Trends & Impact: The Basis for Investment Decisions

Trends Related to Health Spending & Prevention Strategies

• Physical Inactivity Increases Health-Care Costs in Canada
• National Health Expenditure Trends
• Health-Care Costs Related to Major Disease Groups
• Disease Patterns and Organizational Costs
• Non-Wage Job Benefits Are Increasing
• Benefit Streams Data - National Norms
• The Aging Workforce - Increasing the Risk and Costs to Business

Physical Inactivity Increases Health-Care Costs in Canada

It is estimated that in 2001, the economic burden of physical inactivity was $5.3 billion ($1.6 billion in direct costs and $3.7 billion in indirect costs) which represented 2.6% of the total health care costs in Canada, and that 21,000 lives were lost prematurely in 1995 because of inactivity.

A study by researchers at the U.S. Centers for Disease Control and Prevention has estimated that each physically active person saves the American health-care system over $300 annually relative to an inactive person. Based on this, the 63% of Canadians who are still inactive cost our health system $5.7 billion more than if they were active.

In the most recent Economic Burden of Illness in Canada study, the Public Health Agency of Canada reported that the total direct cost (drugs, physicians, hospitals, research) of illness in 1998 was $83.9 billion out of an overall cost for health-care in Canada of $159.4 billion.

Moreover, the indirect costs such as time lost due to long-term and short-term disabilities, and the present value of future productivity lost due to premature mortality and illness in Canada represents an estimated economic value of $75.5 billion.

National Health Expenditure Trends

In its National Health Expenditure Trends report (1975-2004), the Canadian Institute for Health Information reported that total health expenditure, in current dollars, was $114 billion in 2002, and reached $123 billion in 2003 and $130.3 billion in 2004.

After adjusting for inflation, real economic growth was 5.4% in 2003 and 2.2% in 2004. In comparison, health-care spending grew at an average annual rate of 5.2% annually from 1996 to 2002.

Total health-care spending as a percentage of Gross Domestic Product was 9.9% in 2002; the ratio increased to 10.1% in 2003 and 2004.

The private sector share remained fairly constant from 1997 (29.9% of total health expenditure) to 2002 (30.3% of total health expenditure).

Drugs and capital spending have been the fastest-growing components of total health expenditure. Drug expenditure increased by 8.7% in 2003 and 8.8% in 2004, while capital spending rose by 18.9% and 0.5%, respectively.

Health-Care Costs Related to Major Disease Groups

The occurrence of all of the following major disease groups has been linked in some degree to physical inactivity. Increasing physical activity has been proven to prevent them or reverse their progress

• Cardiovascular Disease
• Cancer
• Diabetes
• Osteoporosis
• Arthritis
• Obesity
• Mental Illness

Cardiovascular Disease

Cardiovascular disease, the number one cause of premature death in Canada, claims the lives of 79,000 Canadians annually and costs the health-care system over $6.8 billion in direct costs and $11.7 billion in indirect costs.

Heart disease and stroke combined are the number one cause of hospitalization among men and women in Canada (18% of hospitalizations in 2000-2001).  Regular physical activity reduces the risk of high blood pressure, stroke, and coronary heart disease; the latter by as much as 50%.

For ischemic heart problems alone - treatment of which cost Canadian hospitals $1.3 billion in 1998 - each percentage point increase in the number of people that are physically active (i.e., from 24.1% to 25.1%) would reduce annual treatment costs by $10.3 million.

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Cancer

Cancer in Canada has an economic burden (of direct and indirect costs) of $14.2 billion.

Physical activity can reduce the risk of colon cancer by as much as 50%.  There were 5,900 deaths in Canada from colorectal cancer in 1997 and an estimated 16,400 new cases.

Research also shows that physical activity may protect women against breast cancer.  Over 2,300 Canadian women died of breast cancer in 1997 with an estimated 18,400 new cases appearing in that year.

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Diabetes

Almost 5% of Canadian women and men over the age of 20 suffer from diagnosed diabetes, with the disease accounting for over 5,000 deaths annually.  Diabetes resulted in almost 280,000 admissions and over $203.5 million in hospital costs in Canada in 1998.

The prevalence of type 2 diabetes has increased at an alarming rate in the past 20 years.  The economic burden of diabetes is estimated at $1.6 billion in 1998; $0.4 billion (25%) in direct costs and $1.2 billion (75%) in indirect costs.

Physical activity can reduce the risk of developing non-insulin-dependent diabetes by as much as 50%.  Diabetes is also a complicating factor in heart disease and stroke.

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Osteoporosis

A full 25 % of women over age 50 and 50% over age 70 will develop osteoporosis.  Seven in 10 fractures in those over the age of 45 are due to this disease.

Physical activity, particularly in the teenage years but also later in life, can help to build strong bones and prevent or delay osteoporosis.

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Arthritis

Arthritis affects over 4 million Canadians and is the leading cause of disability in more than 600,000. Musculoskeletal conditions, including arthritis, account for $13.7 billion in indirect costs to the Canadian economy annually to which $2.6 billion in health-care costs is added.

Most forms of physical activity improve functioning and relieve symptoms among people with osteoarthritis and rheumatoid arthritis and, in many cases, can also reduce the need for medication.

