The Economic Costs of Health
The swingeing cuts in health funding that have been – and continue to be – implemented over the past couple of years have seriously debilitated the public health service. Its overall prognosis continues to decline as does the outlook for those of us obliged to avail of its failing facilities. Even if the economic situation in Ireland should improve, the damage that has been inflicted on the health service will make it far more difficult and costly to restore in the future.
As we entered the New Year, the health service was once more on the front page for all the wrong reasons. Over 500 patients nationwide were forced to endured treatment while stranded on trolleys in hospital corridors due to a shortage of bed beds. Meanwhile, as is her wont in times of crisis, the Health Minister Harney was safely wrapped up in a bed far away with no intention of returning to the scene of yet another disaster.
Although, the callous disregard and treatment of patients has left most people disgusted there is still no sign of the political will required to ensure universal access to and equitable treatment in our public health service. The current political predilection to slash and burn the public service finances is further aggravating the situation.
In response, solid economic explanations need to be developed to support the argument concerning the importance of investment in the public health sector. Such arguments can help further clarify the importance of allocating sufficient financing to the health sector by detailing the cost outcomes.
As Brid O’Connor, CEO of the Mental Health Commission, explains.
Resources are not infinite, so choices must be made between alternative uses of the same resource or service… ‘economic analysis is therefore a crucial aid to decision making on resource allocation and on priority setting’. While decisions on resource allocation are grounded in values, economics is a central tool in the making of these decisions.
However, in order to undertake a serious economic analysis of the true costs of health to the state, the wider economic impact and outcomes of ill health, such as any resulting decline in economic productivity, must be taken into consideration. Merely tabulating direct expenditure on the public health sector is insufficient.
The 2001 WHO Commission on Macroeconomics and Health highlighted the significant economic benefits to be realised through improving the overall level of health in a country. They argued that diverging economic growth rates could be explained to a large extent by population health status, even taking standard macroeconomic variables into account. The Commission calculated that up to 50% of the growth differential between wealthier and poorer nations could be explained by their contrasting incidences of ill health and varying lifespans.
Suhrcke et al confirmed these findings, noting that these benefits would be obtained through an increase in the availability of labour, higher productivity, improved levels of education, training uptake and superior course completion rates. This would also lead to an increased availability of funding that could be invested in physical and intellectual capital.[i]
The European Commission found that improved standards of health lead not only to greater average life expectancies but to, even more importantly, increased `healthy´ life expectancy, which boosts overall economic productivity and output.[ii]
Research conducted in several European countries between 1970 and 2003 revealed notable welfare benefits linked to increases in life expectancy. These ranged from 29-38% of GDP and far exceeded total national health expenditure.[iii]
O´Shea and Kennelly estimated the economic cost of mental health associated issues alone at €3 billion or just over 2% of Ireland´s GNP. One third of this figure was made up of healthcare related costs while the remaining €2 billion resulted from reduced economic output.[iv] Schizophrenia alone cost €460.6 million in 2006. Once again the costs of lost economic productivity €343 million far outweighed those of direct health expenditure at €117.5 million.[v]
Recent research by the UK based Sainsbury Centre for Mental Health (SCMH) has tried to provide an economic weighting for the human and social costs of mental health problems. These costs refer to the reduced quality of human life resulting from health problems. The SCMH estimated that mental health issues costs the UK £105.2 billion (€125 billion) in 2009/10. Human and social costs made up 51% of these costs (£53.6 billion), economic output losses 28.8% (£30.3 billion) and health care costs 20.2% (£21.3 billion).[vi] Together with the Northern Ireland Association for Mental Health (NIAMH), the SMCH calculated the overall 2002/3 cost of mental health issues in Northern Ireland at £3 billion, more than the total expenditure on health and social care for all health conditions.[vii]
These studies clarify a number of issues. Firstly, failing to invest adequately in improving the health of the Irish population is not just an ethical issue, it carries with it serious economic implications. Secondly, the costs of healthcare are dwarfed by the costs of lost economic output. Thirdly, given that the costs of bad health are not just confined to providing healthcare but reverberate throughout the whole of the Irish society, we need to look at seeing how we can improve the overall level of health of the Irish population through tackling negative social determinants and health inequities between different social groups.
Tackling Health Inequalities
While biological or genetic predispositions play an important role in determining dissimilar health prospects at the individual level, they fail to account for larger scale variations in health risks and the rapid changes in (healthy) life expectancies of differing social groups over comparatively brief periods. According to Farrell et al:
Health is not just the outcome of genetic or biological processes but is also influenced by the social and economic conditions in which we live. These influences have become known as the ‘social determinants of health’. Inequalities in social conditions give rise to unequal and unjust health outcomes for different social groups.
People who are less well off or who belong to socially excluded groups tend to fare badly in relation to these social determinants. Negative social determinants not only lead to health problems but also create problems in terms of access to services and recovery rates. They result in varying levels of health risk between different socio-economic groups are known as health inequities/inequalities. Health inequities impact upon individuals irrespective of where they are in their personal life cycle and can also have detrimental effects on their later health prospects even if their overall quality of life and circumstances improve.
Mackenback et al estimate that health inequalities reduce average life expectancy across the EU25 by 1.84 years, a total of approximately 11.4 million life years lost per annum and healthy life expectancy by an average of 5.14 years or an approximate yearly loss of 33 million healthy life years. In economic terms, the costs of these inequities are equivalent to 20% of health care costs and 15% of social security benefits. When valued as a capital good – “an important component of the value of human beings as means of production” – the economic losses resulting from inequality related health problems were estimated at around €141 billion in 2004 or 1.4% of EU25 GDP. If regarded as a consumption good – “health directly contributes to an individual’s ‘happiness’ or ‘satisfaction'” – the economic cost soared to €1,000 billion or 9.5% of GDP.
