World Bank

1. World Bank Making the Business Case for Health and Disability Management in Middle Income CountriesMarch 4, 2004

2. Overview • The Case for Caring • The Macro Economic Case for Action • Demographic and Economic Factors • The Micro Economic Case for Change • Case Studies • Key Findings • A Framework for Solutions

3. The Economic Reasons Are Clear “While it is impossible to place a value on human life, compensation figures indicate about 4% of the world’sGDP disappears with the cost of diseases through absences from work, sickness, treatment, disability and survivor benefits”International Labour Organization (ILO) Using the same methodology, the annual global GDP estimate is a loss of US $1.37 to $1.94 trillion The World Bank

4. Sample Disability Organizations of & for People With Disabilities • United Nations • “World Programme of Action Concerning Disabled Person”, 1982 • Decade of Disabled Persons, 1983-92 • The United National Standard Rules on the Equalization of Opportunities for People with Disabilities – 1993 • The Asian & Pacific Decade of Disabled Persons, 1993-2002 • The Copenhagen Declaration of Social Development, 1995 • International Labour Organization (ILO) • Code of Practices on Managing Disability in the Workplace, 2001 • National Institute of Disability Management and Research (NIDMAR) • Consensus Based Disability Management Audit (CBDMA™) 2002

5. Returning Sick or Disabled Employees Back to Work Is “A cost savings for employers AND a lifeline for employees” Wolfgang Zimmerman, NIDMAR

6. SocialWelfare EqualRights A changing framework for health and disability • Move from a medical model of “inability” to a social model of disability that eliminates barriers that are: • Social • Political • Economic • Cultural • Environmental

7. Definition of Developing Countries Developing Countries Low- and middle-income countries in which most people have a lower standard of living with access to fewer goods and services than do most people in high-income countries. There are currently about 125 developing countries with populations over 1 million; in 1997, their total population was more than 4.89 billion. • Low income:Classified by the World Bank in 1997 as countries whose GNP per capita was $765 or less in 1995 • Middle income:Classified by the World Bank in 1997 as countries whose GNP per capita was between $766 and $9,385 in 1995. These countries are further divided into lower-middle-income countries ($766- $3,035) and upper-middle-income countries ($3,036-$9,385). Source: World Bank Website

8. Definition of Developing Countries Source: World Bank Website

9. Definition of Developing Countries Source: World Bank Website

10. The Case for Concern • Why should employers in developing countries be concerned? • Attract and retain high producing workforce • Be competitive for benefits • Find more ways to reduce costs • Keep employees motivated • Reduce illness absenteeism • Improve administrative efficiency • Maintain, improve and manage health • Increase satisfaction • Multi-national companies interest in consistent labor and cost management initiatives

11. The Operation of a Macro Economy & Why Demographics Matter Labor Growth Rate GDP Growth Rate Productivity Growth Rate + = Depends on consumer demand Quality of workers, capital stock and technology Demographics

12. Macro Economic View for Change Labor Growth (Demographics): • Global Aging • Labor Growth Rates in Middle Income Countries • Unemployment Rates Productivity Growth (Health Indicators) • Mortality • Health Expenditures • GDP and Per Capita • Disability Prevalence Other Issues • Social Reform; wage and job protection

13. The Operation of a Macro Economy and Why Demographics Matter We know what we want here We know what we have here Do we have enough of this to make it work? Labor Growth Rate GDP Growth Rate Productivity Growth Rate + = Depends on consumer demand Demographics Quality of workers, capital stock and technology

14. Working-age Populations (20-64) of Selected Countries in Thousands for Selected Years 2000 2010 2020 2030 Canada 18,943 20,911 21,517 20,985 Mexico 51,316 63,492 74,047 80,586 Japan 79,074 75,904 68,993 65,070 France 32,071 32,628 31,424 30,173 Germany 51,228 50,046 48,685 43,189 Italy 32,416 30,924 28,636 24,194 United Kingdom 32,197 32,540 32,345 29,380 United States 167,105 186,967 197,288 198,257 Source: United Nations, World Population Prospects: The 2000 Revision.

