1. Public Health Finance : Theory and Practice Feb 8 2006, Washington DC Thomas E. Getzen, Ph.D. Professor of Risk, Insurance & Healthcare Management Temple University and Executive Director, iHEA

2. The function of FINANCE in Public Health

3. Theory Public Health Core Functions Economics Public Goods Finance Risk, Time

4. Practice Financial Management Public Health Financing and Organization

5. Definition “Public health finance is a field of science and practice that deals with the acquisition, management, and use of financial resources to advance the health of populations through prevention and health promotion.” (Moulton, Halverson, Honore and Berkowitz, 2004).

6. Core Functions IOM, WHO, DHHS – many versions Assessment, Assurance, Policy The provision of information, and the mobilization of action based on that information. “information goods”

7. Public Health Finance is Complex Network, system management. Different from physical goods and services. Thus, simply getting a set quantity of funds is not sufficient.

8. Characteristics of Public Goods COST: Non-exhaustive no additional cost per added user. REVENUE: Non-exclusive can’t charge (must use general tax).

9. Externalities (infectious diseases) Knowledge transfer Distribution (taxes, benefits) --only Government can transfer $$$.

10. Typical Public Goods National Defense Money Supply, Stabilizations Education Environment Industrial Policy (trade)

11. Behavioral Finance Savings “mental accounts” Money illusion 401(k)’s Regulations and help needed for efficiency.

12. core aspects Information Regulation Distribution Catastrophe Prevention

13. Information

14. regulation

15. distribution

16. Catastrophes

17. Prevention

18. Financial Theory Timing Risk

20. Time Discounted Present Value “discount rate” matters Fairly simple to implement. Time discounting applies to health, as well as to money.

21. Risk Actual risk is never really known. Win some, lose some. ROI is not certain, or regular. Some losses are just too large for the market – for catastrophes, need Govt. --and health is too big a risk for most people to take care of on their own.

22. Behavioral Finance Why public finance for individual illnesses with no externalities? Individuals rarely behave optimally without help. 401(k) example. Thus, we need guidance, and the guiding agencies (SEC, FDA, FTC, CDC) need resources.

23. Practice Financial Management Public Health Financing and Organization

24. Financial Management Operations Ratios different from for-profit corporation. --capital allocation treated as expense, rather than as an asset. What is “ROE” for public health? Where do reserves, rewards come from?

25. Public Health Financing & Organization Form follows function. Short-term (budget) v. Long-Term (growth) Changing environment “creative destruction” --public entrepreneurship ---examples: HIV/aids, Bioterrorism. Must update ratios and benchmarks. (otherwise, same-old same-old)

26. Building Public Health Finance Support “Venture Capital”

27. Training Programs Mix of degree and continuing ed. Core curricula.

28. Organization and Funding Think outside the box. Shrink or collapse some of the boxes. Not just bridge-building, but reconfiguration. Use “information industries” (software, media, biotech) as models. --nb, creative financing rather than unit pricing.

29. Research and Theory Public Health was at the forefront of science in 1905. Why not in 2005? Information science, network models. Import ideas (options, volatility, risk segmentation, rating agencies).

30. Conclusion Getting better at what is currently done is necessary, but not sufficient. To fulfill the core functions: (assessment, assurance, policy) create a theory and practice of investment in population health.