ARCHIVED - Archive - Investing In Prevention - The Economic Perspective


1. Overview

Understanding the economic benefits and costs of preventive health interventions enables policymakers and program managers to make better-informed decisions about where and how best to invest to order to improve the health of the population.  While the economic dimension is only one of many inputs to consider when considering the merit of an intervention, having such knowledge on hand allows for a more rigorous, systematic, and transparent decision-making process in a world of limited resources.

Supporting this knowledge is an extensive body of evidence on the economics of prevention.  This literature is vast, encompassing research on the economic costs of illness and injury, economic evaluations of specific clinical and health promotion interventions, and the potential micro- and macro-economic benefits of improved health and well-being.  It is also evolving and expanding rapidly, mirroring the growing interest among researchers and practitioners alike in applying economic analyses to the realm of public health. 

In 2004, Goldsmith and colleagues (2004) undertook a broad review of this field from a Canadian perspective.  Since then, new data have emerged and further inquiries have been advanced.  To capture this latest knowledge in a way that supports the needs of decision-makers, a further summative review is in order.

This synthesis paper summarizes the current state of knowledge and debate about the economic benefits of prevention.  It highlights the economic potential of preventive health, draws on examples of recent economic evaluations in key intervention areas to illustrate general research trends, discusses current gaps in evaluation knowledge, and outlines some of the critical methodological considerations when using economic evaluation evidence to inform policy and program decisions.  Importantly, while it strives to be comprehensive in scope, the analysis contained herein neither purports to be nor constitutes a systematic review of the literature.

The remainder of this paper is organized as follows.  Section 2 examines the economic case for investing in prevention, focusing on the economic costs of ill health (or conversely, the potential economic benefits of avoided illness and improved health) for the health care system and society more broadly.  Section 3 offers a brief overview of the research methodology, and presents the organizational framework for the results.  Section 4 discusses key findings and messages, based on our survey of the evidence, that together illustrate the state of knowledge about the economic benefits of prevention, and in particular the application of economic evaluations in preventive health interventions.  Section 5 provides a brief summary and concluding remarks.

2. The economic rationale for investing in prevention

2.1 The economic burden of illness in Canada

Ill health imposes significant economic costs on both the Canadian health care system and society more broadly.  The extent of this burden can be understood as comprising three components: direct costs, indirect costs, and the value of morbidity and mortality. 

  • Direct costs refer to “the value of goods and services for which payment was made and resources used in treatment, care, and rehabilitation related to illness or injury” (Health Canada, 2002:1).
  • Indirect costs represent “the value of economic output lost because of illness, injury-related work disability, or premature death” (Health Canada, 2002:1).  They are often measured in terms of lost potential earnings resulting from illness-related absence from work or early mortality.  Other indirect costs include underperformance at work due to sickness (“presenteeism”), the value of lost non-market production (e.g., care-giving, unpaid work) due to illness or disability, and the value of time lost from work and leisure activities by family members or friends providing care to ill persons. 
  • The value of morbidity and mortality (sometimes referred to as “intangible costs”) reflects the intrinsic worth attributed to better health, and includes “the personal and/or subjective consequences associated with illness such as physical pain, mental anguish, anxiety, fear, loss of good health, stress in personal relations, and family life” (Hankivsky et al., 2004:268).  While this final category of costs is the broadest in scope and the most difficult to assess, methods have been developed to value them in either utility terms, such as a quality-adjusted life-year (QALY) or disability-adjusted life-year (DALY), or in monetary terms (e.g., through “willingness-to-pay” surveys).

The total economic burden of disease and injury in Canada is substantial.  In 2000, the direct and indirect costs alone were estimated at $188 billion (internal PHAC data).  Figure 1 illustrates these costs for seven major disease and injury categories.  Notably, the indirect costs accrued by society are as great as or greater than the direct costs associated with the provision of health services.

The economic burden for major diseases/injury categories in Canada, 2000.

