Two Macro trends we need to heed

Since our public debate in political circles tends to focus on what donors want or who is winning the political “gotcha” game, I thought it might be important to repeat some comments about macro trends for which we need to plan ahead. Looking forward from a report sanctioned by the World Economic Forum (WEF) and Organisation for Economic Cooperation and Development (OECD) that was done in 2008-09 timeframe, several macro trends were identified by leaders in business, education, foundations, and governments. Two are highlighted below.

First, a key concern is simply demographic and it has and will shape our economy and budgets for some time. The world population is aging. It is getting worse here in the US, but it is much worse in places like Japan and Greece, e.g.  In fact, a key reason Greece is struggling today is trying to fund financial commitments made to people who have already retired. You can address the benefit commitments to future retirees, but much of the liabilities owed are for people who have left the workforce and being funded by fewer relative workers per retiree.

This is hitting the US in our cities and states and will continue to do so. Just count the number of states who are grappling with serious underfunding issues on pensions and seeing higher retiree medical costs. It impacts our federal Social Security and Medicare programs as well, but with the earlier retirement opportunities in state pension plans, the cost impact is exacerbated there. With the tandem problem of communities not growing due to suburban flight and poor planning, a number of cities have had to declare bankruptcy. This why it is critical for all governmental pension and retiree medical  plan sponsors to address the future issues now so costs can be spread and mitigated.

Second, a key macro trend that makes the above problem worse, not better, is we are an increasingly obese world.  Unlike the aging ranks, the US can lay claim to being the most obese country in the world. We are number one. This is one of the reasons we can lay claim to the most expensive healthcare system in the world. A former UK colleague, who helped companies with developing global health management plans, noted that the greatest export of the US is obesity. That was not meant to flatter us.

As a former actuary, I can tell you the medical cost rate for people in their fifties is generally 2 to 2 ½ times the medical cost rate of the average workforce.  The ratio goes up for older populations. Yet, as we have grown in size through obesity, we are even greater train wrecks waiting to happen. This is why it is critical we get as many people insured for healthcare as possible, so they can see doctors now, be prescribed treatment patterns, and attempt to ameliorate future health catastrophes. We spend a lot of time talking about and fighting cancers which is great, but heart disease will kill 10 times more people, especially women, who tend to ignore symptoms more so than men and wait longer to seek help. And, heart disease risk is heightened when patients are more obese.

There are other key macro trends noted within the WEF and OECD report. It is worth the read to understand other key drivers of our global economy. But, these two are overarching problems which we need to deal with now before they become worse, as the more we wait, the higher the cost impact.

29 thoughts on “Two Macro trends we need to heed

  1. One of the pension issues that is usually not addressed is the chronic underfunding of public pensions that has persisted for decades. This is a political problem more than an actuary problem. To this day, state and local governments defer payments into pension funds, in the hope that some magic will happen in the future to take care of the shortfall. Locally, for example, the city of Fresno pension coffers are dangerously underfunded. They have glossed over the issue by making unrealistic assumptions on levels of future contributions and returns on investments. They are assuming a return rate, for example, of 8% per year, when the reality is closer to 2-3%.

    The other thing is dealing with public unions, and again, speaking locally, egotistical boards of supervisors believed they were up to public negotiations, when everyone recommended hiring professionals. In order to not upset the public union voters, they gave away the ranch so to speak. Police and fire officers have difficult jobs, but do they really deserve 100% pensions???

    Good post

    • Barney, this is an age old problem and that is making concessions with future benefits way down the road. This has been happening pre-ERISA which was signed in 1974 and was and is done by management of major organizations and public entities. These benefits included pension increases with COLAs and free retiree medical benefits. The dilemma as you note is these obligations come home to roost at some point and are exacerbated by retrenching cities who have less tax base to cover them – Detroit is an excellent example. In Stockton, CA and other cities, the problem on the pension side was made worse by people gaming the system to add to final average pay to increase benefits. So, there are examples with people whose retirement benefit exceeds or is a very high percentage of their pay. When you add in that fire and police can retire early (from hard jobs), the city could pay a pension for forty years.

      We are well past timed of dealing with these issues. We will see more city bankruptcies in the next five years unless major actions are taken now. Good comments. BTG

      • In calif, there are about 10 cities, including Fresno, bordering on bankruptcy. Most just won’t acknowledge it.

      • Hugh, sometimes short run planning is to make the issue go away for now or leave the problem for a future governing body. One of the neat things about Denmark’s strategic plan to combat climate change (which is important when your country is below sea level), is it had to last beyond the current legislature and prime minister’s term. So, it was necessarily and consolidated long range planning effort. In America, long term is about six months. Thanks bro, BTG

  2. Note to Readers: Whether or not you are a Rosie O’Donnell fan, she has an interesting and informative stand-up routine on HBO. I think it is called “Gotta Have Heart.” She discusses her heart attack during the routine which should have killed her. She speaks at length about what happened and how she did everything wrong providing a forewarning of what women should watch out for. She notes to remember HEPPP – Hot, exhausted, pain, pale, puke. Here is a link to a news review of the special.

