Cost of Illness Handbook

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You are here: EPA Home Prevention, Pesticides & Toxic Substances Pollution Prevention and Toxics Cost 

of Illness Handbook 

Note: EPA no longer updates this information, but it may be useful as a 

reference or resource.

This web page provides electronic access to the COI 

Handbook. It gives regulatory analysts a quick and resourcesaving estimate of the lower bound cost of medical care for a 

number of environmentally-related illnesses.

Specifically, this web page contains information on the per 

capita incremental direct medical costs associated with the 

various illnesses linked to environmental pollutants. The U.S. 

Environmental Protection Agency developed this information 

to provide support for benefits analyses, policy evaluation and 

development, and other EPA activities. The site contains cost 

data for numerous cancers, developmental diseases and 

disabilities, respiratory diseases, acute diseases, and 

additional illnesses.

Work on this project began in 1991 and is ongoing. The 

Agency welcomes comments and additional data regarding the 

information contained in this web page, which can be 

communicated by clicking on comments link in the footer.

The handbook was prepared for the Office of Pollution 

Cost of Illness Handbook Home | USEPA

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Prevention and Toxics, under the direction of Nicolaas Bouwes, 

by Abt Associates, Cambridge, Massachusetts. Funding for the 

project has been provided by the Office of Pollution Prevention 

and Toxics, the Office of Water, the Office of Radiation and 

Indoor Air, and the Office of Policy, Planning and Evaluation.

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Cost of Illness Handbook

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You are here: EPA Home Prevention, Pesticides & Toxic Substances Pollution Prevention and Toxics Cost 

of Illness Handbook How to View or Download the COI Report 

How to View or Download the COI Report 

Note: EPA no longer updates this information, but it may be useful as a 

reference or resource.

Separate chapters, that the reader can select and download 

individually, provide background and cost data for specific 

illnesses. In addition, the handbook contains links to chapters 

containing relevant information. For example, chapters dealing 

with cancers contain links to Chapter II.1, the introductory 

cancer chapter that contains basic information relevant to all 

cancer chapters. All chapters are linked to Part I [PDF, 149 

KB], an introduction which contains basic information on 

objectives, handbook content, analytical methodology, and 

limitations. 

1. View Sections of the Report Online

Individual sections of the document are available in Adobe 

Portable Document Format (PDF) from the COI Handbook 

Table of Contents. Note: It is essential to read Part I to get a 

full overview of the COI project. 

How to view PDF files:

PLEASE NOTE: Some of the documents 

mentioned in this Section are in Adobe's Portable 

Document Format (PDF). To view or print them you 

will need to have the Adobe Acrobat Reader 

program installed on your computer. The Reader 

can be downloaded and used with no charge; check 

here for more information on the Adobe Acrobat 

Reader. 

2. Download the Report for Printing

The entire COI document is available in a self-extracting 

compressed word perfect zip-file called ENTIRE.EXE. To access 

this file, follow these directions:

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1. Download the file ENTIRE.EXE (self-extracting compressed 

Adobe Acrobat zip file, 1.8 MB) to a directory on your 

computer's hard drive or LAN directory. Follow your browser's 

prompts to save the file. 

2. Using a file management system either in DOS or Microsoft 

Windows, run the downloaded zip file. For example, in 

Windows, open ENTIRE.EXE from the directory in which you 

saved it. Follow your computer's prompts to 'Unzip' the file into 

a new folder you will create, we suggest naming the folder 

"COI". 

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Cost of Illness Handbook

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You are here: EPA Home Prevention, Pesticides & Toxic Substances Pollution Prevention and Toxics Cost 

of Illness Handbook Table of Contents 

Table of Contents

Note: EPA no longer updates this information, but it may be useful as a 

reference or resource.

PLEASE NOTE: Some of the documents 

mentioned in this Section are in Adobe's Portable 

Document Format (PDF). To view or print them you 

will need to have the Adobe Acrobat Reader 

program installed on your computer. The Reader 

can be downloaded and used with no charge; check 

here for more information on the Adobe Acrobat 

Reader. 

Executive Summary [PDF, 19 KB]

Part I: Introduction to the Cost of Illness Handbook

[PDF, 149 KB]

Part II: Cancer

● Chapter II.1. Introduction to the Costs of Cancers 

[PDF, 87 KB] ● Chapter II.2. Cost of Stomach Cancer [PDF, 143 KB] 

● Chapter II.3. Cost of Breast Cancer (pending) ● Chapter II.4. Cost of Kidney Cancer [PDF, 36 KB] 

● Chapter II.5. Cost of Lung Cancer [PDF, 115 KB] 

● Chapter II.6. Cost of Skin Cancer (pending) 

● Chapter II.7. Cost of Colorectal Cancer [PDF, 61 KB] 

● Chapter II.8. Cost of Bladder Cancer [PDF, 125 KB] 

Part III: Adverse Developmental Effects

● Chapter III.1. Introduction to the Costs of 

Developmental Illnesses and Disabilities [PDF, 59 KB] ● Chapter III.2. Cost of Low Birth Weight [PDF, 51 KB] 

● Chapter III.3. Cost of Cleft Lip and Palate [PDF, 54 KB] 

● Chapter III.4. Cost of Limb Reductions [PDF, 32 KB] 

● Chapter III.5. Cost of Cardiac Abnormalities [PDF, 46 

KB] ● Chapter III.6. Cost of Spina Bifida [PDF, 32 KB] 

● Chapter III.7. Cost of Cerebral Palsy [PDF, 35 KB] 

● Chapter III.8. Cost of Down Syndrome [PDF, 33 KB] 

● Chapter III.9. Cost of Reducing High Blood Lead Levels 

in Children [PDF, 32 KB] 

