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Economic Valuation of Selected Illnesses in Environmental Public Health Tracking

Zhou, Ying ScD; Nurmagambetov, Tursynbek PhD; McCord, Matthew MSPH; Hsu, Wan-Hsiang PhD

Journal of Public Health Management & Practice: September/October 2017 - Volume 23 - Issue - p S18–S27
doi: 10.1097/PHH.0000000000000641
National Program: Research Article

Background: In benefit-cost analysis of public health programs, health outcomes need to be assigned monetary values so that different health endpoints can be compared and improvement in health can be compared with cost of the program. There are 2 major approaches for estimating economic value of illnesses: willingness to pay (WTP) and cost of illness (COI). In this study, we compared these 2 approaches and summarized valuation estimates for 3 health endpoints included in the Centers for Disease Control and Prevention's National Environmental Public Health Tracking Network—asthma, carbon monoxide (CO) poisoning, and lead poisoning.

Method: First, we compared results of WTP and COI estimates reported in the peer-reviewed literature when these 2 methods were applied to the same study participants. Second, we reviewed the availability and summarized valuations using these 2 approaches for 3 health endpoints.

Result: For the same study participants, WTP estimates in the literature were higher than COI estimates for minor and moderate cases. For more severe cases, with substantial portion of the costs paid by the third party, COI could exceed WTP. Annual medical cost of asthma based on COI approach ranged from $800 to $3300 and indirect costs ranged from $90 to $1700. WTP to have no asthma symptoms ranged from $580 to $4200 annually. We found no studies estimating WTP to avoid CO or lead poisoning. Cost of a CO poisoning hospitalization ranged from $14 000 to $17 000. For patients who sustained long-term cognitive sequela, lifetime earnings and quality-of-life losses can significantly exceed hospitalization costs. For lead poisoning, most studies focused on lead exposure and cognitive ability, and its impact on lifetime earnings.

Conclusion: For asthma, more WTP studies are needed, particularly studies designed for conditions that involve third-party payers. For CO poisoning and lead poisoning, WTP studies need to be conducted so that more comprehensive economic valuation estimates can be provided. When COI estimates are used alone, it should be clearly stated that COI does not fully capture the nonmarket cost of illness, such as pain and suffering, which highlights the need for WTP estimates.

Environmental Health Tracking Branch (Dr Zhou) and Air Pollution and Respiratory Health Branch (Dr Nurmagambetov), Division of Environmental Hazards and Health Effects, National Center for Environmental Health, Centers for Disease Control and Prevention, Atlanta, Georgia; Tracking Network, Environmental Epidemiology Program, Utah Department of Health, Salt Lake City, Utah (Mr McCord); and Bureau of Environmental and Occupational Epidemiology, New York State Department of Health, Albany, New York (Dr Hsu).

Correspondence: Ying Zhou, ScD, Environmental Health Tracking Branch, Division of Environmental Hazards and Health Effects, National Center for Environmental Health, Centers for Disease Control and Prevention, 1600 Clifton Rd, Atlanta, GA 30329 (yzhou2@cdc.gov).

The authors thank Thomas Largo and Melanie Jetter for valuable inputs.

The findings and conclusions in this article are those of the authors and do not necessarily represent the official position of the Centers for Disease Control and Prevention.

The authors declare they have no actual or potential competing financial interests.

Supplemental digital content is available for this article. Direct URL citation appears in the printed text and is provided in the HTML and PDF versions of this article on the journal's Web site (http://www.JPHMP.com).

Human exposures to environmental contaminants are associated with various adverse health outcomes. Programs, interventions, or policies can be implemented to prevent or reduce human exposure and the corresponding adverse health effects. Benefit-cost analysis, also referred to as cost-benefit analysis, is a systematic process for calculating and comparing benefits and costs of a decision or policy to determine if its benefits outweigh the costs and by how much. For example, the framework and principles of benefit-cost analysis were applied to evaluate the results of the Clean Air Act.1 In benefit-cost analysis of public health programs, health outcomes need to be assigned monetary values so that different health endpoints can be compared and the improvement in health can be compared with the cost of the program. Assigning an accurate monetary value to health outcomes can be a challenging task. There are 2 commonly used methods—willingness to pay (WTP) and cost of illness (COI).

