The broader economic impact of healthcare: Assessing healthcare as

Transcription

1 The broader economic impact of healthcare: Assessing healthcare as an investment for fiscal sustainability A government perspective analytic framework Carina Schey University of Groningen, Netherlands, Guest Researcher C.f.schey@rug.nl Global Market Access Solutions, USA, Switzerland mark@gmasoln.com

2 Healthcare as an Investment A healthy population is an engine for economic growth & Investments in health are essential for economic growth and should be a key component of national development strategies. WHO, The Report of Working Group 1 of the Commission on Macroeconomics and Health Policy-makers who are interested in improving economic outcomes (e.g. on the labour market or Suhrcke M, McKee M, Sauto Arce R, Tsolova S, Mortensen J. The contribution of health to the economy in the European Union. European Communities, 2005; ISBN for the entire economy) would have good reasons to consider investment in health as one of their options by which to meet their economic objectives.

3 Health & Wealth Preston, SH. International Journal of Epidemiology. 2007, 36;

4 Relationship between health and the economy Health Income/ Wealth Health canimpact the economy in severalways: 1) Increased productivity 2) Decreased absenteeism 3) Labour force participation 4) Education 5) Savings/investment Suhrcke M, et al. BMJ 2006;333:

5 Important economic relationships Population Health Productivity/ Economic Growth Economic Growth Tax Revenue How nations spend on healthcare resources not only influences economic growth, but likely influences tax receipts

6 Economic and fiscal perspectives of health Productiv ve Output Societal Government Health Service Government perspective largely ignored as traditional societal perspective analysis considers that transfers and lost taxes have no impact on society welfare gains or loss From government perspective, fiscal transfers and lost taxes that arise from illness are real costs that can be derived in much the same way as unemployment From government perspective, citizens are not only a cost but also a source of revenue that influence tax receipts From government perspective, changes in population health influence government accounts: expenditure (i.e. costs) and revenue (i.e. taxes)

7 WHO Framework: Economic consequences of poor health How poor health impacts government WHO guide to identifying the economic consequences of disease and injury (2009). ISBN

8 Government perspective on health in workingaged adults UK Impact on government accounts Annualcostto government2007 Billion Percentage government cost Workless benefits Healthcare Government cost Government cost Lost revenue 29 43% % Foregonetaxes Revenue loss % Total costs to government Can HTA capture the other 90% of costs? Dame Carol Black's Review of the health of Britain's working age population 17 March 2008, TSO London

9 FRAMEWORK FOR ESTIMATING THE FISCAL IMPACT OF INVESTMENTS IN HEALTHCARE Government Perspective Modelling

10 Life stages and government fiscal transfers Government Transfers/Taxes childhood School years Working years Retirement Investments in health at different life stages will have different impacts on government accounts: costs and revenue (i.e. taxes)

11 Different perspectives different metrics of benefits Perspective Costs Accounting for economic benefits Health service Health service costs No Societal Government Health service costs Patient costs Indirect costs Health service costs Non-disease related health costs Family allowances Education costs Disability Pension costs Lostwages Whobenefits: individuals, corporations, government? Losttaxrevenue for government: i. Income taxes ii.consumption taxes iii.corporate taxes iv.excise taxes Health service and societal perspectives are often divorced from fiscal reality of government finance

12 Generational accounting Costs and revenue by age European Commission. (2000) European Economy: Generational accounting in Europe. Directorate-General for Economic and Financial Affairs.

13 Generationalaccountingframeworkappliedto health funding Government transfers(lifetime) Health programs: HPV Pneumococcal Pertusis Diptheria Influenza Education Allowances Child subsidies Pensions Tax transfers to government (lifetime) Income taxes Excise taxes Property taxes Sales taxes Corporate taxes Model design based on: Kotlikoff L. Generational Accounting: Knowing Who Pays, and When, for What We Spend. New York. New York, USA: Free Press, 1992.