Table of Contents | Cost of Illness Handbook | USEPA

● COI Home

● Executive Summary

● Table of Contents

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Table of Contents | Cost of Illness Handbook | USEPA

Part IV: Respiratory Illnesses

● Chapter IV.1. Introduction to Respiratory Diseases 

[PDF, 9 KB] ● Chapter IV.2. Cost of Asthma [PDF, 221 KB] 

● Chapter IV.3. Cost of Acute Respiratory Diseases: 

Hypersensitivity Pneumonitis, Humidifier Fever, and 

Legionnaires' Disease [PDF, 30 KB] ● Chapter IV.4. Middle Ear Infections (Otitis Media) 

(pending) 

Part V: Symptoms

● Chapter V.1. Symptoms [PDF, 6KB] 

● Chapter V.2. Symptom Groups [PDF, 76 KB] 

Appendices

● Appendix A: Inflation and Discounting Factors [PDF, 28 

KB] 

Glossary [PDF, 7 KB]

References [PDF, 39 KB]

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Chapter I.1 I.1-1 Introduction to the Cost of Illness Handbook

CHAPTER I.1. INTRODUCTION TO THE COST OF ILLNESS HANDBOOK

Clicking on the sections below will take you to the relevant text.

I.1.A Overview

I.1.B Willingness to Pay and Cost Components 

I.1.B.1. Definition of Willingness to Pay

I.1.B.2 Components of Willingness to Pay

I.1.B.3 Approaches to Measuring Willingness to Pay

I.1.B.4 Conculsions 

I.1.C Organization of Handbook. 

I.1.C.1 Illnesses Covered in the Handbook

I.1.C.2 Chapter Format

I.1.C.3 Section Contents

I.1.C.4 Selection of Illnesses

I.1.C.5 Linking Diseases to Agents

I.1.D Methods used to Estimate Direct Medical Costs

I.1.D.1 Overview of Method

I.1.D.2 Survivors and Nonsurvivors

I.1.D.3 Data Sources

I.1.E Susceptible Subpopulations

I.1.F Limitations

I.1.F.1 Uncertainties Regarding the Market Value of Medical Goods and

Services

I.1.F.2 Differences in Critical Patient Characteristics.

I.1.F.3 Geographic Differences in Medical Practices and Services

I.1.F.4 Uncertainty Regarding the Application And/or Accuracy of Input

Data

Appendix I.1-A Equations Describing the Expected Present Discounted Value of the Per

Capita Lifetime Stream of Costs Associated with a Given Illness 
1

 The chapters were developed over many years and the costs are presented in the current dollar

value for the year the chapters were written. Inflation factors based on the Consumer Price Index can be

accessed by clicking on the lefthand sidebar and used to inflate the costs to any year up to the present.

Link to inflation factors: Appendix A

Chapter I.1 I.1-2 Introduction to the Cost of Illness Handbook

CHAPTER I.1. INTRODUCTION TO THE COST OF ILLNESS HANDBOOK

This handbook is provided through EPA’s website. All chapters in the

handbook have links to this chapter because it contains basic information

on objectives, content of the handbook, analytical methodology,

limitations, and results. It is anticipated that the web site will be updated

continuously and this chapter will be modified as new information becomes

available. As shown in the example below, you can use sidebars appearing

at the left to link to resources that may be useful while reading and using

the Chapters. These include the table of contents (which can be used to

link to any chapter), a glossary with abbreviation definitions, inflation and

discounting factors, an executive summary, and other useful websites (e.g.,

OPPT).

Sidebar example:

Click here to link to the Table of Contents

The cost of illness is an estimate of the incremental direct medical costs

associated with medical diagnosis, treatment, and follow-up care. This

includes various cost elements, such as physician visits, hospitalization, and

pharmaceuticals. This Handbook does not estimate the costs in lost time

or wages that may be incurred by either a patient or his or her unpaid

caregiver. The costs also do not include pain and suffering, which may be

substantial. Rather, this Handbook provides information on medical

treatments and their costs, usually aggregated over the lifetime of the

patient. These costs are inflated to the current year, and summarized at

various discount rates.1 A discussion of willingness-to-pay, which is

presented later in this chapter, outlines in more detail the cost elements that

are and are not included in the Handbook.

A normative approach is used to estimate costs, whereby the average age

at diagnosis, the average life expectancy, and other average or mean values

are used to estimate costs. The text notes situations which may arise that

would lead to higher or lower costs than those estimated in this Handbook. 

Due to the variability in medical costs geographically and over time, there

is considerable uncertainty associated with estimating direct medical costs. 

An estimate of costs is often useful, however, when considering planning,

decision-making, and regulatory development. As such, it can provide an

efficient lower-bound estimate of the benefits of avoiding an illness.
2

 For simplicity and brevity’s sake, illnesses in the Handbook refer to diseases, birth defects, and

other acute and chronic conditions requiring medical attention.

Chapter I.1 I.1-3 Introduction to the Cost of Illness Handbook

I.1.A Overview

Improvements in human health in the form of avoiding adverse health

effects frequently constitute a major portion of the benefits resulting from

environmental regulations. There are a variety of approaches to estimating

the value of these benefits, but one of the simplest and more

straightforward approaches is to calculate the medical and related costs

avoided because of the health improvements. 

The purpose of this handbook is to present information on the direct

medical costs resulting from illnesses that are associated with exposure to

environmental agents.2 These cost data can be used for policy and

regulatory development and evaluation, benefits assessments (e.g., RIAs),

and other applications where there is interest in either medical costs

avoided due to pollution prevention or costs incurred due to a lack of

pollution control. Direct medical costs represent only a portion of the total

benefits associated with pollution prevention/reduction, but in many cases 

these lower-bound estimates may be sufficient for decision-making

purposes.

This handbook has been developed over many years, beginning in 1991. 

