Better Outcomes, Lower Costs?

Decisions about how to institutionalize public health services and how to allocate public health funds are essential aspects of policy making in the United States. Public health services, often confused with personal medical care, are related to solving society-based health problems, which involve preventing, contagious disease, preserving water quality, maintaining sanitary conditions, and ensuring food safety. Across the country, local public health departments take on different institutional forms. Some are regionalized, meaning that they operate under the supervision of their municipal governments. Other public health service providers are organized in independent and multi-county departments.

An efficient allocation of funds for public health services requires careful consideration of citizen demand and the appropriate type of institutionalization. Is it more efficient to have local public health departments institutionalized independently? Or is it better when public health departments function as agencies of the municipal governments (that is, to be regionalized)?

In the paper “Does Regionalization of Local Public Health Services Influence Public Spending Levels and Allocative Efficiency?” Laurie Bates and Rexford Santerre explore public health service funding and regionalization issues. Because funding for these services comes from taxes and intergovernmental grants, Bates and Santerre assume that demand for community public health services will respond to changes in tax-share, income, and other public spending on education and other municipal services. To explore the allocation of resource efficiency with respect to the type of institutionalization of public health departments, the authors compared the spending levels of the local and regional demands for public health services, then examined if resources for public health services are more efficiently allocated to independent public health departments or regional public health departments.

In a study of 169 Connecticut towns and cities from 2001 to 2008, the authors found that the change of demand for public health services responds more to the change in tax-share than the change in other types of public services, like education. The results also showed that demand for public health services does not respond much to a change in citizen income level and that a change in education spending and other municipal spending is not associated with change in intergovernmental aid on public health spending. According to the authors, such findings imply that there is no spillover effect of public health-directed intergovernmental aid services to other types of public services.

And how does the spending on public health services change in response to the change on institutional structure of public health departments? Research results show that when a public health department in a region shifts from a local independent institution to a regionalized department acting as a governmental agency, there is a corresponding increase in spending on public health services in the region.

To test the allocation efficiency for public health resources, the authors proposed that the efficiency of public health spending in a region be determined by the aggregate property values. The underlying rationale is that public officials decide the level of spending on public health services in order to maximize aggregate property value in the region. The authors found that a 10 percent increase in local public health spending reduces aggregate property values, on average, by 1.2 percent. According to authors, this result indicates that regionalizing independent public health departments may not be the preferred policy goal from the perspective of resource allocation efficiency. In addition, the authors explained that the efficiency loss resulting from additional public health spending is larger in regions with a greater population.

The research by Bates and Santerre has many useful implications for public health funding. The results of their study may help public health officials better understand citizen demand for public health services and find more efficient allocations of resources to serve the public.

Feature Photo: cc/(PNNL – Pacific Northwest National Laboratory)