AMERICAN JOURNAL OF
o-ti |s December 1979 Volume 69, Number 12
EDITOR Alfred Yankauer, MD, MPH EDITORIAL BOARD
Michel A. Ibrahim, MD, PhD (1980), Chairperson Myron Allukian, Jr., DDS, MPH (1982) Paul B. Comely, MD, DrPH (1982) Joseph L. Fleiss, MS, PhD (1982) Ruth B. Galanter, MCP (1980) George E. Hardy, Jr., MD, MPH (1981) David Hayes-Bautista, PhD (1981) C. C. Johnson, Jr., MSCE (1980) Selma J. Mushkin, PhD (1981) Anita L. Owen, RD, MA (1982) Doris Roberts, PhD, MPH (1980) Ruth Roemer, JD (1981) Jeannette J. Simmons, MPH, DSc (1981) Robert J. Weiss, MD (1980) M. Donald Whorton, MD, MPH (1982) STAFF
William H. McBeath, MD, MPH Executive DirectorlManaging Editor Allen J. Seeber Director of Publications
Doyne Bailey Assistant Managing Editor Michelle Horton Production Editor Monica Pogue ProductionlAdvertising Assistant Alison E. Ruffley Editorial Assistant
CONTRIBUTING EDITORS William J. Curran, JD, SMHyg Public Health and the Law1 Barbara G. Rosenkrantz, PhD Public Health Then and Nowr Jean Conelley, MLS Book Corner
1210
Established 191 1
Cost-Benefit Analysis: Caveat Emptor Cost-benefit analysis has become an increasingly larger part of the life of government regulators. Even though environmental and occupational health regulation holds great promise as a source of health improvement and consequent reduction of medical care costs, many politicians are wary of the potentially large compliance costs that such regulations can impose. All three branches of the federal government in the United States are moving toward the position that regulators must demonstrate that the benefits of health standards are greater than their costs. On its face, such an approach seems completely justifiable. After all, what could be more reasonable than evaluating the effects of government actions to determine if their benefits justify their costs? One answer to this question is that the effort to specify costs and benefits is reasonable, but that unquestioning reliance on costbenefit analysis can lead to policy recommendations that are biased against con-
trolling health hazards. Cost-benefit comparisons often collapse numerous health benefits into an aggregate measure, discard effects whose magnitude is not well understood, and emphasize effects more readily expressed in dollars over those without a clear market value. The basic reason for this is that it is easiest to draw policy conclusions from simple comparisons. To see why analysts want simple measures, let us look at the following three examples: * The annual costs of a regulation are $800,000 while its annual benefits are $500,000. * The annual costs of a second regulation are $800,000, and it will probably save one life yearly. * The annual costs of a third regulation are $800,000 and, annually, it will probably save one life, produce one less hospitalization and achieve ten fewer weeks of work lost. While the medical care costs of hospitalization and the wage loss associated with lost work can be measured, neither of these dollar figures is an adequate measure of the total costs associated with serious illnesses. The total costs include suffering and loss of function-attributes that are very important to the affected people, but very difficult if not impossible to express in dollars. How much is it worth to avoid the loss of one life? a chronic respiratory disease requiring hospitalization? a disease leading to time lost from work? While dollars and cents answers to these questions have been suggested, none are, in my opinion, satisfactory (see Acton' for further discussion). Without general agreement about the value of averting serious illness, the cost of each illness becomes a largely arbitrary value decision for the evaluator. Cost benefit analysis is easier to translate into policy recommendations when its output is a simple summary statement of costs and benefits. In order to reduce a set of health outcomes to a simple statement, the analyst may focus on a single health outcome, or only on those benefits to which dollar values can be easily assigned. Such a simplification would change the third example above to read: "The annual costs of a third regulation are $800,000 and, annually, it will probably save one life and have other health benefits." These "other health benefits" are likely to be ignored when decisions are AJPH December 1979, Vol. 69, No. 12
EDITORIALS
being made. The effect of the analyst's simplification may therefore be a bias against decisions to commit resources to the prevention of disease. Simplifying the benefit-cost comparison by reducing the range of benefits considered is made even more attractive when available studies of health effects are limited to only a single health outcome. In the case of air pollution, studies of serious health effects have largely been limited to mortality as an outcome measure. Since there is very little information about the amount of serious, non-fatal illness associated with air pollution, anyone performing a cost-benefit analysis would be hard pressed to include such illness in his or her analysis. The paper in this issue of the Journal by Carpenter, et al,2 attempts to expand the health outcome side of the cost-benefit equation. It uses hospitalization as a measure of morbidity associated with differences in exposure to sulfur dioxide and particulates. In addition, it estimates changes in hospitalization costs, thus quantifying an important aspect of the medical care costs of air pollution.* The success of this effort can be judged by the reader. Cost estimates of disease and death due to air pollution can and should be improved. However, in addition to observing the caveats discussed earlier, there are other reasons to be circumspect in the application of cost-benefit analyses to air pollution control decisions: the analyses tend to overstate the costs.3 In the first place it may be impossible to obtain engineering estimates of control costs except by using those provided by industries, in whose interests it is to exaggerate these costs. Second, and perhaps more important, is the fact that short-run costs are easier to estimate than are long-run costs. In the short run, compliance can only be *The study by Carpenter, et al, does not present conclusive evidence about the relationship between SO2, particulates, and hospitalization rates. Other studies will be necessary to confirm the results reported here. What is important is that more studies using hospitalization as an outcome measure should be done.
