The aging workforce and medical cost inflation in Singapore are projected to drive up average medical costs per employee by 108% to S$1,973 (US$1,448) per year in 2030, representing a mounting financial burden for employers. Based on current trends, productivity loss due to sickness absenteeism per employee is projected to increase by 25% based on gross national income (GNI). With an aging workforce, at the national level, this represents a cost of S$3.3 billion (US$2.4 billion) in 2030, a 43% increase from 2016.
The forecast is contained in a societal aging research report released yesterday by Mercer and Marsh & McLennan Companies’ Asia Pacific Risk Center (APRC).
The report, titled “Aging Workforce: Cost and Productivity Challenges of Ill Health in Singapore”, says that the three main drivers of this are: (1) the aging of the workforce, which leads to an increase in sick days, (2) a larger workforce, and (3) the GNI per capita growth rate.
The segment of Singapore employees aged over 50 is projected to increase by 55%, and to represent 40% of the workforce by 2030. With an increase in demand for medical services, the aging demographic will contribute to 41% of the escalation in medical costs, as it will drive a rise in the utilisation of healthcare services, which together with healthcare cost inflation, will result in a significant surge in overall costs, says the report.
Mr Neil Narale, Singapore Business Leader for Mercer Marsh Benefits, said: “With improved management of health conditions permitting individuals to stay in the workforce longer, increasing financial needs in retirement, as well as more flexible employment options, such as working from home, and on-demand jobs in the gig economy, there is a growing trend for Singapore employees to postpone their retirement.
“However, health risks increase with age, ranging from diminishing motor and sensory functions to a greater incidence of chronic diseases, which will create challenges for employers.”
In Singapore, societal aging is estimated to drive the prevalence of chronic diseases such as cancer and diabetes by up to 200% by 2030, which means Singapore will face the challenges of stagnating productivity growth through increasing rates of absenteeism and presenteeism.
What is worth noting is that 60% of all medical claim costs are attributable to 10% of claimants. This highlights the value of interventions for high-risk groups, such as health and wellness programs to reduce the incidence of disease, and screening for earlier detection of disease.
Mr Narale added: “Organisations need to adapt to current demographic trends by implementing strategies to mitigate the higher costs of ill health and capitalise on the productivity of an older and potentially shrinking workforce. This includes workforce analytics to characterise productivity drivers, as well as evidence-based workplace strategies such as health initiatives, workplace redesign, and return-to-work programmes.
“While an aging workforce may present challenges related to higher healthcare needs, older workers are associated with advantages such as greater firm-specific knowledge, and lower turnover rates. Accordingly, if managed properly, diversity of age at work can serve to improve productivity and reduce the need for governments to tax corporates and the next generation to support the elderly.”
The report is a collaborative effort across Marsh & McLennan Companies. The analyses conducted in the report are based on a sample of the Mercer Claim Database for incurred claim year 2013-2015. The database contains longitudinal claims data of approximately 68,000 insured headcount. Data are collected from 560 parent companies of a combined total of more than 700 entities. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies.