What are the economic benefits of prevention?

Chronic diseases are associated with significant costs to the health system, such as hospitalisations and charges to Medicare, as well as broader economic or societal costs. Prevention not only lowers healthcare costs, it reduces the costs to the economy associated with premature death and years spent in ill health. Prevention ensures fiscal sustainability for Australia.

Office workers smiling

A range of economic benefits

The economic benefits of preventive health range from macroeconomic benefits, such as improvements in gross domestic product (GDP), to other societal benefits such as reduced environmental impacts and healthcare system cost savings.

Prevention benefits employers and businesses. If chronic disease is prevented, employees spend less time off work (absenteeism), and do not have reduced capacity at work due to ill health (presenteeism).

In 2017, the Productivity Commission conservatively estimated that Australia’s GDP could be increased by $4 billion per year if the health of people in fair or poor health was improved. 1

A more sustainable healthcare system and increased productivity

Our research indicates preventing chronic conditions leads to a more sustainable healthcare system and increased productivity through increased attendance at work and more productive years in the workforce. Increased productivity also produces improved GDP. 2

  • Increased attendance at work

  • More productive years in the workforce

  • Improved gross domestic product

Reduced hospitalisations and absenteeism

Prevention leads to reduced hospitalisations and reduced absenteeism and presenteeism, which is associated with income lost due to disease and premature death.

  • Fewer hospitalisations

  • Less absenteeism and presenteeism

  • Less income lost due to disease and premature death

What is the value of prevention to the economy?

Many preventive health interventions generate economic benefits. 3

Australians who are in good health are better able to lead fulfilling and productive lives, participate fully in their communities, education and work.

Every dollar spent on treating chronic disease that is preventable is money that could be spent elsewhere in the health sector; every year of productive life lost to premature death or disability could have been directed to a more productive and prosperous society.2

Teacher smiling

Examples of the economic value of prevention

  • Each additional kilometre walked has been estimated to result in health-related benefits that range in value from $1.04 to $2.08. Each additional kilometre cycled results in health-related benefits that range in value from less than $0.02 to $1.12. 4
  • Increasing walking within a neighbourhood is associated with health-related benefits worth an average $14.65 per adult annually, depending on the destination and context. The economic value of increasing neighbourhood walkability is worth an average $1.62 per adult annually (range $0.11 to $15.73). 4
  • A report from PwC recommended investment in a set of obesity prevention and treatment interventions, which it said could result in significant reductions in obesity prevalence and provide a net benefit of AUD$10.3 billion over 10 years. 5

Is prevention cost-effective?

Many preventive health interventions may be highly cost-effective for governments. Some promote health and reduce costs overall because of the reduced need to treat expensive diseases. Others allow Australians to live longer with better quality of life, and come at a reasonable cost to the health system. 3

Most preventive health strategies lead to cost savings that far outweigh the cost of their implementation. Research shows that cost savings have been achieved particularly from multiple strategies in tobacco control, but also from interventions targeting physical activity, diet and obesity.2

The types of interventions that are particularly cost-effective tend to have the largest population health impact. These include regulatory strategies, such as mandatory salt reduction and reformulation 7, restrictions on advertising unhealthy food to children, tobacco control restrictions, and fiscal interventions such as taxation of unhealthy or harmful products like tobacco 8, alcohol 9  and sugary drinks 10.

A cost-benefit analysis framework for preventive health interventions
Boy eating watermelon

How can we make the economic argument for prevention?

It can be challenging to make the economic case for preventive health interventions as the benefits of prevention can take many years to become evident.

Modelling is a good way to understand the long-term economic benefits of prevention. For example, the Prevention Centre’s dynamic simulation modelling work provides a ‘what if’ tool through which to test various policy scenarios over time to see which are likely to be the most effective and cost-effective, both for individuals and the system as a whole.

Health economics can be used to inform decision making through the lens of efficiency. Health economics can answer questions related to how best to perform healthcare activities, whether a program should be funded, and what the right mix of activities should be to maximise health with the limited healthcare resources.

Increasingly, it is recognised that preventive health interventions are complex, with actions required across various sectors and impacts on other areas in society. Therefore, various methods may be required for the effectiveness and cost-effectiveness evaluation of these interventions. 11

Health economics is also concerned with equity. There are specific techniques that can be used to guide decision-makers on the equity impact of their decisions.

Policy makers and academics at a workshop in Canberra group around a table, arranging the coloured papers on it as part of a modelling exercise.

Note

As risk factors associated with chronic disease are impacted by all sectors of society, it is important to examine the economic benefits of interventions across various sectors. Despite a large body of literature, evidence gaps remain, particularly in terms of reporting on non-health co-benefits of prevention and collecting data for economic evaluations to demonstrate the economic benefits of prevention.

