Roland Berger Strategy Consultants

Study
In-depth knowledge for decision makers

High

The level of
social protection

Belgium

31%
31%

France

Medium

Germany

US

26%
26%

UK
Japan

Low
13%

27%

22%

Russia

China

5%

The level of social protection

varies widely among
countries around the globe
Total social expenditure
as % of GDP

Transforming social systems A global challenge

global topics
Social systems

Social systems, the public infrastructures that support a nation's

citizens, are central to the strength of a nation. But they are costly.
According to current estimates, China, France and Belgium, Russia and
the US spend over USD 4,400 billion on social systems. In today's
climate of global recession, advancing social systems may be a major
challenge, but it also presents a pivotal opportunity for progress.

Study 3

global topics
Transforming Social systems
This study is part of Project 2012, Roland Berger's GLOBAL TOPICS initiative

contents
introduction
Social systems as a global issue

p4

In sound health
Transforming social systems

p6

The future of Social systems

Six recommendations and the global outlook

p 20

Roland Berger Strategy Consultants

introduction

Social systems as a global issue

Study 5

GLOBAL TOPICS 2012: Social systems

AS A GLOBAL ISSUE
In 2012, 60 nations are undergoing changes in their political
leadership. These leadership shifts are a global event. Together,
they concern 56% of the world's population and over 50% of global
GDP. What's more, the challenges faced by these leaders are not
simply isolated, national issues they are GLOBAL TOPICS that
cross nations, geographies, classes and cultures. Our world today
is more interconnected than it has ever been. This comes with
great opportunity, but as we saw with the recent financial crisis, it
also comes at great cost. While developed countries are trying
torecover from the financial crisis, up-and-coming countries are
finding new opportunities and therefore new footing. Natural
disasters in recent years have affected economies across the
globe take, for example, the tsunami that hit Japan in 2011. And
though energy supply is a long-standing pivot of geopolitics, its
influence will only continue to grow as natural resources become
more scarce. Amidst all of this, sweeping demographic change is
threatening many nations' abilities to care for their people.
Leaders in 2012 must look beyond the short-term wins of election
years, should follow their local issues across borders, must
innovate not only their countries but also their thinking, if they are
to face these challenges and set their national stages for progress.
Roland Berger Strategy Consultants has therefore developed
Project 2012 as part of our GLOBAL TOPICS initiative, a global
sounding board to help political and business leaders seize the
opportunities for progress that these challenges make possible.
Clearly, our world today is shaped by many dynamics, from
globalization to climate change. Project 2012 zeroes in on three
ofthese dynamics, what we term "GLOBAL TOPICS". These GLOBAL
TOPICS underlie the opportunities at the doorstep of our current
and future leaders and of our current and future world: economic
revitalization, the environment and societal well-being. We look
atthese three issues in the context of the Volatile, Uncertain,
Complex and Ambiguous ("VUCA") world and establish an agenda
for developed and developing nations alike which addresses
thefour main elements of a national system: Territory, People,
Enterprise and Government, or TPEG.
Our Project 2012 thus aims not only to provide deep insight into
the major issues at hand and their far-reaching effects on
societyand the economy, but also to provide leaders a concrete
action listthat reveals the way forward even at the local level.
Toilluminate the opportunities for developed and developing

nations, Project 2012 centers around France, Belgium, the

US,China and Russia, which together represent over 40% of
globalGDP.
It is in tackling the GLOBAL TOPICS that both political and business
leaders can have the most impact, and their solutions will be
fundamental to the competitiveness of their nations. In this
think:act study, we focus on the GLOBAL TOPIC "Social Systems". In
the case of societal well-being, social systems are increasingly
under pressure and require answers, but as the topic is a source of
intense debate, many leaders shy away from tackling it head-on.
But innovation in this area can significantly impact national
strength and progress in developed and developing nations alike.
Our experience in healthcare and pension systems and our
insights into the current and future landscape of societal wellbeing have enabled us to develop concrete recommendations for
world leaders. Social systems may be a major challenge of our
time, but they present a host of opportunities that are well within
reach. Today's leaders have opportunity on their doorsteps.

Roland Berger Strategy Consultants

In sound health

Transforming Social systems

Study 7

National strength, national cost

Social systems, the public infrastructures that support a nation's
citizens, are central to the strength of a nation. Though the
particular challenges faced in this arena may differ across borders
and economic maturities, there are important, overarching
questions and principles that most countries around the world
share. How can a country provide sound national systems while
keeping public debt levels in check? How can social systems
effectively respond to changing demographic patterns? And how
can such systems tackle social inequalities?

f1

In 2010, public social

expenditure totaled
USD 4,400 billion in the
five focus countries
Public social expenditure, 2010, (USD bn)

f1 While some countries like France spend a great deal on social

Belgium

systems (31% of GDP), others, like Russia, spend relatively little

(13% of GDP). Levels of public financing of social systems vary
widely among nations. For example, public spending in France
accounts for 92% of all social systems spending; in the US, that
figure is much lower. And in many places, social systems
expenditure has grown considerably. Between 1980 and 2007,
social systems spending's share in GDP rose by 8% in France, 2%
f3 inChina, 3% in Belgium and by 3% in the US. In that same period,
inequality between socioeconomic classes also rose in most
developed and developing nations around the world. According to
the GINI index, since 1980 there have been marked increases in
the income gaps in nations like the US (by 7 points), Russia
(by19points) and China (by 23 points).

