The Health & Productivity of the Aging American Workforce: The Politics of Incapacity

Kenneth Mitchell, Ph.D..Chattanooga, TN

2

The Collision of Competing Self Interests

Politics of Incapacity

Medical Employer

Personal Entitlements

The Collision between Competing Self Interests

3

Set a Course for the Aging Workforce

The Reality: Economic, Demographic and Labor Market Issues

The Health, Productivity &

Disability Connection

Productive Aging:A New Life Stage

Productive Aging: A ProgramBlueprint

4

The Reality

Economic & Demographic Influences

Summary Points:

• The Age Tsunami• Social Security Solvency• Medicare/Healthcare Impact• Disability Risk Patterns• Pension Program Metamorphosis

New Reality

5

The Age Tsunami

Source: U.S. Census

1930 1940 1950 1960 1970 1980 1990

4.5

4.0

3.5

3.0

2.5

2.0

Birth

in M

illion

s

The Boom Years: 1946-1964

6

Social Security and Medicare’s Cash Deficits

-750

-500

-250

0

250

2000 2005 2010 2015 2020 2025 2030 2035 2040

Medicare HI cash flow Social Security cash flow

Medicare HIcash deficit

2004

Social Securitycash deficit

2017

Billions of 2005 dollars

Note: Projections based on the intermediate assumptions of the 2005 Trustees’ Reports.Source: GAO analysis based on data from the Office of the Chief Actuary, Social Security Administration and Office of the Actuary, Centers for Medicare and Medicaid Services.

7

Long Term Challenges of the Social Security System

Date Event

2009 Social Security cash surplus begins to decline

2017 Annual benefit costs exceed cash revenue from taxes

2027Trust fund ceases to grow because even taxes plus interest fall short of benefits

2041 (SSA)

2052 (CBO)

Trust fund exhausted, annual revenues sufficient to pay about 74% – 78% of promised benefits

Sources: Social Security Administration, The 2005 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds. Washington, DC, March 2005. Congressional Budget Office, The Outlook for Social Security: Potential Range of Social Security Outlays and Revenues Under Current Law. Washington, DC, June 2004 (updated April 2005).

8

Healthcare Cost Pressures *

• Demographics (+1% annually)

– An aging population/work force with greater longevity

• Emerging Technologies (+ 2% annually)

– New diagnostics and treatment, new devices, new medications

• Change in Status of Drugs ( -0.5% annually)

– Generic and OTC applications

• Mandated Benefits (+0.5% annually)

– Legislation affecting medical costs (e.g. . Colorado move from no fault auto insurance to tort system = +2.0%

• Medical Price Inflation (+ 6.0% annually)

– 2.5% general inflation plus Medical inflation @ 3.5%

• Baseline Utilization (+2.0% annually)

– Changes in patient behavior – Changes in provider behavior

• Benefit Plan Changes (-2% annually)

– Risk and cost transfer to patient

* Reported by the American Academy of Actuaries, 2005 Rising healthcare cost Briefing

9

Private Pension Forces

Change in Employer Pension PhilosophyEmployee Retirement: A Personal Responsibility

Defined Benefit vs. Defined ContributionIncreasing Number of Defaults

PBGC Deficits

IBMUnited AirlinesVerizonGeneral MotorsDelta Airlines

IBMUnited AirlinesVerizonGeneral MotorsDelta Airlines

Long Term Trend?Leaders?Survivors?A New Paradigm?Ultimate Impact?

Long Term Trend?Leaders?Survivors?A New Paradigm?Ultimate Impact?

10

Labor Market Dynamics

Changing Work Force Dynamics are Redefining Work Options & Opportunities

Summary Points:

• Work Force Growth• Shortage of Workers in the US• Changes in Future Growth Patterns• Older Worker Industries• New Verbs – Out Source – Off Shore

An EmployerParadox

Source: Employment Policy Foundation analysis and projections of Census/BLS and BEA data.

Millions of People

Expected Labor Force and Labor Force Demand Palpable by the End of This Decade

0

50

100

150

200

250

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

Labor Needed

Labor Available

A Growing Shortage of Workers in the US:

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Age of Workers

Percent Growth in U.S. Population by Age: 2000-2010

Dramatically Different Patterns of Growth by Age

1. Declining number of mid-career workers

2. Few younger workers entering the work force

3. Rapid growth in the over-55 workforce

Source: US Census Bureau International Data Base

5% 5%

-9%

18%

48%

15%

-20%

0%

20%

40%

60%

80%

16-24 25-34 35-44 45-54 55-64 65+

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. . . Continuing for Our Working Lives!

