The multiplier effect of compound interest in health
The concept of compound interest, common in finance, can be applied in health economics to illustrate how initial investments in the prevention and treatment of chronic diseases can generate significant cumulative benefits in the long term.
In health economics, the compound interest formula can be adapted to calculate the accumulated value of investments in early health interventions, prevention, and treatment of chronic diseases over time. This adaptation can help estimate the economic benefits of such investments.
The general compound interest formula is as follows:
FV (future value): represents the future value of the investment in health.
PV (present value): represents the initial investment in health programs (e.g., early diagnosis, vaccination, prophylactic treatment).
r (growth rate of benefits, like the interest rate in finance): reflects the expected return on investment in terms of avoiding costs, improving quality of life, or reducing long-term adverse events. This can be calculated based on healthcare savings or increased patient productivity.
n (periods): refers to the time (generally in years) over which the benefits are expected to accumulate, which may span the patient’s lifetime or the duration of a health program. It’s the value where the compound interest effect is reflected.
Suppose an early cancer diagnosis program has an initial investment of 1,000,000 $ and is expected to save 5% annually in care costs by reducing the need for advanced treatments. The formula would estimate the future value (FV) of that investment over 𝑛 years, showing how public health savings accumulate in a compound manner.
This formula permits analyzing the impact of early decisions on the financial sustainability of a healthcare system and highlights the multiplier effect of investing in public health.
Cancer is one of the leading causes of death worldwide and a key area where “compound interest” in health has a profound effect. Investment in prevention and early diagnosis programs can dramatically reduce the costs associated with advanced-stage treatment of the disease. For instance, early detection campaigns for breast and colon cancer can identify the disease at early stages, where treatment success rates are higher, and costs are significantly lower. Every dollar invested in early detection campaigns generates “compound interest” by avoiding future costs, such as advanced treatments, hospitalizations, and palliative care, while enhancing population productivity.
A public health policy that invests in early detection of these cancers could allocate initial funds to equip health professionals, purchase diagnostic equipment, and develop awareness campaigns. These resources generate a “compound return” in health, as early diagnoses lead to higher patient survival and quality of life, reduce work absenteeism, and lessen the financial burden on the healthcare system, freeing up funds for other priority areas.
Also in chronic hematological diseases like hemophilia, the compound interest effect is also observed through early and continuous prophylactic treatment programs. Patients with hemophilia require specific medications to prevent bleeding episodes that, if left untreated, can cause permanent joint damage, disability, and frequent hospitalizations. While prophylactic treatments have a high initial cost, the long-term benefit is significant. Each year of life without joint complications and hospitalizations represents a potential savings to the healthcare system and an improvement in the patient’s quality of life.
Government policies that subsidize or cover prophylactic treatment for people with hemophilia essentially apply the principle of compound interest in health: they invest in preventing future complications, which in turn reduces the need for more costly interventions in the long run. Over time, these investments help create a healthier patient population with lower disability rates and a higher economic and social contribution.
Applying compound interest in health economics means recognizing that the benefits of initial investments in prevention, diagnosis, and early treatment not only accumulate over time but tend to multiply. Public health policies that adopt this approach create a healthier, more productive society with a reduced burden on the healthcare system.
Public or Government affairs projects in public-private collaborations, can work together to promote and sustain these programs, involving key stakeholders from civil society, the public, and private sectors to maximize available resources. Compound interest in health is not only a financial concept but also a social and healthcare investment strategy, as prioritizing early and sustained investments in chronic diseases creates a virtuous cycle in which health and savings benefits accumulate and multiply, ensuring a positive and lasting impact on society.
EDUCATIONAL PILLS:
International Master in Medical Affairs. Program part of the educational offerings of the BioTech and Pharma School. In Memoriam César Nombela. Certified by the Catholic University of Ávila. Information
Advanced Management Program. IE Business School. Executive Development Programs. Information
READING PILLS:
Cancer control in the Commonwealth: a roadmap. The Lancet Oncologý
What’s the secret to eternal innovation? Enrique Dans
The Latest on Healthcare Research. Q3 2024 Update. Uncharted Territories con Tomás Pueyo.
Cancer death rate by type, World, 2021. Our World in data
Everything costs. Seth´s blog
The Medallas de Galicia 2017 were awarded at the Museo Centro Gaiás, located within the Ciudad de la Cultura de Galicia (Spain). This annual event, celebrated in Santiago de Compostela, honors individuals and institutions that have made significant contributions to Galicia in various fields, including culture, social work, sports, science, and the arts. The Ciudad de la Cultura de Galicia itself is an architectural landmark designed to promote the region’s cultural heritage through exhibitions, awards, and cultural programming. Toni Simón elaborated José Manuel Romay Beccaria´s speech.
Oracle announces new AI-powered electronic health record. CNBC
STARTUP PILLS:
Investment oportunitties: Capital Cell
Hub-and-Spoke Biotechs: Nimbus Therapeutics. The Century of Biology, By Elliot Hershberg
PODCAST PILLS:
#322 — Bone health for life: building strong bones, preventing age-related loss, and reversing osteoporosis with evidence-based exercise | Belinda Beck, Ph.D. Petter Attia
EVENTS PILLS:
17th European Public Health Conference 2024. Sailing the waves of European public health: exploring a sea of innovation. Main conference 13–15 November 2024. Pre-conferences 12 November 2024. Lisbon, Portugal. + info
AseBio Green Innovation Forum 2024. November 19, 2024 in Pamplona. Asebio