WTP for health improvement program or policy is the maximum amount of money an individual would voluntarily pay to obtain the improvement, given his or her budget constraints.2 WTP estimates all the costs associated with the disease including medical and indirect costs that are parts of COI estimates, as well as intangible costs such as pain and suffering and the impact on others not directly affected by the disease but who are close to the patient. There are the 2 ways to measure WTP—revealed preference approach and stated preference approach. Stated preference methods typically employ survey techniques, for example, contingent valuation surveys and choice experiments, to ask respondents about their WTP for the outcome of concern.2 Revealed preference methods draw statistical inference on values from actual choices people make within markets. For example, travel cost, hedonics, defensive behavior, damage cost are several revealed preference valuation methods.3 For environmental illnesses, revealed preference data are scarce and stated preference data are necessary when actual market choices are not observed.4

In the valuation literature, mortality risk reduction has been studied extensively. A large body of literature focuses on individual WTP for a given small risk reduction in mortality risk. A statistical case, or a statistical life, involves aggregating small risk across individuals so that the cumulative risk reduction equals 1.0. The corresponding cumulative WTP for such a statistical life has been termed the value of a statistical life (VSL). Research suggests that VSL ranges from $1 million to $10 million.2 However, WTP for nonfatal risks has received less attention in the literature, although WTP measures are well suited to assess more subtle welfare effects related to day-to-day activities such as pain and discomfort, inconvenience, activity restrictions, and a patient's concern about the worry or inconvenience caused to the family and friends, which are experienced by many people with chronic diseases.5

In practice, the COI method is used more often to estimate monetary values for illnesses or loss due to illnesses. From the perspective of society, for example, COI represents how much the society would save if the illness did not exist. COI is typically estimated by evaluating direct and indirect costs of disease.6,7 Direct costs of a disease include costs of hospitalizations, emergency department (ED) visits, medication, primary care services, medical devices, and medical tests.7 Administrative data and survey data are the 2 most common data sources to estimate the direct costs of many diseases. For example, the Healthcare Cost and Utilization Project databases are derived from administrative data and contain encounter-level, clinical and nonclinical information including all-listed diagnoses and procedures, discharge status, patient demographics, and charges for all patients, regardless of payer, that is, Medicare, Medicaid, private insurance, uninsured.8 An example of survey data is the Medical Expenditure Panel Survey, which is a set of large-scale surveys of families and individuals, their medical providers, employers, cost and use of health care, and health insurance coverage.9 Indirect costs include the value of reduced productivity or absenteeism at work or school, and travel time associated with the medical care. To estimate indirect costs associated with lost or reduced productivity, many studies used wage compensation to value productive time, assuming that workers are paid the value of their marginal product.2 This method is referred as “human capital” approach.

In this article, we provide a general comparison of the 2 major approaches for estimating economic value of illnesses—WTP and COI, based on information from the literature. We also summarize valuation estimations for 3 health endpoints included in the Centers for Disease Control and Prevention's (CDC's) National Environmental Public Health Tracking Network,10 which are asthma, carbon monoxide (CO) poisoning, and lead poisoning. Suggestions and implications for future use of WTP and COI analyses related to these health endpoints are also discussed.

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Methods

First, to compare WTP and COI estimates in general, we would ideally like to use estimates for the same study subjects. Therefore, we identified peer-reviewed, empirical studies that compared WTP and COI for the same respondents. We searched for key words such as willingness to pay (or WTP) and cost of illness (or COI) in the Scopus database. We reviewed all the estimates for health endpoints that could be relevant to environmental pollution.

Second, to demonstrate the current status of valuation using WTP and COI approaches, we focused on 3 specific health endpoints. To choose the health endpoints, we asked 13 state health departments in CDC's Tracking Program10 to identify up to 3 conditions for which they were interested in economic values. The 3 health endpoints that had the most interest were asthma, CO poisoning, and lead poisoning. We conducted a search of peer-reviewed literature using PubMed, Scopus, and Google Scholar for these health endpoints with either WTP or COI cost estimates. To construct initial search strings, we used combinations of key words such as asthma, carbon monoxide poisoning, lead poisoning, Willingness-to-Pay, WTP, cost-of-illness, COI, economic burden, IQ, and earnings. The reference lists of relevant articles were also examined. Given the limited number of studies that used both WTP and COI approaches on the same study subjects, we did not require the WTP and COI estimates for these health endpoints to be from the same study population.