15. Reasons for Change: Labor Growth Rate Average Annual Labor Force Growth Rate (2001-2010) Source: United Nations Statistics Division

16. Reasons for Change: Unemployment Rates Source: United Nations Statistics Division

17. Reasons for Change: Mortality (upper middle income) Source: United Nations Statistics Division

18. Reasons for Change: Health as a Percentage of GDP Source: The World Bank Group: Human Development Network Development Data Group

19. Reasons for Change: Health Expenditure per Capita Health Expenditure Per Capita ($) Source: United Nations Statistics Division

20. Reasons for Change: Select Countries Prevalence of Disability % with Disability Source: United Nations Statistics Division

21. Reasons for Change: Compliance & Wage Protection Ranking of selected OECD countries by “strictness” of employment protection legislation Most Strict Legislation Least Strict Legislation Source: OECD 1994

22. Key Findings • Global aging (and infertility rates) is expected to reduce the labor force in industrial countries significantly • Health status and health care spending is lowest in low and middle income countries due to access and availability issues • Middle income countries have a large labor force and high unemployment rates, resulting in employer belief that the cost of replacing workers is lower than retaining existing workers • Middle income countries spend at least twice as much on disability related programs as they spend on unemployment • Disability benefits on average account for more than 10% of total social spending, in Poland they are double • Direct medical and disability costs are usually mandated and are paid through government assessments, therefore business has less incentive to change

23. Key Findings • Health indicators such as lifestyle issues drive a need for health management; smokers incidence rates are >27% in 58% of OECD countries, Obesity rates are growing with more than one third of the countries averaging a BMI rate of almost 15% or greater • Aging population drives fewer workers and increasingly more stress on social programs that cannot afford the increases

24. The Opportunity for Change • Health and absenteeism are key cost drivers for business • Retaining an already well trained work force is key • Access to timely and quality medical care is a critical issue for employees and employers • Companies who leverage these issues are operating at improved cost levels and therefore more competitive • Middle income countries could be positioned to leverage over-burdened health care systems • A component of the solution is a partnership with government and business

25. Microeconomic Case for Change • Case Studies • Mexico • Poland • Key Findings

26. The Business Case for Health, Absence and Disability ManagementA Case Study Why Change? • Direct and indirect costs of health & absence are not consolidated in a way to show total impact • Consistent metrics and tracking of the total cost of health and disability costs are usually non-existent • No common framework or interventions in place • Many factors drain employee productivity and increase business costs • Unmeasured and unmanaged processes create inefficient systems, disruption to business and impact employee effectiveness at work

27. Case Studies – Mexico & Poland • What Was Done: • Pilot sites were selected • Stakeholder & process evaluations were conducted • Internal & external gap analysis completed • All costs were analyzed; direct & indirect • Employee benefits • Business Systems • Root cause analysis of absence & disability completed • Recommendations were made & pilots launched for 6 months

28. Customers Employee Business Operations Secondary Customers Work Councils/Labor Representatives Government National Health Care Systems Business Human Resources Health & Safety Finance On-Site Medical Clinics Union Relations Legal Health Absence & DisabilityAligning Customer Requirements with Business Goals Overall Expectations Employees • Safe work environment • Reasonable pay and benefits • After illness, return to work when safe Business Operations • Productive and reliable work force • Well trained work force • Program improvements had measurable impact on business goals (bottom line, productivity) • Reliable data to make decisions • Cross functional support for change

29. The Business Case – costs are not easily consolidated Profit & Loss Variable Costs Base Costs Sales & Advertising Direct materials Government Assessments Other variable costs(Transportation/Packing) Other; rent, depreciation, maintenance, legal, etc. Direct Labor Plant ProcessControls Hours Capacity Absenteeism Hours Capacity Shortage  Product Volume Capacity increased to balanceAbsenteeism Absenteeism/Disability/Health

30. The Business Case The Total Cost of Health and Disability: Direct Costs Indirect Costs Other Costs • Illness/Disability • Health Care • Overtime • Replacement Workers • Quality • Retraining • Others • Employee Morale • Management Time • Government Requirements

