The economic consequences of disease

Studies into the economic impact of disease started with the “cost-of-illness” idea in the mid-1960s, combining the “direct” costs of medical care, such as travel costs, with the “indirect” cost of lost production because of reduced working time. More recently, macroeconomic growth models have been used to better understand the dynamic and multifaceted influence of ill health on economic activity at the societal level. In addition, research has looked at the microeconomic consequences of ill-health, particularly at the household level in lower-income countries.

Estimating the burden of disease in populations is based on measuring morbidity and mortality. However, only focusing on morbidity and mortality effects provides an incomplete picture of the economic consequences of poor health on overall human welfare. “Shocks” created by poor health can lead to huge increases in health expenditure, reduced functional capacity and lost income or productivity and can thus be a primary risk factor for impoverishment.

It is well known that ill health may affect educational attainment (and thus levels of future income). Moreover, at a societal level, low levels of health lead to lower savings rates, lower levels of investment and, ultimately, lower rates of return on capital, contributing to impaired economic growth. Looking at the impact of health on macroeconomic growth from a different perspective, one wants to measure the contribution that health can make to economic growth. Such a positive association between health and wealth is part of today's financially driven culture and a major argument for greater investment in healthcare systems and services.

Relevant policy questions to consider are: What impact does ill health have on GDP? How much does society pay for medical and other expenses because of illness? What is the impact on social welfare in general? Are there any effects that transgress country boundaries? Chapter 18 provides a more detailed discussion on the role of health economics in responding to global health threats (such as Covid-19).

From the microeconomic perspective, we look at three players: households, firms and government, each of which poses different questions:

Households. What impact does ill health have on a household's income or consumption patterns? How much do households pay for medical or other expenses as a result of illness (for an episode, over a year or over a lifetime)?