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Results

General comparison of WTP and COI

We found 4 studies since 1996 that used both WTP and COI to estimate the cost associated with health outcomes with a known or suspected environmental cause. Richardson et al11 found WTP for 1 less symptom day due to wildfire smoke to be $87 to $95 calculated using defensive behavior (revealed preference) and contingent valuation methods. In comparison, they found that the daily COI estimate to treat symptoms related to wildfire exposure was $3. Note that the authors also reported $17 as the comprehensive daily COI estimate, which incorporated the value of lost recreation days resulting from an illness. A study on minor respiratory symptoms associated with air pollution in Taiwan found the WTP to COI ratio ranging from 1.5 to 2.3.12 The WTP in this study was estimated using a contingent valuation survey using face-to-face interviews. The COI includes loss in income and mitigating expenditures such as seeing a doctor and taking medication. Chestnut et al5 investigated COI and 2 approaches to measure WTP of patients with heart disease for changes in their angina symptoms, which are actual expenditures for averting-behavior and contingent valuation. Their results indicate that although negligible COI changes were expected with small changes in angina frequency, the study subjects had significant WTP to avoid increases in angina frequency. Also, the 2 approaches for estimating WTP provided comparable estimates.

The aforementioned comparisons for WTP and COI focused on illnesses of minor to moderate severity. For more severe cases, for example, hospitalizations, medical costs may include payments not only made by patients but also made by third parties such as insurance companies and employers. Chestnut et al13 estimated the economic benefits of reducing respiratory and cardiovascular hospitalizations using COI and WTP. Their WTP estimates indicated that individuals value preventing a 5-day hospitalization at an average of about $2400. Average total COI to society per 5-day hospitalization ranges from $22 000 to $39 000. Out-of-pocket financial costs incurred by patients in this study were $500 to $3600. The authors also conclude that conventional COI categories, medical costs and patient's lost earnings due to respiratory or cardiovascular hospitalization, make up from 90% to 95% of total society costs for respiratory and cardiovascular hospitalizations. However, individuals typically pay only a small fraction of these costs and an individual's WTP for a reduction in the cause of illness will not be expected to reflect medical costs paid by insurance and may not fully reflect lost income covered by paid sick leave.

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Economic values for asthma

In 2014, 17.7 million adults (7.4%) and 6.3 million children (8.6%) were estimated to have asthma.14 Estimates of the environmentally attributable fraction for asthma were 30%.15 Total COI to society associated with asthma was about $56 billion in 2007.16 The incremental cost approach is commonly used to estimate COI per person due to asthma. It estimates the excess expenditures associated with a disease by obtaining the difference between the expenditures associated with the treatment of patients diagnosed with the disease versus similar patients not diagnosed with the disease.17 The incremental expenditure methodology measures expenditures solely attributable to that particular disease, as it adjusts for differences in variables considered to have an impact on expenditures. We found 5 studies that evaluated the cost of asthma using the COI approach. Incremental annual medical costs per person due to asthma have been estimated at $1999,18 $3180,19 and $325916; Kamble and Bharmal17 assessed direct costs at $1005 per child and $2078 per adult per year. Indirect costs have been estimated at $1732 per person per year.19 Barnett and Nurmagambetov16 estimated indirect costs to be about $301 per year for a worker and $93 for a student. A recent state-level analysis of asthma COI reported that across all ages, direct medical costs range from $1860 in Mississippi to $2514 in Michigan (median = $2178) (2014 US dollar) per individual with asthma per year whereas for children, direct medical costs range from $833 in Arizona to $1121 in Michigan (median = $983).20 The study also found that across all ages, individuals with asthma missed a median of 1.6 days of work or school per year due to asthma. The total annual absenteeism costs range from $4.4 million in Wyoming to $344.9 million in California. We calculated that the average annual absenteeism cost is around $200 per person per year (using the total cost of absenteeism in the state divided by the total number of people with asthma in the same state).