The level of sophistication and complexity in the field of health economics

has evolved and the approaches taken in the chapters has likewise evolved.

In addition, the needs of the Agency and the requirements of benefit cost

analysis have changed with the advancing field of economics. To address

specific Agency needs, the chapters have been tailored to address program

requirements. For example, some chapters (e.g., stomach cancer) provide

direct medical cost information for survivors and nonsurvivors separately,

while other chapters dealing with other cancers contain medical costs

averaged over all patients with the disease. In each case, the approach was 

designed to meet the specific requirements of the Office within the Agency

for whom the cost estimates were prepared. Consequently, although all

chapters contain information on direct medical costs, the approaches and

level of detail vary, depending on when the chapter was written and the

specific requirements that the analyses were designed to address.

Many offices within EPA have funded the analyses of medical costs

discussed in this handbook. These include Office of Pollution Prevention

and Toxics (the primary funding office), the Indoor Environment Division

within the Office of Air and Radiation, the Office of Policy Planning and

Evaluation, and the Office of Water. 
Chapter I.1 I.1-4 Introduction to the Cost of Illness Handbook

I.1.B Willingness to Pay and Cost Components 

When calculating the value of human health benefits, the ideal approach

would be to estimate the value of these improvements in health to everyone

affected by an illness (e.g., the patient, family, friends, community). 

Economists measure this value in terms of how much they are willing to

pay for it. Obtaining the detailed information necessary to comprehensively

estimate willingness to pay (WTP), however, is complex and expensive. In

addition, some components of WTP, such as the value of avoiding pain and

suffering, are very difficult to estimate with accuracy. As an alternative to

estimating WTP, the direct medical costs of treating diseases provides a

lower-bound estimate of the benefits of reducing exposure to harmful

pollutants. 

I.1.B.1. Definition of Willingness to Pay

WTP is a measure of value based on the premise, central to economic

theory, that the value of a good is simply what it is worth to those who

consume it or benefit from it. The amount an individual is willing to pay

for a particular good may be higher, or lower, than the cost of that good. 

WTP for a good will vary from one individual to another and may decline

with how much of the good an individual already has. In the case of

market goods, the comparison between the price of the good and the

individual’s WTP for it determines whether or not he or she buys the good. 

If the price is lower than his WTP, he will buy the good at less than he

would have been willing to pay for it, receiving what economists call

“consumer surplus.” If the price exactly equals his WTP, then the

individual will be equally happy whether he keeps the money and forgoes

the good or pays the money and gets the good. If the price exceeds the

individual’s WTP, he will not buy the good.

In the context of environmental regulations and policy, economists define

the value of a reduction in health risks as the sum of all individuals’ WTP

for it. Most people would be willing to pay something for a reduction in

risk to themselves, but many people would also be willing to pay for a

reduction in risk to others. Most parents, for example, would probably be

willing to pay for a reduction in the risk of their children incurring a serious

illness. These altruistic components of WTP may be insignificant in many

cases, but they may be substantial in the case of serious diseases or

disabilities. The total value of a risk reduction, then, is the sum of all

WTPs for it. 

Environmental contaminants generally cannot be linked with certainty to

specific health effects experienced by specific individuals. Instead, the

contaminants increase the likelihood, for all exposed individuals, of

contracting specific diseases. Rather than summing the WTPs for a given
Chapter I.1 I.1-5 Introduction to the Cost of Illness Handbook

risk reduction over all those who enjoy the risk reduction, however, it is

often easier to think in terms of the value of an adverse health effect

avoided. Some people who would have contracted the illness will now

avoid contracting it. The total value of an avoided illness is what the

otherwise-afflicted individual would be willing to pay to avoid it plus what

others would be willing to pay for him or her to avoid it. The sum of these

WTPs is the total value of the avoided case of illness, referred to here as

total WTP. In practice, average WTPs are used to value adverse health

effects avoided because WTP will vary from one individual to another.

The crosswalk between valuing risk reductions and valuing a case avoided

can be made by valuing a statistical case avoided. For example, suppose

that a regulation is passed that reduces the risk of contracting pneumonia

by a factor of 0.001. That means that one fewer individual out of every

1,000 people whom the regulation affects would be expected to contract

pneumonia. Suppose each person has some positive WTP for this risk

reduction of 0.001, and that the average WTP is $5. The total willingness

to pay to avoid the one case of pneumonia that would otherwise be

expected to occur per 1,000 people is $5,000 ($5 per person × 1,000

people). That is, the value of a statistical case of pneumonia avoided

would be $5,000. Regulations typically affect cities of substantially greater

size than 1,000 people, however, so there are typically many cases avoided. 

For example, if a regulation reduced the risk of contracting pneumonia by

0.001 in a city with 3 million people, there would be 3,000 (0.001 ×

3,000,000) fewer cases of pneumonia expected to occur in the city as a

result of the regulation. If the value of a statistical case of pneumonia

avoided in that city is $5,000, the pneumonia-related benefit of the

regulation in that city would be 3,000 statistical cases avoided × $5,000 per

statistical case avoided = $15 million. 

In theory, nonmarket goods should be valued in exactly the same way as

market goods — in terms of what people would be willing to pay for them,

(i.e., their willingness to pay). Unlike most market goods, many nonmarket

goods are public goods, from which many people benefit simultaneously. 

A reduction in the risk of an adverse health effect is such a public good,

because all the exposed individuals will experience a decrease in the

likelihood of contracting the disease. 

I.1.B.2 Components of Willingness to Pay

WTP to avoid an illness contains several components. Illness imposes both

direct and indirect costs that would not be borne if the illness was avoided. 

