Healthcare Planning for an Aging World

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by Christine Owen

In its report The Future of Pensions and Healthcare in a Rapidly Ageing World: Scenarios to 2030, the World Economic Forum indicates that new forms of collaboration between key stakeholders – individuals, financial institutions, healthcare providers, employers, and governments – will be critical in order to finance the ongoing well-being of current and future generations in a sustainable manner.

The report represents the culmination of 12 months of work interacting with CEOs, senior executives, worldclass academics, top government officials, high-level representatives from international organizations, nongovernmental organizations, and senior politicians. It presents three scenarios to 2030 designed to challenge current thinking, create new insights, facilitate the debate between key decision-makers, and provide momentum for action. It also includes a “deep dive” into two case study countries: Italy and China. These case studies explore in more detail how the three global scenarios could play out in specific developed and emerging economies.

The scenarios are:

• The winners and the rest — A world where growth is strong, inequality burgeons, and there are opportunities for many but opportunities for many more are lost.
  
  
• We are in this together — A world where people reassert their common destiny and stakeholders work together to address the challenges of aging societies.
  
  
• You are on your own — A world where economic turmoil forces rapid and radical reforms, but where painful changes may ultimately prove constructive.
  
  

Working, as Mercer does, with multinational employers around the world as they develop employee health and benefits programs provides the opportunity to track the impact of the macro forces identified in the World Economic Forum report and also to observe some initial stakeholder responses. While it is too early to identify a sustainable trend, there is evidence that we are headed toward a hybrid of the "the winners and the rest" and "you are on your own" scenarios.

This is neither a comfortable nor a reassuring glimpse into the future. If the short-term responses are a true guide to longer-term reality, the future health of the global workforce looks at best uncertain. And at worst it is in dangerous decline — driven by uncontrolled health risks and preventative and curative care that will be available only to those who can afford to pay for it.

Arguably, the true winners will be the businesses that come to understand the key role they will increasingly play in the health of their global workforces, and the likely impact that health will have on global economic growth. Are they ready to use their influence to shape the future?

Demographic shift
Changing demographics and an increase in the dependency ratio mean that fewer people will do more of the work for more years. In longer-established economies, where populations are aging faster, the problem has been well understood for some time. It is, therefore, all the more surprising that, even in these economies, employers do not seem to have seriously considered the potential implications and invested in structured programs that prevent chronic disease, reduce health risk, and promote wellness — and, as a result, productivity. This is not an arena that governments are likely to fill willingly, and if they do, it will only be to reduce their own public health burdens

Though growth of chronic disease has been, until now, a burden of established economies, the World Health Organization has shown that the prevalence of chronic disease is now growing faster in emerging economies and in younger populations, meaning that with the rapid demographic changes, this will soon be a global problem. Enlightened employers have recognized this as an opportunity to adopt tried and tested approaches from elsewhere — appropriately focused and adapted to new cultures — to drive real health improvement as part of achieving corporate financial objectives.

Global economic performance and investment return
There is massive variation in spending on healthcare across the world. When comparators are viewed on a per-capita basis, it is clear that available funding is far too low to provide quality healthcare, irrespective of how efficiently it might be delivered. In many cases, the healthcare infrastructure is underdeveloped and delivery is significantly impaired.

Organizations are becoming increasingly concerned about the impact of the increased burden of healthcare they are being asked to carry. Governments almost universally are shifting the responsibility for funding and in some cases, provision, to employers or individuals. In less affluent, emerging geographies, employers (and multinationals specifically) are seen to have the deeper pockets and therefore become tempting government targets for "contribution." Indeed, the likelihood of such a shift in healthcare cost burdens to the private sector is such that many organizations are building an increased cost of health provision into due diligence models prior to making decisions on market entry.

Given this trend, organizations will need to decide how much responsibility they are prepared to take for healthcare provision and, potentially, the involvement they may want in its effective delivery. In the future, if regulation allows, multinationals may choose to use their combined influence to shape the healthcare markets and even to control the cost and accessibility of healthcare.

