'A Better Start' – How will it pay?

What we talk about when we talk about costs

16/04/2014

In our last post, we promised to talk more about what we mean when we say ‘costs’ in the context of ‘Preventonomics’. This is important because – as discussed last time – ‘costs avoided’ is how we will decide whether an intervention is good value for money.

 

The economists’ view on costs

Often, when people talk about costs, they mean money. But there is more to it. As people, we are embedded in a complex social system that includes not just formal services and institutions, but also the labour market where we sell our time to employers, other markets where we are consumers, and social relationships with our family and friends as well as wider society. Everything we do impacts on this web of connections.

When economists talk about ‘costs’ they are talking about all those impacts. For example, a child with persistent conduct problems is likely to need support from social services, additional educational help, may have high health care needs and may be involved with the criminal justice system at some point in their life. These are costs that can be easily captured because they are the same as expenditure on conduct problems. So these costs are measured directly in monetary terms.

 

Looking beyond the money

But there are other costs: children with persistent conduct problems often develop anti-social personality disorder in adulthood, and this is correlated with a host of problems. One important consequence is a higher risk of unemployment. This isn’t something that can be measured directly in terms of expenditure (except for benefit payments, but this is a topic for another post). Economists therefore need another way of measuring costs. In the case of unemployment, we try to find out how much the person WOULD have earned if they were the same except that they had not developed persistent conduct problems. In this way, we turn ‘unemployment’ into a ‘money’ figure.

So, what do we mean when we talk about costs? Economic costs in the context of ‘Preventonomics’ are – in principle – all the negative impacts of a childhood problem on all aspects of a child’s life and on society, converted into monetary terms. We use money because it is familiar, and it allows us to easily compare the size of impacts on different sectors or different people.

 

Costs in the ‘Preventonomics’ models

That being said, the ‘Preventonomics’ work is firmly rooted in evidence, and we can only consider those impacts where there is good evidence that a) the impact is caused by the problem we are trying to prevent and b) the intervention in question has been shown to reduce the impact.

There are also a few cost categories that we exclude from the outset because including them would be problematic. One of these categories is the value of additional life years gained or improved quality of life – a number that easily becomes so large that it overshadows any other impacts. Where there is evidence that the interventions impact on quality of life or mortality, we will describe this but not convert it to money.

One big part of our work for the Big Lottery Fund is providing tools for the local areas who will implement ‘A Better Start’. These economic models will allow them to calculate how much they can potentially save (or how much cost they can avoid) by implementing evidence-based interventions.

These models will have two parts: The first is a short-term model that looks at a typical local authority budget cycle and focusses on expenditure, to help with budget planning. The second takes a longer view and includes more types of costs, converted into money, to reflect the broader social savings the interventions may achieve.

This approach addresses one of the problems associated with prevention: expenditure on interventions from one budget may lead to savings in another. The same is true when we look at wider society; increased health care expenditure to provide effective interventions may mean that fewer people will be unemployed down the line. Our model will give an indication of the size of savings, and who is likely to benefit.

 

We will be back with a new post after Easter. In the meantime, follow @BigFirstYears and @Preventonomics on Twitter and use the hashtag #ABetterStart to join the conversation!

 

“Costs avoided” – how we calculate savings

04/04/2014

As we mentioned in our last post, one difficulty faced in early years prevention is that money needs to be spent on interventions right now, but the pay-offs often don’t materialise until well into the future. This has implications for research: to show whether an intervention is good value for money, we have to follow people for a long time. This is difficult for many reasons: it places a lot of demands on research participants; there are high costs associated with carrying out such a long study and it takes a long time until results are available.

 

A potential solution: “costs avoided”

Here’s how we get around these problems in ‘Preventonomics’. Instead of conducting long-term studies, we pull together the existing evidence on the costs associated with childhood problems in the three “A Better Start” areas (nutrition, social and emotional learning, speech and language development) in an economic model. This gives us an estimate of the cost of not intervening.

We then look at interventions shown to be effective in preventing these problems, and calculate how much could potentially be saved if they were implemented. This means we calculate the savings from intervening early as “costs avoided”.

 

Parenting programmes – an example of a modelling study

One example of this approach is our study looking at savings from parenting interventions to prevent persistent conduct disorders. The full article can be found here. We compared two scenarios: in the first scenario, a “typical” five-year old with conduct problems did not receive the intervention we were looking at. We reviewed the literature and put together the best available estimates on the chance that this five-year old would still have problems by age 16 – this was 50%.