Direct costs result from the increased resource utilization caused by the

illness, and may be medical or non-medical. For example, the cost of an

ambulance used to transport a person to the hospital is a direct medical

cost, while child care and housekeeping expenses required due to illness are

non-medical direct costs. In addition to the direct costs, there are
3

 Opportunity cost is the cost associated with forgone opportunities. Time spent in the hospital,

for example, is time that would otherwise have been spent in productive and/or leisure activities. The

opportunity cost of a hospital stay is the value of the productive and/or leisure time lost during the hospital

stay. 

Chapter I.1 I.1-6 Introduction to the Cost of Illness Handbook

opportunity costs (the value of productive and leisure time lost) to the

patient and possibly to others.3 Finally, illness causes anxiety, pain, and

suffering, the cost of which, although difficult to measure, is very real and

may be very large. Most people would be willing to pay something to

avoid the pain and suffering that comes with illness, as well as to see loved

ones avoid pain and suffering. There is also a perceived value to most

individuals of maintaining public health (i.e., most people would place

some value on reducing the number of children with asthma, the number of

people with cancer, the incidence of birth defects, and the occurrence of

most illnesses).

Finally, in some cases people may take precautionary actions to avoid

contracting environmentally-related illnesses. People may buy bottled

water, for example, if their water supply is contaminated or if they believe

it may be. In these cases, there are not only costs associated with the

occurrence of the illness, but costs incurred in efforts to prevent the illness. 

These costs would be avoided or reduced if the risk of the illness were

reduced. The components of total WTP are shown in Figure I.1-1. 

I.1.B.3 Approaches to Measuring Willingness to Pay

The challenge confronting the analyst is to measure the total value

associated with avoiding an illness. This is a difficult challenge due to the

variability in human perceptions, responses, and the complexities involved

in measuring individual attitudes and extrapolating to a larger group. 

Economists have developed several ways to measure the value of morbidity

avoided; each method has advantages and disadvantages. 
Chapter I.1 I.1-7 Introduction to the Cost of Illness Handbook

INDIRECT COSTS DIRECT COSTS

WTP to Avoid

Pain and Sufferingb

for

Medical Services

Value of

Lost Productive

Timec

family and

community

for

Special Servicesd

patient

patient

caregiver

(unpaid)

Value of 

Lost Leisure

Time

paid directly by

patient

paid indirectly by

patient and rest of

public through

insurance

premiums, taxes,

etc. (see text for

additional detail)

paid by hospital or

MD

Total Willingness to Pay (WTP)a

Figure I.1-1. Elements of Willingness to Pay

a. See text for a discussion of cost elements. The cost components above are associated with contracting a disease. People who avoid disease by employing averting

behavior may incur other costs (e.g., the cost of buying bottled water). Both the cost components listed above, and those associated with risk avoidance would be

reduced or eliminated if the risks were reduced or eliminated.

b. Heightened morbidity or other adverse effects associated with a lack of treatment (e.g., due to insufficient resources) may increase pain and suffering. This indirect

cost category is very difficult to measure.

c. Lost time includes a partial or complete loss of the ability to carry out activities (paid or unpaid).

d. Includes special education (children); worker retraining (adults); workers’ disability; and/or specialized equipment, transportation, and other services required due to

the illness.
Chapter I.1 I.1-8 Introduction to the Cost of Illness Handbook

I.1.B.3.1 Averting Behavior. 

One approach to valuing WTP relies on the averting behavior of people. 

This “averting behavior” approach provides estimates of WTP based on

actual behavior in markets. The major drawbacks of this method, however,

are that (1) it is limited to situations in which averting behavior is possible

(i.e., not all contaminants can be avoided), and (2) it is difficult to isolate

WTP for improved health from WTP for other aspects of the averting

behavior. For example, while use of an air conditioner may reduce

exposure to ambient air pollutants, it also cools the house. 

Evaluation of averting behavior may be complex because pollution

avoidance costs are situation dependent. Using the air conditioning

example, community factors that influence air conditioner use include the

extent of public notification about pollution problems, ambient

temperatures, etc. Individual decision factors include a subjective rating of

the pollutant’s health risks. 

I.1.B.3.2 Contingent Valuation

A second method, contingent valuation, is to simply ask people how much

they are willing to pay for a good or service that is not traded on the

market. The valuation is contingent upon establishing the market. This

method involves designing surveys that present people with hypothetical

situations in which they are queried about how much they would be willing

to pay for a specified nonmarket good (such as to avoid a case of

pneumonia). The advantage of the contingent valuation method is that it

attempts to estimate the right thing — individuals’ WTP. In addition, in

contrast to the averting behavior approach, it can be applied to any risk

reduction or adverse health effect. It is a controversial method because it

of necessity elicits responses to a hypothetical situation. The reliability of

the estimates obtained through contingent valuation methods is questioned

by many economists and by others. The approach is resource intensive and

costly. It requires careful questionnaire design and interpretation of

responses. In spite of its drawbacks, it may be a useful tool for obtaining

valuation data, and has the potential for contributing to a variety of

planning, evaluation, and regulatory activities.

I.1.B.4 Conclusions 

The cost of illness method used in this handbook estimates the direct

medical costs associated with an illness. This method has several

advantages. It is straightforward to implement and easy to understand. In

addition, it is likely to result in relatively accurate estimates of the

components of total WTP that it attempts to measure, the medical cost

component. The major drawback of the cost of illness method is that it

omits several components of total WTP, most notably the WTP of the

patient and of others to avoid the anxiety, pain, and suffering associated

with the illness. These components may be substantial, especially for
4

 Some researchers (Crocker and Agee, 1995) have suggested that the cost of illness approach

may not always underestimate costs (e.g., when treatments are painful and consequences are limited,

patients or their caregivers may have ambivalent attitudes). If this is true, however, it is likely to be

expected to be the exception rather than the norm under circumstances of fully informed medical

information, because most individuals place a higher value on regaining their health (in the case of

non-terminal diseases) than on avoiding medical procedures. 

