In: Handbook of Health Economics
Prevention ranges from medical decisions such as vaccinations and clinical preventive services delivered during periodic health examinations to private health lifestyle decisions such as regular exercise and non-smoking. The aim of this chapter is to provide an overview of economic issues that cut across a variety of prevention decisions. After discussing what prevention means, the chapter reviews some basic theoretical insights about prevention from human capital models and insurance models. Consumer or household behavior receives most of the attention, partly because there is not an identifiable industry that produces prevention viewed broadly. The chapter next explores market failures that might lead to too little prevention from a societal perspective: ex ante moral hazard from health insurance, externalities from vaccinations, lack of consumer information, and the public good aspects of prevention-related research and development. Health economics provides some conceptual and empirical arguments for policies to encourage prevention. However, the economic perspective often remains quite different from the perspective of many public health professionals who are strong advocates of prevention. With that distinction in mind, the chapter then turns to policy-relevant questions of whether prevention can reduce total medical expenditures, and the effectiveness of policy interventions to encourage prevention. The chapter concludes with some reflections on what economics has offered and can offer to prevention research.
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