Strengthening health equity – globally and within countries – means going beyond contemporary concentration on the immediate causes of disease. More than any other global health endeavour, the Commission on the Social Determinants of Health (CSDH) focuses on the ‘causes of the causes‘ – the fundamental global and national structures of social hierarchy and the socially determined conditions these create in which people grow, live, work, and age.
Maximising the overall level of health and well-being of the general population requires progressing beyond the mindset that the only way to improve health standards is through investing in public health service accessibility and delivery. Although the public health services are of course an essential component of any health system and indeed a social determinant themselves, there is an urgent need to involve those socio-economic sectors, which directly impact on our health prospects. In this respect, it is particularly important that those negative social-determinants which lead to health inequalities and inequities are effectively identified, diagnosed and targeted.
Similarly health policy measures and the ensuing programmes and initiatives should be co-ordinated throughout society, involving all the relevant stakeholders, so that negative social determinants creating increased health risks can be successfully tackled. In this respect, the development and implementation of inter-departmental policies and programmes from the government level down will play an essential part in eradicating structural inequality and endemic poverty, prime culprits in leading to health inequities.
A determinants approach to health promotion requires action across the entirety of our society and economy, one which emphasises “coherent action” to minimise negative social determinants and foster positive ones for all our population. This will be definitely meet with concerted opposition as there are many who would prefer the current inequitable status of resource distribution of resources to remain as it is.
In the short run, we need to work towards ensuring that at the very least the social and economic status of all our citizens meets certain minimum standards. As the Founder President of the Candidate Institute for Research, J. Fraser Mustard, explains:
If we want to produce health-and I deliberately use an economic term-we have to work on reducing poverty and socio-economic inequality. The levelling out of such inequality and the uneven distribution of wealth is an important factor if we want to continue to improve health and make wise economic choices in our investments.[viii]
For those of us who aspire to living in a just society, the provision of an essential public good such as universal and equitable healthcare is surely a prerequisite. However, not only is an approach to health based on tackling negative social determinants and health inequalities the ethically correct manner in which to proceed, it also makes sound economic sense.
Of course, such an approach will demand a long term outlook. While there are immediate measures that can be introduced to alleviate the impact of negative social determinants, it is in the long run that the real benefits will become evident.
Furthermore, there appears to be a distinct willingness on the part of the Irish population to invest in such policies. As the 2010 TASC issue of `The Solidarity Factor´ notes, there is an overwhelming majority (91%) of the Irish population that either strongly agreed or agreed there is a pressing need for a redistribution of resources to address the issue of inequality, which lies at the heart of so many health problems. In contrast only 4% felt strongly or disagreed with this proposition.
In the final analysis, the construction of a society based on the principles of equitable health and well-being for everyone is a question of social justice. As defined by the CSDH:
Social justice is a matter of life and death. It affects the way people live, their consequent chance of illness, and their risk of premature death.
It is unacceptable that in a country where the number of High Net Worth Individuals has returned to positive growth – increasing by over 10% in 2009 – we appear resolutely unwilling to mobilise the resources to maximise the health prospects of our fellow citizens.
This piece was written by Justin Frewen and Dr. Anna Datta
Photo courtesy of the Irish Examiner.
[i] NIAMH/SCMH (2003) Counting the Cost: The Economic and Social Costs of Mental Illness in Ireland. Northern Ireland Association for Mental Health/Sainsbury Centre for Mental Health. http://www.centreformentalhealth.org.uk/pdfs/costs_of_mental_illness_in_nireland.pdf
[ii] EC (2007) Together for Health: A Strategic Approach for the EU 2008-2013. European Commission: Brussels
[iii] Suhrcke, M., Arce, R. S., McKee, M. & Rocco, L. (2008) Economic Costs of Ill Health in the European Region. WHO (Europe): Denmark. http://www.saludinvestiga.org.ar/biblioteca/world-health-organization/economic-costs.pdf
[iv] O’Shea, E. & Kennelly, B. (2008) The Economics of Mental Health Care in Ireland. Mental Health Commission: Dublin. http://www.mhcirl.ie/documents/publications/The_Economics_of_Mental_Health_Care_in_Ireland%202008.pdf
[v] Behan, C., Kennelly, B. & O’Callaghan, E. (2008) `The Economic Cost of Schizophrenia in Ireland: a cost of illness study.´ Irish Journal of Psychological Medicine. 25(8): 80-87. http://www.ijpm.org/content/pdf/400/schiz.pdf
[vi] SCMH (2010) The economic and social costs of mental health problems in 2009/2010. The Sainsbury Centre for Mental Health. http://www.centreformentalhealth.org.uk/pdfs/Economic_and_social_costs_2010.pdf
[vii] NIAMH/SCMH (2003) Counting the Cost: The Economic and Social Costs of Mental Illness in Ireland. Northern Ireland Association for Mental Health/Sainsbury Centre for Mental Health. http://www.centreformentalhealth.org.uk/pdfs/costs_of_mental_illness_in_nireland.pdf
[viii] Mustard, J. F. (2008) `How Neurobiological Embedding Impacts on Adult Health, Learning and Behaviour.´ Reconciling Economics and Health: The Challenge of Prevention. (DuPont, M. C. ed.) Décision Média: Québec, Montreal
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