1 The Contribution of Health to the Economy in the European Union Marc Suhrcke Martin McKee Regina Sauto Arce Svetla Tsolva Jørgen Mortensen Results of a study financed by EC DG SANCO A collaboration between: London School of Hygiene & Tropical Medicine, Centre for European Policy Studies (Brussels), World Health Organization (Venice)

2 Better health promotes economic growth in poor countries Better health promotes economic growth in poor countries Have we made the case for health in HIGH-income countries? Have we made the case for health in HIGH-income countries?

3 Health has been acknowledged as a determinant of economic growth in low-income countries - …but not in high-income countries!! The role of human capital in economic growth is widely acknowledged – …but only for education! Health plays a very limited role in rich countries’ economic development strategies (…)

4 1. Aim of the study 2. Empirical evidence 3. Policy implications 4. Was that it in terms of making the case for health?

5 1. Aim of the study …and of our related work in this area

6 1)Review the empirical evidence on the impact of health on the economy – as it is relevant for EU countries 2)Provide a rationale for placing health more firmly into the overall economic development strategies in EU countries

7 2. Empirical evidence

8 The cost of illness: Expenditure on coronary heart disease per 100,000 persons (GBP million, 1999 prices)

9 Relevant channels from health to the economy: a simple framework

10 Labour supply is low in the EU Source: Eurostat

11 Labour supply is particularly low in the EU among the elderly Source: Eurostat

12 The impact of health on wages and earnings Poor health negatively impacts on wages and earnings Poor health negatively impacts on wages and earnings Physiological proxies for health (height/ BMI) also associated with higher earnings (although possibly due to social meaning of these measures) Physiological proxies for health (height/ BMI) also associated with higher earnings (although possibly due to social meaning of these measures) Most work from US, relatively little from Europe Most work from US, relatively little from Europe

13 The impact of health on labour supply Good health increases probability of participating in labour force Good health increases probability of participating in labour force Good health reduces probability of early retirement Good health reduces probability of early retirement Health impacts on carers Health impacts on carers Men caring for sick wives likely to leave labour forceMen caring for sick wives likely to leave labour force Women caring for sick husbands more likely to join labour forceWomen caring for sick husbands more likely to join labour force

14 Impact of health on education Human capital theory predicts that more educated individuals will be more productive, and obtain higher earnings Human capital theory predicts that more educated individuals will be more productive, and obtain higher earnings Children with better health will have less absenteeism and lower dropout rate Children with better health will have less absenteeism and lower dropout rate This is confirmed in low income countries This is confirmed in low income countries Little work in high income countries Little work in high income countries

15 Impact of health on savings Theory predicts that improved health will increase savings Theory predicts that improved health will increase savings Individuals have greater probability of reaching retirement Individuals have greater probability of reaching retirement This is confirmed in low income countries This is confirmed in low income countries Insufficient evidence from high income countries Insufficient evidence from high income countries

16 The impact of health on the macroeconomy The historical contribution of health to economic development The historical contribution of health to economic development Cross-country studies Cross-country studies Worldwide samplesWorldwide samples High-income countries onlyHigh-income countries only

17 The historical contribution of health to economic development The current levels of economic wealth in today’s high-income countries are to a substantial degree explained by past achievements in health

18 Cross country studies on the impact of health on income levels or income growth Worldwide studies (including high-income countries) Worldwide studies (including high-income countries) Health enters as a very robust – indeed one of the most robust – predictors of income and growthHealth enters as a very robust – indeed one of the most robust – predictors of income and growth In some cases, health appears more important than educationIn some cases, health appears more important than education High-income countries only High-income countries only Very few studiesVery few studies Many use measures of health that fail to discriminate between high income countriesMany use measures of health that fail to discriminate between high income countries A new analysis looking at cardiovascular mortality shows substantial impact on economic growth in high income countriesA new analysis looking at cardiovascular mortality shows substantial impact on economic growth in high income countries

19 ‘Full income’ – a broader perspective EU countries ( )

20 The contribution of health care to the economy The health sector is important simply because of its size The health sector is important simply because of its size Currently it accounts for about 7% of GDP in EU15 Currently it accounts for about 7% of GDP in EU15 More than financial services or retail sectorMore than financial services or retail sector About 9% of all workers in EU25 employed in health sector About 9% of all workers in EU25 employed in health sector Consequently, its performance will directly impact on economic performance, and indirectly on labour costs, flexibility, and allocation of resources in broader economy Consequently, its performance will directly impact on economic performance, and indirectly on labour costs, flexibility, and allocation of resources in broader economy

21 In summary … Poor health impacts negatively on wages and earnings Good health increases labour supply through higher employment and later retirement Evidence from low income countries shows beneficial impact on savings and education GDP is an imperfect measure of performance. When health income is examined, there is a substantial positive return on investment in health care The health sector is an important element of the economy in its own right

22 3. Policy implications

23 1)Demonstrating previously unrecognised economic benefits to health markedly changes cost-benefit considerations associated with investing in health 2)Economic policymakers should explicitly consider investing in health as one of the options by which to achieve their economic goals 3)Acknowledging the bi-directional relationship between health and the economy means that it is economically sound to have health as an integral part of the overall economic strategy

24 4)A particular importance for thinking about ways to close the economic gap within the enlarged EU (  Structural Funds) 5)Is the welfare state good for growth? 6)What is the aim of economic policy?

25 7)If health is good for the economy, how then should we invest in health? a)Investing in the health system b)Investing outside the health system: “Healthy Public Policy” (understood as policies outside the health sector that impact upon health without the primary goal of doing so)

26  The economic evidence offers a good opportunity to start making the case for healthy public policies  Healthy public policies can bring health benefits, but in turn also additional economic benefits precisely via the health benefits. This needs to be demonstrated! Making the case for “healthy public policies”

27 4.Where next?

28 1)Need for improved quantitative assessment of the narrow and wider costs and benefits of health investment, in particular for: a)Investment in prevention through the health system b)Healthy public policies  This would allow direct insertion into economic investment strategies!

29 2)Clear evidence that government has an economically justified role to intervene in health policy in rich countries and this is not simply a matter for individual choice  This would lay the ground for seeing effective government health intervention as similarly “justified” as e.g. investment in road infrastructure or schools

30 … and more research The vast majority of the evidence reviewed comes from the USA The vast majority of the evidence reviewed comes from the USA The paucity of large scale, internationally consistent surveys in Europe is a major factor The paucity of large scale, internationally consistent surveys in Europe is a major factor … which in turn feeds into lack of research capacity to undertake this research … which in turn feeds into lack of research capacity to undertake this research We cannot assume that results can be extrapolated uncritically across the Atlantic We cannot assume that results can be extrapolated uncritically across the Atlantic

31 Further reading Suhrcke M, McKee M, Sauto Arce R, Tsolva S, Mortensen J. The Contribution of Health to the Economy in the European Union. Brussels: European Commission, 2005.