To demonstrate the full value of prevention, researchers and policy makers need to ensure they are measuring a range of health and non-health outcomes, including physical health, mental health, social, environmental and/or economic outcomes. Economic costs and benefits of preventive strategies also need to be routinely collected to enable more rigorous economic evaluations and costings of interventions. 2

Find out more

The publications and other resources listed in the references below may be useful to those looking for more detailed and in-depth evidence around the benefits of chronic disease prevention.

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  1. Productivity Commission. Shifting the Dial: 5 Year Productivity Review, Report No. 84. 2017. Canberra. https://www.pc.gov.au/inquiries/completed/productivity-review/report
  2. Howse, E, Crosland, P, Rychetnik, L, Wilson, A. The value of prevention: An Evidence Review. The Australian Prevention Partnership Centre, 2021. https://preventioncentre.org.au/resources/the-value-of-prevention/
  3. Jackson H, Shiell A. Preventive health: How much does Australia spend and is it enough? Canberra, Australia: Foundation for Alcohol Research and Education; 2017. https://fare.org.au/wp-content/uploads/Preventive-health-How-much-does-Australia-spend-and-is-it-enough_FINAL.pdf
  4. Zapata-Diomedi B, Brown V, Veerman JL. An evidence review and modelling exercise: The effects of urban form on health: Costs and benefits.  The Australian Prevention Partnership Centre; 2015. https://preventioncentre.org.au/resources/the-effects-of-urban-form-on-health-costs-and-benefits/
  5. PwC. Weighing the cost of obesity: A case for action. A study on the additional costs of obesity and benefits of intervention in Australia. PricewaterhouseCoopers; 2015. https://www.pwc.com.au/pdf/weighing-the-cost-of-obesity-final.pdf
  6. Health Technology Analysts Pty Ltd. The Potential Impact of Salt Reduction in Australia. Sydney, Australia: The George Institute for Global Health; 2020. https://www.georgeinstitute.org/sites/default/files/documents/potential-impact-of-salt-reduction-in-australia.pdf
  7. Gebreslassie M, Sampaio F, Nystrand C, Ssegonja R, Feldman I. Economic evaluations of public health interventions for physical activity and healthy diet: A systematic review. Preventive Medicine. 2020;136. doi: 10.1016/j.ypmed.2020.106100
  8. Stockings E, Hall WD, Lynskey M, Morley KI, Reavley N, Strang J, et al. Prevention, early intervention, harm reduction, and treatment of substance use in young people. The Lancet Psychiatry. 2016;3(3):280-96. doi:10.1016/S2215-0366(16)00002-X; Chamberlain C, Perlen S, Brennan S, Rychetnik L, Thomas D, Maddox R, et al. Evidence for a comprehensive approach to Aboriginal tobacco control to maintain the decline in smoking: An overview of reviews among Indigenous peoples. Systematic Reviews. 2017;6(1). doi: 10.1186/s13643-017-0520-9
  9. Harris M, Fatema K, Spooner C, Harris-Roxas B, Mahimbo A, Barr M, et al. Review of effectiveness of certain healthy lifestyle interventions to reduce alcohol consumption, increase levels of physical activity and healthy eating and reduce overweight and obesity (2014-2019). An Evidence Check rapid review brokered by the Sax Institute for the Cancer Institute NSW. Sydney, Australia: Sax Institute; 2019. https://www.saxinstitute.org.au/publications/evidence-check-library/review-of-effectiveness-of-certain-healthy-lifestyle-interventions-2014-2019/
  10. Ananthapavan J, Sacks G, Brown V, Moodie M, Nguyen P, Veerman L, Mantilla Herrera AM, Lal A, Peeters A, Carter R. Priority-setting for obesity prevention-The Assessing Cost-Effectiveness of obesity prevention policies in Australia (ACE-Obesity Policy) study. PLoS One. 2020 Jun 19;15(6):e0234804. doi: 10.1371/journal.pone.0234804. PMID: 32559212; PMCID: PMC7304600.
  11. Skivington K, Matthews L, Simpson SA, Craig P, Baird J, et al. A new framework for developing and evaluating complex interventions: update of Medical Research Council guidance. British Medical Journal. 2021 Sep 30;374. https://www.bmj.com/content/374/bmj.n2061

Acknowledgement of Country

The Australian Prevention Partnership Centre acknowledges Aboriginal and Torres Strait Islander peoples as the First Australians and Traditional Custodians of the lands where we live, learn, and work.

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Funding Partners

The Australian Prevention Partnership Centre is funded by the Australian Government Department of Health and Aged Care, ACT Health, Cancer Council Australia, NSW Ministry of Health, Preventive Health SA, Tasmanian Department of Health, and VicHealth.

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