Income and wealth distribution in emerging markets
In many geographies, a significant amount of healthcare is funded through individual out-of-pocket expenses – ranging from 20% in Japan to 75% in India. This has a significant effect on individual behaviors when accessing services, as well as on expectations of quality and compliance with treatment. In turn, it makes quality healthcare a priority for the emerging middle class.

In almost all emerging geographies, preventative medicine, clinical gatekeeping, and primary care are limited. Governments are starting to focus on these areas, but limited availability of care remains one of the main reasons for an increasing infectious/chronic disease burden affecting utilization and cost of care. Care is often fragmented and/or delayed, in turn affecting the clinical outcomes.

Two-tier systems are emerging – with a base-level public system and a broader, higher-quality service for those who can pay. Health tourism is playing a part by creating a new, high-quality infrastructure, but it can divert resources from public provision and further broaden the healthcare divide.

Changing patterns of chronic and infectious disease Chronic disease now accounts for 60% of deaths worldwide. Some 70% to 90% of cases of chronic disease are influenced by lifestyle factors. Westernization has brought with it the negative aspects of poor diet, smoking, alcohol, lack of exercise, and a high-pressure, stressful lifestyle.

Experience in the U.S. has shown the effectiveness of welltargeted risk management programs. But development of culturally adapted programs is slow.

Some U.S. and European multinationals are looking to extend their home-country programs to other geographies, but many are experiencing problems with local adaptation. Where businesses are getting this right, the gains are visible, positive, and in some cases dramatic.

In some emerging countries there is also a change in attitude to the coverage of dread diseases under medical plans. In countries such as Russia and India, serious endemic diseases are excluded from medical plans, for example, AIDS/HIV, leprosy and TB in India. In Russia, supplementary insurance coverage is starting to emerge, albeit with limited coverage.

Climate change and environmental degradation
Disease is shifting with climate change. Malaria and dengue fever zones track temperature rise and increased humidity. Employers are seeing increasing medical plan utilization for infectious diseases, most of which stem from infections related to pollution of both air and water. Incidence of asthma in the young, as well as low-grade/ longer-term digestive conditions, are also increasing.

Employers with large, mobile work forces are already aware of the cumulative effects of exposure to adverse climates and the long-term impact on health, though few have done much yet to address this potential time bomb.

Drought and floods are affecting the very fundamentals of life, with food shortages a very real and current danger to health in poorer countries, and, longer term, an emerging problem in the wider global economy.

Bird flu made everyone aware of the potential for a global health catastrophe. Many organizations admit that their preparedness for such an event is not adequate, and the public sector response is, in many cases, woefully inadequate.

Urbanization
The speed of urbanization in emerging geographies has been far faster than anticipated. Infrastructure lags, and living conditions include: overcrowding; poor sanitation; increasing animal and human proximity; poor air quality; massive traffic-management issues; and high accident and fatality levels. It is from communities deeply affected by some or all of these environmental factors that multinationals recruit, and the effect on health, resilience and productivity of these recruits is very visible. Increasingly, employers are seeing the need to address these issues to achieve effective employee management as well as to demonstrate good global corporate citizenship.

In exhibit 1 we explore the current reaction of various stakeholders to the macro forces. There is little, if any, visible collaboration among the stakeholders, and there is a clear emergence in some geographies of a two-tier health system.

The "we are in this together" approach appears to confront major barriers, and its implementation may be a distant aspiration.

This paper paints a somewhat bleak picture. A continuation of current trends will lead to a fragmented approach to the health of the global workforce, where, to a greater or lesser degree, access to appropriate quality healthcare will be a benefit rather than a right.

It seems likely that the funding and provision of healthcare will become increasingly the responsibility of the private sector and that multinational employers in particular will be forced to play a large and potentially crucial role. If that prospect becomes an inescapable burden, the private sector will have a real motive to address the problems in a thoughtful and effective way.