pheconomycards

Public health and the U.S. economy

[ Fall 2012 ]

How the next U.S. president can stack the deck in favor of people’s health and wealth in 2013

With the November 2012 elections on the horizon, Americans surveyed in national polls consistently rank the economy as their number one concern. Public health professionals can have a big impact on this ballot-box issue. More than 17 percent of the U.S. Gross Domestic Product is spent on health care—in many cases, for conditions that could be prevented or better managed with public health interventions. Yet only 3 percent of the government’s health budget is spent on public health measures. A 2012 study in Health Affairs notes that since 1960, U.S. health care spending has grown five times faster than GDP.

Why do these numbers matter?

First, a healthier workforce is a more productive workforce. According to an April 2012 report from the Institute of Medicine (IOM), the indirect costs associated with preventable chronic diseases—costs related to worker productivity as well as the resulting fiscal drag on the nation’s economic output—may exceed $1 trillion per year. A 2007 study from the Milken Institute found that when unhealthy workers show up on the job, as many must to survive financially, the effects of their lower productivity on the nation’s economic health are immense: in dollar value, several times greater than the business losses accrued when employees take actual sick days. Avoidable illness also diverts the economic productivity of parents and other caregivers.

Second, the costs of health care are built into the price of every American-built product and service. And the per capita cost of health care in the U.S. is higher than in any nation in the world. If the U.S. can reduce the costs of health care over the long term—by preventing diseases that require costly medical procedures to treat and by making our existing health systems more efficient—the costs of American products can become more competitive in a global marketplace.

Today, U.S. per capita health expenditures are more than twice the average of other countries in the Organization of Economic Cooperation and Development. The IOM estimates that cutting the prevalence of adult obesity by 50 percent—roughly the same reduction across the population as was achieved through public health’s multipronged attack on smoking in the late 20th century—could cut annual U.S. medical care expenditures by $58 billion.

Put simply, effective public health measures, including those aimed at improving health systems, have the potential to be economic engines. But these engines have been chronically underfunded and have received too little attention from lawmakers and voters. Michael Blanding, a Boston-based journalist and author, asked seven Harvard School of Public Health experts from widely ranging fields, to assess public health’s vital but often overlooked role in the American economy. Here’s what they told him.

Walter Willett: Stop Spending Government Funds to Promote Obesity
Meredith Rosenthal: Prevent Duplication, Coordinate Care
Norman Daniels: Spend More to Reduce Risk
Milton Weinstein: Identify What is Cost Effective
Kate Baicker: Focus on Value, not just Price
Deborah Allen: Invest Now … or Pay Later
David Bloom: Treat Health as the Nation’s Number One Asset

 

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Stop Spending Government Funds to Promote Obesity

Walt Willett
Chair, Department of Nutrition

The obesity epidemic has huge economic consequences, and we have not even begun to pay the full cost. There is a generation of children today who have diabetes or prediabetes, and they are just coming to the age when they will start developing heart disease and kidney failure, and need amputations as well as treatment for sight loss. These conditions will cause enormous costs in the future, even if we arrest obesity at the present levels.

The federal SNAP program (Supplemental Nutrition Assistance Program, formerly called “food stamps”) allows recipients to use SNAP dollars for any kind of food. As a result, SNAP serves as a funnel for nearly $80 billion a year of taxpayer money to the junk food industry. This industry produces the foods most readily available in low-income neighborhoods—a lot of soda and lower-cost foods loaded with calories and refined starches. People on the SNAP program are more obese, have more metabolic syndrome, and have more cardiac risk factors than people not on SNAP, adjusted for income. And their health care costs will be higher, which ends up costing taxpayers even more.

All we have to do to fix this is apply the same criteria, or similar criteria, to SNAP purchases that we already have for the federal WIC program (Women, Infants and Children program), which essentially allows purchases only for healthy foods. That policy would cost virtually nothing, but it would transform the food supply and dramatically improve the health and wellbeing of SNAP recipients. Little stores and bodegas that only stock junk now would start carrying healthy foods, the cost would come down because of the greater volume of healthy alternatives, and these foods would also become available for those not receiving SNAP benefits.

We are talking about doing something that is cost neutral but would produce not just better health, but also economic benefits in the medium and long term. How? If you change what people eat—and perhaps return physical education to our nation’s schools at the same time—within months, children’s weight and incidence of diabetes will go down. Their parents’ weight will decline as well. Within a year or two, there will be important medical cost savings. Long-term health costs will decline as fewer people develop diabetes, and the cost of healthy food will drop for all of us.