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Obesity

Obesity increases the risk of coronary heart disease, diabetes, osteoarthritis, and various cancers. It also increases the risk of back injuries, which are a significant cost to industry.

Over half of Canadians carry excess weight and two-thirds of these are considered to be at health risk. Rates of obesity have grown dramatically in the last 20 years.

The cost associated with obesity in 2001 was estimated at $4.3 billion ($1.6 billion of direct costs and $2.7 billion of indirect costs).

Physical activity affects body composition and weight favourably by promoting fat loss. Active individuals have a lower risk of being overweight.

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Mental Illness

Mental disorders account for over $4.6 billion in direct costs to the health-care system each year and $3.2 billion in indirect costs. Mental conditions accounted for over 10 million patient-days in hospitals in 2000-2001.

Physical activity can help promote mental health and can even prevent some mental health disorders by improving self-confidence, self-esteem and other psychological factors.

Physical activity is associated with fewer symptoms of anxiety and depression, is a proven antidote to stress, and has a positive effect on mood.

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Disease Patterns and Organizational Costs

A full 70% of an organization's benefit costs are incurred in six disease categories.

Detailed below, these categories represent the most prevalent types of illness and injury experienced in the North American workplace. They are also preventable or at least modifiable through physical activity and other lifestyle/behaviour changes.

1. Cardiovascular : Includes such things as hypertensive heart disease, myocardial infarction, angina, arteriosclerosis, cardiac arrest, and other heart-related disorders.
2. Musculoskeletal: This category is organized into three sub-categories of injuries:
   1. Back - includes all forms of intervertebral disc disorders, psychogenic backache, plus sprains and strains of the sacroiliac region, etc.
   2. Repetitive Strain Injury (RSI) - includes carpal tunnel syndrome, fibromyalgia, as well as RSI of wrist, elbow and/or shoulder, etc.
   3. Other - includes all other forms of musculoskeletal injury and usually includes sprains, strains, and dislocations, etc.
3. Respiratory: Includes all forms of acute sinusitis, laryngitis, and bronchitis, as well as acute upper respiratory infections, viral infections, viral pneumonia, and influenza, etc.
4. Digestive: Includes all forms of functional digestive disorders, ulcers and esophagitis. Some digestive cases may be hard to distinguish from stress.
5. Cancer: Includes all sites and forms of neoplasms.
6. Stress: In addition to some forms of gastric disorders and gastroenteritis, the stress category includes many forms of headache, anxiety reactions, and miscellaneous conditions such as insomnia, etc.

Non-Wage Job Benefits Are Increasing

The cost of mandatory non-wage benefits for employers (Employment Insurance, Canada/Quebec Pension Plan, and workers' compensation) increased from 5% of payrolls in 1961 to 12% in 1998.

The cost of discretionary benefits (employer-sponsored insurance, pensions, paid leave, profit and stock option plans) also rose, helping to push the cost of non-wage benefits from 23% to 36% between 1961 and 1998.

In 2000, 62% of employees were offered at least one employer-sponsored insurance - extended medical, dental or life/disability. Half were offered all three.

The most common 'family-friendly' workplace benefits included employee assistance programs and fitness and recreation facilities, offered to 28% and 14% of employees respectively.

Employees in high-paying, unionized, full-time or permanent jobs were much more likely to have access to all types of non-wage benefits.

Benefit Streams Data - National Norms

• Incidental Absenteeism: 16.39% of benefit costs - 1.5% of payroll
• Workers = Compensation: 20.77% of benefit costs - 1.9% of payroll
• Weekly Indemnity: 19.13% of benefit costs - 1.75% of payroll
• Short-Term Disability: 18.03% of benefit costs - 1.65% of payroll
• Long-Term Disability: 9.29% of benefit costs - 0.85% of payroll
• Drug Plans: 6.56% of benefit costs - 0.6% of payroll
• Extended Health Care: 8.2% of benefit costs - 0.75% of payroll
• Employee Assistance Program: 1.64% of benefit costs - 0.15% of payroll

The Aging Workforce - Increasing the Risk and Costs to Business

One in three Canadians will be 55 or over by 2021, compared with one in five in 2001.

As the proportion of older people increases relative to the young, fewer young people are expected to enter the workforce to take the place of retirees.

In 2001, there were 2.7 people aged 20 to 34 in the labour force for every participant aged 55 and over, down from 3.7 in 1981.

Statistics Canada's Labour Force Survey (2003) indicates that work days lost to illness and disability increase with age for both genders.

In 2003, workdays missed because of illness or disability increase with age, from an average of 5.2 days for those aged 15 to 24 to 10.5 days for full-time employees aged 55 and over - more than double.

Absences from work due to personal reasons (which include illness or disability and other personal or family demands) have been increasing in recent years. In 2003, full-time employees holding one job only missed 9.0 days of work versus 7.3 in 1997. The aging of the workforce is a main reason.

In most organizations/businesses in Canada , an aging workforce means business can anticipate increased pressure on benefit programs and lost productivity if the workforce does not remain healthy.

Physical activity can help to counter the effects of aging and improve sickness and disability profiles for those over 50 years of age. In fact, doctors say that regular physical activity is the best "remedy" against aging.