Chapter I.1 I.1-9 Introduction to the Cost of Illness Handbook

serious illnesses. In addition, this handbook does not include direct

non-medical costs, the opportunity costs of family members or other

unpaid caregivers, or time lost for the patient. Consequently, the values

reported here are only a partial estimation of the cost of illness, which, as

described above, is itself an underestimate of the total economic costs

associated with the diseases considered. Because it omits these

components, the cost of illness method provides an underestimate of WTP

to avoid the disease.4

I.1.C Organization of Handbook. 

This handbook is organized into sections based on common features of

illnesses and the type of illnesses discussed, such as cancer, developmental

illnesses and disabilities, diseases of specific organ systems (i.e.,

respiratory), and acute illnesses. They were organized in this manner

because the diseases contained in these categories are similar in important

aspects, including: cost calculation methods; biomedical data on disease

definition, causality, susceptible subgroups, and treatment; survival

patterns; and the types of medical services required and their costs. For

example, cancers frequently require similar types of medical intervention,

share similar characteristics regarding survival data, and have many

causative agents in common. Developmental effects also share many

characteristics; they manifest early in childhood, involve protracted

treatment, occur in clusters, require both medical and other professional

intervention, and may have similar causative agents. For both cancer and

developmental effects, toxicological data are often not organ-specific, and

providing general information regarding chemical associations in an

introductory chapter was most appropriate. Most sections begin with a

chapter that discusses the common characteristics of a disease group with

respect to background medical data, cost, and causality.
5Bone and liver cancer costs are also briefly discussed in the introductory cancer chapter (Chapter

II.1).

Link to Chapter II.1

Chapter I.1 I.1-10 Introduction to the Cost of Illness Handbook

I.1.C.1 Illnesses Covered in the Handbook

Medical costs are provided for the following illnesses: 

Cancers5

breast cancer

kidney cancer

lung cancer

skin cancer

stomach cancer

colorectal cancer

bladder cancer

Developmental Illnesses and Disabilities

low birth weight

cleft lip and palette

limb reductions

cardiac abnormalities

spina bifida

cerebral palsy

Down syndrome

high blood lead levels

Respiratory Diseases

asthma

acute respiratory illnesses

Symptoms

Some of these chapters are currently in development or undergoing

revisions (e.g., skin cancer). 

I.1.C.2 Chapter Format

Each chapter covering a specific illness follows the same general format;

the level of detail provided depends on the availability of information and

the goals of the analysis. First, the chapter provides the reader with

background information on the disease (Section A), including a definition

and description of the disease, adverse effects related to the disease,

associations with environmental pollutants, common medical approaches,

and likely disease outcomes (prognosis). 

The second portion of each chapter (Section B) provides specific cost

information, including the methodology used to estimate costs, sources of

the data, and cost estimates. Costs are provided that were current in the

year in which the chapter was written or revised (1996 and forward). The
Chapter I.1 I.1-11 Introduction to the Cost of Illness Handbook

costs can be updated to the current year using the Consumer Price Index

(CPI) Medical Services inflation data provided in “Appendix A: Inflation

and Discounting Factors” on the sidebar at left. 

Link to Appendix A

Section B of each chapter also discusses results and limitations of the

methods used. In some cases an uncertainty and/or sensitivity analyses is

also provided. Studies that provide alternative cost estimates are presented

and discussed, when available. When more than one set of results is

discussed, recommendations for data use are given in a section titled

"Conclusions." 

The headings that appear in the format of each disease chapter are listed

below and described in the text that follows:

A Background

A.1 Description

A.2 Concurrent Effects

A.3 Causality & Special Susceptibilities

A.4 Treatments and Services

A.5 Prognosis

B Costs of Treatment and Services

B.1 Methodology

B.2 Results

B.3 Limitations

B.4 Other Studies

B.5 Conclusions

The chapters introducing each part of the handbook, such as cancer and

developmental effects, do not follow this format because they do not deal

with a specific disease. 

I.1.C.3 Section Contents

The contents of each section are as follows:

A. Background: 

A.1 Description: provides a clear definition of the disease and what

subcategories of an illness are omitted. This section may also include data

on occurrence for some diseases, depending on the needs of the sponsoring

office.

A.2 Concurrent Effects: often there are other diseases associated with a

given disease. These may be attributable to the same causes (e.g.,
Chapter I.1 I.1-12 Introduction to the Cost of Illness Handbook

environmental pollution). If the concurrent effects have been reported in

the reviewed medical literature, then they are listed in this section.

Treatment often incurs additional risk; radiation treatment, anti-cancer

drugs, and other therapies can cause serious illness while curing the target

disease. These secondary illnesses usually constitute a separate disease,

however, so their costs are not provided in the same chapter. In some

cases, the costs of these diseases are discussed in other chapters within the

handbook. Concurrent effects are listed even when cost data are not

provided, so that the analyst using the data can report the underestimate

and uncertainty associated with additional anticipated illness. 

A.3 Causality and Special Susceptibilities: information on the

associations between environmental agents and diseases is presented in this

category. Factors that may increase susceptibility are also discussed; these

include many pre-existing conditions. Data are limited, however, on

special susceptibilities. A comprehensive evaluation of illnesses that would

increase susceptibility or severity of a disease was beyond the scope of this

analysis. In general, a pre-existing disease in the target organ causes

additional medical complications and higher costs. For example, coronary

artery disease in someone with pre-existing heart disease is likely to be

much more serious and costly.

1.4 Treatment and Services: includes a brief description of common

treatments and related services. In most cases, this description does not

include support services, such as specialized occupational training required

for rehabilitation. This information was available for some the chapters

that cover childhood diseases and disabilities, and so is included as

supplemental cost data. 