138
249
260
794
2959
China

Russia

Reining in these costs and transforming social systems in

sustainable and innovative ways mean looking at two systems
inparticular: healthcare and pensions. These systems are
foundational to any social system and therefore have considerable
impact on the strength of that system and the country as a whole.
Healthcare and pensions are thus key levers in the transformation
of social systems. To understand these levers in all their
complexity and to identify best practices and roadmaps forward,
Project 2012 looked closely at the five focus countries: France,
Belgium, the US, Russia and China. Six general recommendations,
and the tools and innovations to support them, were subsequently
identified. Targeted implementation measures can navigate the
complexity of social systems and guide leaders toward progress.

France

US

Source: OECD, National Statistics Bureau China, Ministry of Finance Russia

Roland Berger Strategy Consultants

f2

The level and structure of social

expenditure varies widely
across the focus countries
Total social expenditure as % of GDP by type of
financing, 2007

France
Share of GDP: 31 %
Public: 92% Private: 8%

Russia
Share of GDP: 12,7%
Public: 100%1 Private: 0%

Belgium
Share of GDP: 31.1%
Public: 85% Private: 15%

US
Share of GDP: 26.4%
Public expenditures

Public: 61% Private: 39%

China
Share of GDP: 5.2%

Private expenditures
Size of the circle represents the level of expenditure as a % of GDP
Source: OECD, National Statistics Bureau China, Ministry of Finance Russia 1) Private social expenditures not available

Public: 63% Private: 37%

Study 9

At the front lines: healthcare and pensions

f10 Around the world, social systems face two major challenges: the

rising costs of healthcare and the demographic changes that

areimpacting pension structures. By addressing these challenges,
both developed and developing nations can make significant
headway in the struggle to bring public debt and social inequalities
under control.
The mounting costs of healthcare
f6 All major economies are seeing healthcare spending rise. In 2010,

healthcare spending in the US accounted for just over 17% of GDP,

well above its peers in Asia or even Europe. Across Europe, many
countries have similar spending levels, but those levels are
increasing. Developing nations such as China, where currently
alarge percentage of expenditure is borne by the patients
themselves, are expected to catch up to their developed peers.

f9
The soaring costs of healthcare can be attributed to a range of
factors, but four factors in particular lie at the core of the problem.
The first is the system's increasing reliance on and use of hightech diagnostics and prescription drugs. But despite this rising
use, non-communicable diseases, or NCDs (e.g. heart disease,
diabetes, Alzheimer's), are growing in prevalence as populations
f8
become more affluent and mortality rates drop. NCDs are the
second major cost factor. In 2001, global mortality rates from
NCDs stood at 59%; by 2010, this percentage had jumped to 67%.
On the one hand, widespread measures to prevent NCDs are
lacking; on the other hand, their growing prevalence means more
acute care and more long-term care, placing exponentially greater
demands on the system. A third cause behind rising healthcare
costs is an inadequate and inefficient supply of care itself.
Whiledeveloping nations face severe workforce shortages, most
developed nations simply have too many care providers.

f3

Income gap is expected to widen in the focus countries

but will remain quite small in France and Sweden
GINI index, 2005 p2020 (in points)
Growth rate of GINI index, 2005 p2020 (%)

china
russia
US

+2.9%
+2.1%
+1.9%

2005
49.2
2005
40.9

2005
28.4

+1.0%

2005
28.8

Source: EIU 1) Sweden as additional example

2020
43.0

2005
46.9

sweden1 +1.7%
france

2020
52.1

2020
48.8
2020
30.1
2020
29.8

Roland Berger Strategy Consultants

Workforce scarcity inevitably raises costs; surplus, on the flip side,

engenders ineffective coordination and mismanagement. From
this follows the fourth cost factor: fraud and corruption. In the
European Union alone, conservative estimates put losses from
fraud and corruption at EUR 56 billion annually.
f5 But soaring costs and higher spending have not led to better

health outcomes on the whole. According to the World Health

Organization, the US, which spends more per capita than every
other country (except Norway) on healthcare, has an average
lifeexpectancy of only 78 years. France, where spending is in line
with many of its European neighbors, has a life expectancy
of81years. In the last 50 years, life expectancy in China has
increased by 30 years; in that same time in Russia, lifeexpectancy
increased by only 2 years. It is clear that some nations must
improve their systems by spending more; it is also clear that many
nations must become more cost-effective by spending better.
Aging vs. working: The pensions problem
Pensions are another major pivot within most countries' social
systems. The world's ongoing demographic redistribution is
altering the workforce available and thus shaking the foundations
of many pension infrastructures.
f4 The demographic redistribution can be attributed to two trends.

