zoom call and speak directly to a doctor. They can even share resources we can review immediately after the meeting. 

That means healthcare practitioners can provide higher quality service, without adding any costs. It also makes health services more accessible to people who in the past may have opted not to go into the clinic at all. How big could telehealth be? McKinsey has estimated the potential market size at $250 billion. Just for this one small innovation.        

Data science and predictive analytics are assisting healthcare practitioners in diagnosing and treating patients faster. Technology has also made it easier to monitor patients’ health remotely. What makes these innovations exciting is that they can scale globally when their effectiveness is proven. Process innovation can quickly be adopted across global healthcare. That means the businesses behind the innovations can scale faster than ever before.  

Massive Market Size

Globally, countries spend ~10% of their GDP on healthcare, with wealthier countries spending more. The global vaccination effort is building lasting links between nations that can help facilitate sharing of resources in the future. That can amount to faster adoption of new and improved treatment methods, translating into profits for the businesses rolling out these services.

The breakdown of health spending shows how great the opportunity is for private businesses serving the US market.  Of the total $8.4 trillion spent on health every year, the US accounts for 42%. That’s ~4.2% of global GDP. In one market. This kind of market is rare. 

Consumers want better health services. An Ipsos survey shows that 40% of global respondents are unsatisfied with their national health systems. 

Government Spending on Healthcare Growing

Even before the COVID-19 pandemic began, the World Health Organization reported that global spending in health was growing. It was $8.3 trillion in 2018. 

Government spending on healthcare was no exception. Governments know that a large portion of voters are among the older cohorts that are more likely to need advanced healthcare services. It is in their best interest to ensure the healthcare systems are well-funded. 

Health systems around the world have been decimated by the pandemic. They will need to be rebuilt, in many cases from the ground up. With a recession being forecasted in some countries, the burden on health systems will increase. Even if it means taking on additional debt, many countries around the world will be best served by investing heavily in their healthcare systems. It is one area where belt-tightening is not considered appropriate. 

In the US, the American Rescue Plan includes funding to reduce health insurance costs for unemployed Americans. The total size of the plan: $1.9 trillion. This opportunity is massive.


The healthcare systems around the world have been tested over the past two years. Many have been found wanting. As investors, our role is to identify and fund opportunities that will deliver a return on investment. The healthcare space is littered with opportunities that match this description. In the case of healthcare innovation, we can also make the world a better place at the same time.

Thank you for your loyal readership

The Financial Star.