1.5 Prognosis: contains quantitative or qualitative information on likely

disease outcomes. This information is important because survival

probabilities, and the duration between diagnosis and death among those

who do not survive, are used in cost of illness evaluations and have an

impact on the cost of a disease.

B. Costs of Treatment and Services: contains medical cost data and

methods used to estimate costs.

B.1 Methodology: describes methods used in calculating the costs of

medical treatments and services, and the basic information used to calculate

costs.

B.2 Results: summarizes cost estimates. Discounted costs at zero, three,

five, and seven percent are provided for most illnesses. 

B.3 Limitations: describes shortcomings of the methodology and results. 

These typically include a discussion of factors such as the age of the data,
6Toxicological and epidemiological studies may strongly suggest, but rarely provide, unequivocal

evidence for links between exposure and effects. Credible studies in the peer-reviewed literature that

demonstrated statistically significant associations between exposure and effects were considered adequate

Chapter I.1 I.1-13 Introduction to the Cost of Illness Handbook

sources of information, assumptions regarding treatment, and other

factors that may affect the applicability or accuracy of cost estimates.

B.4 Other Studies: when other study results are available, they are

presented and the advantages and disadvantages of the various studies are

discussed. In all cases, the study results recommended for use are

presented first and described in detail in the "Methodology" and "Results"

sections. Those studies with results of limited use are presented later in

this section.

B.5 Conclusions: when more than one set of results is discussed in the

medical cost and/or time sections, the final recommendations regarding the

optimal results are given in this section. The section is not included in

chapters having only one set of study results.

I.1.C.4 Selection of Illnesses

EPA selected diseases for inclusion in this handbook based on 1) the

known need for disease cost estimates for regulatory or policy activities, or

2) the anticipated need based on a review of the environmental health

literature and Agency activities. 

Regulations and policy evaluations often require cost and benefit

information for specific illnesses anticipated to be affected by a rule or

policy. Because reductions in exposure to pollutants will result in

improvements in human health, evaluations of rules or policy changes may

incorporate consideration of the impacts on human health, including the

benefits of illness avoidance. For example, the medical cost estimates for

stomach, bladder, and lung cancer provided in this handbook were

developed in 1998, in response to a need for economic data for Office of

Water rules covering radon and arsenic. 

Illnesses were also selected based on their likely occurrence as a result of

exposure to environmental pollution and anticipated future needs of the

Agency for cost data. Many illnesses that are frequently associated with

environmental pollutants, or that are clearly linked to pollution episodes

(e.g., asthma) were evaluated and included in the handbook. For these

health-based selections, the environmental health literature (i.e., toxicology

and epidemiology) was consulted. The illnesses in this handbook have

been linked to exposure to environmental hazards including both chemical

(e.g., PCBs) and physical (e.g., radiation) hazards. 

The health-based selection process included the following considerations:

• a link to environmental exposures in the toxicological and/or

epidemiological literature;6
evidence for inclusion in this handbook. The associations listed in this handbook are presented at the

screening level; risk assessments and health evaluations require an in-depth review of the literature on each

chemical.

7

 HSDB is an on-line toxicological database maintained by EPA and available through the National

Library of Medicine’s TOXNET. IRIS and HEAST, developed by EPA, contain data regarding

carcinogenic and non-carcinogenic effects of chemicals.

Chapter I.1 I.1-14 Introduction to the Cost of Illness Handbook

• illnesses that could reasonably be linked to exposure levels likely to

occur in the environment;

• the availability of costing data for an illness (either in the form of

multiple mergeable databases, or in the economic literature);

• occurrence linked to multiple chemicals, ubiquitous chemicals, or

those of particular interest to EPA based on policy considerations

(e.g., lead, mercury);

• an illness that does not result in death shortly after onset. 

Professional journals were consulted for information on health effects. In

addition, some federal sources, such as the Hazardous Substances Data

Base (HSDB), the Integrated Risk Information System (IRIS), the Health

Effects Assessment Summary Tables (HEAST), and the Agency for Toxic

Substances and Disease Registry’s (ATSDR) Toxicological Profiles, were

used as the sources of data linking illnesses and exposure to environmental

pollutants.7 In selecting illnesses, a convergence was sought between the

likelihood of an illness based on environmental exposure levels and the

availability of good quality aggregate cost data from databases and

research papers. For high priority illnesses, it was sometimes necessary to

construct cost estimates using a theoretical approach when aggregate data

were not available. 

I.1.C.5 Linking Diseases to Agents

Matrices with preliminary information on environmental agents associated

with cancers and with birth defects are provided in Chapters II.1 and III.1,

respectively. These contain lists of hundreds of agents that have been

associated with the disease categories in either toxicological or

epidemiological data, or both. 

Some of the agents were identified with a single disease during research on

a single disease or disease category (e.g., birth defects) and have not been

reviewed regarding the induction of other diseases in the Handbook. In

some cases, the diseases were studied as a result of their link to an agent. 

For example, the costs associated with stomach cancer were evaluated for
Chapter I.1 I.1-15 Introduction to the Cost of Illness Handbook

a proposed radon rule. Consequently, when the stomach cancer chapter

was written, an extensive search for other stomach carcinogens was not

conducted.

In addition to those chemicals listed because the data were obtained for a

specific chapter, data on chemicals associated with health risks were

collected specifically for the matrix from general toxicological sources. 

Most linkages between chemicals listed and categories of effects (i.e.,

cancer and birth defects) did not involve an extensive search of the

literature, and are often based on a quick review of relevant databases. The

reader should assume that the matrices do NOT list all adverse effects of an

agent, or all agents that can cause a disease. This limitation is due to the

very sizable scope of the work that would be required to fully evaluate all

potential effects of the hundreds of chemicals listed in the matrices. In the

future additional data may be added to the matrices. 

