The economics of illness

We hardly differentiate between sicknesses, diseases, and illnesses on the basis of their definitions. There are actually some specific differences, especially when interpreted by physicians. According to Professor Eric Cassell of Public Health at Cornell University, when someone in our society is ill, he assumes that he has a disease, but how he feels is ill. Dictionaries simply define illness as a disease or period of sickness affecting the body or mind. However, illness matters and has a significant effect on the lives of individuals, their families, communities, and wider society. The economic concerns are also strong and subject to study by policy makers.   

The reaction of others to sick people

Sometimes our attitude toward sickness itself qualifies as a disease. Almost everyone has experienced neglect at some point in his/her life. If a patient tells a healthy man that he is sick, mixed results are seen. He might feel embarrassed and ashamed. If the disease is an infectious one like Covid-19, one can imagine the insane attitude of people toward him. Even his non-infectious family members are subjected to bitter experiences such as weird looks, odd expressions and subtle signals of others. The corona patient may feel like a pariah in a paranoid society. 

There are people who think if someone gets sick, he is either lying, overreacting, or he did something sinful to deserve it. There may be administrators or employees who might shame subordinates if they look ill or take time off to focus on their illness. Often, they pressurize sick employees to come to work. So, people seek to rush their recoveries so that they can get back to normal health as quickly as possible, even if they do not get cured completely. Corona pandemic has caused further erosion in empathy as well.  

Economic burden of disease

People generally do anything to avoid getting sick and visiting a doctor. They are always afraid of a gigantic medical bill. Therefore, they often engage in self-diagnosis on the internet. They try to manage severe injuries with duct tapes and any type of fever with Paracetamol. 

It is all that people with limited resources want to spend. Despite sufferings from the early symptoms of a deadly disease, they are prone to believe that they would eventually be okay. They will come round from the pain and suffering of illness soon. Many do not have time to be sick as they remain busy foraging. They do not take their health seriously. In particular, the societal and economic consequences of poor health can be substantial.

Economists opine that people's well-being is determined by their state of health, their consumption of goods and services, and the amount of leisure time they have. Ill health can influence all three components together or one at a time. It can reduce utility functions because of reductions in his income or productivity, as well as savings and investments. 

Poor health requires people to incur medical-related expenses that they would not have incurred in the absence of illness. This may reduce the ability to consume non-health goods and services like food, housing, or education. Ultimately, this reduces their economic well-being, which in turn can reduce the availability of leisure time, for example, individuals need to provide care or support for ill family members. 

The Nobel Prize in Medicine 2020 has jointly been awarded to three virologist Harvey J. Alter, Michael Houghton and Charles M. Rice for the discovery of the Hepatitis C virus. Their discovery has enabled the development of a new hep C drug that can cure 75 to 95 percent of patients, thereby saving millions of lives. But how expensive is the treatment? 

Each miraculous pill costs $1,000 (around Tk. 85,000). Completion of a 12-week course of treatment will cost approximately $100,000. Yet Hepatitis C virus may not leave the body. This calculation somehow suggests the imperativeness of pursuing regular investigation of the economics of illness for proactive and reactive management of sickness and reduction of the economic burden of disease.

Nurses observing patients in a hospital ward. Photo: Mumit M

Health policy questions

Appropriate estimation of the economic costs associated with a particular disease or health condition can certainly contribute to addressing a number of health policy questions. Some of these questions relate to the microeconomic level of households, firms or government such as the impact of ill-health on a household's income or a firm's profits while others relate to the macroeconomic level, including the aggregate impact of a disease on a country's current gross domestic product or its future growth prospects. 

The resulting estimates can usefully inform decision-makers about the overall magnitude of economic losses and their distribution over a number of key drivers or categories of cost. Different studies have set forth several policy questions like: What impact might major causes of death and disability such as stroke, or road traffic injuries or new health shock like the Corona pandemic have on the current or future rate of economic growth in countries? What proportion of government resources could have been directed to alternative uses in the absence of these diseases or in their presence?  How much of a household's income is reduced by the inability to work or is used up for medical care? 

Cost of illness

The economic cost of illness comprises direct cost and indirect cost. The direct expenses encompass the costs of prevention, detection, and treatment of the illness and the indirect costs refer to the value of lost production because of reduced working time or loss in output due to disability, mortality, and premature death. 

The indirect expenses are the costs to society rather than to sick individuals or their families. The indirect costs resulting from lost earnings represent losses to the gross national product (GNP). Unfortunately, the losses due to illness of housewives who cannot perform their housekeeping duties (nonmarket labour) are generally not considered during the calculation of the GNP. 

Direct and indirect costs are summed up to provide an estimate that is said to represent the overall cost that any sort of illness imposes on society, often expressed as a percentage of GDP. Several studies show that the cost of illness might influence the decision of the ministry of finance or a donor agency to release additional funds to combat a specific health problem or threat. 

Management of illness

Illness at any cost needs to be managed. Prevention and prior interventions are effective means of improving or maintaining health, reducing demand on the government-funded medical and health care services as well as other public services, while at the same time they are effective ways of supporting economic growth as well. 

For some diseases and for some sections of the population, public intervention is intuitively the right thing to do. Govt might ponder on proposals like the national health care system or national healthcare insurance programs such as a single-payer health care system to deliver health care services to meet the health needs of target populations. It may be administered by the public sector, the private sector, non-profit organizations or by combining their individual activities. Funding mechanisms may vary with each particular program. 

The economic issues of illness need to be studied regularly and holistically. The economic case for prevention versus treatment must be compared as well. When an individual is in need of treatment, it generally becomes an issue of the individual and the onus lies more on the individual. 

On the other hand, human rights regarding health issues need to be addressed by the government. Government may take prevention measures for major diseases and hence illness. In addition to making the case for the government to spend money on prevention, the public must take responsibility for their own health and wellbeing.

Although insufficient as a basis for setting priorities and allocating resources in health, the economic cost of illness studies may help government to identify possible strategies for reducing the cost of sicknesses, diseases, and illnesses whatever we name it and take appropriate preventive actions or treatment strategies. 

The author is Assistant Professor, Institute of Appropriate Technology, BUET and Reviewer, Advances in Economics and Business, HRPUB, USA. He can be reached at [email protected]

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.