The first is increasing life expectancy in conjunction with

decreasing birth rates. Progress in healthcare and improved
quality of life in most developed and developing nations have led
to an overall increase in longevity by 17 years in the world
onaverage and the historical gap between men and women is
closing. Through at least 2020, the number of retirees will
continue to rise. At the same time, birth rates in the last 60 years
have fallen significantly, especially in developing countries,
leading to a decrease in the traditional workforce population. In
other words, there are more people calling on the pension
systemand fewer people to finance it.
The second trend is the changing and lengthened workforce
lifecycle: this is leading to longer education systems, later career
beginnings, and in some cases longer careers and later retirement.
Developed and developing nations alike must look to sound
infrastructures and policies that can respond to these changing
demographics in fundamental and sustainable ways.

Developed and developing nations respond

Without doubt, rising healthcare costs and demographic
f9
pressureon the pension system are issues being closely watched
aroundthe world. Most countries are also taking steps toward
solving these issues, whether through traditional approaches or
innovative measures. Project 2012 has examined how trends
affecting healthcare and pensions are already being tackled in the
five focus countries: France, Belgium, the US, Russia and China.
The story of social systems in these five countries brings the issue
into sharp focus, and reveals the targets of change there and
elsewhere around the world.

Healthcare
The growing impact of technology and prescription drugs
As the impact of technology and prescription drugs on the system
grows or, put another way, as the system's dependence
ontechnology and prescription drugs grows many countries are
seeking out more efficient tools and methods in their introduction
and use.
High tech is both a blessing and a curse in countries like the US
and France, where the average number of diagnostic and magnetic
resonance imaging (MRI) exams has increased sharply since
2000. Curbing unnecessary or redundant medical tests and
implementing monitoring systems are on the agendas of many
stakeholders. Belgium, which conducts more CT scans than any
other European country, is discussing a governmental proposal
tocurtail radiology expenses from the top down. Similarly, French
political leaders are looking into ways to reduce the costs of
testing.
But high costs do not necessarily have to accompany
technological advancements. Implemented well and innovatively,
technology can go a long way toward reducing healthcare
costs.Developing countries like China and Russia, where
technology useis still maturing, are investigating sustainable
reimbursementmodels in the modernization of services. In
France, several e-health initiatives have been launched which are
improving not only cost figures but also patient care and the
healthcare structures that support it. High administrative costs in
the healthcare sector are also being tackled by mobile payment
platforms like the RAZCODE system in the US, which uses 2D
barcodes to share health information and initiate payments.

Study 11

f4

A continuing trend: Workforce is shrinking

significantly in relation to retirees across
selected countries

Pensioner

Worker

Worker/pensioner ratio, 1950 and 2010

1950

France

US

Russia

China

Source: EIU

2010

Roland Berger Strategy Consultants

f5

Social systems under pressure: While birth rates have been

decreasing significantly over the last 50 years, life expectancy
has been steadily increasing

Birth rates
Change in birth rate, Births per 1,000

CHIna
RUSsia
US
FRAnce
Belgium

1960 2010

people, 2010

-24
-14
-10
-5
-5

13
11
14
13
12

Life expectancy
Change in life expectancy Life expectancy at
at birth, 1960 2010

CHIna
FRAnce
Belgium
US
RUSsia
Sources: World Bank, UN

+30
+11
+10
+8
+2

birth, 2010 (years)

69
81
80
78
73

Study 13

In almost every illness and disease area, prescription drug use and
its costs are rising. The US saw a USD 7 billion rise between 2009
and 2010 alone. In 2000, total pharmaceutical expenditure in
France was EUR 400 per capita. By 2008, that figure had jumped
to about EUR 550. One initiative to reduce this cost burden is the
recent development in France of paperless prescriptions, currently
active in 900 pharmacies but set to expand to 23,000 pharmacies
by 2013. Paperless prescriptions can save up to two hours of
pharmacy labor as well as significantly reduce the burden
oninsurance, which spends EUR 4 million a year on the collection
of prescriptions alone. Companies such as IBM and DocMorris
arealso innovating the way drugs are supplied and how the data
on their use and outcomes is collected. In addition to innovative
approaches such as this, many countries are encouraging the
prescription of generic drugs over name brands, usually through
incentives offered to the doctors and providers themselves.
Curbing the rise of NCDs
The healthcare system is also under pressure from the growing
prevalence of NCDs. In France, for example, the number of NCD
patients grew annually by 6% between 2008 and 2010, and NCDs
account for 70% of the country's health expenditure. Though
politicians are looking for infrastructural ways to reduce or contain
the rising costs of NCDs, payors (the public insurance system and
complementary insurance providers) are also pursuing
preventative measures across the care spectrum. These include
primary measures (to avoid disease development entirely),
secondary (early diagnosis and reduced morbidity) and tertiary
(restoring function and minimizing complications). The Vigisant
pilot program was recently launched in the northern region of
France to detect hypertensive employees of participating
companies. These employees were then monitored at home via
telemedicine technologies.
Disease management programs like these have great potential to
reduce the severity of NCDs as well as their associated costs. In
the US, the Metabolic Syndrome Program is saving about EUR 716
per patient through daily monitoring, personal coaching and
coordination efforts between relevant care providers. Similar
programs in Germany and the Netherlands are also proving that
significant cost savings can be achieved through disease
management. In China, insurance coverage is being expanded as
away to bring the costs of NCDs under control. A cooperative
medical system (the NCMS) was established in 2003 as a largely
government-financed insurance scheme for rural populations. It
began with 90% coverage of 20 serious diseases, but that number
was brought to 25 in 2010.