Links to Chapters II.1 and III.1 

I.1.D Methods used to Estimate Direct Medical Costs

As noted above, total costs associated with an illness incorporate many

elements. This handbook focuses on direct medical costs. The direct

medical costs of illness are calculated for the life cycle of each illness, (i.e.,

from diagnosis to cure or patient death). The goal of this handbook is to

provide cost estimates that are generalizable to any area of the United

States; therefore, cost data representative of the nation as a whole were

sought. Standard disease treatment methods, using generally acceptable

practices, were also considered appropriate. Finally, the average patient

experience regarding prognosis and survival was used in the cost estimate. 

This approach is expected to yield representative cost estimates that are

generally applicable. They may be modified by changes in technology or

cost structure.

I.1.D.1 Overview of Method

Six basic steps are necessary to calculate direct medical costs:

1. Identify a cohort who has received the standard treatment for the

disease. If costs are to be determined by treatment component, list

the standard treatment elements. 

2. Determine the costs of each phase of treatment or for each

treatment component and the timing of these costs. 

3. Combine the cost estimates with probability data regarding the

likelihood of receiving specific treatments and their timing. 
8

 Background costs are the average costs incurred by a population matched (e.g., in age, sex, etc.)

for those with the disease, and include care for both healthy and diseased people in the population.

Chapter I.1 I.1-16 Introduction to the Cost of Illness Handbook

PVC ' j

99

n'l

P

i

l,s

(n) DC i

l,s

(n & l % 1)

(1 % r)

n&l

Incorporate survival data in probability estimates based on the age

of onset of the disease and life expectancy.

4. If total medical costs are used (rather than disease-specific cost

elements), determine the background medical costs that would be

incurred in the absence of the disease.8 Modify the disease-related

costs as needed to obtain incremental costs.

5. Discount the stream of treatment costs over time to estimate

present value treatment costs. All costs in the handbook are

adjusted to 1996 dollars using the medical care cost component of

the Consumer Price Index.

6. Aggregate the discounted stream to obtain an estimate of the total

medical costs of the disease.

Ideally, this process is carried out for both survivors and nonsurvivors of

the disease (these two subgroups are discussed below). These basic cost

estimation activities are carried out for all illnesses. As discussed above,

results reported in the literature are used for many of the diseases. In a few

cases, these steps were carried out specifically for the development of

chapters in this handbook. 

The data obtained in the various steps above are used in a single

aggregating equation described by Hartunian et al. (1981) to calculate the

expected direct present value costs (PVC) for any individual of a given sex,

impairment category, and age at onset of impairment:

where:

n = the various ages of the individual,

l = the age at impairment onset,

P

i

l,s(n) = the probability that a person of sex s who acquires

condition i at age l will survive to age n,

DCi

l,s(n-l+1) = the dollar value of the average annual incremental direct

costs generated by such persons during year n-l+1

following impairment onset, and

r = the discount rate.
Chapter I.1 I.1-17 Introduction to the Cost of Illness Handbook

In reality, data rarely exist regarding the probability of survival and direct

costs for a specific disease for each age of diagnosis and sex. If there were

such data, however, the estimated average direct costs would be calculated

by weighting the direct costs for each age and sex by the percentage of

incidence in each sex/age grouping. 

Appendix I.1-A, “Equations Describing the Expected Present Discounted

Value of the Per Capita Lifetime Stream of Costs Associated with a Given

Illness,” contains a listing of equations and their input parameters used to

estimate the expected present discounted value of the per capita lifetime

stream of medical costs. The appendix includes more detail than is

provided in this section.

Link to Appendix I.1-A.

I.1.D.2 Survivors and Nonsurvivors

Medical costs associated with a disease differ for those who survive a

disease and those who die of it. For purposes of the cost analysis in this

handbook, survivors are defined as those people who are diagnosed with a

disease, but do not die of it (although they may die of another cause). 

Nonsurvivors are those who die of the disease at any point after diagnosis. 

Separate cost estimates for survivors and nonsurvivors are provided in the

handbook for a few types of cancer, due to a specific Agency program

need. These estimates are listed separately in cases where it is important to

distinguish between the differing costs for the two groups, and in cases

where the value of a statistical life (VSL) is used for nonsurvivors. When

the VSL is used for nonsurvivors, their medical costs have already been

incorporated into the cost estimate. Under these circumstances, it would

be appropriate to use the medical and time (and any other costs) for

survivors, but not for nonsurvivors. The use of cost data depends on the

composite of all cost calculations that are being carried out for a benefits

assessment. 

A patient’s probability of receiving specific treatments is modified by the

likelihood that he or she will survive to receive that treatment. Survivors

incur initial treatment costs but not charges for services, such as terminal

care associated with the disease. They may die of other causes during the

treatment period, and their probability of receiving treatment is modified by

the probability that they will die of another cause. This probability is

determined from the background mortality rates for the U.S. population,

as reported by the Department of Health and Human Services publication

series, Vital Statistics in the United States (DHHS, 1994). The probability

of death due to the disease is determined from the medical literature (e.g.,

from the National Cancer Institute for cancers) for nonsurvivors. 

Determining survivorship for some illnesses, such as asthma, is very

difficult due to rapid advances in treatments and the confounding effects of
Chapter I.1 I.1-18 Introduction to the Cost of Illness Handbook

limited access to care among some socioeconomic groups. When survival

data are provided in a chapter, the source and confounding effects are

discussed.

The methods used to calculate medical costs for survivors and

nonsurvivors are described briefly below. Numerous additional

calculations are often required to determine survival rates, life expectancy,

etc., and are discussed in chapters where required.

