Australians could also be living longer, but lifestyle-related chronic diseases are actually the leading explanation for disease, death and disability. Almost 40% of Australians aged 45 and over have two or more chronic conditions, corresponding to arthritis, asthma, back problems, cancer, chronic obstructive pulmonary disease (COPD), heart disease, diabetes and mental health problems.
Healthcare spending in Australia is approx 10% of GDP and health care costs proceed to rise faster than inflation. Treasurer Joe Hockey left the door open for a GST on health care, while state premiers signaled raising the GST to fifteen% or the Medicare levy to 2% to cover rising health care costs.
So far, nevertheless, the economic advantages of implementing policies that reduce the danger of chronic disease have been largely ignored in the controversy about containing health care costs. This will be achieved through educational programs to cut back risk aspects corresponding to smoking and weight gain, in addition to through early detection and treatment programs.
To illustrate the impact of improving health on wider economyscientists from the Center for Policy Studies on the University of Victoria translated the outcomes of the study a Finnish study the health impact of a large-scale diabetes education program in an Australian setting.
The Finnish program included individual counseling and group sessions on nutrition, physical activity and weight management. On an Australian scale, nearly a million people can be involved and the associated fee can be roughly A$0.5 billion.
If such a program produced comparable lifestyle effects to those in Finland, GDP growth would amount to A$4.5 billion per yr, or 0.3% of GDP. Compared to efficiency gains from policies in areas corresponding to tax and trade, this can be a huge profit.
Why are the potential profits so high?
Economic models of potential savings take note of two key links between the economy and chronic disease.
The first is clear: treating chronic diseases is dear. It raises our taxes and limits our ability to enjoy other types of private and non-private consumption, corresponding to good roads, public transport, education and housing.
The second key connection is less obvious but extremely necessary: chronic disease reduces our ability to work. People in poor health – especially in the age group over 49 – participate in the labor market at a much lower rate than those in good health.
Data from Household, income and work dynamics in Australia Research (HILDA) shows that the proportion of potential staff in each age group who’re employed falls sharply in the event that they are in poor health:
Chronic diseases corresponding to diabetes are a significant factor in poor health, which in turn significantly reduces labor supply and employment.
But where should we direct funds for prevention and intervention?
We modeled two comparable health programs geared toward improving health changes. One program reduces the variety of elderly individuals who lose their health. The second reduces the variety of young individuals who progress to poor health.
Evidence from economic modeling shows a transparent victory in improving health outcomes in the older group. The GDP and employment advantages are ten times greater for an older transition program than for a younger transition program (see chart below).
There are two reasons. The former will be seen in the primary graph: the employment of older people is far more sensitive to their health condition than the employment of younger people.
The second one is determined by the dynamics of health changes. Once members of the older group fall into poor health, often related to chronic diseases, they have a tendency to stay in that state, with low levels of economic activity. On the opposite hand, young persons are more more likely to experience temporary episodes of ailing health that quickly return to good health.
What does all this mean?
We should take into consideration health not only as an area of social policy, but additionally because the foremost element of economic policy. The potential contribution of fine health policy to the economy far exceeds that of most other microeconomic reforms.
Finally, we should always not take into consideration health policy solely in terms of costs. Costs are necessary, but health affects the economy in far more profound ways through labor supply. Improving residents’ health enables them to contribute more to the economy by maintaining employment. This especially applies to people over 50 years of age. Maintaining the health of this group largely is determined by reducing the incidence of chronic diseases.