Upgrading the supply of care

To tackle the shortage of healthcare workers, many countries are
looking to improve their healthcare infrastructures. Globally, the
shortage totals about 2.4 million workers. In developed countries,
this is particularly due to the growing elderly population and
urbanization. In developing countries, the shortage can be traced
to lower public investment and higher poverty levels. Shortages,
however, are at critical levels in much of Africa and Asia. Whereas
the Americas account for 37% of the world's healthcare workers
and 10% of its disease burden, Africa accounts for only 3% of the
healthcare workers and 24% of the disease burden. Though a
global approach to this problem is clearly needed, innovations and
solutions begin at the local level. Telemedicine measures in
countries such as France, as illustrated above, can ease shortage
problems. China is encouraging investment, both domestic and
foreign, to strengthen its healthcare network and improve
accessibility. Russia is looking into ways to improve access by
locating medical centers near train stations and other hightrafficareas.
But even developed countries with an excess supply of care are
having to tackle issues at the infrastructural levels. A major
challenge in many such countries is poor coordination between
care providers and between those providers and patients. Hightech systems developed by Toshiba and Orange through the
Demeter project are bringing telemedicine to France, particularly
to the elderly and to those who lack mobility or who live in isolated
areas. In partnership with General Electric and ARS Ile de France,
Orange has also launched an e-health platform that shares
patientMRI data across hospitals. Similar sharing platforms are
being launched in the US. One such platform is Revolution Health,
aprivately owned information portal and social network where
individuals can gain access to online tools to better manage their
health and healthcare spending. Easing and enabling coordination
between care providers as well as with patients is an important
step toward improved healthcare.
A particularly disruptive innovation in this area has come in the
form of retail clinics in the US. These are relatively low-cost
providers that offer the less complicated services, and are
generally conveniently located (e.g. in grocery stores) with long
opening hours. Staffed by nurse practitioners, retail clinics
diagnose and treat non-serious medical conditions such as colds,
earaches and acne, and provide immunization services. Nearly
half of all consumers in the US are receptive to the retail clinic
concept, and the number of clinics has multiplied by six since

Roland Berger Strategy Consultants

2006. The retail clinics apply entrepreneurial models to bring

carecloser to those who need it a model that can readily work
inmany nations around the world.

Developing nations face issues ranging from the sale of expired

products, collusion between public officials and care providers,
bribery, and other hard-to-detect system abuse. Prescription drug
reimbursements and supply systems often play a role here. In
some places, such as China, up to 46% of a hospital's revenue
comes from drug sales. Since 2001, attempts have been made to
weaken or even sever this link, to reduce the kickbacks
pharmaceutical companies offer, and to place the major portion of
drug supply with retail pharmacies. At the government level, many
countries, including China and Russia, are developing anticorruption measures. China's work to separate drug procurement
from drug sales and its establishment of a drug bidding system
are good examples of attempts to make the Social System more
transparent and thus less prone to fraud and corruption.

Confronting fraud and corruption

f7 Fraud and corruption are major issues in most countries'

healthcare systems. Be it informal payments to care providers,

kickbacks or absentee rates among healthcare workers,
corruptionand fraud account for a significant share of the
overallcosts of care.
In developed countries, 25% of social systems expenditure
isdueto fraudulent use of the system, often in the form of
misleading entitlement claims. France is tackling this problem
through a range of penalties and legal ramifications,
improvements to coordination between providers and payors,
andis also considering innovative measures such as an
electronicand biometric identity card.

f6

Healthcare spending represents a growing share of GDP

Healthcare spending as % of GDP, 2005 and 2010 (%)
Growth of healthcare spending, 2005 2010 (%)

+46%

Russia

France +26%
sweden +20%
1

china
US

+14%
+13%

Source: EIU 1) Sweden as additional example

2005
5%

2010
8%

2005
11%

2010
14%

2005
9%
2005
4%
2005
15%

2010
11%
2010
5%
2010
17%

Study 15

Very clean
10

Sweden1 9.3

US 7.1
France 7.0
7

f7

Corruption is a major
challenge for social
systems in all
countries, especially
in emerging countries
such as China and
Russia

China 3.6

Russia 2.4

Corruption perceptions index, 2011

Scale of 0 10, where 0 means that a country is perceived as "highly corrupt"
and 10 means that a country is perceived as "very clean"
Source: Transparency international 1) Sweden as additional example

Highly corrupt

Roland Berger Strategy Consultants

f8

Non-communicable diseases have become a global

threat Mortality rates are increasing

67%
2010

Global death rates from non-communicable diseases, 2001 and 2010 (%)

59%
2001

Source: CFR

f9

The major non-communicable diseases represent a large and

growing part of healthcare spending in mature economies
Share of disease-specific costs to total healthcare costs in the US, 2005 (%)