achieved by applying known techniques to existing facilities-which were not designed to achieve low levels of pollution. It is cheaper, in the long run, to design new plants and equipment than to retrofit old plants and equipment. Moreover, pollution regulations may, over time, induce the discovery of better methods of controlling pollution. If shortrun (high) costs can be estimated and long-run (low) costs can only be speculated about, the analyst is more likely to use the former than to guess at a long-term cost that would be lower than the known short-term cost by some indeterminate amount. In the quest for simple, quantitative measures of costs and benefits, a cost-benefit analysis is likely to underestimate the health benefits of air pollution regulations and overestimate their costs. Such studies should be viewed with caution, especially since the fact that they are simple and quantitative often gives them the appearance of objectivity. Under the circumstances, it is reasonable to view the increasing pressure to compare costs and benefits not only as a tool to control the costs of regulation, but also as an evaluation method that may bias political decisions against even those regulatory decisions that are cost-effective.
LESLIE I. BODEN, PHD Address reprint requests to Leslie I. Boden, PhD, Assistant Professor of Economics, Occupational Health Program, Harvard School of Public Health, 665 Huntington Avenue, Boston MA 02115.
REFERENCES 1. Acton JP: Measuring the value of lifesaving programs. Law and Contemp Problems, 40:46-72, 1976 2. Carpenter, BH et. al.: Health Costs of Air Pollution: A Study of Hospitalization Costs. Am J Public Health 69:1232, 1979. 3. Lave L: Air Pollution Damage: Some Difficulties in Estimating the Value of Abatement: In: Environmental Quality Analysis. Kneese, AV and Bower, BT, eds. Baltimore, Johns Hopkins,
1972. 213-242.
Intestinal Parasitism and Public Health Practices In Institutions for Mentally Retarded People Deficient public health practices within institutions for mentally retarded people have been reflected in numerous reports of elevated prevalence rates for intestinal parasites (20-60 percent), antibodies to hepatitis A virus (20-40 percent), and serological markers for hepatitis B virus (60-80 percent). 1-3 In institutions with lengthy histories of neglect, high prevalence rates for these infections have provided unequivocal evidence for past deficiencies in public health practices. In newer institutions or those with changing conditions, incidence rates for parasitic infections and/or serological conversions for hepatitis A and B markers might provide useful measures of the effectiveness of current public health practices. Although data of this type are seldom analyzed routinely in institutional populations, the available eviAJPH December 1979, Vol. 69, No. 12
dence suggests that the rates for these infections commonly exceed those in referent community populations by manyfold.4 Several forces have operated to improve conditions within institutions in the United States during the 1970s. First, numerous class action suits against accountable public officials and state agencies have been heard in federal district courts across the country following the court decision in Wyatt vs. Stickney (1972) in Alabama.5 This prototypic case not only established the constitutional right of mentally retarded individuals to appropriate habilitation and treatment, but also enumerated specific standards to be met by the institution in question. In subsequent cases, federal court judges have mandated specified changes in institutional conditions 1211
o-ti |s December 1979 Volume 69, Number 12
EDITOR Alfred Yankauer, MD, MPH EDITORIAL BOARD
Michel A. Ibrahim, MD, PhD (1980), Chairperson Myron Allukian, Jr., DDS, MPH (1982) Paul B. Comely, MD, DrPH (1982) Joseph L. Fleiss, MS, PhD (1982) Ruth B. Galanter, MCP (1980) George E. Hardy, Jr., MD, MPH (1981) David Hayes-Bautista, PhD (1981) C. C. Johnson, Jr., MSCE (1980) Selma J. Mushkin, PhD (1981) Anita L. Owen, RD, MA (1982) Doris Roberts, PhD, MPH (1980) Ruth Roemer, JD (1981) Jeannette J. Simmons, MPH, DSc (1981) Robert J. Weiss, MD (1980) M. Donald Whorton, MD, MPH (1982) STAFF
William H. McBeath, MD, MPH Executive DirectorlManaging Editor Allen J. Seeber Director of Publications
Doyne Bailey Assistant Managing Editor Michelle Horton Production Editor Monica Pogue ProductionlAdvertising Assistant Alison E. Ruffley Editorial Assistant
CONTRIBUTING EDITORS William J. Curran, JD, SMHyg Public Health and the Law1 Barbara G. Rosenkrantz, PhD Public Health Then and Nowr Jean Conelley, MLS Book Corner
1210
Established 191 1