Estimates of WTP from an individual's perspective to eliminate asthma symptoms ranged from about $13 to $350 per month.21–27 Aside from evaluating individuals' WTP to eliminate asthma symptoms, others have examined WTP for other asthma-related outcomes, such as asthma mortality, and a symptom-free day (SFD). The value of an individual's life was estimated up to $3.8 million for adults, with small children receiving the highest valuation at $14 million (aged <4 years).24 WTP for 20 additional SFDs per year was $6 per month by caretakers of small children with asthma (aged <5 years).28 We estimated that this is about $3.6 per additional SFD (= $72 per year/20 SFDs per year). A study in Vancouver found that patients were willing to pay Can$14 (about US $11) for 1 additional SFD; stratification based on asthma control revealed that uncontrolled patients were willing to pay Can$18 (about US $14) for each additional SFD.29

Note that WTP studies mentioned earlier are all for individuals with asthma (including children), except for the study by Lloyd et al,27 which focused on a random sample of people. The perspective of all the aforementioned WTP studies is from an individual's perspective, whereas in COI studies mentioned earlier, costs paid by third parties were also included. We present a summary of the results of valuation for asthma and 2 other health outcomes in the Table.

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Economic values of CO poisoning

Unintentional, non–fire-related (UNFR) CO poisoning is one of the most common causes of poisoning in the United States.30 However, we found only 2 studies in peer-reviewed literature on CO poisoning–related costs. Hampson31 calculated the cost of accidental CO poisoning using the COI approach. The study included costs of hospitalization, death, and cognitive impairment following CO poisoning. The study estimated that about 334 individuals younger than 65 years die annually from UNFR CO poisoning, with an average loss of 26 years of productivity. On the basis of $41 000 of median per capita annual income in United States in 2014, the study estimated the annual cost of deaths to be $355 million based on productivity losses due to premature death. About 27 500 patients went to an ED annually for UNFR CO poisoning, and about 2800 people were hospitalized with hospitalization costs of about $15 500 per patient in 2014. Hospitalization costs were based on a previous report by Miller and Bhattacharya,32 in which they used COI approach. Approximately 6600 individuals (about 24% of the 27 500 patients who went to the ED) sustained long-term cognitive sequela annually, with total loss in earnings of approximately $925 million (or loss in lifetime earnings at about $141 000 per patient). Note that the report by Miller and Bhattacharya32 also estimated that lifetime medical costs were 1.9 times of the hospital cost, since it includes professional fees and postdischarge care cost. It also estimated that at least 20% of patients experienced lifetime sequelae, which will cause a 15% productivity loss and 15% quality-of-life loss. Using lifetime productivity of $938 000, the authors reported that productivity loss will be $141 000 per affected person, including $96 000 in lost wages and $45 000 in lost household production. Using a value of statistical life of $5 million, the quality-of-life loss was estimated to be $609 000.

Zaloshnja et al33 studied costs of unintentional home injuries, including CO poisoning. The study had a societal perspective, for example, cost to victims, families, government, insurers, and taxpayers, and included 3 components in their cost estimate—medical cost, indirect cost, and quality-of-life loss. They found that average cost per incident for fatal injury was $1.7 million and for nonfatal injuries was $13 800, which was a weighted average of hospitalized nonfatal injuries of $288 000 and those nonhospitalized of $6900. On the basis of the Zaloshnja et al study, a study by Mason and Brown34 assumed the average cost for nonfatal CO poisoning was $17 250. The study by Mason and Brown34 also cited a report in the United Kingdom, which compared the benefits and costs of installing CO detectors.35 The value of a life used in the study was £1.7 million (in 2008 value). The values of serious and minor CO poisoning injuries used in the analysis were £194 000 and £15 000, respectively.

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Economic values for lead poisoning

The adverse health effects of lead poisoning include cognitive and behavioral impairments in children and anemia, hypertension, renal impairment, immunotoxicity, and reproductive problems in the general population.36 Since the ban of lead in gasoline and paint in the United States in 1970s, blood lead levels (BLLs) have been decreasing dramatically. However, current research indicates that no amount of lead in the blood is safe. Neurological damage in children has been reported even at low BLLs.37,38

