An Ounce of Prevention

Journal of Economic Perspectives—Volume 35, Number 2—Spring 2021—Pages 101–118 Joseph P. Newhouse enjamin Franklin (1735) advised that the marginal rate of substitution enjamin Franklin (1735) advised that the marginal rate of substitution between prevention and cure had a constant value of –16, although he between prevention and cure had a constant value of –16, although he B B didn’ didn’t put it in exactly those terms. Per t put it in exactly those terms. Perhaps with Franklin’ haps with Franklin’s adage in mind, s adage in mind, when discussions turn to the cost of health care, many advocate more resources for when discussions turn to the cost of health care, many advocate more resources for prevention. prevention. In this paper, I look at prevention through an economic lens and make three main points. First, those advocating preventive measures are often asked how much money a given measure saves. This question is misguided. Instead, preventive measures can be thought of as insurance, with a certain cost in the present that may or may not pay off in the future. Although most medical preventive measures improve expected health, they do not save money. Various lifestyle and early child- hood interventions, however, may both save money and improve health. Second, preventive measures, including medical and lifestyle measures, are heterogeneous in their value, both across measures and within measure, across individuals. As a result, generalizations in everyday discourse about the value of prevention can be overly broad. Third, health insurance coverage for medical preventive measures generally should be more extensive than coverage for the treatment of a medical condition, though full coverage of preventive services is not necessarily optimal. ■ ■ JJo osseep ph P h P. N . Neew wh ho ou usse i e is J s Jo oh hn D n D. M . Ma ac cA Arrtth hu ur P r Prro offeesssso or o r of H f Heeal altth Po h...