A growing body of research has estimated the numbers of people who become ill or die because of unhealthy housing. The research also has provided estimates of the effectiveness of housing interventions to eliminate or reduce these adverse health outcomes. However, few studies compare the economic burden of housing-related adverse health outcomes with the resources required to implement relevant interventions. Public health practitioners should use economic analyses to guide decisions regarding the efficient use of resources.1,2
This article gives an overview of economic analyses commonly used in public health, examines the economic burden of housing-related illness, and compares economic studies that focus on housing-related illness and associated interventions. Examples are given to discuss the appropriate interpretation of findings from economic studies and to help guide decision making regarding implementation of housing-related interventions to improve health. Specific housing-related health issues discussed include asthma and adverse effects from lead, radon, and carbon monoxide (CO). The economic costs and burden of common housing-related injuries are excluded from this article and will be the subject of a separate subsequent analysis. The work did not involve human subjects.
Overview of Economic Analysis Methods
Five types of economic analysis methods are common in the public health literature:
* Cost of illness (COI)
* Cost analysis (CA)
* Cost-effectiveness analysis (CEA)
* Cost-utility analysis (CUA)
* Cost-benefit analysis (CBA)
Cost-of-illness studies convey the magnitude of a public health problem in monetary terms. The summary measure of a COI analysis includes all costs (ie, medical, nonmedical, and productivity) associated with all adverse health outcomes resulting from a health problem.3 In contrast, a “program” CA quantifies the value of resources required to implement 1 or more interventions. This type of analysis may include not only costs associated with implementing the intervention but also costs that are saved as a result of the intervention. In the latter case, results from the CA are presented as net costs (ie, COI minus total program costs).4
Cost-of-illness studies and cost analyses that focus on a single program are inherently descriptive in nature—they are conducted to describe the economic burden of a disease or illness or the costs and potential cost savings associated with implementing an intervention.5 Economic evaluation analyses, in contrast, go beyond merely quantifying illness-associated or intervention implementation costs to comparing the costs and effects of alternative intervention strategies. In public health, the most common of these economic evaluation approaches is CEA.3 The summary measure of CEA is a ratio of net cost of the intervention (program cost minus costs saved because of adverse health conditions prevented) per improvement in health resulting from the intervention (eg, cost per case averted or cost per symptom-free day).3,5,6 Alternatives under consideration may include another intervention, “usual care,” or the “do nothing” option.7 When alternative strategies intended to address the same health outcome are being compared, the alternatives can be ranked on the basis of their cost-effectiveness ratio. Cost-effectiveness analysis is typically performed to compare the relative efficiency of 2 or more interventions, that is, to determine the relative bang for the buck of each intervention.2 Under these circumstances, the incremental cost-effectiveness ratio is reported. The incremental cost-effectiveness ratio is the additional cost per additional unit of health effect resulting from the intervention under study as compared with the next best alternative.7 Unless an intervention is both more effective and less costly than all alternatives, the determination of whether an intervention is cost-effective assumes a threshold exists for which the health benefits gained are judged by decision makers to be large enough to justify the additional cost of the intervention,8 although there is some controversy surrounding the use of such thresholds.5
Cost-utility analysis is technically a special case of CEA.3,5,7 What distinguishes CUA from CEA is that the health outcome measure, typically quality-adjusted life years (QALY), accounts for both the prolongation and quality of life.5,7 A QALY is a health outcome that incorporates preferences for different health states, where 1 is perfect health and 0 is death. While the QALY is the predominant generic outcome measure used in CUAs, alternative outcome measures have been proposed. For example, the World Health Organization recommends the use of disability-adjusted-life-years in CUAs.9 Because the outcome measure in a CUA captures the multifaceted nature (ie, both length and quality of life) of health outcomes and therefore allows disparate health conditions and interventions to be compared, a number of health economists recommend CUA be conducted as part of any economic analysis.1,7 This recommendation notwithstanding, some researchers note that QALYs can be subjective, are not available for many health outcomes, can be difficult to measure, and may not be universally accepted.3
Some researchers suggest CBA as the gold standard of economic evaluation methods.3 A CBA compares the costs and consequences (both positive and negative) of disparate intervention strategies in monetary terms. It can be useful in choosing among competing program options, helping to decide whether to implement a program, and setting priorities within resources constraints.3,6 For example, CBA is the primary form of economic evaluation used in regulatory analyses, including regulations relating to housing and environmental health.2 The summary measure of a CBA is expressed as either net benefit (ie, costs minus benefits) or as a ratio of costs to benefits. In CBA, “benefits” comprise the economic value of all averted adverse outcomes associated with the disease under study. Because both the numerator and denominator of the ratio are expressed in common units (eg, dollars) and the summary measure is dimensionless, decision makers can compare disparate public health problems and programs. However, it is often difficult to valuate certain health outcomes in monetary terms (eg, freedom from pain) and it may be distasteful or controversial to value health or a human life in monetary terms.3,6