When valuing lead poisoning, many of the studies focused on lead exposure and cognitive ability, and its impact on earnings. Note that productivity loss is a part of indirect cost in the COI approach, and the value of productivity loss expressed as a “corresponding earning losses” is referred to as the “human capital” approach. For example, Grosse et al39 estimated change in lifetime earnings corresponding to change in BLLs using the following equation:

where ΔE is change in earnings (in dollars); ΔBLL is change in BLL (in micrograms per deciliter or μg/dL); ΔIQ/ΔBLL is change in intelligence quotient (IQ) points per unit BLL; ΔE/E/ΔIQ is percent change in earnings per IQ point; and E is discounted lifetime earnings (in dollars). Grosse et al39 estimated that US preschool-aged children in the late 1990s had IQs that were, on average, 2.2 to 4.7 points higher than they would have been if they had the blood lead distribution observed among US preschool-aged children in the late 1970s. As a result, the estimated economic benefit for each year's cohort of 3.8 million 2-year-old children ranges from $110 billion to $319 billion. Landrigan et al15 estimated that the average BLL of 2.7 μg/dL for 5-year-olds in 1997 results in an average lifetime earning loss of 1.61%, which is about $14 000 for a boy (= 1.61% × $881 027) and $8000 for a girl (= 1.61% × $519 631).

Equation (1) allows the calculation of change in earnings due to any changes in BLL that are of interest to us. Therefore, we reviewed available estimates of the coefficients in this equation in the literature. For ΔIQ/ΔBLL, we found 11 studies that evaluated change in IQ points per unit BLL in children. Five of these studies assumed a linear association between IQ and BLLs,37,40–43 4 assumed a log linear association,38,44–46 and 2 studies compared IQ scores for children with BLLs in different categories.47,48 The estimated IQ point decrement due to an increase in BLLs from 10 to 20 μg/dL ranged from 1.7 to 4.6 among studies that assumed a linear association between IQ and BLLs (see Supplemental Digital Content Table, available at http://links.lww.com/JPHMP/A366, for more details). For ΔE/E/ΔIQ in equation (1), there is an estimated 1.8% to 2.4% decrease in lifetime earnings per 1 IQ point loss.39,49,50 Grosse et al51 also provided the present value of lifetime production by age and gender (2007 US dollar), which can be used as the last item E in equation (1). The last 2 items in equation (1) can also be combined. For example, Gould52 suggested that the reduction in present discounted value of lifetime earnings per 1 IQ point loss associated with lead poisoning was $17 815 (2006 US dollar). Zagorsky53 reported that 1 IQ point increase raised annual income by $234 to $616 in 2004.

In addition to earnings loss due to IQ reduction, we found 4 studies that examined the costs of health care, special education, lead-linked crime, and attention-deficit/hyperactivity disorder (ADHD) associated with lead poisoning (Table).52,54–56 Gould52 provided information to estimate the health care cost of lead exposure per child. For example, there is no health care–related costs for children with BLLs of less than 10 μg/dL, $74 per child for BLLs of 10 to 20 μg/dL, $1027 per child for BLLs of 20 to 45 μg/dL, $1335 per child for BLLs of 45 to 70 μg/dL, and $3444 per child for BLLs of 70 μg/dL or more.52 Special education is necessary for an average of 3 years for 20% of children with BLLs of more than 25 μg/dL and 10% of children with BLLs of more than 10 μg/dL, and the average annual cost of special education is $14 317 per child (2006 US dollar).41,52,55 In addition, for ADHD cases in children 4 to 15 years of age, Gould52 assumed that the annual average medical treatment cost per child to be $565 for drug and counseling therapy and average parental work loss costs to be $119 per child. Nevin et al54 assumed that median health care costs for those with ADHD were $4300 versus $2000 for those without ADHD over a 9-year time period.

A study by Fewtrell et al57 estimated the global burden of disease due to environmental lead exposure. Instead of lost in lifetime earnings, it focused on relevant disease conditions—mild mental retardation (caused by decreased IQ) and a number of cardiac diseases (due to increased blood pressure from lead exposure). In addition, there have been few attempts to characterize the intangible impacts of lead exposure directly. A recent cost-benefit analyses in French children incorporated a judge's ruling of €120 000 of “damages and interests” to 6 victim families and €8000 for each child with BLLs of 10 μg/dL or more.55

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Discussion

Economic valuation for illnesses has received various levels of attention in the literature depending on illness. Among the 3 conditions, only asthma was studied using both WTP and COI approaches. We found no WTP study for CO poisoning or lead poisoning. CO poisoning has the least number of cost estimates reported in the literature. For lead poisoning, loss in lifetime earnings (part of COI) was most commonly used for valuation. Among the studies on asthma that we reviewed, annual total direct COI ranged from $800 to $3300 and indirect costs were from $90 to $1700. As a comparison, WTP by individuals to eliminate asthma symptoms was from $580 to $4200 per year.