 

Meredith Rosenthal

Prevent Duplication, Coordinate Care

Meredith Rosenthal
Professor of Health Economics and Policy

What really matters to health economists is value.

Health care is a huge part of our national economy, and our Medicare and Medicaid programs represent the most important spending categories in the national budget. But our health care system is subject to market failures, so some of that spending does not generate improved health. We are wasting money in health care that we could be spending on education, roads, and other goods and services that we value as private citizens.

So improvements in this area, particularly reforms to health insurance and delivery systems, have an important role to play in balancing the federal budget and in fixing the economy as a whole.

One critical area for reform is primary care. Without robust primary care, lots of people—especially patients with complex needs—are getting poorly coordinated care. The health care delivery system has been ineffective at managing these patients, because as soon as they leave the doctor’s office, the medical system disengages.

That’s why the concept of patient-centered medical homes that we are studying is so important. In this model, insurers pay primary care providers a fixed amount for each patient every month, whether the patient sees the doctor once a year or every week. The provider is accountable for coordinating any care that may be needed across specialists, hospitals, home health agencies, and nursing homes, as well as care provided by community-based services and the patient’s loved ones.

Concepts like the patient-centered medical home have the potential to reduce waste from overuse and duplication of medical tests and services, and also increase the delivery of high-value preventive care. The result is a more efficient and effective, and less costly, system designed to keep patients healthy, rather than respond to illness.

 

Norman Daniels

Spend More to Reduce Risk

Norman Daniels
Mary B. Saltonstall Professor of Population Ethics and Professor of Ethics and Population Health

There is vast evidence suggesting that as important as medical care may be, risk reduction—particularly public health measures that reduce the chances people will suffer adverse health conditions—has the greatest impact on people’s health. The return on investment from these measures is not always economic, but if we look carefully at what improves the health of large numbers of people, we’re going to place considerable value on public health initiatives.

A well-known Centers for Disease Control and Prevention (CDC) report noted that people in the U.S. increased their average life expectancy by 30 years in the 20th century. When the CDC listed the major drivers of that increase, most of them were public health initiatives: clean water, motor vehicle safety, vaccine programs, occupational safety programs, smoking cessation programs, and the like.

Because the benefits of risk reduction programs like these are often invisible, there is an obstacle to investment in public health. When people are healthy, they rarely attribute their health to a specific action taken by government. They view it as their constitution or their lifestyle or their luck.

But if they’re sick, it’s highly visible and they demand to be treated. The visibility of that need creates enormous pressure to heavily invest in medicine, rather than in public health.

When legislators look for something to cut in the budget, they cut something that has no visible effects. If you stop investing in anti-tobacco campaigns, you don’t necessarily see more illness right away—it might take a long time to appear. But private markets don’t produce public goods like clean water or clean air, which everybody draws on. If you don’t believe that, just look at the rates of diarrheal disease in countries that don’t have sanitary conditions.

 

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Identify What is Cost Effective

Milton Weinstein
Henry J. Kaiser Professor of Health Policy and Management

We’re spending more than one-sixth of our national income on medical care. We’ve already reached the point of diminishing returns in some areas of medical care, but we can still see very good returns for many medical and public health interventions that are currently underutilized.

If you want to get more health for the money, then reallocate resources from some of the things that are done in medical care that are not cost effective and use that money for underutilized, cost-effective programs, including both medical and public health programs that aren’t being done enough.

What does this mean on a practical level? We need to convince doctors and patients that women don’t need a Pap smear every year if they have had three normal Pap smear tests. Doing a Pap smear once every three years is extremely cost effective, but doing it every year adds about $800,000 per life-year gained across the population. If most girls and young women are vaccinated against the virus that causes cervical cancer, human papillomavirus, then guidelines may well shift toward even less frequent screening.

Intensive care unit treatment for patients with certain fatal conditions, or extra diagnostic tests such as MRI, CT scans, and PET scans, are expensive; for many patients who don’t have clear indications of a disease, you often get very small gains. In these scenarios, you’re talking about cost-effectiveness ratios of hundreds of thousands of dollars per quality-adjusted life-year gained.

How do we persuade the American people that more care isn’t necessarily better care? It’s hard. People view medical care as an entitlement: If I’m sick, I should get the best available medical technology. A first step is to show that we can get more value for the money we’re already spending—but that will mean doing more of some things and less of others.

 

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Focus on Value, not just Price

Kate Baicker
Professor of Health Economics

The key is not spending less, but improving the value delivered through our health care system. Lots of interventions that are cost effective don’t actually save money. For example: smoking cessation programs might be costly, because smokers who die before the age of 65 then don’t collect Social Security benefits and Medicare. If we just want to save money, we could hand out cigarettes. But that’s wildly inconsistent with public health goals.

