The financial costs and The financial costs and benefits of alcoholbenefits of alcohol

Christine GodfreyChristine Godfrey

Department of Health Department of Health Sciences & Centre for Health Sciences & Centre for Health

EconomicsEconomics

University of YorkUniversity of York

StructureStructure

Definition of termsDefinition of terms Different types of studyDifferent types of study

– What is the policy question?What is the policy question?– What costs and benefits are included?What costs and benefits are included?– Some examplesSome examples– How easy are they to replicate in How easy are they to replicate in

different countriesdifferent countries

Definition of termsDefinition of terms

Financial or economicFinancial or economic– Costs can be just those costs falling on Costs can be just those costs falling on

governments, these costs with any other governments, these costs with any other impacts generally given in money terms or impacts generally given in money terms or any impact that can be valued in money any impact that can be valued in money terms for example loss of life, fear of crimeterms for example loss of life, fear of crime

Private, external and socialPrivate, external and social– Private borne by individuals/familiesPrivate borne by individuals/families– External borne by others External borne by others – Social = private + externalSocial = private + external

Three types of studyThree types of study

Cost of illnessCost of illness– What are the costs of alcohol at a specific What are the costs of alcohol at a specific

time period compared to the situation time period compared to the situation where there was no alcohol?where there was no alcohol?

Externality basedExternality based– Is there evidence that there are excess Is there evidence that there are excess

costs of alcohol given current policies?costs of alcohol given current policies? Economic evaluations Economic evaluations

– Is a policy good value for money compared Is a policy good value for money compared to doing nothing or some alternative?to doing nothing or some alternative?

Features of cost of illness Features of cost of illness studiesstudies

Aim to give a global figure for a Aim to give a global figure for a specific year. Very useful for specific year. Very useful for advocacy purposes.advocacy purposes.

Often expressed as a percentage Often expressed as a percentage of GDP, compared to other drugs.of GDP, compared to other drugs.

Guide for conducting studies exists Guide for conducting studies exists (Single et al, 2003) BUT a lot of (Single et al, 2003) BUT a lot of differences between studies which differences between studies which make comparisons difficultmake comparisons difficult

Contents of cost of illness Contents of cost of illness studiesstudies

Health care costsHealth care costs Workplace Workplace CrimeCrime Accidents particularly road trafficAccidents particularly road traffic Loss of lifeLoss of life Policy and research costsPolicy and research costs

What is not generally What is not generally included and whyincluded and why

Most individual costs and benefitsMost individual costs and benefits– Assumed in a market model individual Assumed in a market model individual

consumers take costs into accountconsumers take costs into account Alcohol revenueAlcohol revenue Other welfare/transfer paymentsOther welfare/transfer payments

– Both revenue and welfare benefits are Both revenue and welfare benefits are transfers not resourcestransfers not resources

Benefits of having an alcohol industry Benefits of having an alcohol industry – Jobs and other “benefits” of an industry follow Jobs and other “benefits” of an industry follow

consumer spending patterns and not seen as consumer spending patterns and not seen as independent – as consumers spend differently independent – as consumers spend differently other jobs etc. created. other jobs etc. created.

Why include alcohol Why include alcohol related deaths?related deaths?

Could argue main costs of loss of life to Could argue main costs of loss of life to individual drinkers and their families and should individual drinkers and their families and should be excludedbe excluded

Argument is that loss of life is a loss of Argument is that loss of life is a loss of productive worth in an economy – productivity productive worth in an economy – productivity loss. Valued by loss of life time earningsloss. Valued by loss of life time earnings

But this valuation gives lower value to women, But this valuation gives lower value to women, disabled etcdisabled etc

Could argue that loss of life is a “cost” to the Could argue that loss of life is a “cost” to the whole society and value by “willingness to pay” whole society and value by “willingness to pay” – yields much higher values £1,144,890 – yields much higher values £1,144,890 compared to £147,187 for UKcompared to £147,187 for UK