Age of Workers

Percent Growth in U.S. Workforce by Age: 2000-2020

7% 8% 7%

-10%

3%

73%

54%

-20%

0%

20%

40%

60%

80%

under 14 15-24 25-34 35-44 45-55 55-64 65+

Source: US Census Bureau International Data Base

14

Median age of Employed Population

Source: 2003 Current Population Survey, U.S. Department of Labor

Selected Industries

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Disability Dynamics

Aging, Disability and Healthcare Cost Connections

Summary Points:

• Presenteeism is the First Indicator• Healthcare Costs & Risk Factors• LTD dominated by older workers• Musculoskeletal/Chronic Pain• STD Durations Extended with Age

Challenges or

Opportunities

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Medical Conditions & Productivity Connections

AmbiguousImpairmentsAmbiguousImpairments

High ScoresHigh Scores

Prevalence =% of ee’sreporting condition

Prevalence =% of ee’sreporting condition

17

Short (STD) and Long (LTD) Term Disability

Source: UnumProvident Disability Database, 2002-2004.

Distribution by age

18

STD Lost Days by Selected Impairments

Source: UnumProvident Disability Database, 2002-2004.

19

Top 4 STD impairments with the Greatest Lost Time

Source: UnumProvident Disability Database, 2002-2004.

Workers over the age 40

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Productive Aging – The Impact of A New Life Stage

Age is not a Disability - Aging is not a Disease

Summary Focus

• Funding for Longevity• Retirement & Productivity Expectations• Benefits & Entitlements Trends• Productivity Barriers & Enhancers• Productive Aging Building Blocks

A New Way of Thinking

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Retirement Expectations…

4%

20%

25%

16%

1%

34%

50 or Under 51-60 61-65 66-75 75 or older Never

At what age do you plan to retire?

Source: The New Employee/Employer Equation, The Concours Group and Age Wave, 2004

22

30

25

20

15

10

5

0

Time for…….Expected Years Spent in “Retirement:”

0

5

10

15

20

25

30

35

1900 1980 1990 2000 2010

13.6

19.4

20-25

1.2

Yea

rs

Source: Age Wave, based on U.S. data, and The Concours Group

30 +

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Productive Aging – A New Life Stage

Prospectively aligning work demands with worker capacities to achieve continuous productivity

Productive Aging Program Focus

Emerging Primary Transitional

45 to 55yrs * 55 – 70 yrs* > 70 yrs*

* or determined based on health, functional capacity and work issues

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A Productive Aging Benefit Blueprint – Key Themes

• Targeted Benefits

– Create a capped or limited LTD period (e.g. 5 - 7 years)

• Shared Risk

– Share lost time risk to employee combined with stay at work Incentives

• Combine Benefits

– Shared healthcare coverage (private/public/part time) with access to focused healthcare services to reduce the impact of chronic disease and protect functional capacity

• Unique Linkages

– Align life balance programs (dependent long term care, elder care etc.) with need for employee to support family members.

• Retire Retirement

– Support career/ retirement transitions, work/learning/leisure cycles, flex work, mentoring, research, education, training, application of new technologies

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Increase fitness

of workers

Protect work

capacity

Create H&P

culture

Where & When Can an Employer Make a Difference?

Full work Productivity

Working but Productivity

Impaired

Intermittent & Cyclic

Lost time

Lost Time < 3 - 5days

Lost Time< 26 weeks

Health Promotion

Risk Reduction

Disease/Condition Management

Disability Management

LeaveManagement

Increase compliance

with law

Track & monitor

absences

Reduce adminburden

Reduce onset of chronic disease

Reduce sudden death in workforce

Reduce work

related injuries

Reduce impairment

Reduce medical/

pharmacy costs

Reduce Presenteeism

Reduce STD Incidence &

duration

Reduce LTD incidence &

duration

Reduce WC med & Ind’ty

costs

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The Intangibles: Here in Lies the Rub

Employer Disenfranchisement

EmployeeDisengagement

Injuryor

illness Event

Premature Disability &

Excessive Healthcare Costs

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Productive Aging: Target ROI

• Qualitative

– Fully engaged employee

– Appropriate utilization of corporate human capital

– Improved functional capacity of older workers who do leave the work place

• Quantitative

– Reduced lost time

– Reduced healthcare costs

– Continued contribution to the organization

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Summary Trends

• Greater Employee Responsibility

• Reduced Employer Funding

– Longer EPs for disability

– Implement Higher co-pays if “unmanaged

• Greater Need for support services to control work disruptions and presenteeism

• Greater Need to manage the organization’s human capital assets held by the older worker group

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This Can Happen to You!

If we do not protect the productivity options of the boomer generation, we will

have roaming bands of bored, annoyed, grumpy,

unemployed but physically fit elders leading to social upheaval and mayhem