What Presidential Debates Actually Have To Do With Sports

There is one thing that both Republicans and Democrats can probably agree on when it comes to presidential debates – there is an over abundance of sports metaphors and clichés used both by candidates and commentators. Debates are typically described with “winners and losers”, “which candidate takes the lead”, and who “scores the most points”. Candidates “practice” for debates with “coaches” and “coordinators”. Because President Barack Obama is a well-known basketball fan, many pundits described his performance last night with comments like, “President Obama engaged in a four corners basketball strategy and tried to run out the debate clock.”

Despite the overuse of sports imagery when it comes to Presidential debates, the candidates actually did discuss issues that are highly relevant and topical to the sports industry. A significant portion of the debate centered on Medicaid, Medicare, Social Security, and the Affordable Healthcare Act. In particular, the Medicare and Social Security debate have the strongest parallels to the healthcare issues currently being discussed in the sports industry. These programs have functioned like a defined benefit plan typical to traditional pension plans. Many people ages 65 or older receive certain guaranteed benefits based on their income levels and need for healthcare services. The combination of these programs covers a large majority (if not all) of these healthcare costs. Obama wants to largely keep the same system that exists now for Medicare and Social Security in place while reducing the costs that the government pays to service providers. Romney, using a similar version of the plan articulated by his candidate for Vice President Paul Ryan, wants to start changing Medicare by adding with what is commonly known has a voucher system. In this version of defined contribution plan, the government would provide senior citizens with a certain amount of money through a voucher and allow people to choose how they want to spend their money.

This is almost the exact same issue that was at the center of the National Football League’s lockout of its referees. Essentially, the referees wanted to continue a defined benefit plan that would be similar to how Medicare currently functions. The NFL would pay referees’ pensions at a certain levels given their ages and years of service to the league. The NFL wanted to move to a defined contribution plan that would work more like the voucher system. Essentially, the NFL would make smaller contributions but allow the referees the chance to pursue their own strategies for their retirement investments. The NFL and its referees agreed to a hybrid approach in which all referees employed by the NFL before 2017 would have a defined benefit plan. All referees employed after 2017 will have a defined contribution plan.

While the regular NFL referees returning to work may have grabbed the most headlines, there is potentially a much more important development on the sports pension / healthcare front that could reshape the entire sports industry. The state of California recently passed legislation for college athletes who suffer serious or career-ending injuries that “requires the universities to pay future medical costs for on-the-field injuries… They also will have to cover insurance deductibles and pay health care premiums for low-income athletes, among other provisions.”

There is little doubt that financially supporting athletes who suffer career-ending injuries while playing sports is morally and ethically the right thing to do. The real question has always been whether this is economically feasible or sustainable. Supporters say this is feasible because this legislation only applies to schools with $10 million in media revenues. Yet, even these schools are struggling to keep athletic programs from being eliminated. For example, the University of California, Berkeley, which makes more than $10 million in media revenue, has eliminated sports programs all together because of a lack of funding. In addition, unfunded pension liabilities are crippling both the public and private sectors. State governments face massive budget shortfalls because of their unfunded pension liabilities (i.e. they do not have the money to pay the benefits that were promised to government workers) while one of the major causes of the bankruptcies of General Motors was the pensions payments that needed to be made to its retired workers.

It is worth paying attention to the impact of California’s new legislation has on these schools. In particular, will these new costs cripple athletic departments and/or cause more programs within athletic departments to be eliminated. In addition, this new legislation may spur other states to pass similar bills. Former athletes are much more likely to have significant healthcare costs after their careers than the average person of the same age. This means they often are the type of person that is the most expensive for health insurance companies and government supported healthcare programs. More and more state governments may want to transfer these costs back to these colleges and universities, particularly private institutions, to help reduce their own liabilities when it comes to healthcare.      

The only thing that we know for certain is that most organizations are really just beginning to deal with the health care crisis in the sports industry. It will be interesting to see how the debate and policies in the public sector shape the future of the sports industry on these issues.