Figure 1: The economic burden for major diseases/injury categories in Canada, 2000.  Note: Direct costs are expenditures for health services.  Indirect costs include the value of years of life lost due to premature death and the value of activity days lost due to short-term and long-term disability. (Source: Adapted from IHE, 2008; based on data from the Public Health Agency of Canada)

Figure 1 - Text Equivalent

The graph illustrates the direct and indirect costs for seven major disease and injury categories in Canada from the year 2000.  Direct costs are expenditures for health services and indirect costs include the value of years of life lost due to premature death and the value of activity days lost due to short-term and long-term disability. Musculoskeletal diseases had the highest combined direct and indirect cost ($3,939 million and $18,372 million respectively), totalling over 22.3 million dollars. Cardiovascular diseases were a close second with 22.2 million dollars in total costs, followed by neuropsy chiatric conditions with $20.2 million, malignant neoplasms with $17.4 million, injuries with $14.7 million, digestive diseases with 7.2 million, and respiratory diseases with $6.5 million. Notably, the indirect costs accrued by society are as great as or greater than the direct costs associated with the provision of health services.

2.2 Understanding the economic potential of prevention

In the context of rising health care costs and growing emphases on budgetary containment and evidence-based decision-making, recognition of the substantial economic burdens imposed by largely avoidable diseases and injuries has led to a resurgence of interest in preventive public health measures as a means to control health care spending.  Prevention is thought in many instances to be cost-effective, such that a given amount of money could “buy” more health through preventive health measures than through clinical treatment.  In some cases, prevention might even be “cost-saving” to the health care system, such that investing in prevention now will avoid having to pay for more costly treatment later on.  As well, good health in itself may generate economic growth, such that, in avoiding illness and injury, people have more opportunities in life to maximize their educational, labour, and human potentials (Suhrcke et al., 2008).

Accepting the general economic case for investing in prevention, however, does not by itself provide decision-makers with clear direction on the specific types of public health intervention to prioritize for investment.  To meet this need, economic evaluations—the comparative analysis of alternate interventions in terms of their costs and consequences (Drummond et al., 2005)—across the spectrum of preventive health are needed. 

Such analyses are indeed on the rise (e.g., Rush et al., 2004).  Economic evaluation offers a systematic framework for measuring and comparing the economics of policy alternatives (Box 1) (Mudarri, 1993).  This potential can be harnessed to support evidence-based policy-making, improve spending efficiency, and ultimately enhance the sustainability of the health care system.  Saha and colleagues (2001) note six contributions that such analyses can make towards informing decision-making around preventive services:

  • quantifying the differences between two or more effective services for the same condition;
  • illustrating the impact of delivering a given intervention at different time intervals, at different ages, or to different risk groups;
  • evaluating the potential role of new technologies for prevention;
  • identifying key “real-life” conditions that must be met to achieve the intended benefit of an intervention;
  • incorporating the target population’s preferences for intervention outcomes (e.g., balancing quantity and quality of life) (specific to CUAs); and
  • developing a ranking of services in order of their costs and expected benefits (though only if economic analyses are standardized with common units for measuring outcomes).

At the same time, economic evaluations are only one of many factors to be weighed in determining the allocation of scarce health system resources.  The first priority of public health—as with clinical medicine and allied health professions—is to protect and improve health.  Achieving this objective efficiently is of course important, particularly where public funds are involved.  However, as Stein (2001:68) notes, “efficiency is about how we should allocate our resources to achieve our goals, not what our goals should be.  What our goals are, and how much we value them, is properly outside the language of efficiency.”


Cost analysis (CA) computes the net cost of an intervention by subtracting the cost of treating an illness from the cost of preventing it. An intervention is said to be cost-saving when its net cost is negative. CAs do not assess the benefits of the intervention, however, and therefore are not strictly economic evaluations.

Cost-benefit analysis (CBA) typically compares the cost of an intervention to the expected or actual improvements in health as valued in dollars. CBAs can also adopt a broader societal perspective to capture benefits beyond health. Results are often presented in terms of a benefit-to-cost ratio (i.e., dollar value of health and/or social improvement divided by cost of prevention). Benefit-to-cost ratios greater than one suggest that the intervention of interest offers value-for-money. In practice, however, the assignment of dollar values to various health and social gains, including the value of life itself, presents a number of challenges (including that of public acceptability).

