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Returns on Investment in Public Health - An Epidemiological and Economic Analysis

Prepared for The Department of Health and Aged Care
By: Applied Economics
July 2001

Acknowledgments

This study of the Returns on Investment in Public Health: An Epidemiological and Economic Analysis has been prepared for the Population Health Division of the Commonwealth Department of Health and Aged Care, who commissioned the report. We wish to acknowledge in particular the considerable assistance received during the preparation of the report from two officers of the Department: Brian Harrison and Catherina van Moort.

We have received support from several other people. We particularly wish to acknowledge the assistance received from Michelle Scollo for assistance with the chapter on tobacco reduction and Suet-Lam Mui for assistance with the chapter on HIV/AIDS. We thank Peter McIntyre and Heather Gidding of the NCIRS for their general advice, for supplying Australian data on measles and Hib, for assisting in accessing England and Wales data on measles and for their helpful comments on a draft chapter on immunisations for measles and Hib diseases. We are also grateful to Brynley Hull of the NCIRS for providing data on immunisations from the ACIR. The methods and any remaining errors are the responsibility of the authors.

The authors of the chapters and appendices are as follows:

  • Summary: Peter Abelson
  • Introduction: Peter Abelson
  • Tobacco Reduction: Peter Abelson and Richard Taylor
  • Programs to Reduce Coronary Heart Disease: Peter Abelson and Richard Taylor
  • Public Health Programs to Reduce HIV / AIDS; Jim Butler
  • Immunisation Programs: David Gadiel
  • Road Safety Programs and Road Trauma: Peter Abelson
  • Annexe A: Richard Taylor and Mark Clements
  • Annexe B: Richard Taylor and Mark Clements
  • Annexe C: Richard Taylor
  • Annexe D: Jim Butler
  • Annexe E: Jim Butler

Summary

This report describes an epidemiological and economic analysis of five public health programs: namely programs to reduce tobacco reduction, coronary heart disease, HIV/AIDS, measles and Hib-related diseases, and road trauma.

For tobacco consumption, coronary heart diseases, immunisation against measles, and road trauma, the study reports on the effects of public health programs since 1970, which is approximately the start of the period of modern public health interventions in these cases. For the HIV/AIDS and Hib public health programs, the evaluation starts in the mid-1980s and early 1990s respectively. Outcomes are forecast to year 2010 except for the immunisation programs where outcomes are forecast to 2003.

For each public health program, the study estimates:

  • The costs of the public health program,
  • the reduction in cases of disease that can be attributed to public health interventions since the programs were started and up to 2010,
  • the benefits of the reductions in disease in terms of increased longevity, improved quality of life, and reduced health care expenditures,
  • the total return to society of investment to public health interventions, and
  • the savings to government.

From a societal perspective, the return to the community is the important outcome rather than the narrower measure of the financial return to government.

The report contains an introductory chapter describing the methodology and main assumptions and a chapter on each case study. This summary provides the main points and conclusions.

Introduction

Chapter 1 establishes the framework for the analysis. For each subject, the study:

  • Describes the relevant public health programs over 20 or so years.
  • Reviews the effects of the public health programs on individual behaviour.
  • Determines whether changes in behaviour caused changes in health outcomes.
  • Estimates mortality and morbidity with and without public health programs.
  • Estimates the costs of the public health programs.
  • Estimates the benefits of the programs in terms of longevity, improved health status, and lower health care expenditures.
  • Evaluates the benefits and costs of the public health programs from the perspective of (a) the whole Australian community and (b) government expenditures.

The National Public Health Partnership between the Commonwealth, States and Territories describes public health as ‘the organised response by society to protect and promote health and to prevent illness, injury and disability’. This definition is adopted in this report.

Data on the costs of the public health programs were obtained where possible from the relevant health authorities. However, generally, only recent data were available so that estimates were required for costs in the 1970s and 1980s, and sometimes even in the 1990s.

For each public health program, detailed estimates were made of deaths and disease averted. Estimates of the reduction in health care expenditures draw largely on recent detailed work by the Australian Institute for Health and Welfare. For the reasons given in Chapter 1, a value of life of $1.0 million and an equivalent value of $60,000 for a healthy life year is assumed.

The estimated net benefit of each program is presented in net present value terms, based on a discount rate of 5 per cent per annum, with all benefits and costs discounted back to the start of the respective program. The net present value (NPV) is a summary figure of net benefit that indicates whether the total benefits exceed the costs (if the NPV is positive) or the costs exceed the benefits (if the NPV is negative). Results drawing on alternative assumptions about costs, benefits and discount rates are also presented.

Tobacco Reduction

Over the last 30 years tobacco consumption has fallen substantially in Australia. Among adult males, smokers fell from 45 to 27 per cent of the population; among adult females, smokers fell from 30 to 23 per cent of the population. Moreover, smokers smoked fewer cigarettes per capita.