31. Issues: Costs for sick leave and disability increasing – 2x company average Medical clinics unable to provide effective primary care Access to routine pharmaceuticals were not available due to government barriers No clear communication when employees were returning to work No consistent return to work programs in place Overtime rates were raising outpacing U.S. “sister-facilities” Government supplied health care systems were overextended and inefficient however willing to partner with business Recommendations/Impacts: Contracted with IMSS (National provider of health care services) for priority care, service requirements, and integrated communication systems Created an arrangement with National Health Insurance to provide medications that could be delivered through on site medical clinics Created a standard software tracking system for all locations for improved measurements & cost impacts Local ownership and leadership of Absence programs were key – cross functional steering committee created for sustainable change Absence was reduced by 30% in first 6 months of pilot resulting in cost savings for company – employees had better quality medical care and retained valuable job Mexico Case Study

32. Issues: Absence rate was higher than company averages Multiple types of absenteeism caused time away – disrupting business operations Sick Absenteeism – paid at 100% salary Unpaid personal leaves Marriage, child birth, death in family Unapproved leaves Child care related absenteeism (80% of salary paid from government insurance) Avoidable/preventable absence estimated to be 6% (1/3rd of absence) Recommendations/Impacts: Defined Absence in two categories: Controllable Sick Child care Others Uncontrollable Government mandated leave Company provided leave Measures established – showed range of controllable hours lost were 8.5  4.2 hours/employee in one calendar year Supervisor outreach established Triage to other support systems Sick child care Flexible work arrangements Approval provided for absence by supervisor Absence was reduced by almost 20% Poland Case Study

33. Case Study Lessons Learned • Country & business cultures vary greatly • Total systems approach works best • National healthcare systems can be a challenge and an opportunity • Return on investment will be direct, indirect costs and productivity • Reliable data is often scarce, but can be gathered • Multinational businesses can be a facilitator of change • Results are a win for both employers and employee interests

34. A Framework for Change Health and Productivity Model • Population Health ManagementAn Integrated Strategy Across The Health Continuum • Wellness Management • Information • Motivation • Preventive Screening • Risk Management • Targeted Intervention • Targeted Screening • Demand Management • Self Care • Nurse Advice Line • Disease Management • Compliance • Risk Management • Disability Management • Case Management • Decision Support Health & Well Being Low Risk, Optimal Health At RiskInactivity, Obesity,Stress, High BloodPressure Minor Illness/InjuryDoctor Visits Chronic DiseaseDiabetesHeart Disease DisabilityTraumatic InjuryCancer 85% of Employees = 15% of Costs 15% of Employees = 85% of Costs Source: 2003 Wellness Councils of America

35. Health Status Influences More Than Medical Costs In The Workplace • Health status and disability has a direct correlation to business bottom lines. • Direct and Indirect costs include: • Absenteeism from work • Disability program use • At work injury program costs • Overtime/Turnover • Family related medical leave • Presenteeism (on-the-job productivity losses) • Non-Health related costs: • Government regulations are increasingly complex adding business costs to comply • Management time to address workplace implications for the disengaged and absent

36. A Broad Framework for Solutions • Political • Model changes after other successful companies and countries • Assure equality of treatment • Government is often a change agent for social development • Economic • Globalization has put price pressures on all companies • Develop a workplace strategy consistent with economic development principles • Cost of social programs are outpacing ability to pay, new ideas are a competitive requirement • Cost savings are throughout the system; create a baseline and measure impacts • Stage economic development for innovation and capital investments • Pressure for jobs and productivity require action

37. A Broad Framework for Solutions • Social • Government programs may welcome new ideas • Generate clear guidelines, rights, and responsibilities for programs • Promote success through communication and published studies • Environmental • Company policies and benefit programs can be a lynch pin for change • Leverage work already pioneered by other companies and countries • Benchmark best practice companies • Leverage private and non-profit enterprises to assist in solutions • Consider a community wide effort • Cultural • Country and company cultures vary • Sensitivity for privacy and benefit entitlement • Cross functional support within a company is critical • Involve public resources, employee and labor will be essential for success

38. A Business Framework for Solutions • Four variables influence the cost of health, absence and disability • Funding • Pools • Direct and Indirect ROI • Tiers • Benefit Plan Features • Integration/Coordination • Voluntary/Ancillary Programs • Private Plans • Prevention • Safety • Education • Health Management • Program Management • Policies/Practices • Healthcare Access • Return to Work • Administrative Services Benefit Plan Features

39. “The only asset that’s unique to a company...an asset that can’t be replicated by rivals...is the quality of their workforce. -Robert Reich22nd Secretary of Labor of the United States April 2002 – Corporate Assets Redefined

40. Open Forum & Questions