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Increasing spending on prevention is cost-effective: report

Professor Alan Shiell

16 June 2017

A strong case can be made for increasing spending on the prevention of chronic disease because it is cost effective – even if it means removing funding from other parts of the health system, a new report suggests.

Preventive health: How much does Australia spend and is it enough? by the Prevention Centre’s  Hannah Jackson and Professor Alan Shiell, from La Trobe University, compares Australia’s spending on preventive health to that of other OECD countries.

Launched at a Forum at Parliament House in Canberra, the report concludes that the level of Australia’s spending on prevention is a poor guide to how much should be spent.

Watch the forum.

The report said there was evidence that some preventive health interventions promoted health and reduced costs because they eliminated the need to treat expensive diseases.

Many other interventions improved equity and allowed Australians to live better quality lives, and came at a reasonable cost to the health system, the report said.

Professor Shiell said there was considerable scope to reallocate resources to improve health outcomes and reduce overall health spending. “The simple test is to look at the added value and how does that compare with the activities that would need to be curtailed,” he said.

The report was co-funded by the Heart Foundation, Kidney Australia, Alzheimer’s Australia, the Australia Health Promotion Association and the Foundation for Alcohol Research and Education.

It found Australia spends around $2 billion a year on activities identified as prevention according to Australian Institute of Health and Welfare and OECD accounts.

This equates to about $89 per person a year and represents just 1.34% of the total health budget – putting Australia well behind other OECD countries with broadly similar populations such as Canada, the United States and New Zealand.

However, this comparison is not the best way to measure prevention spending, the report concludes.

Spending under-estimated

Official accounts underestimate total spending on prevention because they do not take into account local government expenditure or prevention activities undertaken by general practice, hospitals or the pharmaceutical industry.

Comparisons also risk the response that other countries are spending too much, as their life expectancies are similar to that in Australia, Professor Shiell said.

A better argument is to look at the cost-effectiveness of prevention activities, weighing up their value add not just in terms of savings but in improved equity and quality of life.

The key to determining whether Australia should spend more on prevention was to compare the value that would be added by an increase to the opportunity costs (i.e. what would have to be lost because that funding could not be spent on something else).

The report highlighted the complexity of funding mechanisms for prevention in Australia, and questioned how this impacts on the efficiency and equity of the overall effort to prevent chronic disease.

Mrs Jackson said she was surprised at how complicated, variable and fragile the funding mechanisms were in Australia, and at how these characteristics varied between countries with broadly similar health systems.

“The data that we have seen isn’t inclusive of everything that prevention is. Coupled with expenditure data, we also need an effective outcomes monitoring framework in place that incorporates indicators relating to the social determinants of health,” she said.

The report recommended that Australia should consider establishing institutional structures to evaluate the cost effectiveness of preventive health interventions and monitor their outcomes, as England has done.

–  Helen Signy, Senior Communications Officer