Regardless of economic evaluation method, the viewpoint from which the analysis is conducted has important implications in the design of an economic study and on the results of the analysis.3,4 The study perspective used is particularly important because the costs associated with adverse health, as well as the costs and benefits associated with implementing an intervention aimed at addressing the heath issue, are typically not distributed equally among various groups within society. For example, low-income households suffer a disproportionate share of illness because of substandard housing.10,11 However, by choosing an appropriate perspective (eg, societal) for the conduct of an economic evaluation of an intervention aimed at improving low-income housing, all relevant costs and benefits associated with the intervention can be accounted for regardless of who pays or who benefits. Other possible analysis perspectives include the federal, state, or local government; the health insurer or payer (eg, a health maintenance organization or Medicaid); the employer; or the individual. However, the societal perspective is often used in public health and is recommended by the Panel on Cost-effectiveness in Health and Medicine.7 The Panel on Cost-effectiveness in Health and Medicine, a 13-member group of nongovernment scientists and scholars with expertise in CEA, was convened in 1993 by the US Public Health Service to assess how CEAs are being conducted in the field and to make recommendations on how such studies can be conducted to improve their quality and facilitate their comparability. In the societal perspective, all significant costs and health effects associated with everyone affected by the intervention are included in the analysis regardless of who pays or who benefits.3,7 However, public health practitioners working at the local level may not have sufficient expertise to use analyses conducted from a societal perspective. In addition, analyses conducted from a societal perspective typically do not valuate intangibles important to public health practitioners such as social justice.1,2 Although economic evaluation from other perspectives often can be deduced from a societal perspective by including only the appropriate subset of costs and consequences in the analysis, such studies may not include all costs of interest to local public health officials (eg, all implementation costs). Consequently, health economists may serve local and state public health agencies by conducting analyses from a government or other payer perspective. Table 1 provides a list of cost categories and examples of the types of data typically used for different study perspectives. Other issues important to conducting and understanding economic analyses, such as study time frame, analytic horizon (eg, the upfront costs of a housing intervention might result in health benefits that can be captured only years later), and discount rates, are not discussed in this article. Others have provided brief overviews of these important economic concepts.2,6 In addition, other resources are available for more in-depth study.3,5,7
Published Costs of Specific Housing-Related Health Outcomes and Interventions
Some housing-related health outcomes and relevant interventions have received considerable attention in health economics, whereas others have not. For example, a search of PubMed and the Internet reveals a substantial body of literature on the cost of asthma morbidity. However, a similar search resulted in no COI studies on CO poisoning. For the current discussion, we include economic analyses on common housing interventions to prevent asthma, lead and CO poisoning, and lung cancer related to radon. All monetary values have been adjusted to 2008 dollars, using the overall Consumer Price Index, which may result in an underestimation of medical costs.12
Asthma and indoor agents
Asthma-related costs, estimated at $20 billion in 2007,13 rank among the highest for chronic diseases.14 On average, each child and adult with asthma costs respectively $1044 and $2157 more in direct medical costs than children and adults without asthma15 and asthmatic children miss 2.5 more days of school a year.16 Productivity losses due to missed work by parents of children with asthma total $333 each year per child with asthma, and $123 of lifetime earnings per school-aged child with asthma is lost because of premature death. Annual mean health care expenditures for children with asthma are nearly 2.5 times the amount incurred for children without asthma ($2140 vs $887).17
Environmental exposures account for a substantial portion of the economic costs of asthma. For example, 1 investigation suggests approximately 20% of asthma cases may be attributable to dampness and mold at an annual cost of $4.0 billion.18 More than $1.1 billion annually in asthma-related direct and indirect costs are estimated to be attributable solely to residential exposures in children and adolescents 16 years or younger.19
Several COI studies have been conducted for asthma, and CA and CEA have been performed on asthma-related housing interventions (Table 2).16,18,20–28 The COI studies were conducted mostly from a societal perspective. One team of researchers limited their study to asthma-related costs for Medicaid recipients and therefore used a payer perspective.23 Studies vary in the comprehensiveness of cost categories included. For example, medication costs associated with allergic rhinitis, a common comorbidity of asthma, were included in 1 study,22 whereas other studies either did not explicitly state the types of medications considered16 or included only estimates of costs for asthma-specific medications.22 Differences in how the study is framed should be considered when comparing study results.5
Asthma-related interventions have been the focus of many health economic studies, but few included a housing-modification component.8 Of 2 studies that did include such a component, the costs included in each analysis differed substantially. For example, the CA conducted by Krieger et al24 compared only urgent direct medical care costs of 2 groups that received different levels (“high intensity” vs “low intensity”) of an home-based environmental intervention, whereas Kattan et al25 were more inclusive in the direct medical costs (eg, both scheduled and unscheduled medical visits, and controller and rescue medications) considered in their CEA.
