Related links: http://www.richmondfed.org/publications/research/region_focus/2010/q2/feature2_weblinks.cfmPublic health - Economic aspects

Christina Zajicek

Renee Courtois

English

Research Papers in Economics

T
en years ago the United States declared that 
widespread transmission of the measles — one of
the world’s most infectious diseases — had been
eliminated. No small feat considering that 50 years ago 
virtually everyone in the United States got the disease
before the age of 20. As many as 4 million Americans con-
tracted the disease each year; 400 or 500 died, while about
48,000 were hospitalized and 1,000 left with chronic 
disabilities like brain damage or deafness. 
Vaccinations are at the root of this dramatic improve-
ment. Nowadays, most years see about five dozen cases of the
measles in the United States. In 2008, the year-end total of a
mere 140 cases was the worst in years. As with all modern-day
outbreaks, the disease was imported from foreign visitors to
the United States or from U.S. residents who traveled abroad
and acquired measles in other countries experiencing 
outbreaks. Once in the United States, 90 percent of infected
people had not received the measles vaccination or their 
vaccination status was unknown, according to the Centers
for Disease Control and Prevention.
Though small in relative terms, recent outbreaks are a
reminder that containment of vaccine-preventable diseases
depends critically on the number of people in the popula-
tion who choose to get vaccinated. If enough people are
immunized, they collectively create “herd immunity” —
with sufficiently few susceptible people in the population,
the disease is unable to spread, protecting those who are not
vaccinated by medical necessity,
choice, or because they are too young. 
That rate is determined by a mathe-
matical formula based on factors
including the vaccine’s rate of failure
and how easily the disease is transmit-
ted. Professor Matthew Davis at the
University of Michigan says the rule of
thumb is that it takes about an 80 
percent vaccination rate against a 
disease to provide herd immunity to
the other 20 percent. But for a highly
infectious disease like the measles —
which will infect nine of 10 susceptible
people who come into contact with 
it — as much as 95 percent of the 
population must be vaccinated to 
provide herd immunity.
About 67 percent of children aged
19 to 35 months receive the broadest
set of vaccinations recommended by the CDC, according to
the latest data available. Though below the 80 percent mark,
herd immunity is not necessarily threatened since vaccina-
tion rates are much higher for each individual disease. For
example, Idaho, the state currently with the lowest total vac-
cination rate, still enjoys coverage above 80 percent for most
vaccines. By and large, it is the case that most children
receive most vaccines.
But that’s for the nation as a whole; there are pockets of
the country — sometimes as narrow as the community or
school level, for which data are scarce — with a relatively
higher rate of unvaccinated individuals. “That suggests there
are areas that are more at risk of getting these vaccine-
preventable diseases than others,” says Davis. In some
schools, as many as 15 percent to 20 percent of students are
unvaccinated. Modern measles outbreaks tend to be concen-
trated in unvaccinated populations, such as members of the
same religious congregation or young classmates in commu-
nities where a culture of natural medicine is prominent. 
The reasons behind widely different vaccination rates
across regions are not entirely understood by the health care
community. One clear part of the explanation is that
requirements differ dramatically across states (vaccine 
recommendations can be enforced only at the state level).
According to the Centers for Disease Control, all states
require vaccinations against diphtheria, tetanus, pertussis
(whooping cough), polio, and measles prior to kindergarten
entrance through 12th grades. States
have mixed vaccination requirements
for other diseases, such as mumps 
(47 states plus Washington, D.C.), and
varicella or chickenpox (44 states plus
D.C.), among others. 
But all states allow for exemptions
that permit a child to attend 
public school unvaccinated. Medical
exemptions, such as an allergy to a
component of the vaccine, are allowed
in all states, though well under 1 per-
cent of children fall into that category.
Religious exemptions are allowed by
48 states and Washington, D.C. —
West Virginia and Mississippi are the
exceptions — and 20 states allow
philosophical exemptions. 
The ease of being granted an
exemption also is a factor. Some states
Region Focus | Second Quarter | 2010  19
BY RENEE COURTOIS
Measles* Mumps*
Pertussis*
(Whooping Cough)
1950 211.01 N/A 79.82
1960 245.42 N/A 8.23
1970 23.23 55.55 2.08
1980 5.96 3.86 0.76
1990 11.17 2.17 1.84
2000 0.03 0.13 2.88
2009 0.02 0.65 4.40
Date Vaccine
Introduced 1963 1967 1949
*Per 100,000 people in population
Marked Improvement
New cases of many diseases have fallen 
dramatically since vaccines were introduced,
though experts note that some diseases, 
like pertussis, are on the rise.
NOTE: A national measles outbreak spanning 1989-1991
boosted new case numbers for 1990.
SOURCE: Centers for Disease Control and Prevention.
Data for 2009 calculated by author using CDC and
Census data.
 20 Region Focus | Second Quarter | 2010 
require only a signature on a form, whereas others require
notarized personal statements, annual reviews, and input
