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2015/FMP/WKSP1/003 Session: 1

The Fiscal Implications of Ill Health Submitted by: Philippines

Workshop on Fiscal Management Through Transparency and Reforms Bagac, Philippines 9-10 June 2015

The Fiscal Implications of Ill Health Kenneth Hartigan-Go MD Undersecretary Department of Health [email protected]

2014 ABAC-LSIF Study on Impact of Health on Worker Productivity The estimated annual cost in terms of lost gross domestic product (GDP) in 2030 due to Non-Communicable Diseases (such as cancer, heart disease, and diabetes):

6.1% for Malaysia; 5.8% in the Philippines; 5.5% in the United States; 5.4% for Peru; 4.9% for Australia; 4.3% for China

The Challenge •

The aging population and the increase in longevity are stretching the capacity of government, businesses, and individuals to provide for the retirement of their citizens, former employees and themselves, respectively.

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This is placing pressure on tax revenues, corporate profitability, and the abilities of individuals to fund their retirement.

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Under these pressures, the size of unfunded pension liabilities has increased, and for many APEC economies are on a par with, or exceed liabilities, arising from borrowings. The response has been to lift contribution rates and bring benefits into line with what is affordable.

The Challenge •

The role of poor health in determining these liabilities has not received the attention it arguably deserves.

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NCDs such as cancer, heart disease, and diabetes are likely to affect pension payments by bringing forward retirement, or for those retired, reducing their ability to secure supplementary work.

Supporting facts • Australian Bureau of Statistics survey of Retirement and Retirement Intentions – Almost a quarter retired five years earlier than others due to sickness, disability or injury. – Poor health dominant reason for males under 55 (56.8%)

• US Health and Retirement Study – 55-59 – 35% reported poor health as a reason for retirement – 60-64 and 65-69 – proportion was about 30%

2015 ABAC-LSIF Study on the Impact of Ill Health on Pension Expenditures – Stage 1 • Victoria Institute of Strategic International Studies, Melbourne, Australia • Review pension systems of 7 countries • Australia • China • Japan • Malaysia • Peru • Philippines • United States

2015 ABAC-LSIF Study on the Impact of Ill Health on Pension Expenditures – Stage 2 • Development of a model to estimate the impact of poor health on pension funds in each country • Development of scenarios to determine the effectiveness of interventions that reduce chronic diseases that lead to early retirement

Timeframe for Study, Feedback, and Developing Recommendations to Ministers and Leaders • • • •

early July 1st draft circulated for comment late July circulate 2nd draft ABAC III endorse final draft Presentation to Health Ministers at the APEC High-Level Meeting on Health & the Economy (Aug 30-31, Cebu, Philippines) • Presentation to Finance Ministers at the APEC Cross-Fora Dialogue on the Fiscal Implications of Non-Communicable Disease in the Asia-Pacific Region.

Proposal: APEC Cross-Fora Dialogue on the Fiscal Implications of Non-Communicable Disease • Presentation of findings and recommendations of the 2015 LSIF-ABAC Study with a view to informing Ministers and Leaders of possible consequences and options for consideration. • When? 2 hour dialogue on Sept 9 (TBC) in Cebu, Philippines

• Who? Finance Ministers and senior officials; business leaders; world-renowned health economists.

Proposal: APEC Cross-Fora Dialogue on the Fiscal Implications of Non-Communicable Disease

• Examine how APEC Economies can make smarter investments in “good health”(such as prevention, early detection, and early interventions). • Consider the various sources of revenue for healthcare financing, including the private pillar.

Request SFOM:  Welcome the 2015 ABAC-LSIF Study on the Impact of Ill Health on Pension Expenditures  Endorse holding the Sept. 2015 Cross-Fora Dialogue with Finance Ministers

Thank you! Kenneth Hartigan-Go MD Undersecretary Department of Health [email protected]