Cardiovascular disease
Cancer
Diabetes
Weight problems & obesity
Other chronic
All other

33%
20%
11%
10%
9%
17%
0%

Total costs

Source: CDC

100%

74%

26%

Study 17

Pensions

Extending employment
The changed workforce is another epicenter of the pension issue,
and many countries, both developed and developing, are
findinginnovative solutions. Two categories of measures have
emerged. The first are those that extend the span of working life
through incentives for both the employee and the employer.
China,for example, is moving toward making its retirement plans
fully portable, and many Western European countries have
recently extended the required number of working years. Germany
has reduced mandatory pension contributions for companies that
hire workers over the age of 50. And France is considering a payas-you-go system similar to the one adopted in Sweden, where the
pension received is based on one's personal contribution and life
expectancy. Sweden's move in this direction was the first truly
structural change to the retirement system, and similar profound
changes are likely to be seen elsewhere.

Tackling pension challenges is as much a demographic as an

infrastructural undertaking. The aging populations around the
world mean two things: more people in retirement or of retirement
age, and a shrinking workforce in traditional terms. Countries
aretherefore looking for ways to increase pension contributions
whileat the same time adjust to a changed workforce.
Improving birth rates
f5 Increasing contributions to the system can come in one of two

ways: more people or more contributions or both. China has

taken a direct route toward improving its birth rates by replacing
its one-child policy with a two-child policy, which was first
implemented in select provinces but has been rolling out across
the nation since 2009. Other countries, such as Belgium, seek to
improve the conditions under which families can grow, for
examplethrough improved daycare facilities.

f10

Two major challenges in the health sector: Emerging economies need

to increase life expectancy, whereas mature economies need to
contain /reduce costs
Life expectancy at birth, 2010 (years), per capita health expenditure, 2010 (USD)

Source: WHO

Life expectancy (years)

84

Japan
Italy

Spain

80

Greece
Poland

76

China

Brazil

68

Germany

France
Belgium

Switzerland

Norway

US

Contain/reduce costs

Russia

India

64

Canada

Turkey

72

Iraq

UK

Sweden

Increase life
expectancy

60
56
52

South Africa

Health expenditure (USD)

48
0

500

1,000

1,500

4,000

4,500

5,000

7,500

8,000

Roland BeRgeR Strategy ConSultantS

the second category of measures addressing the changed

workforce are those which improve the employability of the
elderly. innovative initiatives are underway in France, italy, the uK
and germany. e-bazaar, for example, is an online marketplace
being developed for seniors which will allow them to easily
become an entrepreneur and sell goods and services. the site also
provides courses to develop new skill sets like web design, and
offers general support in marketing, business administration and
the like. as populations work longer, they will draw less on their
pension plans, giving the system some much needed breathing
room.

F11

europe is an example of a
worldwide trend the share of
employed citizens over 55 years
old is increasing as countries
react to demographic change
employment rates by age group, 2000 2010 (%)

Focus: europe typifies a worldwide trend

Source: eurostat

Study 19

+3%

+33%

+24%
+12%

+30%

+22%

+79%

+29%

Sweden
+102%

2000:

78.6

46.0

4.9

2010:

80.7

61.0

6.3
+78%

+63%
finland
UK
2000:

63.2

36.1

5.2

2010:

70.8

44.0

8.5

+127%

2000:

58.5

22.8

2.3

2010:

72.5%

40.8

4.1

+53%

netherlands
2000:

54.1

18.5

2.6

2010:

70.1

37.3

5.9

+26%
+18%

+71%

+12%
Hungary

+20%

2000:

33.7

7.6

1.7

2010:

51.7

13.0

1.9

+75%
2000 2010
+45%
+25%
Spain
2000:

46.2

26.7

1.6

2010:

54.4

32.0

2.0

55 59 age group

france
2000:

48.1

10.2

1.1

2010:

60.6

17.9

1.6

60 64 age group
65+ age group

Roland Berger Strategy Consultants

The future of Social systems

Six recommendations and the global outlook

Study 21

our Six recommendations

Though every nation faces its own particular set of circumstances,
these six general recommendations apply to most countries
todifferent degrees. In a VUCA world, how trends in social systems
will play out in any given month or year is impossible to predict.
But broad outlines and possible scenarios can give political
andbusiness leaders important direction even as these leaders
prepare to change course at any given moment. And with that
direction comes the tools and innovations that will drive the way
forward.

f12

The relevance of the six recommendations

varies among the focus countries

Relevant recommendation

1. Close
coverage gaps

Russia
China
US
France
Belgium
Source: Roland Berger

2. Minimize
fraud and
corruption

3. Improve
quality
of healthcare

4. Reduce
NCD burden

5. Increase
6. Cut
worker-pensioner healthcare
ratio
costs

Roland Berger Strategy Consultants

1.

