An Unhealthy America: The Economic Burden of ... - Milken Institute

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illion. A parallel calculation for smoking alone suggests thatlower tobacco use is responsible for 9.4 million fewer illnesses in2023, along with $31 billion less in treatment costs and $79 billionin added productivity.Impacts at the State LevelDifferences in lifestyles (smoking, alcoholabuse, diet, exercise), along with demographics(age distribution, ethnicity) and urbanization,partly explain differences in disease ratesamong the states. States with the highest ratesof chronic disease also tend to have the worstreadings on behavioral risk factors, the highestpercentage of elderly residents, and ademographic mix predisposed to one or morechronic diseases.Forgone Economic Growth Over the Long TermThe long-term impact of chronic disease on economic growth—the consequence of less investment in human and physicalcapital—is likely to be of even greater magnitude than the impactof treatment costs and lost labor supply. This is becauseimprovements in health today also yield increased investment ineducation and training a generation from now.Figure ES-2 : : State Chronic Disease IndexThe map in figure ES-2 groups states accordingto their rankings on the Milken Institute StateChronic Disease Index, which measures theconcentration of chronic diseases. As the mapshows, the least healthy states lie in a belt ofobesity and smoking that runs from theNortheast through Oklahoma. West Virginia,Tennessee, Arkansas, Kentucky, and Mississippiall fare poorly. The low scores for Massachusettsand Maine result from the high incidenceof cancers and perhaps more completereporting. Those with the healthiest populationsare in the West, led by Utah, Alaska, Colorado,New Mexico, and Arizona.We find that all states stand to gain in theoptimistic scenario, with even the lesspopulousstates, such as Alaska, avoiding79,000 cases of chronic disease (a 16.4 percentreduction) and achieving benefits of $2.6billion (27 percent) through lower treatmentcosts and higher productivity in 2023. Amongthe most populous states, California avoids4.3 million (17.6 percent) cases of chronicdisease and gains $117.1 billion through lowertreatment costs and higher productivity in 2023.Forgone Output(US$ Trillions)$6$5$4$3$2Top QuartileSecondThirdBottom QuartileFigure ES-3 : : Long-Term Forgone Economic OutputChange in Real GDP Between Baseline and Optimistic Scenarios$1$02005 2010 2015 2020 2025 2030 2035 2040 2045 2050YearSource: Milken Instituteiii
Existing estimates of the economic impact of disease tendto ignore the productivity growth that results over the longterm as returns on human capital investment accrue tosubsequent generations.We used a standard economic model of the relationshipbetween inputs (capital, labor, skills) and output to simulatethis impact, with health affecting the rate of investment andthus the rate of economic growth. Life expectancy at age 65serves as a plausible proxy for this health variable, which affectsdecisions to invest both in human capital (education) andphysical capital. An innovation from our research is therecognition of the dynamic feedback between health andhuman capital formation over time.Comparing a baseline, business-as-usual scenario with anoptimistic scenario assuming substantial (but plausible)reductions in chronic disease cases yields a gap of $1.2 trillionin real GDP terms in 2023, widening to $5.7 trillion in 2050 (apercentage difference of 17.6 percent). This represents adifference of about three-tenths of a percentage point inaverage annual economic growth resulting from lower rates ofinvestment in education and physical capital. As a benchmark,over the past twenty years, real GDP growth has averaged 3.0percent (see figure ES-3).The Big PictureWhile the avoidable treatment costs of less-than-optimalprevention and early intervention are large, the avoidableimpact on GDP linked to reduced labor supply and lower ratesof investment is gigantic. The good news implied is that thepotential economic returns to initiatives that lead to a healthierpopulation are enormous. To that end, we offer some guidelinesfor change.Incentives in the health-care system should promoteprevention and early intervention. Employers, insurers,governments, and communities need to work together todevelop strong incentives for patients and health-careproviders to prevent and treat chronic disease effectively. Inmany respects, we’ve gotten what we paid for: only a tinyfraction of health-care spending is devoted to the promotionof healthier behavior, despite the fact that preventable chronicdiseases are linked to smoking, obesity, lack of exercise, anddrug and alcohol use.As a nation, we need to renew our commitment to achieving a“healthy body weight.” Rising obesity rates threaten to sendtreatment costs for diabetes and related conditions, such asheart disease and stroke, soaring over the next twenty years.There needs to be a strong, long-term national commitment topromote health and wellness.The rapid growth of chronic disease is costing us lives, qualityof life, and prosperity. The current health-care debate rightlyfocuses on the extension of coverage to the uninsured andthe design of a financing mechanism that is both fair andefficient. We suggest that the nature of services provided—the failure to invest in prevention and early intervention—deserves equal place in the debate. An increased emphasison prevention would both improve the health of Americansand offset some of the costs of an aging population byincreasing economic productivity.This analysis should be seen as a contribution toward a sorelyneeded national discussion on health-care spending andchronic disease. Further research is necessary to bringadditional precision and knowledge in measuring theeconomic, human, and social costs of preventable chronicdisease and identifying opportunities to reduce or avoid them.iv
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