Essential Health Benefits (EHB) are things that a Qualifying Health Plan (QHP) must cover under the ACA. The area I want to focus on right now is the EHB’s for preventive care. These are the well visits, these are the contraception requirements, these are the screenings and these are the vaccinations. The Republican plans have been arguing that one of the reasons why the ACA premiums are too high is the list of covered services is too long. I am assuming that contraception requirements will be axed within seventy eight seconds of inauguration but on a cost basis those benefits are minor as the savings from not having effective no-cost sharing contraception are roughly balanced out by the increased unplanned pregnancy costs. If anything as IUD’s have gotten cheaper, contraception is a net money saver.
Instead I want to focus on the vaccinations right now as they have a different set of economic properties than all of the other preventive care requirements. They are at least partially public goods with non-linear returns to scale. What does that mean?
Let’s look at a preventive service that is almost entirely a matter of private consumption. If I was to have a colonoscopy to screen for colon cancer, I get all of the benefit of the scan. I am either told that there is nothing to worry about for the next long while or there is a problem that was caught early. If there is a problem, the polyps can removed and any treatment could get started as needed. If I have colon cancer, I can not give it to anyone else. I fully internalize the benefits of the cancer screening by either receiving peace of mind, early treatment or avoiding high cost end stage treatment.
The HPV vaccine is different. If I was young enough to have been in a HPV vaccine receiving cohort I would have received the vaccine. It provides me with significant benefits. It dramatically lowers the risk of me catching an infection and thus lowers the risk of developing a set of cancers later on in life. It also provides other people within my cohort benefits even if they are not vaccinated. If I was with a partner who has not vaccinated, she could not catch HPV from me. Any of her other partners would not get HPV that originated from me. I also could not get HPV from her. I am a blocking point in any potential infection chain.
Here the modeling of benefits gets funky and non-linear. If I am the only person in the world to have received the HPV vaccine, I internalize almost all of the benefits of the vaccination. Using traditional economic logic, I should pay for the vaccine fully myself. If I am the last person in the world to get vaccinated, there is almost no marginal benefit to me as there are no possible ways for me to get infected by HPV anyways. That scenario illustrates herd immunity. If there is a large number of people already vaccinated and I choose to get vaccinated, I internalize some of the benefits but the marginal increase in herd immunity is real as more potential infection chains are broken and the community as a whole benefits. More importantly, the people with compromised immune systems benefit the most as they get some additional indirect protection without risk.
The same logic applies to other vaccines. I went with HPV because I was in a three meeting on vaccination strategies yesterday.
Optimal vaccination levels, once we consider total cost, are not 0% and it is not 100%. It is probably in the high 90’s for most infectious diseases where the externality of herd immunity. Right now the United States is significantly below that for the entire array of early childhood vaccines. We are still able to generate significant positive externalities by increasing vaccination rates.
Since we can significantly increase total social welfare by increasing vaccination and since not all of the benefit of a vaccination is accrued by the person who received and paid for the vaccine, this is a textbook case that calls for public subsidy to promote further vaccination. Vaccines are one of the hills to fight hard for in any replace bill as it is good policy in both the short and long run and the economic logic is air tight.