from local health officials. A2006 study in the Journal of the
American Medical Association (JAMA) found that exemptions
doubled between 1991 and 2004 in states with a relatively
easy exemption process, with no obvious increase occurring
in states with a harder exemption process. The study found
that states with a stricter exemption process had lower rates
of exemptions and, consequently, lower incidence of the 
diseases in question.
The Costs and Benefits of Vaccinations
Vaccines are heralded as one of the single greatest public
health triumphs the world has seen. Thanks to vaccines,
deadly and debilitating diseases have been kept at bay, 
virtually wiping out the incidence of illnesses such as 
mumps, polio, and measles. This has freed health 
professionals to focus on chronic diseases like cancer. The
demonstrated effectiveness of vaccines in preventing 
disease clearly provides an individual with an incentive to
get vaccinated.
Vaccines work by injecting the body with a mild or dead
form of a virus, providing the immune system the opportu-
nity to figure out how to attack it. The immune system has a
memory: If ever again confronted with the disease, it will
recall the blueprint to the antibodies. Edward Jenner discov-
ered the method in the 18th century when he observed that
milkmaids rarely contracted the deadly smallpox disease,
which he hypothesized was because they contracted the
less-virulent version that afflicted cows. Their bodies were
able to fend off cowpox and establish immunity to smallpox
in the process.
Despite proven benefits of vaccinations, some parents
choose not to vaccinate their children. One reason is that
vaccines are a victim of their own success: As diseases like
measles and polio decline in numbers or are eradicated, so
dies the memory and fear of them. And in many states the
exemption process is less burdensome than actually getting
the many required rounds of vaccinations viewed by some
parents as excessive.
Financial costs are an impediment, sometimes leaving
areas with many low-income families vulnerable. Vaccines
are funded through a mixture of private and public sources.
For those with health insurance, differing state regulations
mean insurance coverage of vaccines varies. Few state regu-
lations mandate national recommendations as a guide,
though, and the skyrocketing expense of the full recom-
mended regimen of vaccines increasingly means that many
are not covered by insurance. 
Public assistance is available for children not covered or
underinsured. The U.S. government under President
Clinton enacted the Vaccines for Children program that
subsidizes child vaccinations for the vast majority of 
children whose private insurance doesn’t cover them. 
A growing number of states also have “universal purchase”
programs in which the state purchases and distributes 
vaccines to both public and private immunization providers
at lower prices. 
Despite such steps, financial barriers persist. Families
often don’t know they’re covered by government programs,
according to Davis, and that has limited their success.
But parental fear of vaccine safety is by far the largest
stated reason for avoiding vaccinations. Nearly one in eight
parents refuse at least one recommended vaccine, according
to Davis and coauthors in a 2010 study, especially newer 
vaccines for chicken pox and human papillomavirus (HPV).
One in five believes some vaccines can cause autism in 
otherwise healthy children. 
Interestingly, it’s not that such parents think vaccina-
tions are ineffective; even vaccine refusers overwhelmingly
believe vaccines are able to prevent disease, according to
Davis and his coauthors. It’s that they think vaccinations
may be more harmful than the diseases they prevent, given
the low probability of catching them.
Experts say the risks from vaccines are small. Mild reac-
tions are common — about one in four children experience
low-grade fever following the diphtheria/pertussis/tetanus
(DPaT) shot, for example — but severe reactions are very
rare. One in 1 million children will experience seizures or
brain damage after the DPaTshot. Severe effects are so rare
that it is hard to know if they’re caused by the vaccine,
according to the CDC. 
Experts view the parental fears of such small risks as a
major threat to public health since they have led to
decreased vaccination rates and subsequent outbreaks in
other countries. After a study linking the MMR vaccine to
autism — a study that was discredited and retracted earlier
this year — was published in a British journal in 1998, MMR
vaccination rates in England dropped over 10 percentage
points in six years. England saw 56 measles cases in 1998, and
by 2008 there were 1,370. A similar story occurred in the
northern region of Nigeria after people shunned the polio
vaccine out of AIDS and other concerns. Following 
a rapid resurgence of polio in that country, experts say
immunization against polio in Nigeria is in danger of failing.
The lesson is that as immunization rates fall, there can be
a tipping point at which even the vaccinated face increased
risk since no vaccine is perfectly effective, and diseases start
to dramatically resurge. But where that tipping point is,
experts aren’t sure.
Guiding Vaccination Policy
In the matter of vaccinations, there is a natural tension
between self-interest and public welfare. How should 
policymakers weigh public health with private freedom 
concerning health choices? Researcher Alison Galvani 
of Yale University and various colleagues have developed 
