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Austria cares for YOU – Part II

13. December 2011

In this segment of the detailed report on the GCC health care sector and Austria‘s contribution to the healthcare industry, The Austrian Trade commission will explore the various pointers/factors that has influenced this report. Excerpts from the study has been used in the article.

The GCC healthcare sector has been recently plagued by a sharp increase in healthcare needs primarily led by a growing and ageing population and a rise in chronic non-communicable ‘lifestyle’ diseases. Moreover, rising population coupled with an ageing demographic pattern is expected to drive healthcare demand in the GCC. The GCC population growth has averaged at 3 % per annum over the past 5 years, among the highest growth rates in the World.

All these factors have set the healthcare industry for consistent growth accompanied by a fundamental shift in the industry structure, infrastructure quality, payer model and funding options. According to the several reliable sources, the industry is expected to reach a market size of about US$ 47-55 billion by 2020.

In 2006, the per capita healthcare spending in the GCC was US $ 631 in 2006, below the global average of US $ 716. It is expected that the GCC per capita healthcare spending will grow faster than the global average due to the fact that the population in the region is growing at a pace higher than the global average and this in turn will fuel a rise in aggregate healthcare demand. Healthcare spending will also escalate as gulf baby boomers born during the region’s first oil price boom enter the aged category. Although GCC healthcare systems are far better than they were 20 years ago, many residents remain unsatisfied with the availability and quality of care at government-run hospitals and clinics. Government agencies mostly lack the managerial skills needed to run health-care facilities, and cash incentives alone have not been enough to attract specialists to treat the rising numbers of people with ailments such as heart disease and cancer.

Several factors including current shortage of medical professionals – physicians, specialists, dentists and nurses, training and development endeavors in the area of medical science – will accentuate going forward as demand for healthcare services continue to grow.

The healthcare provider in the region can be categorized into three segments – Ministry of Health (MOH), non-MOH public sector entities and the private sector (UAE ministry of health).

GCC healthcare has a very low private sector penetration rate and currently stands at 25% of expenditure on average. For e.g. the private sector in Saudi Arabia contributes only 28% of the total amount spent on healthcare. The figure is much lower in Oman where only 15% of the total is contributed by the private sector Bahrain registers the highest rate of private sector involvement at more than 33%.

With over 75% of the total healthcare expenditure in the region incurred by the public sector, the government remains the chief financier and provider of healthcare in the region (WHO, Alpen Capital).

The average life expectancy across the region has risen from 60 years in the late 1970’s to an average of 75 years primarily due to various health reforms. The current average age in the gulf ranges from 23 to 31 years, however, the proportion of population above 60 years of age will increase as Gulf baby boomers born during the region’s first oil price boom become pensioners. This will generate significant healthcare demands according to health care experts, as four-fifths of a person’s healthcare needs typically occur during the post retirement age.

The GCC may require in excess of 25,000 additional beds by 2020 to address the growing demand for in patient treatments. The largest share of the demand increase is accounted for by Saudi Arabia, followed by the UAE.

The biggest threat to health sector growth in this region is its heavy reliance upon its underlying economies, whose strength is dictated by the fluctuating price of oil. Changes in the health of the economy are generally reflected in the healthcare sector.

Structure and health insurance penetration

The GCC countries show a significantly lower than the global average health insurance coverage where only 10% of the GCC population are covered under a health insurance program. A latent potential in the form of an underpenetrated health insurance market is slowly unlocking with the introduction of mandatory medical insurance for expatriates. Most GCC countries are framing legislative policies to mandate employers to provide basic healthcare services, incl. insurance, to their expatriate employees. The expatriate workforce forms about 40-60% of the total population of the GCC countries.

Key growth drivers

Key factors driving the growth include:

· increasing public and private wealth fuelled by the oil and gas resources
· a friendly regulatory environment
· growing demand on health care with rising population
· higher proportional growth of the above 60 years of age population and age related illnesses
· growing health care demand through lifestyle diseases

These are the factors on the basis of which all the GCC countries will be marked in the healthcare sector. In the next segment, The Austrian Trade Commission will analyse and study each country’s healthcare sector on the basis of the above pointers.