14 The impact of government spending on economic growth fiscal multipliers Values greater than 1 indicate positive economic stimulus associated with spending Social protection spending 1,29 Economic affairs spending Community spending -0,29-0,48 Culture & recreation spending 3,19 General public services 0,81 Education spending 3,16 Defense spending Total health spending -3,62 1,92 Total government spending 0, Reeves et al. Globalization and Health 2013, 9:43

15 The per capita fiscal life course Taxes Tax transfers commence in working years and continue throughout life Year Transfers Education expenditure in early life Tax financed healthcare provided throughout life Pension and allowances Each year Tax Transfers= Net discounted tax (NPV) NPV is cumulative

16 FISCAL MODELLING IN HEALTH Case studies

17 Likely fiscal consequences of communicable diseases Susceptible working-age adults, generate age-specific and unemployment adjusted lifetime earnings and tax. Tax includes income tax, indirect tax (e.g VAT) and other tax such as stamp duty, property tax, local tax Pre-mature mortality resulting in productivity loss (earnings loss leading to decreased tax revenue) Tax Higher direct medical (inpatient/outpatient costs) for the healthcare system - 0 Transfers Year Permanent disability due to vaccine preventable conditions increases costs for governments Kotsopoulos, et al. J. Of Mental Health Policy and Economics (2013)

18 Breaking down the benefits of adult immunisation Total number of infections With vaccination Without vaccination Prevented infections Results are dominated by Pneumonia, Invasive Pneumococcal Disease, & Influenza Infection-attributable deaths Influenza Pneumonia IPD Pertussis Diptheria Herpes zoster Tetatnus 0 With vaccination Without vaccination Prevented deaths Influenza Pneumonia IPD Pertussis Vaccines Europe Day Public Conference: Investing in Health Through Prevention Written by Vaccines Europe Diptheria Herpes zoster Tetatnus

19 Aggregated benefits adult immunization in Netherlands Government budget item Value Incremental Fiscal impact Medical cost-savings Savings 6,351,724 Productivity loss (indirect costs) Savings 24,793,930 Prevented disability costs Savings 502,426 Gross discounted tax Revenue 547,490,400 Vaccination cost Cost 136,878,802 B/Cratio Return on investment 4.02 Investment 1 in adult immunization has the capacity to generate over 4 of future economic revenue for government Vaccines Europe Day Public Conference: Investing in Health Through Prevention Written by Vaccines Europe

20 Fiscal assessment individual vaccines Net Present Value (NPV) 450,0 400,0 NPV (m million euro,2011) 350,0 300,0 250,0 200,0 150,0 100,0 50,0 0,0-50,0 Influenza Pneumonia PCV IPD Pertussis Herpes zoster Total Developed in relation to SAATI Project sponsored by Pfizer

21 Comparative analysis: Fiscal impact vaccination Benefit: Cost ratio (ROI) Total 4,08 Herpes zoster 0,34 Pertussis 0,11 IPD 2,75 Pneumonia 11,9 Influenza 2, ROI Developed in relation to SAATI Project sponsored by Pfizer

22 Lifetime fiscal consequences of Attention deficit hyperactive disorder (ADHD) In present values non- ADHD individuals incur higher lifetime taxes and lower transfers Over lifetime, non-adhd individuals achieve higher education and pay more tax compared to untreated ADHD Tax Transfers Non-ADHD individuals have higher education costs due to higher educational achievement e.g. more people in University Year Each year Tax Transfers= Net discounted tax (NPV) NPV is cumulative ADHD is associated with higher health care costs Annual fiscal transfers ADHD Annual fiscal transfers non-adhd Annual fiscal revenue ADHD Annual fiscal revenue non-adhd Kotsopoulos, et al. J. of Mental Health Policy and Economics (2013)

23 Lifetime fiscal impact of Attention deficit hyperactive disorder (ADHD) The lower employment opportunities attributed to ADHD children are associated with lifetime fiscal losses This is mostly attributed to reduced education-linked wages, higher unemployment, and premature mortality Non-ADHD ADHD Year-25 Year-35 Year-45 Year-55 Year-65

24 Fiscal benefits of reproductive medicine In Vitro Fertilisation(IVF) policy analysis (Singapore) $ Lifetime cumulative discounted net tax revenue of different public subsidy options for assisted reproduction in Singapore Net fiscal be enefits Sing$ $ $ $ $ Current policy Increased cycle policy $ $0 -$