Close
coverage gaps

In developing countries like Russia and China, closing the

significant gaps between socioeconomic classes is key to tackling
social systems challenges. Such gaps can be closed by ensuring
full healthcare coverage, introducing multi-tier pricing levels for
medical support, limiting out-of-pocket payments to a certain cost
percentage, increasing reimbursement for severe diseases to up
to 90% for the poorer populations, and implementing access and
options for free medical care. Pension advancements can be made
by ensuring a minimum level of pension payments as a
percentage of average local wage; by calculating pensions based
on work experience, average wages, special achievements,
number of children raised, etc.; and by increasing pension benefits
themselves. Overarching steps in the social system can also be
taken: improved focus on the beneficiaries of the system, such as
pregnant women, children, and the disabled; improved social
benefits; and improved quality of life for the elderly.
To tackle the coverage gaps successfully, countries must meet
two criteria. One, they must increase governmental and employer
funding of the social system. Two, they must promote cultural
change that will improve the stability and unity between groups
across regions, which includes improved incentives for giving to
charity.

2.

Minimize fraud
and corruption

Developing countries also experience high levels of fraud and

corruption in their social systems. Measures must take a threefold
approach that targets health providers, health payors, and
patients/endusers. Health providers can strengthen internal and
external control systems and improve procurement competences
and tools. Absenteeism can be countered with effective incentives
and sanctions, frequent inspections, improved supervision, and
more contracted health workers. Corruption at the level of the
health payor can be addressed through improved budgeting and
accounting systems, the use of e-procurement, better managed
and cleaner payrolls, and transparent recruitment and promotion
processes. The private sector can also be involved to speed up
these processes. Corruption and fraud from patients and endusers
can be tackled through formalized user fees and increased
remunerations for health workers to prevent bribery.
In a general sense, monitoring and increased transparency
shouldbe encouraged and enabled. Governments should pass
anti-corruption legislation and guidelines, confiscate property
asapenalty, and government employees should be barred from
personal business activity. Law enforcement agencies should
receive higher budgets.
If fraud and corruption are to be reined in, national transparency
guidelines must be developed. But, and perhaps more importantly,
their implementation must take place at the regional and local
levels.

Study 23

3.

Improve quality
of healthcare

Developing nations must also make strides in advancing the

quality of healthcare. And not only the quality directly, but also the
accessibility and affordability of that care. Quality improvements
can be made by modernizing the medical and associated IT
infrastructures, standardizing clinical treatments, educating
staffand equalizing salaries accordingly, introducing annual
prophylactic examinations, and incentivizing doctors by
monitoring results. Where the drug supply is financially linked
tohospitals, as in China, such connections can be severed.
The quality of care also comes down to how accessible it is.
Accessibility can be improved through more municipal health
services, medical outlets in high-traffic areas such as railway
stations, and cross-regional medical centers. Private practices,
especially needed in rural areas, can be encouraged by
implementing more favorable conditions for them, and health
resort treatment can be reimbursed by insurance.
The affordability of healthcare is also a major factor in a system's
quality, especially in developing nations like China and Russia.
Introducing multi-tier pricing levels for medical support, including
different drug reimbursement lists, will help make healthcare more
affordable to more citizens. The introduction of a wider variety of
healthcare institutions, such as grassroots healthcare and private
hospitals, will also improve the affordability of healthcare in
developing nations.
To improve the quality of healthcare, national guidelines and
quality indicators must be established, but the responsibility
forimplementation and control must lie at the regional levels.
Governments must also ensure funding for cost-effective
measures that the population can afford.

4.

Reduce
NCD burden

The growing prevalence of NCDs affects every country, developing

or developed. Several measures can be taken at the infrastructural
level, as well as at the various levels of care.
Infrastructural measures to reduce the NCD burden include
integrating prevention and control into national and regional
health plans, developing national guidelines and standardizing
therapy accordingly, providing and educating staff, creating
transparency through quality indicators and regular evaluations,
and launching pilots to test the effectiveness and efficiency
ofnew measures.
Primary care can prevent NCDs from even forming. Measures
include promoting healthy lifestyles through education, especially
for children, developing athletic infrastructures like bike paths,
prohibiting tobacco and alcohol advertising and sales to minors,
and increasing taxes on tobacco. Secondary care measures, such
as screening programs, can ensure that NCDs are caught early.
Tertiary care measures largely involve better and more wellrounded patient monitoring and care, and therefore aim to reduce
the overall burden that NCDs place on both patients and the
system as a whole. A patient's health condition and care can be
monitored proactively and continuously, especially with the new
technologies becoming available, which could include drug-dose
reminder systems and specialists available should questions
arise. Tertiary care enhancements also include interdisciplinary
collaboration that would link primary care physicians, specialists
and other health professionals in care management. On the
patient side, shared decision making methods over the course of
the therapy can improve patient motivation. Involving the patient's
larger environment, such as relatives and local council services,
can also make steps in improving tertiary NCD care.
Easing the burden of NCDs requires educated, motivated citizens
and health professionals and close cooperation between payors,
providers and employers at both regional and national levels.
Target groups and subsequent measures must be thoroughly and
carefully chosen to ensure cost-effective implementation.

Roland Berger Strategy Consultants

5.

Increase workerpensioner ratio

6.