Two cost analyses suggest that while integrated pest management (IPM), a strategy for reducing exposures to both pesticides and allergens (eg, insects and rodents),29,30 is more effective than standard pest management strategies, IPM is initially 2 to 3 times more costly than standard pest management.27,28 Because both studies were conducted from the payer perspective, the true total costs of pest control methods studied may not have been adequately quantified (eg, resources used by occupants to purchase and apply supplemental pesticides were not included). In addition, the links between exposures to pesticides in residential settings and health outcomes and associated costs were not examined in either study.
Blood lead levels in children in the United States have decreased significantly over the past decade.31 The resources essential to achieve this success were allocated, in part, as a result of policy changes made on the basis of published estimates of the financial benefits of eliminating lead exposures.32–37 Although studies demonstrate that blood lead levels have had a staggering impact in terms of productivity losses alone, they focused primarily on intelligence quotient–related productivity improvement. For example, elevated blood lead levels have been linked to many long-term adverse outcomes, including attention-deficit/hyperactivity disorder, juvenile delinquency, and criminal behavior, and an increased need for special education.35,38,39 However, these studies did not consider how reducing or eliminating lead exposures in young children could lead to reductions in costs associated with the aforementioned conditions. Thus, the total benefits of lead hazard prevention and mitigation likely are much higher than the estimates reported in studies that focused on productivity losses alone.
A recent CBA that compared the benefits of lead hazard mitigation with costs associated with lead paint hazards in homes estimated that exposures due to these hazards costs the US society from $205 to $288 billion for a cohort of children 6 years and younger.12 In one of the few CBAs that explicitly described the intervention being evaluated (lead-safe window replacement),40 societal benefits from productivity gains, savings in energy costs, and higher housing market values were all included in the study, but other costs (eg, direct medical costs) and benefits (eg, from reduced crime and special education needs) were not accounted for. In contrast, an earlier CBA included savings resulting from reduced medical and special education costs and expected productivity gains, as well as program costs associated with the intervention.41
Several of the lead-related evaluations were conducted from a societal perspective.12,40,41 However, there are many adverse effects associated with lead exposures that are potentially relevant from a societal perspective that were not included in any of the studies reviewed. For example, none of these studies included costs associated with the effects of in utero lead exposure (eg, reduced gestational age or lower birth weight) or certain adult adverse outcomes (eg, increases in blood pressure and cardiovascular disease).35
Lung cancer related to radon
Radon is estimated to cause 21 000 lung cancer deaths annually at an average cost of $1.1 million per person.42 In contrast, typical costs for radon mitigation ranges from $900 to $2850, with an average per unit cost of $1350,43 while the cost of making a new radon-resistant home ranges from $460 to $660.44 There is conflicting evidence on the effectiveness and cost-effectiveness of specific radon prevention and mitigation strategies. For example, basic preventative measures in new homes, such as the use of sealed membranes, have been found to be ineffective in 1 study,45 yet highly cost-effective in another study (which implies effectiveness).46 In contrast, active radon mitigation in existing housing has been found to be effective30,45,47 but may not be cost-effective.45 The monetary units here are pounds-sterling, not dollars. When a societal perspective is taken, the determination of whether a specific radon prevention or mitigation intervention is cost-effective or not rests on many factors. Such factors include, but are not limited to, (1) the action level above which remediation of the home is recommended (currently 4 pCi/L in the United States); (2) the proportion of homes with radon levels over the action level; (3) the proportion of households that have radon levels over the action level that decide to remediate; (4) the risk of developing lung cancer based on radon dose; and (5) the age of the residents living in the home.46–50