25 $ Fiscal benefits of reproductive medicine In Vitro Fertilisation(IVF) policy analysis (Singapore) Lifetime cumulative discounted net tax revenue of different public subsidy options for assisted reproduction in Singapore Current policy Net fiscal be enefits Sing$ $ $ $ $0 Increased subsidy policy Increased cycle policy Profit from investing in IVF -$ Fiscal cost of new births

26 IS HEALTHCARE SPENDING SUSTAINABLE? Impact of technology and how to assess

27 How do new technologies influence sustainability? No clear definition of sustainability CEA does not address sustainability Spending has continued to increase despite introduction of HTA processes Broader set of tools are required to evaluate how technology influences sustainability

28 Compare and contrast CEA and fiscal modelling in health CEA Fiscal modelling in health Perspective Health service Government, including government funded health service Costs Healthcarecosts Indirect costs Healthcarecosts Indirect costs (from government perspective) Outcomes QALYs Life years saved Fiscallifetime based on changes in productivity, life-years Use in decisionmaking Informs technical efficiency Informs benefits and costs for government, including health costs Influence on sustainability

29 Where to spend healthcare dollars? Mental health Breast Cancer Reproduction Prostate cancer screening Paediatric Immunisation Adult Immunisation Cardiac disease If Treasury were allocating healthcare resources, would treatments be prioritized differently? 29

30 Investments in health over the life course Government Cost Tax Revenue Taiwan per capita costs and tax receipts (2011), data on file

31 Final considerations... Government perspective useful framework for demonstrating how investments in health translate into net tax revenues for government Government perspective s analysis highlights limitations of health service perspective Should more importance be placed on health-related productivity gains considering shrinking numbers of workingaged adults and ageing populations? Sustainability of public finances is at the fore considering fiscal challenges associated with ageing Decision-making in some areas of health involves range of stakeholders from Treasury and Finance ministries as is common with vaccine procurement

32 Final considerations... weaknesses Government perspective modelling undervalues the true economic benefits of health status changes because it values health only in discounted net taxes and ignores the intangibles of being healthy Reports outcomes in a metric unfamiliar to health authorities

33 Contact information: Carina Schey Global Market Access Solutions Guest Researcher University of Groningen

34 Background Over the course of life, individuals at different stages of life can be recipients of government transfer payments, as well as transferring wealth to government in the form of various taxes By understanding the fiscal transfers between individuals and government, it is possible to derive a net fiscal position of an individual at any stage of life by deducting age-specific gross transfer payments from age-specific gross taxes Producemeasures often used in financial economics that is, the Net Present Value (NPV), Present Value (PV) of projected money flows and Return on Investment (ROI) linked to vaccination cost

35 Final Considerations Lost taxes and transfers linked to changes in population health status represent real costs to governments Fiscal modelling shares many features with CEA including estimating cost offsets paid by public services Possible to adapt CEA/CUA models to fiscal models Synergies between taxation and development which can help to align initiatives Low and middle income countries can quantify the benefits from investments in health Decision-making in some areas of health involves range of stakeholders from Treasury and Finance ministries this is common with vaccine procurement

36 Tax (Pres sent value, KRW Millions) Comparison of lifetime income taxes from smoking cessation vs. tobacco taxes paid 6,00 5,00 4,00 3,00 2,00 1,00 0,00 Lifetime additional tax Lifetime tobacco tax Age The lifetime additional tax revenue is greater from smoking cessation compared withthetobaccotaxrevenue inthoseaged25 65 The lifetime tax revenue gain is much greater in younger aged persons compared with those that stop smoking in later years suggesting that encouraging people to stop smoking earlier in life is more profitable

37 The impact of government spending on economic growth fiscal multipliers Values greater than 1 indicate positive economic stimulus associated with spending Social protection spending 1,29 Economic affairs spending Community spending -0,29-0,48 Culture & recreation spending 3,19 General public services 0,81 Education spending 3,16 Defense spending Total health spending -3,62 1,92 Total government spending 0, Reeves et al. Globalization and Health 2013, 9:43