When comparing WTP and COI, WTP in theory should be greater than COI, since WTP accounts for all costs including direct and indirect costs that are parts of COI estimates, as well as the value that individuals place on pain and suffering, loss of satisfaction, and leisure time. However, because of difference in study perspectives (social vs individual), whether costs paid by third parties are included, as well as how WTP were estimated, some studies found WTP to be similar to or smaller than COI.13

A study's perspective is an important feature of cost studies as it defines which costs are relevant for the analysis. From a societal perspective, all costs must be included, including those borne by payers, health care providers, patients, and employers. As a comparison, from the enrollee's perspective, costs to his or her health insurance company, or to his or her employer, may not be directly relevant. It was pointed out that the relationship between medical costs and WTP from an individual's perspective are likely distorted when insurance pays part of the costs.2 This is because for covered conditions, an individual's out-of-pocket costs are likely to underestimate the costs from a societal perspective. Adding costs paid by third parties may overestimate WTP for that treatment, as individuals may receive treatment that they would not have willingly funded themselves.2 In addition, in benefit-cost analysis, the party that pays for the cost does not always get all the health improvement benefits. Therefore, it is important to first decide the perspective of the study and then decide which costs and benefits are relevant in the analysis.

When WTP estimates were elicited using a contingent valuation survey, there is considerable variation in the types of questions used.58–60 For example, comparing with dichotomous choice questions, previous studies found that responses to open-ended questions were often biased downward.61 Blumenschein and Johannesson22 also reported a WTP range from US $7000 to $46 000 per quality-adjusted life-year based on an evaluation of multiple methods. This may be an important factor in the range variation of WTP estimates that were reported.62,63 It is worth pointing out that while there are considerable variations and uncertainties associated with WTP estimates, ranking of WTP estimates among different groups can still provide useful information. For example, Blomquist et al24 found that WTP for asthma control tends to be highest for young children and young adults at about $4000 annually and lowest for adults in their 50s and 60s at around $1700 annually. We note that the order related to different age groups was reversed with COI approach; that is, children's COI estimates for asthma were only about half of the costs for adults.17,20

COI and WTP for asthma control we reviewed were from independent studies with different study populations. As a result, some of these differences may be due to the differences in the characteristics of the study respondents as well as decision-making heuristics and biases. For example, perceived/subjective attitudes toward asthma, and how it impacted quality of life, may have a greater effect on WTP than objective measures of disease severity.25,26 Brandt et al25 explained that objective measures of disease (such as use of a spirometer to measure forced expiratory volume or frequency of asthma symptoms) do not accurately reflect how a family experiences the disease. Other authors also found that forced expiratory volume is an important measure of asthma severity but it may not always properly capture quality-of-life reporting.22,26,64,65

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Implications for Policy & Practice

* When assigning monetary values related to public health programs, such as CDC's Tracking Program, societal perspective is more relevant than individual perspective.

* For conditions with no WTP estimates available, COI estimates can be applied as a placeholder. However, it should be clearly stated that COI underestimates the economic value of illnesses, as it does not fully capture the nonmarket cost of illness, such as pain and suffering, which highlights the need for WTP estimates.

* The valuation estimate for an illness can be combined with disease surveillance data to assess economic burden of the illness. This would, in turn, allow us to estimate the economic burden of a health outcome, compare across different illnesses, and conduct cost-benefit analysis of relevant public health actions.

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Conclusion

More data sources and literature are available for COI analyses than for WTP estimates. Among the 3 major conditions we focused on, WTP estimates are available for asthma while we did not find any WTP estimate for avoiding or treating CO poisoning and lead poisoning. More WTP studies are needed, particularly studies designed for conditions that involve third party (eg, health insurance company, employer). Findings from such studies would allow CDC's Tracking Program to assign more comprehensive monetary values in order to estimate economic burden of environmentally related health outcomes, to conduct benefit-cost analysis for public health actions aimed at reducing exposure to environmental pollution, and to provide integrated environmental public health data in support of decision making by relevant programs, organizations, and communities.

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asthma; carbon monoxide poisoning; cost of illness (COI); lead poisoning; willingness to pay (WTP)

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