Goldilocks and the money spent on preventive health

This blog is based on the report Preventive health: How much does Australia spend and is it enough? written by the authors for the Foundation for Alcohol Research and Education and the Prevention First coalition.


What’s your reaction when you find out that one of your neighbours spends three times as much as you on cable television, and another spends twice as much on travel? We’re guessing that you don’t think you are spending too little on these items. Yet that is how we often react when we see how much Australia spends on public health compared with other countries.

According to the Australian Institute of Health and Welfare, Australia spends $2 billion on activities labelled as ‘public health’. This is equivalent to $89 per person and less than 1.5 per cent of all health spending spent on prevention. Is this too much or too little? In comparison with the 30 plus other countries in the Organization for Economic Cooperation and Development, we sit mid-league at sixteenth when it comes to per capita spending, nineteenth as a share of GDP and twentieth as a share of spending on health. If this were porridge, then Goldilocks might be tempted to conclude ‘just right’.

Yet the fact that countries such as the USA, the UK and Canada spend three to five times more per person than Australia is of concern for some public health advocates. They point to the fact that Australia faces an increasing burden of chronic disease, much of which is preventable, and this places a large burden on the health system and the economy as a whole. Surely, we should spend more to avert the impending crisis, they suggest.

Unfortunately even though one might agree with this argument, it is not difficult to dismantle it. First, we already spend more on prevention than is indicated in the national accounts. They exclude spending by local government, some clinical prevention in primary care and preventive pharmaceuticals. Secondly, there are differences among jurisdictions in how pubic health is categorised, even among states and territories in Australia, which explains some of the reported differences in spending. Finally, how much we spend tells us nothing about how well it is spent. Could it be that Canada and the UK spend too much on prevention? The fact that health outcomes are often better in Australia than elsewhere should give pause for those who argue we spend too little.

But not too much pause. We know that prevention can be highly effective and it can be highly cost-effective. Indeed, some preventive actions such as changes to alcohol pricing and taxation, and restrictions on advertising junk foods to children, promote health and reduce costs. Not everything is quite so rosy. Some prevention is a waste of resources. But the point is that there is solid science behind disease prevention now that wasn’t there 30 years ago. Countries need to wake up to this. There are choices to be made about the best ways forward when it comes to improving population health.

So how should we decide how much to spend on prevention? We can learn from Goldilocks. Her search strategy involved local experimentation, tasting from successive bowls of porridge until she found the one that offered the best combination of taste and temperature, and trying out the different spoons and chairs until she found the most functional and comfortable.

Economists might recognise this as marginal analysis. This is the process of assessing the changes in benefits and costs arising from small changes in the level of ‘spending’.

If we were to increase spending on prevention by say $100 million per year (roughly 5 per cent of the current budget), what would we spend it on and would the expected change in health outcomes offset any additional net-costs? Similarly, what if we were to reduce spending by the same amount? What would we cut back on and would any consequences that follow be offset by savings that could be reallocated to produce greater benefits elsewhere? If an increase in spending yields net benefits then a further round of increases should be considered. And vice versa. By this way the prevention system moves incrementally towards higher (or lower) levels of spending, determined by the ratio of marginal benefits to marginal costs. Changes in spending are decided not by what other countries are doing but whether the return on investment in Australia (which includes any reduction in health inequity) warrants the cost.

Marginal analysis has been criticised for relying too much on expert opinion. But the process is supported with the evidence-based ‘taste it and see’ approach that Goldilocks adopted. This would see any increase in spending on prevention tied to a funded commitment to evaluate and so add to the evidence base. We had exactly this with the National Partnership Agreement on Preventive Health (NPAPH). Unfortunately, that story came to a premature end when the bears returned to the house and abolished the NPAPH before Goldilocks had had time to find the level of preventive spending that was ‘just right’.


Read the Prevention 1st event wrap-up here.

Watch the Prevention 1st event video here.

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Hannah Jackson

Hannah is a Health Economics Research Officer in the Department of Public Health at La Trobe University. Hannah has a Bachelor of Pharmacy (hons) and Master of Public Health (health economics stream), and aspires to contribute to an ambitious and robust research culture.

Alan Shiell

Professor Shiell is Professor of Health Economics in the School of Psychology and Public Health at La Trobe University. Prior to taking up this position he was the Chief Executive Officer of the Centre of Excellence in Intervention and Prevention Science, and before that he was Professor of Public Health Economics at the University of Calgary where he held a CIHR Chair in Applied Public Health. Alan tweets from @AlanShiell.

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