Cost-Benefit Analysis: Caveat Emptor Cost-benefit analysis has become an increasingly larger part of the life of government regulators. Even though environmental and occupational health regulation holds great promise as a source of health improvement and consequent reduction of medical care costs, many politicians are wary of the potentially large compliance costs that such regulations can impose. All three branches of the federal government in the United States are moving toward the position that regulators must demonstrate that the benefits of health standards are greater than their costs. On its face, such an approach seems completely justifiable. After all, what could be more reasonable than evaluating the effects of government actions to determine if their benefits justify their costs? One answer to this question is that the effort to specify costs and benefits is reasonable, but that unquestioning reliance on costbenefit analysis can lead to policy recommendations that are biased against con-
trolling health hazards. Cost-benefit comparisons often collapse numerous health benefits into an aggregate measure, discard effects whose magnitude is not well understood, and emphasize effects more readily expressed in dollars over those without a clear market value. The basic reason for this is that it is easiest to draw policy conclusions from simple comparisons. To see why analysts want simple measures, let us look at the following three examples: * The annual costs of a regulation are $800,000 while its annual benefits are $500,000. * The annual costs of a second regulation are $800,000, and it will probably save one life yearly. * The annual costs of a third regulation are $800,000 and, annually, it will probably save one life, produce one less hospitalization and achieve ten fewer weeks of work lost. While the medical care costs of hospitalization and the wage loss associated with lost work can be measured, neither of these dollar figures is an adequate measure of the total costs associated with serious illnesses. The total costs include suffering and loss of function-attributes that are very important to the affected people, but very difficult if not impossible to express in dollars. How much is it worth to avoid the loss of one life? a chronic respiratory disease requiring hospitalization? a disease leading to time lost from work? While dollars and cents answers to these questions have been suggested, none are, in my opinion, satisfactory (see Acton' for further discussion). Without general agreement about the value of averting serious illness, the cost of each illness becomes a largely arbitrary value decision for the evaluator. Cost benefit analysis is easier to translate into policy recommendations when its output is a simple summary statement of costs and benefits. In order to reduce a set of health outcomes to a simple statement, the analyst may focus on a single health outcome, or only on those benefits to which dollar values can be easily assigned. Such a simplification would change the third example above to read: "The annual costs of a third regulation are $800,000 and, annually, it will probably save one life and have other health benefits." These "other health benefits" are likely to be ignored when decisions are AJPH December 1979, Vol. 69, No. 12
EDITORIALS
being made. The effect of the analyst's simplification may therefore be a bias against decisions to commit resources to the prevention of disease. Simplifying the benefit-cost comparison by reducing the range of benefits considered is made even more attractive when available studies of health effects are limited to only a single health outcome. In the case of air pollution, studies of serious health effects have largely been limited to mortality as an outcome measure. Since there is very little information about the amount of serious, non-fatal illness associated with air pollution, anyone performing a cost-benefit analysis would be hard pressed to include such illness in his or her analysis. The paper in this issue of the Journal by Carpenter, et al,2 attempts to expand the health outcome side of the cost-benefit equation. It uses hospitalization as a measure of morbidity associated with differences in exposure to sulfur dioxide and particulates. In addition, it estimates changes in hospitalization costs, thus quantifying an important aspect of the medical care costs of air pollution.* The success of this effort can be judged by the reader. Cost estimates of disease and death due to air pollution can and should be improved. However, in addition to observing the caveats discussed earlier, there are other reasons to be circumspect in the application of cost-benefit analyses to air pollution control decisions: the analyses tend to overstate the costs.3 In the first place it may be impossible to obtain engineering estimates of control costs except by using those provided by industries, in whose interests it is to exaggerate these costs. Second, and perhaps more important, is the fact that short-run costs are easier to estimate than are long-run costs. In the short run, compliance can only be *The study by Carpenter, et al, does not present conclusive evidence about the relationship between SO2, particulates, and hospitalization rates. Other studies will be necessary to confirm the results reported here. What is important is that more studies using hospitalization as an outcome measure should be done.