Summary of some Summary of some estimatesestimates

StudyStudy CountryCountry YearYear Costs (€ Costs (€ billionbillion

Collins,1991Collins,1991 AustraliaAustralia 19881988 1.191.19Collins, 1996Collins, 1996 AustraliaAustralia 19921992 1.521.52Collins, 2002Collins, 2002 AustraliaAustralia 19981998 3.283.28Rice, 1990 Rice, 1990 USUS 19951995 72.472.4Harwood 1997Harwood 1997 USUS 19921992 141.0141.0ONDCP 2001ONDCP 2001 USUS 19981998 127.8127.8Maynard1992Maynard1992 EnglandEngland 19851985 3.733.73Fenoglio2003Fenoglio2003 FranceFrance 19971997 17.617.6

Example – England, £ Example – England, £ billion, 2002. Rannia, billion, 2002. Rannia,

20032003Health careHealth care 1.7 (8.5%) €2.51.7 (8.5%) €2.5

WorkplaceWorkplace 3.9 (19.5%) €5.83.9 (19.5%) €5.8

Lost output to Lost output to premature deathpremature death

2.5 (12.5%) €3.72.5 (12.5%) €3.7

CrimeCrime 11.9 (59.5%) €17.711.9 (59.5%) €17.7

TotalTotal 20.0 €3020.0 €30

How easy are these How easy are these studies to completestudies to complete

Can be a substantial research exerciseCan be a substantial research exercise But for health, international reviews and But for health, international reviews and

WHO figures availableWHO figures available But need routine data on deaths and But need routine data on deaths and

health service use in disease categories health service use in disease categories for detailed own country estimate for detailed own country estimate

Crime and workplace costs need local Crime and workplace costs need local data on risks and costsdata on risks and costs

Figures can be used for other types of Figures can be used for other types of studiesstudies

Externality studyExternality study

Question is at a moment in time, with Question is at a moment in time, with current alcohol policies, is there evidence of current alcohol policies, is there evidence of excess costs.excess costs.

Part of the study may be to compare any Part of the study may be to compare any excess costs to the revenue yieldexcess costs to the revenue yield

What should count?What should count?

AddictedAddicted Not addictedNot addicted

Unaware of Unaware of adverse adverse consequenceconsequencess

Private and Private and external external costscosts

+ production + production resourcesresources

Private and Private and external external costscosts

Aware of Aware of adverse adverse consequenceconsequencess

External External costs + ?costs + ?

External External costscosts

Implications of different assumptions: 1. Implications of different assumptions: 1. Consumers fully informed and rationalConsumers fully informed and rational

There is a case for ignoring individual There is a case for ignoring individual adverse consequencesadverse consequences

Economic models are generally based Economic models are generally based on families as the decision making unit on families as the decision making unit and therefore family consequences may and therefore family consequences may also be ignoredalso be ignored

Policies that lead to an involuntary Policies that lead to an involuntary change in alcohol consumption could be change in alcohol consumption could be seen to have adverse consequences as seen to have adverse consequences as individuals loose the benefits of individuals loose the benefits of consumptionconsumption

Implications of different Implications of different assumptions: not informed but not assumptions: not informed but not

addictedaddicted Alcohol consumers are not aware of the Alcohol consumers are not aware of the

consequences and therefore cannot act consequences and therefore cannot act in their own best interests – there is a in their own best interests – there is a potential gain in overall welfare potential gain in overall welfare (reduction in social costs) if (reduction in social costs) if governments act to reduce consumptiongovernments act to reduce consumption

Models would therefore include a value Models would therefore include a value for the costs to individuals and their for the costs to individuals and their familiesfamilies

Implications of assumptions: Implications of assumptions: what about addictionwhat about addiction