game theory models in which an individual’s choice 
depends on the strategies chosen by others. They used 
these models to analyze the vaccination rates that could 
prevail under a purely voluntary vaccination policy regime 
compared to vaccination rates that would maximize Region Focus | Second Quarter | 2010  21
the welfare of the population as a whole. 
If the decision to vaccinate was left purely up to self-
interest, individuals (and parents, in the case of a child)
would decide whether to vaccinate based on their percep-
tion of the costs and benefits of doing so. But if everyone
else is immune, a vaccine poses little individual benefit. 
For individuals who view vaccines as especially risky or the
risk of disease as low, their best choice will be to go without.
Therefore, in the Nash equilibrium — a game theory out-
come in which no individuals can improve their lot given the
strategies chosen by others — the total vaccination rate is
likely to be lower than socially optimal. 
The outcome, in this case, would be greater illness since
a nonimmunized person is more likely to catch and spread
the disease. This meshes with empirical studies: Several have
found that communities with lower vaccination rates had
higher infection rates even among vaccinated children. 
The utilitarian approach is arguably more characteristic
of the vaccination policy we have today: Vaccine mandates
are intended to maximize the welfare of the entire popula-
tion, at least where disease control is concerned. School
mandates have been by far the most effective way to increase
vaccinations. However, some requirements test the limits 
of public tolerance for sacrificing freedom for the greater
good like the newer adolescent vaccines for sexually trans-
mitted diseases that have proven unsavory to many parents.
Exemptions are a way to modify the utilitarian approach
to allow a greater scope for private preferences. But they
undermine the benefits provided by mandates since exemp-
tions provide an opportunity to “free ride” off the immunity
of the herd, just like in the Nash equilibrium. Those exempt-
ed get the benefits of immunity through the herd without
the hassle, financial costs, or perceived risks of vaccination. 
Both strategies seem to imply that policy should also
focus on directing private choice toward the optimum; 
that is, to bring the Nash and utilitarian outcomes closer 
together through strategies that increase voluntary vaccina-
tions. This means understanding people’s decisions not to
vaccinate and improving accurate public information about
the costs, benefits, and administration of vaccinations. 
This could be particularly helpful concerning the risks that a 
vaccine poses for a given individual, since those fears are one
of the biggest current threats to herd immunity and have led
to reduced vaccine uptake and outbreaks in the past.
Research indicates that the people most trusted to con-
vey information about vaccine safety are doctors. So Davis 
suggests that any efforts to address the public’s concerns
over vaccine safety have to involve individual physicians to
be effective. There’s risk with any procedure or medication,
he says, but it’s hard to know whether a given individual will
experience side effects as he or she receives something for
the first time. “For some people the vaccine safety concerns
are outweighing the possible benefits in their minds, and
that’s a very important conversation that doctors need to
have with patients and parents.”
If all else fails, Galvani and her colleagues suggest that
policymakers shouldn’t discount appealing to altruism as a
way to increase voluntary vaccinations. Parents aren’t always
conscious that the private vaccination decision has public
consequences, according to Davis. He says parents who are
inclined to refuse vaccines often ask why they should give
the polio vaccine, for example, to their children when
chances are imperceptibly small they’ll catch the disease. 
“My answer to them is, ‘Why do you think your child is
not likely to get polio?’ They pretty quickly get to the fact
that their children are protected only because other parents
have vaccinated their children against polio.” No parent, he
says, enjoys realizing their children would be free-riding on
the immunity of other children.  RF
Christina Zajicek contributed to this article. 
0
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40
50
60
70
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100
MD DC VA SC WV NC U.S.
All Recommended Vaccines
Diphtheria, Tetanus, Pertussis (4+ doses) 
Polio (3+ doses) 
Measles, Mumps, Rubella (1+ doses) 
Fifth District Coverage
Percent of children aged 19 to 35 months receiving all recommended
dosages for select vaccines
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SOURCE: Centers for Disease Control and Prevention, 2008 National Immunization Survey
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“Vaccination Externalities.” B.E. Journal of Economic Analysis and
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Geoffard, Pierre-Yves, and Tomas Philipson. “Disease Eradication:
Private vs. Public Vaccination.” American Economic Review, 
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R EADINGS

Advancing immunity : what is the role for policy in the private decision to vaccinate children?

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Advancing immunity : what is the role for policy in the private decision to vaccinate children?

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