Cut healthcare
costs

The declining ratio between workers and retirees is another issue

that affects all countries across the board. There are two primary
categories of actions to be taken in this arena: changing the
retirement structure fundamentally and increasing birth rates.

In general, developed countries face ever-increasing costs in

healthcare. In addition to infrastructural measures, changes
inprescription drug use and supply and in and outpatient care
willcurb and ultimately reduce these costs.

Fundamental changes to retirement include increasing the

retirement age, supporting earlier starts of careers through flexible
education schemes, developing transition models to replace
earlyretirement, increasing career spans in the public sector and
through flexible, tailored schemes, securing pension benefits
despite longer careers, and improving the market attractiveness
of older workers.

Overarching, infrastructural measures include fighting medical

fraud, encouraging prevention, reducing the administrative burden
through "dematerialization" (e.g. EMRs), and in countries like
theUS curbing the growth of medical malpractice lawsuits, which
willin turn reduce in the costs of practitioners borne by insurance
companies.

Improvements in the birth rates around the world can be made,

particularly in developed countries, by reducing tax rates for
families, implementing job protection for women on maternity
leave, and supporting the development of more and better
daycarefacilities. And in China, the two-child policy must be fully
implemented.
The case for change will be a major stepping stone in facing this
challenge. National campaigns will play a role here.

The use and supply of prescription drugs also demands

fundamental changes. Generic drugs should be prescribed more
frequently, and the most common diseases assigned to standard
medications. The cost-effectiveness of both old and new drugs
should be examined and measures taken accordingly. Measures in
other areas such as improved quality of care can also impact the
costs of prescription drugs. For example, improved care
management can include medication management, which will
improve patient compliance, help prevent double prescriptions,
and more quickly address adverse side effects.
Improving in and outpatient care includes implementing new costeffective healthcare structures (e.g. retail clinics, medical homes),
increasing the use of IT (e.g. telecare), standardizing and
controlling treatments to reduce overuse, increasing cooperation
between providers, and encouraging outpatient services. In
France, implementing different price levels for hospitals will also
support large cost cuts.
Cutting healthcare costs must be seen holistically. That means,
first, that standards must be developed and applied to the level of
care. Payors and providers must intensify their cooperation and
commit to change. And IT support must be developed if operational
costs are to drop, as technology's impact on costs will only
continue to grow.

Study 25

GLOBAL OUTLOOK:
TAKING THE LONG VIEW
The government's role in financing social systems is a sensitive
issue, especially in an election year like 2012. Leaders are largely
staying neutral in this arena despite the major impact it can have
on national progress. But the urgency of this challenge reaches far
beyond election years and results. Steps must be taken. Luckily,
leaders from developed and developing countries alike can extract
three basic tenets in the changing social systems landscape:
1. Social systems improvements can best be made through
national guidelines that are implemented, managed and controlled
at the regional and local levels
2. Adjusting the retirement age is unavoidable. The world is ageing,
and increasing the retirement age is an "easy" step towards
finding a new equilibrium
3. NCDs are a global issue, and must be seen that way. Healthcare
players must cooperate locally and across borders to reach
the right groups with the right measures
In addition to these three primary steps, developing countries
withlow debt levels, like Russia and China, must invest directly in
healthcare and pensions by increasing social spending. On the
flipside, developed countries like Belgium, France and the US,
which face high levels of debt, must reduce and control social
spending through cost-efficiency measures if they are to maintain
the current quality of their systems and avoid continued
privatization.
Certainly businesses will experience both positive and negative
effects as social systems are fundamentally reexamined,
challenged and innovated. Though insurance companies and asset
managers will be strained in places like the US, they will also
findnew business opportunities in developing countries like
Russia and China as will healthcare and technology providers.
But in developed countries, such providers will also be asked to
adjust their business models to the changed and changing
landscape. Pharmaceutical companies, facing pressure in more
mature markets where spending cuts will occur, will be able to
turnto developing countries for new business, but in China may
encounter obstacles as the drug distribution channels are
broughtabove board.

Improved and innovated social systems have the potential to

dramatically impact a nation's TPEG. Better social systems
canheighten a country's gravitational pull of knowledge workers
and other important immigration flows, but can also make great
strides in closing the acute income gaps that are growing quickly
around the world. Personal responsibility, both for one's health
and for one's society, can also increase. Enterprises targeting the
elderly can introduce products and services that, in turn, grow a
nation's GDP. And governments can find and encourage new ways
of collaboration, like public-private partnerships, to support
sustainable and proactive solutions.
The key to social systems is implementation, and implementation
at the peak of complexity transforming a system which is layers
upon layers, and in which everyone is a stakeholder. The long view
is the way forward, a holistic perspective vital if such a complex
system is to be managed. And it can be, with the right experience
and the right tools.

f3

Roland Berger Strategy Consultants

Authors of the study

Christophe Angoulvant
Partner, Paris
Phone: +33 1 53 67 03 20
christophe.angoulvant@rolandberger.com