We then calculated the costs over and above those incurred by a child without conduct problems. Next, we estimated the chance that the intervention would further reduce the chance that conduct problems persist. In our analysis, this was an additional 34%. Other factors we considered were drop-out and the chance that the intervention only worked for a short time and problems re-surfaced.

Overall, we showed that an investment of under £1,000 to pay for parenting programmes lead to savings of more than £16,000 over 25 years. Group-based parenting programmes therefore seem like a good investment.

 

“Guesstimates” vs the “real world”

Of course there are downsides to this approach. The estimates are just that – a best guess, based on data already available to us. “Real world” results will vary, based on factors such as fidelity of implementation, staff qualifications and the motivation of people participating in interventions. On the other hand, these estimates are a good indication of whether it is generally worth taking a chance on a particular type of intervention.

 

If you would like to read more examples using the “cost avoided” approach, we recommend you take a look at the PSSRU publication “Mental Health Promotion and Prevention: The Economic Case” (free pdf download).

 

Next time, we will discuss the types of “costs” we will take a look at in the ‘Preventonomics’ work, so please check back here on April 16. In the mean time, follow us on Twitter (@preventonomics) or send us an e-mail ()!

To follow news of the Big Lottery Fund’s ‘A Better Start’ initiative, follow @BIGFirstYears and #ABetterStart.

Prevention + economics = ‘Preventonomics’

21/03/2014

A few weeks ago, we launched the ‘Preventonomics’ blog and introduced the work the PSSRU have been commissioned to carry out for the Big Lottery Fund’s A Better Start (ABS) programme. Today we want to talk about what we mean by ‘Preventonomics’.

First off, where does the name come from? It is a merger of “prevention” and “economics”. You may have heard of the popular science sensation “Freakonomics” – a book that combines pop culture and economics in a freakishly delightful read. It is also a good example of how economics can be usefully applied to a wide range of questions and provide a surprising and fresh perspective.
 

Prevention and promotion

In the 2005 Bangkok Charter for Health Promotion in a Globalized World, the WHO defined health promotion as “the process of enabling people to increase control over their health and its determinants, and thereby improve their health”. This is sometimes interpreted as health education and social marketing that targets behavioural risk factors. A wider definition calls for improvements that are conducive to good health, perhaps housing, working conditions, or enabling employment and food security. Similar principles can be applied when thinking about promotion activities within ABS: What are the factors or circumstances that can be improved to promote child well-being, health and development in the early years?
 
In contrast, prevention focusses on reducing risk factors for poor health or wellbeing. This can happen at any stage of the development of a problem. Primary prevention aims to prevent a problem from occurring in the first place. Secondary prevention tries to prevent early signs of trouble from developing into full blown problems. And tertiary prevention seeks to prevent the negative consequences of a problem by providing treatment for a current problem, or maintenance treatment for those who used to be affected.
Within ‘Preventonomics’, we see prevention and promotion as two parallel processes that work together in improving life chances in the early years. The focus of ‘Preventonomics’ is on the economics of prevention activities.

 
What are the economic aspects of prevention?

There is a general consensus that not enough is invested in prevention and early intervention. While the argument for early intervention and prevention is well established child development research, the economic perspective helps understand why it can be difficult for policy makers to implement. In both the US and the UK only a small proportion of GDP is spent on very young children. Shifting money into preventative services means an increase in expenditure in the short term, but financial pay-offs may not happen until the medium- to longer-term. Moreover, expenditure on prevention from one budget may lead to savings in another; perhaps higher health care costs today reduce use of additional education supports when children are older.

‘Preventonomics’ is about finding evidence of the costs associated with not implementing preventative interventions, identifying cost-effective interventions and estimating potential savings from preventative interventions. We will also show where and when expenditure and savings are likely to occur. The economics of prevention require a long-term view that considers the impact across different budgets and agencies, rather than a narrow perspective that is limited by budget cycles. While we will focus on the public sector in the short term, our longer-term estimates are going to take into account the wider benefits of prevention.
 

What’s next?

Watch this space for more information on ‘Preventonomics’ and our findings, hot off the press. Our next post will be published on April 4th.

In the meantime, why not check out the “Freakonomics” blog or visit these organisations with an interest in the early years: Wave Trust, The Breastfeeding Network, the National Literacy Trust or the Maternal Mental Health Alliance.

Or join the conversation on Twitter! Find us at @preventonomics and use the hashtag #ABetterStart.