At the extreme end if people cannot make At the extreme end if people cannot make rational decisions and get no benefit from rational decisions and get no benefit from their consumption, the resources being their consumption, the resources being devoted to the production and distribution devoted to the production and distribution of the goods consumed in these of the goods consumed in these circumstances could yield more social circumstances could yield more social benefits if used for some other goodbenefits if used for some other good

However, some would argue that However, some would argue that addiction does not preclude all benefit or addiction does not preclude all benefit or all choice – the rational addiction model all choice – the rational addiction model

Externality studies: some Externality studies: some conclusionsconclusions

Framework not generally used in Framework not generally used in empirical studies BUT would be a empirical studies BUT would be a useful useful

Clear economic case for policy Clear economic case for policy actionaction

Could use many of same Could use many of same components as cost of illness with components as cost of illness with addition of many private costs, e.g. addition of many private costs, e.g. Fenoglio et al (2003)Fenoglio et al (2003)

Economic evaluationEconomic evaluation

What are all the costs and consequences What are all the costs and consequences (bads as well as benefits), private and (bads as well as benefits), private and external of two or more alternative external of two or more alternative scenarios/policiesscenarios/policies

Most developed in health care fields, Most developed in health care fields, explicit cost effectiveness criteria in a explicit cost effectiveness criteria in a number of countries e.g. UK, number of countries e.g. UK, £30,000/€45,000 per Quality Adjusted Life £30,000/€45,000 per Quality Adjusted Life YearYear

Uses some of the same information as Uses some of the same information as other studies but more explicit policy other studies but more explicit policy decision making frameworkdecision making framework

What do we knowWhat do we know

WHO Choice projectWHO Choice project Brief interventions and specialist Brief interventions and specialist

treatment – benefits greater than costs treatment – benefits greater than costs – save resources but not necessarily – save resources but not necessarily immediatelyimmediately

Many interventions favoured by the Many interventions favoured by the industry e.g. school education costly industry e.g. school education costly and not effectiveand not effective

Cost effectiveness not equivalent to Cost effectiveness not equivalent to lowest cost to the statelowest cost to the state

How to conductHow to conduct

Expensive well conducted research Expensive well conducted research studies with experimental design, e.g. studies with experimental design, e.g. UKATTUKATT

Add on studies to existing research, e.g. Add on studies to existing research, e.g. MATCHMATCH

Modelling using systematic reviews of Modelling using systematic reviews of the data and local resource estimates, the data and local resource estimates, e.g. Slattery et al (2003)e.g. Slattery et al (2003)

Broader based programme budgeting Broader based programme budgeting approachapproach

Example of local policy simulation - Example of local policy simulation - Scottish Treatment Simulation (Slattery et Scottish Treatment Simulation (Slattery et

al, 2003)al, 2003)

Treatment typeTreatment type Net health care cost per Net health care cost per death averted, £death averted, £

Coping/social skillsCoping/social skills -3073-3073

BSCTBSCT -1278-1278

METMET -2089-2089

Marital/familyMarital/family -2388-2388

AcamprosateAcamprosate -1122-1122

NaltrexoneNaltrexone 20762076

Unsupervised disulfiramUnsupervised disulfiram 55365536

ConclusionsConclusions

Governments often require economic Governments often require economic information in a number of forms, the information in a number of forms, the exact question being asked is importantexact question being asked is important

Estimating the financial burden of Estimating the financial burden of alcohol through cost of illness studies is alcohol through cost of illness studies is a way of getting alcohol onto the agendaa way of getting alcohol onto the agenda

However, in getting specific actions However, in getting specific actions implemented the question of value for implemented the question of value for money in the long term is sometimes money in the long term is sometimes sacrificed to the issue of current sacrificed to the issue of current financial implicationsfinancial implications

Economic information is limited but Economic information is limited but many interventions, even of many interventions, even of limited effectiveness, save limited effectiveness, save resourcesresources

While well conducted research is While well conducted research is needed, a lot can be done with needed, a lot can be done with limited datalimited data