Consistent with cost analyses on other health conditions discussed in this article, economic studies on the effectiveness of radon exposure control to improve health tend to undervalue the benefits of the interventions. Three of the 4 CEA studies listed in Table 3 used cost per life-year saved (gained) as a summary measure, thereby facilitating the comparability of study findings.13,40,41,46–49,51–53 Although each of these studies accounted for reduced costs attributable to preventing premature death caused by lung cancer, health care costs due to extended life expectancy are generally not considered.46 As noted by a team of researchers,49 their study (as well as the other studies reviewed for this article) did not include potential benefits such as delayed lung cancer onset, prevention of nonfatal lung cancer, and benefits to future generations that live in high-risk areas where radon prevention or remediation strategies have been implemented (assuming remediation is effective). Of the radon studies reviewed, only 1 was a CUA.46
Carbon monoxide poisoning not related to fires
Carbon monoxide is the leading cause of all unintentional poisoning-related deaths in the United States,54 especially among adults older than 65 years.53 In residential settings, CO accounts for 5% of poisoning deaths not related to a fire.56 While the public health burden of most CO poisoning is small when compared with other housing-related adverse health outcomes, the Centers for Disease Control and Prevention reports non-fire-related CO exposures caused an average of 480 deaths from 2001 to 2002 and more than 15 000 emergency department visits between 2001 and 2003.55 More than 50% of CO poisoning incidents reportedly occur in the home.57,58 On the basis of a published estimate of the average societal costs of unintentional death in the home59 and assuming 50% of deaths occurred in the home,58,60 residential CO poisoning-related fatalities costs the US society more than $500 million annually. Similarly, assuming the average cost for nonfatal injuries is $17 250,59 and 70% of nonfatal CO poisoning incidents occur in the home,61 morbidity due to residential CO exposures costs approximately $180 million annually in the United States.
Few published studies on societal costs associated with CO morbidity or mortality were identified. This may be because CO poisoning is difficult to accurately diagnose clinically.55,62,63 Although CO detectors are purported to reduce CO poisoning incidents and deaths,64 only 1 study on the effectiveness and costs and benefits of these devices was identified.53 This CBA demonstrated that installing CO detectors is not sufficiently beneficial to justify the costs in homes with new gas and liquefied petroleum gas appliances in the UK, since these appliances already have a secondary safety system built-in.
The lack of CE studies on CO detectors is surprising, given the number of published economic studies on smoke alarm, a similar low-cost, early-warning intervention.
Published economic evaluations for housing-related health outcomes, including asthma, lead poisoning, and radon-related lung cancer, provide valuable information to guide prevention efforts. Nonetheless, more research focusing on the costs of effective housing-related interventions and the resulting economic impact of these interventions is needed. In addition, formal study is needed to demonstrate the effectiveness of interventions for which only anecdotal arguments have been presented. The resulting information can be used to make more efficient use of limited resources, as well as develop and implement programs that will have greater health impact.
Understanding both the strengths and limitations of economic evaluations will help decision makers interpret findings appropriately. For example, a number of economic evaluations reviewed were conducted from the payer perspective. Such studies may be of particular interest to local public health agencies; however, policy makers at the state and federal levels often take a broader view of cost and consequences. Results from CUA and CBA studies enable policy makers at the highest level (eg, Congress, heads of state health departments) to compare disparate health outcomes and related interventions. More CUA and CBA studies are needed to help policy makers who are responsible for allocating resources aimed at addressing wide-ranging problems.
Because decision makers and practitioners in public health increasingly embrace economic analyses to make informed decisions about how best to allocate limited resources, particular attention should be given to important concepts highlighted in this article. These concepts include (1) the selection of the appropriate analytic method(s) to address the question(s) of interest; (2) the perspective from which the analysis is conducted; (3) the comprehensiveness of important costs and consequences (both benefits and unintended negative outcomes) included in the analysis; and (4) the potential impact of omitted costs and benefits.
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cost-benefit analysis; cost-effectiveness analysis; economic analysis; economic evaluation; economics; healthy housing