achieved by applying known techniques to existing facilities-which were not designed to achieve low levels of pollution. It is cheaper, in the long run, to design new plants and equipment than to retrofit old plants and equipment. Moreover, pollution regulations may, over time, induce the discovery of better methods of controlling pollution. If shortrun (high) costs can be estimated and long-run (low) costs can only be speculated about, the analyst is more likely to use the former than to guess at a long-term cost that would be lower than the known short-term cost by some indeterminate amount. In the quest for simple, quantitative measures of costs and benefits, a cost-benefit analysis is likely to underestimate the health benefits of air pollution regulations and overestimate their costs. Such studies should be viewed with caution, especially since the fact that they are simple and quantitative often gives them the appearance of objectivity. Under the circumstances, it is reasonable to view the increasing pressure to compare costs and benefits not only as a tool to control the costs of regulation, but also as an evaluation method that may bias political decisions against even those regulatory decisions that are cost-effective.
LESLIE I. BODEN, PHD Address reprint requests to Leslie I. Boden, PhD, Assistant Professor of Economics, Occupational Health Program, Harvard School of Public Health, 665 Huntington Avenue, Boston MA 02115.
REFERENCES 1. Acton JP: Measuring the value of lifesaving programs. Law and Contemp Problems, 40:46-72, 1976 2. Carpenter, BH et. al.: Health Costs of Air Pollution: A Study of Hospitalization Costs. Am J Public Health 69:1232, 1979. 3. Lave L: Air Pollution Damage: Some Difficulties in Estimating the Value of Abatement: In: Environmental Quality Analysis. Kneese, AV and Bower, BT, eds. Baltimore, Johns Hopkins,
1972. 213-242.
Intestinal Parasitism and Public Health Practices In Institutions for Mentally Retarded People Deficient public health practices within institutions for mentally retarded people have been reflected in numerous reports of elevated prevalence rates for intestinal parasites (20-60 percent), antibodies to hepatitis A virus (20-40 percent), and serological markers for hepatitis B virus (60-80 percent). 1-3 In institutions with lengthy histories of neglect, high prevalence rates for these infections have provided unequivocal evidence for past deficiencies in public health practices. In newer institutions or those with changing conditions, incidence rates for parasitic infections and/or serological conversions for hepatitis A and B markers might provide useful measures of the effectiveness of current public health practices. Although data of this type are seldom analyzed routinely in institutional populations, the available eviAJPH December 1979, Vol. 69, No. 12
dence suggests that the rates for these infections commonly exceed those in referent community populations by manyfold.4 Several forces have operated to improve conditions within institutions in the United States during the 1970s. First, numerous class action suits against accountable public officials and state agencies have been heard in federal district courts across the country following the court decision in Wyatt vs. Stickney (1972) in Alabama.5 This prototypic case not only established the constitutional right of mentally retarded individuals to appropriate habilitation and treatment, but also enumerated specific standards to be met by the institution in question. In subsequent cases, federal court judges have mandated specified changes in institutional conditions 1211