The health benefits of reduced tobacco consumption were large. In 1998, in round numbers, an estimated 17 400 premature deaths were averted because of reduced tobacco consumption. This included 6900 fewer deaths from coronary heart disease, 4000 fewer deaths from lung cancer, 3600 fewer deaths from COPD and bronchitis, and 2900 deaths from strokes and other cancers averted.

The estimated total benefit of health improvements in 1998 alone, due to lower tobacco consumption from 1970 onwards, is $12.3 billion. This comprises longevity gains valued at $9.6 billion, improved health status gains of $2.2 billion, and lower health care costs of $0.5 billion.

Over the last 30 years, Australian governments have implemented many public health programs aiming to reduce tobacco consumption. These programs have included mass media campaigns and other health warnings and regulations that restrict the promotion of cigarette products and influence the conditions under which cigarettes may be consumed. Also, between 1971 and 1996, changes in taxes contributed to a 154 per cent increase in the real price of cigarettes.

Despite many studies of the determinants of tobacco consumption, the contribution of Australian public health programs to reduced tobacco consumption is difficult to quantify. This study adopts the conservative assumption that these programs contributed to 10 per cent of the decline in tobacco consumption (and therefore to 10 per cent of the estimated benefits).

For our 'central case' evaluation, the estimated present value of the costs of the public health programs in year 2000 dollars discounted back to 1971 is $176 million. Even on the study's conservative view of the benefits attributable to the public health programs, the estimated present value of the benefits is $8602 million. The estimated net benefit (net present value) of the public health programs is therefore $8427 million ($8.4 billion).

On even more conservative assumptions, namely that the reduction in tobacco consumption had half the effect on health considered most likely and that public health programs accounted for only 5 per cent of the improvement in health, the net benefit of the public health programs was about $2.0 billion.

In terms of public finances, the estimated present value of the expenditure savings for government in the central case is $344 million. This provides a saving of $2 for every $1 of expenditure on public health programs to reduce tobacco consumption.

Programs to Reduce Coronary Heart Disease

Over the last 30 years, mortality rates from coronary heart disease have also fallen substantially in Australia, as they have in many other countries. Mortality rates for males aged 35 to 74 years fell from nearly 400 per 100 000 in 1968 to under 100 per 100 000 in 1998. Mortality rates for females aged 35 to 74 years fell from 118 per 100 000 to 23 per 100 0000 over the same period. Consequently, there were 28 000 fewer deaths from coronary heart disease than would have occurred with unchanged mortality rates.

Over these 30 years, there were significant declines in some major risk factors for coronary heart disease, namely for smoking, cholesterol, and blood pressure. Changes in these three risk factors accounted for an estimated 70 per cent of the decline in mortality from coronary heart disease, On the other hand, there was little change in the amount of physical exercise taken and the proportion of overweight persons increased.

Concurrently with these improvements in risk factors, the Commonwealth and State governments ran numerous media and other information programs, aimed directly at the public or aimed indirectly at the public though GPs. However, there were also other sources of information and drugs contributed substantially to lower blood pressure. This study allows that the public health campaigns were responsible for 10 per cent of the reduction in smoking (as in Chapter 2) and for 30 per cent of the reduction in cholesterol. However, none of the reduction in blood pressure is attributed to the public health campaigns.

The estimated total benefit of CHD improvements in 1996 due to the three lower risk factors was $8.900 million, including the benefits from reduced smoking. Of this total, the estimated benefits attributable to public health campaigns were $994 million. This comprises longevity gains of $828 million, $100 million from improved health status, and $66 million in lower health care costs.

For our 'central case' evaluation of the public health programs, the estimated present value of the costs of the public health programs in year 2000 dollars discounted back to 1971 is $810 million. The estimated present value of the benefits over the same period is $9289 million. The estimated net benefit of the total public health program is therefore $8478 million ($8.5 billion).

For a sensitivity test, the benefits attributable to the public health campaigns were discounted by 75 per cent. Even on these most conservative assumptions, the gross benefit of the campaigns totals $2151 million and the net benefit would be $1975 million.

In terms of government finance, the estimated present value of the savings in government health care expenditure in the central case is $614 million. This is less than the estimated expenditure on the public health programs of $810 million. However, as noted, this is of little significance compared with the overall social benefit of the programs.

HIV / AIDS Prevention Programs

HIV/AIDS is a viral disease against which there is no vaccine and for which there is no cure. The epidemic in Australia, along with many countries, commenced in the early 1980s. In 1984, government funding for HIV/AIDS education and prevention programs commenced. Australia’s public health response to preventing the spread of this serious disease was based on a non-coercive, non-partisan and cooperative approach. Education programs targeted both high-risk groups and the general population, and by the second half of the 1980s HIV incidence was falling. Back-projection estimates of HIV incidence suggest the annual number of new infections has stabilised at 380 per year in the men-having-sex-with-men (MSM) group and 430 in all exposure groups.

