What we could save by investing in community conditions

July 25th, 2019

In a report released this week, the Lown Institute and the Well Being Trust identified a disturbing pattern in California’s budget. In 2007, California spent more of its budget on programs to improve community conditions — such as public health, social services, and environmental protection — than it did on health care. But over the next ten years, the state’s health care spending increased by 146%, a dramatic increase compared to a 39% increase in spending on community conditions. By 2018, California spent only $0.68 on public health, social services, and environmental protection for every dollar spent on health care.

Despite the substantial increase in health care spending, millions of Californians continue to suffer from chronic health care problems, high infant mortality rates, and lower life expectancy, brought on by toxic air and water pollutants, poverty, food deserts, lack of affordable housing, and low levels of formal education. Ironically, more spending on health care is eating up California’s budget, making it more difficult for policymakers to allocate needed spending for community conditions.

The Lown Institute report stresses the importance of rebalancing state budgets by reducing health care waste and investing in community conditions. Improving public education, increasing financial security, building spaces for people to exercise safely, and providing more affordable housing not only have proven health benefits, they also pay for themselves many times over through fewer hospitalizations and emergency room visits.

Despite the health and financial benefits of investing in community conditions, it is often difficult for organizations that provide social services to secure funding for vital community conditions. One solution is to partner with health care institutions on these investments, since health care institutions benefit from having healthier patients. 

The Commonwealth Fund recently released a new tool to encourage these partnerships between social services providers and health care institutions, by giving them an estimate on how much they could save by investing in community conditions. The Return on Investment (ROI) Calculator, developed by Dr. Victor Tabbush of UCLA and based on work conducted by the SCAN Foundation, “allows organizations to learn how their social needs investment might pay off in terms of cost savings and changes in the amount of health care complex patients use.”

To use the calculator, you’ll need some key information about which social service investments to measure, which health outcomes do you expect to change by investing in social services, the current utilization rates and costs of these services, and the number of people that would benefit from new investments in social services. Some average numbers can be found on the Commonwealth Fund website, but all fields can be tailored to the service that your or your partner organization want to provide.

A page from the Return on Investment Calculator showing the social services and health care utilization measures.

The tool calculates the cost of each service per beneficiary and then calculates the savings to the health sector for investing in community conditions. Their calculations come from a wealth of research on the returns on investment for social spending, a summary of which the Commonwealth Fund has also made available on their website.

Understanding how much communities have to gain from investments in community conditions, both in improved health and decreased spending from health care utilization, is important for creating more partnerships between health care systems and community benefit organizations. The ROI calculator tool is a potential game-changer for establishing the potential benefits of social investments — with this much to gain, we can’t afford not to spend more on community conditions.

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