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  4. Reblogged this on The Discussion: Essays and Contemplations and commented:
    There are many factors shaping our world today. Emerging technologies, political and religious progressions and merges, medical advancement and the distribution of medical breakthroughs. But there are less obvious trends across the planet which must be considered when looking to the health of our future as a species. This article highlights two of those macro trends, as reported by the World Economic Forum (WEF) and Organisation for Economic Cooperation and Development (OECD).
    Do you agree that these trends are of the highest importance for man to consider? What trends do you see going to a macro level and which need more of our attention?

    • Rana, many thanks for your comments. I have written about some of the other macro trends, some of which come from this study. I picked these two, as we overlook obvious drivers that we need to plan for better than we do. We have too many “kick the can down the road” leaders. To me, some of the other macro trends are as follows:

      – over population on our planet beyond our ability to support, especially with rising consumption rates in India and China
      – somewhat related to the above, the scarcity of water – it is the new oil
      – the widening gap between the haves and have nots around the globe – see corruption below
      – man influenced climate change which makes both of the above worse, impacting impoverished countries more and making the chemicals we have leeched into the ground more harmful
      – corruption in leadership – this impacts so many things in poor and richer countries, where moneys and services needed for the disenfranchised are diverted
      – through the use of antibiotics on people and livestock, the ability of our bodies to ward off threats is lessened
      – the need for rational voices to speak up and against the extreme voices who are out to exclude, belittle and harm others (this is the key answer to terrorism)
      – the maltreatment of women and children around the world (we cannot treat half our resources like chattel – it is not right and it is economic constraining

      I am sure I have overlooked a few things. I think if we treat women better, it will have a huge echo effect on other things. Thanks for your comments. BTG

      • Great list. If only folks would pull their collective heads out of the sand (?) and pay attention. I worry that the only way they will is if there is a calamity that demands their attention — and then it may be too late.

      • Thanks. You are so right on the calamity angle. Our leaders fail to make decisions or cut funding and them wonder how we could let something like this happen.

      • I did want to ask, do you have a link to the full report you are speaking to? I’d be very interested in reading the base material, but I haven’t been able to find it online.

      • Really appreciate that. 🙂 I try to link to sources as often as possible, so if there’s a way to study, devise my own article, or at the least provide links for my readers to expand their own knowledge of the topic, I pursue it.

      • Rana, I could not locate it on the OECD website nor the Mercer website, who did the study in concert with WEF and OECD. I do have some select Powerpoint exhibits in a PDF that I could send you. It will cite how the study was done and who was involved. If you will reach out to me with an email, I will send those along. Thanks for your interest. BTG

  5. ” A former UK colleague, who helped companies with developing global health management plans, noted that the greatest export of the US is obesity”
    The greatest import to the US is misery and starvation for opportunity from those healthy trim countries elsewhere.

    • Thanks for your comments. We are indeed a melting pot and opportunity exists, but we have fallen in the worldwide ranks of socio-economic growth among classes. In the US, the class where you were born is now a greater indicator of the class you will remain than it was before. This troubles me as the American Dream has become harder to reach for many and we have so many in our country that go to bed hungry. Having said that, from a documentary on our immigrant population, there is a higher percentage of our newcomers who will work harder and be more entrepreneurial toward a path to success more so than Americans who were born here. Thanks again, BTG

  6. A resounding, “Yes!” on both points you made in today’s post, Dennis. A balance of whole foods, coupled with moderate exercise will turn this epidemic around. America’s addiction to sugar, salt, and unhealthy fats, along with a sedentary lifestyle, will continue to keep heart disease as the number 1 killer, unless we take action. Each person who is willing to stand up for themselves and take care of their own body can turn this problem around. There is no other way and there is no magic pill. Thank you for bringing this issue to the forefront.

    • Patricia, thanks for your comments and for Dennis’ reblogging my post. You have hit the proverbial nail on the head with your comments. There are no panaceas, but American’s addiction to sugar is in part due to makers of products wanting us to be, so we will buy more. I struggle to keep the weight off, but my main weapons are walking and daily stretching, and eating small meals or snacks throughout the day. It lessens the overeating. Thanks again, BTG

  7. Note to Readers: Last night on PBS Newshour, they ended the show with a report on aging and obesity being a double whammy toward chronic health care issues and costs. It is not ironic that the states with the worst obesity epidemic tend to be the same ones that rank low in health care in general. They also tend to be the ones who did not expand Medicaid under the Affordable Care Act. People in poverty eat less healthily than others – more fast food and more food deserts, where there is less fresh food available. There are many stories in Mississippi, for example, where someone has to get on a bus for over ten miles to find a super market.

    This problem is real and is only going to get worse as we age. If you don’t believe go into any mid price range restaurant and sit in one of the fixed booths. The seat is further away from the table to accommodate heavier eaters.

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