How does health impact economic growth?

Healthy populations are able to sustain economic growth. Good health is central to human happiness and well-being. Health makes an important contribution to economic progress, as healthy people live longer, are more productive, and save more. Evidence shows that there is a strong positive correlation between life expectancy and GDP per capita. Moreover, economic growth goes hand-in-hand with health status as high-income populations tend to have better health, nutrition, safe water, sanitation, health care, psycho-social resources, etc.

Healthy populations also tend to increase their income faster through higher productivity, better education, and higher investments. Also, better maternal health directly affects the health of infants and children through beneficial in utero effects, and the mothers’ ability to breastfeed and nourish their children. Healthier women are also more able to participate productively in the labor market. Good health increases the return on educational investments, in particular for girls who start with lower levels of education and labor-force participation (Jayachandran and Lleras-Muney 2009).

How do NCDs and mental health conditions limit economic growth?

Noncommunicable diseases and mental health conditions (NMH) represent an enormous burden for humans and also for national budgets. Non-communicable diseases—diabetes, cancer, chronic respiratory disease, and cardiovascular disease—as well as mental health conditions pose a huge burden in human terms. They are responsible for about half of all Disability-Adjusted Life Years (DALYs) lost and roughly two thirds of deaths worldwide (Bloom et al, 2016). Not surprisingly this affects a country’s capacity to achieve sustainable economic growth.

One method to estimate the projected impact of NCDs on aggregate economic output (GDP) is the economic growth approach that considers how these diseases deplete labor, capital and other factors related to production levels in a country. The WHO developed the EPIC tool to simulate the economic consequences of NCDs by linking diseases to economic growth. It does this by modeling the two main factors of production, capital and labor, and the potential negative impact of NCDs.

In the Americas, the lack of comprehensive information on the impact of NMH on economic growth limits the ability of governments to appropriately address the problem. The paucity of studies in low- and middle-income countries focusing on the impact of NCDs on GDP has led to an information gap concerning the related economic burden (Muka, 2015). This limits our ability to understand the enormous impact of NMH on economic growth and societal ramifications.

How much will NCDs cost to Costa Rica, Jamaica and Peru?

To gain a better understanding of the economic impact of the NCD epidemic and to build an evidence base to inform the implementation of effective policies, the Pan American Health Organization through a collaboration with the School of Public Health of Harvard University used a revised version of the World Health Organization’s EPIC model (EPIC-H Plus) to estimate the impact of NCDs on economic growth in three countries: Costa Rica, Jamaica and Peru. EPIC quantifies the impact of NCDs on aggregate output by modeling reductions in labor supply due to mortality. The EPIC-H Plus tool builds on these models and additionally incorporates reductions in labor supply due to morbidity, and reductions in aggregate output due to increases in health expenditure to treat NCDs and mental health, which divert productive savings and decrease capital accumulation.

The pathway of the EPIC-H Plus model is summarized by the following figure:

In general, the main challenge in using this methodology is the extensive data requirements needed to produce estimates and projections for each country. We used available data from Costa Rica, Jamaica and Peru, to develop the following table which describes the economic impact of NMH on GDP:

After a sensitivity analysis which showed robust results, the impact of NMH on GDP in Costa Rica, Jamaica and Peru is $52.89 billion, $17.22 billion, and $381.70 billion, respectively; a reduction of 4.4%, 3.9%, and 6.8% in GDP for each respective country annually through the 15 year period, 2015 to 2030.

The projected impact of NMH on GDP is enormous, equivalent to 14 times, 18.5 times, and 45 times the level of health expenditure in 2013 for Costa Rica, Jamaica, and Peru, respectively, or 142% of Costa Rica’s 2013 GDP, 106% of Jamaica’s 2013 GDP, and 243% of Peru’s 2013 GDP over this period.

What can be done to change the course of the “NCD tsunami”?

To achieve the reduction of premature mortality from NCDs by 25% by the year 2025, Member States need to invest in effective prevention measures through stronger legislation and regulations aiming at reducing tobacco use, harmful use of alcohol and promoting healthy eating and physical activity; as well as strengthening and transforming Health Systems to better respond to the challenge of NCDs. There is a need for a higher fiscal priority for health, not only for health systems and services management but also in health financing mechanisms such as using fiscal measures for health (e.g. taxation on tobacco, alcohol and sugary sweetened drinks directed to health).

Lack of funding is a significant challenge, but there are cost-effective preventive measures that can be implemented at low cost compared to treating established illnesses later on. The health sector needs to be a stronger advocate for access to funds within the government.

With the EPIC-H Plus model, countries will be able to estimate and adjust to the real impact of NCDs on GDP and will be able to better measure the impact of NCDs on their economies. With such knowledge, countries will be better equipped to advance toward implementing effective policies to tackle NCDs which are included in the WHO Action Plan of NCDs.

The World Economic Forum on Latin America is taking place in Medellin, Colombia from 16 to 17 June.