Vanessa Mrosek
Senior Consultant, Frankfurt
Phone: +49 30 399 27 36 06
vanessa.mrosek@rolandberger.com

special thanks
Country assessments: Huanqiong Wang, Chen Wen, Alain Chagnaud,
CharlotteFeryn, Mathias Garny, Ekaterina Kozlova, Yury Shakhmatov,
ShivamSaxena, Christopher Hoyes, Barbara-Maria Loth
Project management GLOBAL TOPICS: Torsten Oltmanns, Adele Huber
Publication management: Katherine Nlling, Marlena Koppendorfer

Charles-Edouard Boue
Member of the Executive Committee,
President Roland Berger Asia
Phone: +33 1 53670 965
charles-edouard.bouee@rolandberger.com

Study 27

CONTRIBUTING EXPERTS
Yan Kang
Partner, Beijing

Maria Mikhaylenko
Principal, Moscow

Phone: +86 10 84400088 668

yan.kang@rolandberger.com

Phone: +7 495 287 92 46

maria.mikhaylenko@rolandberger.com

Dominique Gautier
Partner, Paris

Jrgen Reers
Partner, Detroit

Phone: +33 1 53670 341

dominique.gautier@rolandberger.com

Phone: +1 248 729 5115

juergen.reers@rolandberger.com

Bruno Colmant
Partner, Brussels

Thomas Wendt
Principal, Detroit

Phone: +32 2 661 03 43

bruno.colmant@rolandberger.com

Phone: +1 248 729 5124

thomas.wendt@rolandberger.com

Dmitri Zaitsev
Partner, Moscow
Phone: +7 495 287 92 46
dmitri.zaitsev@rolandberger.com

Roland Berger Strategy Consultants

Sources
Center for Disease Control (CDC)
US: Share of chronic diseases costs in total healthcare costs, 2010
Council of Foreign Relations (CFR)
Global action on non-communicable diseases, 2011
Department for International Development (DFID)
Strategies to tackle corruption in the healthcare sector
of emerging markets, 2010
Economist Intelligence Unit (EIU)
GINI Index, 2010 2020p
Healthcare spending as % of GDP, 2010
Public debt as % of GDP, 2011
Never too early: Tackling chronic disease to extend
healthy life years, 2012
Eurostat
Active ageing and solidarity between generations a statistical
portrait of the European Union, 2012
http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-13012012BP/EN/3-13012012-BP-EN.PDF
IMF
World economic outlook database, GDP in USD
GDP in USD, 2010
National Audit Office
International benchmark of fraud and error in
social security systems, 2006
National Statistics Bureau China
Public social spending as % of GDP, 1980 2012
Public and mandatory private spending as % of GDP, 1980 2007
Ministry of Finance Russia
Public social spending as % of GDP, 1980 2012
Public and private social spending as % of GDP, 1980 2007

OECD
Diagnostic exams, 2000 2010
Public social spending as % of GDP, 1980 2012
Public and mandatory private social spending in
% of GDP, 1980 2007
Retirement age per country, 2005
Total social expenditure in % of GDP (Delta 1980 2007)
ONS
Labor Force Survey, 2010
Roland Berger
Roland Berger Country Assessment, 2011
Transparency International
Corruption Perceptions Index, 2011,
http://cpi.transparency.org/cpi2011/
United Nations Statistics
Workforce/Pensioner Ratio, 1950 2010
United Nations, Department of Economic and Social Affairs,
Population Division
World Population Prospects: The 2010 Revision
Crude birth rate 1950 2010 (births per 1,000 people)
World Health Organization (WHO)
Life expectancy at birth, 2010
Life expectancy at birth compared to per capita health spending,
2009, (current USD, years)
Shortage of healthcare workers, 2007
Overview: Initiatives for prevention/promotion of
physical activity, 2012
World Bank
Fertility rates (delta 1960 2010)
Life expectancy at birth, 1960 2010
Social expenditures in current USD per capita, 2007
Population and demographics (delta 1960 2010)

Study 29

GLOBAL TOPICS
Project Description
2012 is a year of dramatic economic and social challenges and
one of potential political change, with transitions of power taking
place in 60 countries affecting 50 percent of the world's GDP. With
our initiative GLOBAL TOPICS, we assess the most pressing issues
and outline possible solutions to leaders. Leveraging the global
footprint of our firm, we focus on how debt, welfare issues, energy
supply and changes in demographics affect perspectives for
theworld. We also explore how Africa as an entire continent turns
these challenges into opportunities.

Project 2012
Project Description
Initiated by Roland Berger, Project 2012 is a collaborative venture
designed to advise business and political decision-makers. Together
with dedicated partners from universities and think tanks around
theglobe, such as the Yale World Fellows Program and HEC Paris,
Roland Berger will use the results of Project 2012 to provide a set of
strategic suggestions.

Roland Berger Strategy Consultants

For more information, please visit:

www.rolandberger.com/globaltopics
To become part of our community, please sign up
for expert updates and wiki access at:
www.theproject2012.org

Roland Berger Strategy Consultants GmbH

HighLight Towers, Mies-van-der-Rohe-Str. 6, 80807 Munich, Germany

July 2012

If you have any questions, please contact us at:

global_topics@rolandberger.com

Study 31