Why Invest in ETFs

Historically, health has been an individual concern, but today, personal health and healthcare have broad societal and economic implications. A short 25 years ago, healthcare was only 6% of the nation’s gross domestic product (GDP). Today, U.S. healthcare is a $2 trillion industry, representing 17% of GDP: the highest proportion ever. The nation's healthcare bill has grown substantially, almost three times the overall national inflation rate, increasing by 7.9 percent in 2004, the most recent year with near-final numbers. The overall cost of health care -- everything from hospital and doctor bills to the cost of pharmaceuticals, medical equipment, insurance and nursing home and home-health care -- doubled from 1993 to 2004. Government economists project spending will reach $4 Trillion or 20% of GDP by 2015.1 The exploding cost of healthcare may be the single greatest economic challenge facing our country.

Healthcare expenditures have soared over the past ten years. The full impact of escalating costs has only recently made its way into the national consciousness. Individual awareness of healthcare costs has been limited because insurance companies often covered the bulk of costs before patients ever saw a bill. As costs have risen, people have begun to take notice as their healthcare coverage is reduced or even eliminated. Add to that the impact of the aging “baby boom” generation (82.8 million people born between 1946 and 1964) who began turning 60 in 20062 and one has the makings of a genuine crisis, with essential services becoming unaffordable for millions of individuals.

The economic and societal imperatives of the healthcare equation have prompted numerous and potentially revolutionary innovations in the biotechnology and pharmaceutical industries. Over the last six years, the National Institutes of Health have provided more than $140 billion in grant funding, accelerating the creation of new products and devices.3 These developments have the potential not only to alleviate the healthcare crisis, but also to drive therapeutic benefits to new heights. The mapping of the human genome in 2000 launched serious investigation into new ways to identify disease in its earliest stages and eradicate it before it develops. This represents a paradigm shift from treatment and management to one of prevention and cure, which holds great promise for society and investors. From an investor’s perspective, the challenges facing the healthcare industry present opportunities in the capital markets.