Home Community A Look At Public Healthcare Economics

A Look At Public Healthcare Economics

August 17, 2018
KentMPHHealthcareEconomics.jpg

If “public health” refers to caring for the collective health of a population, then “public health economics” is the science of how a society takes on and manages this responsibility with limited resources. Public health policy is broad: While some of it does focus directly on healthcare, other areas as disparate as environmental protection, individual habit change and infectious disease control all contribute to the economics of public health.1 Studies indicate that there are economic benefits to preventing disease, not just for sick individuals, but for society at large.

Who Pays for Healthcare?

Americans spent $3.3 trillion on healthcare in 2016, or about $10,348 per person. The largest share of this cost, 28.3%, was borne by the federal government, while 28.1% of costs were handled by consumers. The remaining expenditures were distributed between private businesses, state and local governments, and other sources of funding.2 This means that 71.9% of healthcare costs are not charged to consumers, but to some collective source of funding. Each individual is responsible for their own health, but we are all responsible for the costs of public healthcare.

The Power of Preventative Care

One of every five dollars spent on healthcare in the U.S., or around $660 billion per year, is spent on caring for people with diabetes. As discussed above, these costs are shared by our society, so it is in our collective interest to work toward ways to lower these expenditures. On the individual level, it has been shown that 2.5 hours of physical activity per week combined with a 5-7% weight reduction could decrease an individual’s risk of contracting type-2 diabetes by 58%.3 Even a 1% decrease in an individual’s weight could save them $83-103 per year in healthcare costs.

Vaccines and Screenings

Not all interventions save money in the long run, but studies indicate that there are effective measures that can reduce overall healthcare costs. Flu vaccines for toddlers prevent the disease from spreading to adults and impacting their productivity. Cochlear implants for profoundly deaf children have been shown to both decrease the cost of their care over time and markedly increase their quality of life. And mandatory screenings such as colonoscopies for men over the age of 60 have also been shown to reduce our shared healthcare costs.4

The Hidden Costs of Infectious Diseases

Public health economics isn’t just about saving money on healthcare itself; it’s also about avoiding the costs that arise from disease outbreaks and pandemics. Each year, the flu costs Americans around $4.6 billion dollars in out-of-pocket healthcare expenses. But the cost to businesses due to lost productivity during periods of flu outbreak tops $7 billion. Preventative measures, like promoting and distributing the flu vaccine, could serve to decrease not only the healthcare costs incurred by individuals, but the opportunity costs their illnesses pass on to businesses as well.5

Gray Areas in Healthcare Cost Analysis

The economics of healthcare aren’t always as cut and dried as the scenarios described above. While some preventative measures and treatments, such as cognitive-behavioral therapy for early-stage Alzheimer’s disease patients, decrease healthcare costs in the long run, others, like screening all adults over the age of 65 for diabetes, increase health spending substantially in exchange for measurable quality of life benefits for the affected population.4 The societal benefits of healthcare policy decisions are not solely economic, and thus it’s not always clear whether or not healthcare decisions that cut overall costs are truly in the public interest.

Who Decides How to Spend Public Health Money?

In the healthcare arena, sometimes good outcomes are simply worth the money. It is the job of policymakers and their administrations to ensure that each public dollar spent on healthcare is spent wisely. Economists are still learning how to design clear, evidence-based research projects to present policymakers with the best information possible to make healthcare policy decisions, and the success of these projects depends on another significant economic factor: research funding. Ultimately, the best healthcare delivery methods are the ones that work, and the more research that can be done into the ability of economic tools and concepts to make these methods more accessible, the better for all of us.


Explore the importance and far-reaching impact of healthcare economics, and consider how an online Master of Public Health from Kent State University could help you not only initiate vital conversations but effect meaningful changes in the public health sector as well.


1 Retrieved on August 8, 2018, from thelancet.com/journals/lancet/article/PIIS0140-6736(13)62458-7/fulltext
2 Retrieved on August 8, 2018, from cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html
3 Retrieved on August 8, 2018, from surgeongeneral.gov/priorities/prevention/strategy/appendix1.pdf
4 Retrieved on August 8, 2018, from nejm.org/doi/full/10.1056/NEJMp0708558
5 Retrieved on August 8, 2018, from cdc.gov/niosh/topics/flu/activities.html