The healthcare industry will undergo a radical facelift as consumers become empowered by Internet technology and educated about their own healthcare decisions. According to a new Report from Forrester Research, Inc. (Nasdaq: FORR), consumers will use the Internet to direct their own health decisions, pay more health-related bills out of pocket, and develop a new view of their long-term health — creating a distinct departure from today’s domination by HMOs, hospitals, and doctors.

“Employers want lower premiums, insurers want lower costs, doctors want bigger fees, and drug firms need someone to pay for costly technology advances. Who is going to cover the additional costs? The consumer, of course,” said Michael J. Barrett, senior analyst at Forrester. “Although consumers will appreciate their newfound autonomy, they will be resentful of the cost-shifting basis of self-pay.”

From this state will emerge “personalized medicine,” which Forrester defines as the convergence of consumer self-direction, consumer self-payment, and genomics. Three dynamics will flow from personalize medicine. First, diagnostic tests will identify growing numbers of people whose genetic makeup affects drug response, disease susceptibility, and disease progression. A proliferation of new sites that give consumers access to tests and tools will further incite diagnostic and pharmacogenomic markets to boom.

Second, personalized medicine will inspire individual self-perception to deepen. Today’s genetics informs a few people that they are predisposed to rare conditions, while new genetics will provide an entire generation of self-directed, self-paying baby boomers with individualized details on their health — expanding their genetic consciousness. Heightened self-perception fueled by genomics will resegment the population, raising the stakes in conflicts over privacy, discrimination, insurance, affordability, and drug prices.

Finally, as diagnostics expand markets and self-perceptions deepen, healthcare businesses will lose their grip on consumers, who will rely on medications more and providers less. As a result, loyalty to specific drug makers will be tenuous.

Personalized medicine will change the competitive positions of a multitude of players, especially by baby boomers. Aging into the era of personalized medicine, boomers will be most concerned with family health, financial security, privacy, and government intrusion. Forrester also believes that the advent of genomics-based medicine will combine with other factors to catapult actual healthcare spending beyond projections for the latter part of the decade.

For the Report “Personalized Medicine,” Forrester spoke with executives from pharmaceutical companies, biotech firms, and genomics organizations, as well as thought leaders from a variety of technology vendors, academic centers, and professional services firms.