Cost-effectiveness analysis (CEA) compares interventions in terms of the net cost required to achieve a natural unit of health improvement, such as life-year gained or case of illness avoided. CEA calculations are typically expressed in terms of an incremental cost-effectiveness ratio (ICER) (e.g., cost/death averted), which compares the net costs and net health outcomes of two or more alternate interventions. To be informative, ICERs are compared either against the ratio of another intervention option (e.g., the next best alternative, standard practice, no intervention, etc.) or an arbitrary threshold below which interventions are considered reasonably cost-effective. A common rule of thumb in North American research practice is to set this latter benchmark at US$50,000-$100,000/QALY.

Cost-utility analysis (CUA) is a sub-type of CEA for which the unit of health improvement achieved is a utility-weighted health metric, such as a quality-adjusted life year (QALY). The primary benefit of CUAs is that they facilitate the direct comparison of two or more interventions, even across disparate issues whose natural units of health differ from one another.

(Adapted from Partnership for Prevention, 2001)

Public policy-making is both an evidence-driven and a value-based enterprise. While its development should not turn on common-sense assumptions or advocacy pressures, neither should it be determined solely through a mechanical accountancy of costs and benefits. Economic evaluations of existing and new health interventions can help to address important public sector considerations of accountability, fiscal responsibility, and value-for-money in times of budgetary constraint. However, determining which programs to support requires the thoughtful deliberation and balancing of factors beyond those captured through summary measures of economic efficiency. These include, among others, public perceptions of safety and acceptability; societal values of equal access, fairness, solidarity, and distributive justice; and less tangible preferences placed on the avoidance of discomfort, pain, and suffering in oneself and in others.

3. A brief summary of the methodology

The academic and grey literatures were surveyed with the intention of capturing and synthesizing the latest knowledge drawn from economic evaluations of preventive health interventions as well as ongoing research questions and methodological considerations that offer context and guidance on the use of the evidence.

In order to maintain a manageable scope of work, literature searches were concentrated on review articles published in peer-reviewed academic journals and grey literature reports between January 2004 and February 2009. The Medline/PUBMED database was searched using combinations of the following keywords: (i) “clinical prevention,” “primary prevention,” “health promotion,” “health protection,” or “population health” and (ii) “cost-saving,” “cost-benefit,” “cost-effectiveness,” “cost-utility,” or “economic evaluation.” Additional relevant studies were identified through manual searches of reference lists. Relevant publications in the grey literature were identified through a combination of web searches, reference lists of peer-reviewed papers, and consultations with colleagues with expertise in specific public health areas.

Source authors were relied upon to ensure that the cost-effectiveness studies reviewed met minimum standards of scholarly rigour for the conduct of health economic evaluation (e.g., Chiou et al., 2003; Drummond et al., 2005). While sufficient for present purposes, it is recognized that this approach is less than optimal; any future systematic review of the literature is encouraged to independently appraise the quality of the research studies consulted. A number of tools and guidelines are available for this purpose (see, e.g., Carande-Kulis et al., 2000; Centre for Reviews and Dissemination (CRD), 2008; Chiou et al., 2003; Drummond et al., 2005).

The four “faces” of the prevention spectrum employed by Goldsmith et al. (2004) were utilized as an organizational framework:

  • Clinical prevention – includes one-on-one activities involving a health care provider and a recipient of care (patient or client), who may accept or decline the service or recommended health action.
  • Health promotion – includes interventions delivered at a group- or population-level that encourage individual behaviours believed to produce positive health effects and discourage behaviours that produce negative health effects.
  • Health protection – includes interventions delivered at the organizational (e.g., hospital policy), local, provincial, national or international level that reduce health risks by changing the physical or social environment in which people live, such that the role of individual beneficiaries of health protection interventions is either passive or limited to compliance with laws or regulations.
  • Healthy public policy – includes social or economic interventions that act on the determinants of health, and thereby affect health but do not have health as the main policy objective.

Where available, Canadian evidence was prioritized, but as this represented a relatively small proportion of the total literature, evidence from comparable Western developed nations, primarily the US, the UK, Australia, and New Zealand was also drawn upon.

The methodology adopted for this paper was designed to capture in broad strokes the current state of the field. However, given the richness of the relevant literature as well as the summative and non-systematic nature of the chosen research approach, the findings discussed herein should be viewed as tentative. Moreover, the threat of replicating reporting biases—that is, the widespread tendency for positive or statistically significant research results to be published and cited more frequently than unfavourable findings—cannot be ruled out (Sassi et al., 2002; Suhrcke et al., 2007).

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