Our study provides an evaluation of Australia’s public health response to HIV/AIDS over the period 1984 to 2010. The forward estimates are predicated on the assumption that annual expenditure on education and prevention programs remains at the same level in real terms as over the five-year period 1994 to 1998. Analyses have been conducted for the MSM sub-group and all exposure groups combined. Key assumptions in the baseline analyses were:

  • the HIV/AIDS transmission rate would have been 25 per cent higher in the absence of education and prevention programs;
  • there will be no increase in the effect of treatment on the incubation period post-1996 when triple therapies including a protease inhibitor were introduced; and
  • the baseline estimates of expenditure on education and prevention programs for the MSM sub-group are the most plausible estimates.

As with other public health programs analysed in this report, Australia’s investment in HIV/AIDS public health programs returned substantial positive net benefits. For all exposure groups, the present value of expenditures on education and prevention programs in 2000 prices discounted back to 1984 is $607 million. The estimated present value of the benefits derived from these programs is $3105 million. The estimated net benefit is therefore $2498 million ($2.5 billion).

The conclusion that the HIV/AIDS education and prevention programs provided positive net benefit is robust to changes in the key underlying assumptions. Even with simultaneous and substantial changes in all three key underlying assumptions, the net benefit of the programs is $651 million for all exposure groups and $821 million for the MSM sub-group.

Immunisation Programs

The study reports on the evaluation of two immunisation programs: immunisations for measles from 1970 to 2003 and immunisations for Hib disease from 1991 to 2003.

Between 1970 and 2000, measles notifications fell from around 100 000 cases a year to under 2000 cases a year. The introduction of subsidised immunisations for measles in 1970 saved an estimated 95 lives and averted approximately 4.0 million cases between 1970 and 2003. The estimated net present value of these immunisation programs for measles is about $9.2 billion.

On the other hand, the estimated present value of the costs of the immunisation programs was only $52 million. Therefore the net benefit of the program exceeded $9.1 billion.

In the case of measles immunisation, savings in health care expenditures accounted for a high proportion of the estimated benefits. Accordingly, the government made very substantial savings, estimated to be in the order of $8.5 billion, as a result of the immunisation program.

Hib notifications also fell substantially after the introduction of the Hib immunisation programs. Our study estimates that approximately 350 cases were averted annually in the 1990s. We estimate that the introduction of immunisation for Hib-related diseases saved 78 lives and averted 3600 cases between 1993 and 2003.

In the central case evaluation, the estimated present value of the Hib immunisation programs is $165 million. On the other hand, the present value of the expenditure on the programs is $155 million. The estimated net present value of the immunisation programs for Hib disease is a marginal $10 million.

Road Safety Programs and Road Trauma

Australian road accidents have fallen substantially since their peak in 1970. The number of fatalities fell from 3798 in 1970 to 1759 in 1997. Fatalities per 100 000 vehicles fell from 7.96 to 1.58 over the same period.

Since 1970, there have been many road safety programs. Major features were the mandatory fitting of seat belts, campaigns against drinking and driving, reduction in vehicle speed limits and increased enforcement of speed restrictions, and accident black spot programs. In addition, road authorities have paid increasing attention to traffic management.

Macro econometric analysis supported by many micro studies of the impacts of road safety programs suggest that road safety programs were responsible for half of the reductions in road accidents. The other half reflects mainly improved roads and safer vehicles.

However, the analysis is hampered by lack of clear and consistent definitions of road safety programs across the States and over time. This study estimates that Australian governments currently spend $600 million a year on road safety. However, the figure is sensitive to the definition of a road safety program. The actual figure could be half or double this with a narrow or broad definition of a road safety program respectively.

On the other hand, we estimate that road safety programs were responsible for saving about 1000 lives and 5000 hospital cases per year, as well as some other property damages, in the late 1990s. The estimated value of these savings amounted to $2.7 billion per annum.

Overall, there was a substantial net benefit from the road safety programs. Excluding any private costs associated with observing traffic safety regulations, such as increased travel time, the estimated net present value of the benefits of the road programs from 1970 to 2010, using a 5 per cent discount rate, is $13.4 billion.

Including some crudely estimated private costs, mainly due to travel time costs of slower trips, the net present value of the programs falls to $8.7 billion. Adopting the same estimated inputs, but allowing for a discount rate of 7 per cent, the net benefit of the programs falls to $3.4 billion.

Finally, the road safety programs saved governments an estimated $750 million a year in the late 1990s. Despite the estimated savings to government, the net present value of the road safety programs to government is -$1.3 billion with a 5 per cent discount rate. The main benefits of the road safety programs have been to the road user.

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