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.