Our focus should be on producing health at a reasonable price, understanding that only a very small subset of things actually improve health and are cheaper than free.

The relationship between health insurance and the labor market is important because the vast majority of private insurance in the U.S. is delivered through employer-sponsored insurance plans. That is largely a relic of post–World War II wage controls that limited increases in wages but not in benefits, and the fact that employer contributions to health insurance aren’t taxed. This tax treatment of health insurance favors those who get health insurance through an employer instead of buying it on their own, and favors more generous health insurance relative to wages and other benefits.

There is thus a direct connection between health insurance premiums and wages: When the cost of providing health insurance to workers goes up, that leaves less money for things like wages and other benefits that come with employment. When health insurance premiums rise more quickly, workers’ wages rise more slowly and some workers are at higher risk of being laid off.

And what drives health insurance premiums? In large part, it’s the cost of health care.

So it’s clearly good for the economy when we can improve the productivity of the health care sector—or any other sector. But it is also important to remember that any effects improving health care delivery may have on economic growth are second-order relative to the effect on improving health itself.

 

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Invest Now … or Pay Later

Deborah Allen, SM ’80, SM ’86, SD ’98
Director, Child, Adolescent and Family Health
Boston Public Health Commission

In our economic system, payback comes when you sell something expensive to a captive market. You have that in health care, when you sell high-cost drugs, medical services, and equipment.

But public health promotes the opposite: Let’s invest now for a benefit that may not emerge for many years. Let’s create the conditions for healthy birth, healthy infancy, and healthy childhood. The payoff is extraordinary in terms of lifetime health status and averting the need for extraordinarily costly, often ineffective intervention at the later stages of life. It also creates a population that has a much higher quality of life. But it is more difficult to persuade governments or individuals to pay for something for which the payoff is not immediate.

Adverse health exposures for fetuses in utero or children in the early years of life can cause lifelong problems. It could be a mother inhaling toxic chemicals where she works. It could be maternal stress associated with poverty and racism, which causes her fetus to be exposed to toxic levels of the stress hormone cortisol. Exposures like these lead to disproportionate levels of preterm birth and low birth weight. And even if there is no visible impairment, the child is invisibly vulnerable and will have an elevated lifetime risk of asthma, cardiovascular disease, diabetes, and hypertension.

When you invest early in prevention, and a healthy full-term baby grows into a healthy child, then you prevent not only chronic medical problems, but also cognitive and behavioral impacts.

We have to ensure that families have the internal resources to raise kids, but also that families live in communities where there’s access to exercise and good food. These are not what people traditionally think of as health interventions—but they are the things that shape lifetime health.

 

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Treat Health as the Nation’s Number One Asset

David Bloom
Clarence James Gamble Professor of Economics and Demography

There are many links between health and the economy. We’ve known for a long time that richer nations generally have better overall health conditions than do poorer nations—and that, within a country, more affluent individuals have, on average, better health than do poorer individuals. This association has long been thought to reflect a causal link running from income to health—which makes sense for a variety of reasons, including simply that richer countries can afford to spend more on health care.

But new thinking and evidence—much of it pioneered at HSPH—shows that cause and effect also flow in the other direction: A healthy population spurs economic growth. First, healthier people are more economically productive. Better health also leads to an increase in savings rates—because healthier people expect to live longer and are naturally more concerned with their future financial needs.

Another bridge between health and the economy is education. Unhealthy children may enter school with physical and cognitive disadvantages, miss more days of school, attend school for fewer years, and learn less when they’re in school. By contrast, healthy children are more likely to be able to take advantage of whatever education is available to them—and a good education has profound economic consequences throughout an individual’s life. These consequences include a higher starting wage and larger salary increases over the course of one’s working life—earnings that ripple out into the larger economy.

Human health is fundamentally a national asset, which means that spending on the promotion and protection of health is more like a fruitful investment than a consumption expenditure. A 2011 study on the global economic burden of noncommunicable diseases estimated that the five most serious conditions will cost $47 trillion in lost output worldwide over the next two decades. In the U.S., reducing heart disease and cancer alone could save trillions of dollars over that time frame. Investments in public health measures that can avert these diseases (and frequently cost less than treatment) or measures that can better manage these diseases if they do strike, are an essential and highly justifiable way to enhance the value of America’s most important asset: its people.

Michael Blanding, Boston-based journalist and author

Learn more

Health care and the 2012 election (HSPH News)