I.1.D.2.1 Survivors (those who do not die of the disease)

The average cost among survivors of a disease for each year post-diagnosis

may be expressed as:

Average nth Year Costs = medical costs for nth year treatment ×

probability of survival through the nth year + medical costs for nth

year of treatment /2 × probability of mortality in the nth year

As this description indicates, the costs decline as the population decreases

due to mortality. Costs are discounted back to the year of diagnosis. 

Costs for those who die are calculated for one half year because they are

assumed to die at the midpoint of the year. Their survival rate is equal to

the background mortality rate at each age in the U.S. population as

reported in vital statistics reports (e.g., Vital Statistics of the United States,

DHHS, 1994).

The yearly costs are aggregated over the remaining life of the “average”

patient. For example, if the average age of a patient is 40 and medical

visits and drug treatment for asthma are anticipated to be required over the

expected lifetime for a 40-year-old in the general population, the costs for

each year are calculated, discounted from the time of diagnosis, and

summed over a lifetime. This generates a lifetime stream of costs.

Average Lifetime cost = Average 1st year cost + the sum of the

(discounted) average subsequent year costs 

If there is a point at which treatment ceases (e.g., ten years after diagnosis

and treatment for cancer), the costs will be aggregated over time up to that

point. When this approach is compared to the equation supplied by

Hartunian et al. (1981) shown in section I.1.D.1, it can be seen that the

overall cost estimation method is the same.

Link to Section I.1.D.1

I.1.D.2.2 Nonsurvivors (those who die of the disease)

The method for calculating medical costs for nonsurvivors is similar to that

shown above for survivors, but the costs themselves are often different, and

the probabilities used to calculate costs differ. For nonsurvivors, the
9

 For example, Baker et al. (1989 and 1991) were used as a source of basic cost information for

many of the cancer chapters. Additional data required for the cost analyses regarding survival and

mortality estimates and cancer rates were obtained directly from the National Cancer Institute’s databases. 

These combined sources were used to calculate cost estimates.

Chapter I.1 I.1-19 Introduction to the Cost of Illness Handbook

probability of treatment is contingent on surviving the study disease for

each year after disease onset. The general descriptions are the same as

those shown above.

I.1.D.2.3 Average Costs for Survivors and Nonsurvivors

The average lifetime medical costs of a disease are estimated for survivors

and for nonsurvivors separately. The average cost for both together is

calculated as a weighted average of costs for the two groups, using the

proportion of patients in each group. This can be expressed as:

Average Lifetime medical costs = costs for survivors × proportion of

survivors + lifetime costs for nonsurvivors × proportion of

nonsurvivors

I.1.D.3 Data Sources

Most cost estimates provided in this Handbook rely on an evaluation of

databases of actual costs incurred, either for this Handbook or by previous

researchers. Each chapter describes how various data sources were used

to calculate the final results, and contains a discussion of uncertainties

associated with data sources. 

Well-designed studies in the literature that supplied recent cost estimates

were located for most illnesses and were preferred over data collection and

evaluation for the sake of efficiency. For example, many of the childhood

disease chapters in this handbook are based on work done by Waitzman et

al. This research group used 12 databases to accurately construct their

cost estimates. 

Link to Chapter II.2

Using the results of these studies is more efficient than constructing costs

directly from multiple databases. Extensive resources are required to

evaluate national databases, and confidentiality is often an issue that

requires a lengthy timetable for clearances. Most chapters use a

combination of data obtained from the literature and directly from data

sources. Results reported in the literature are supplemented by survival or

other essential data to obtain cost estimates.9 
Chapter I.1 I.1-20 Introduction to the Cost of Illness Handbook

Cost estimates were developed for some diseases by constructing a typical

treatment course through physician panels, and evaluating the cost of each

treatment component using sources such as the Medicare database. This

approach relies on expert judgment by physicians who determine

treatments that the average patient receives, the timing of treatments, and

the likelihood that a percentage of patients will receive a particular

treatment. Survival data are obtained from a secondary source.

Limitations to this approach include physician errors in recall, physician

experience with a non-representative population, and incomplete

knowledge of variations in treatment patterns geographically and among

physician specialties. In addition, the approach tends to estimate ideal

costs because physician panels describe the treatment and costs that a

person with a disease should receive, whereas the direct cost estimation

approach described above is based upon actual costs. For example, skin

cancer costs were evaluated using physician recommendations. The

protocol described is one that provides the most appropriate care; it is not

necessarily the most expensive, but assumes that everyone receives the

services that would address their medical needs adequately. In practice this

does not happen, due to a variety of factors (e.g., limited access or funds,

avoidance of diagnosis). 

Consequently, the chapters based on physician recommendations for

treatment describe costs associated with sound medical practice, and these

values may be higher than the “average” for the U.S. Adequate care for all

patients probably reduces time loss, however, so that what is theoretically

spent on complete medical care may be balanced by related reductions in

unnecessary morbidity and mortality. When these types of analyses have

been done, they generally find that preventive and/or adequate medical care

costs are more than offset by reductions in future morbidity, time loss, and

special services required (e.g., special education).

Due to the limitations of the approach and the resources required to carry

out an analysis based on this type of cost evaluation, it was used for very

few chapters in this handbook. 

I. 1.E Susceptible Subpopulations

Many diseases affect subgroups of the population disproportionately. The

subgroups may be defined by age, gender, racial, ethnic, socioeconomic, or

other differences within the U.S. population. For example, asthma is most

often reported and treated in children and the elderly. Most cancers occur

with increasing frequency in older populations (some leukemias being

notable exceptions). Very few diseases affect all population groups (ages,

sexes, races) equally. For purposes of evaluating costs and potential

benefits to different segments of the population, it is useful to evaluate
Chapter I.1 I.1-21 Introduction to the Cost of Illness Handbook

whether there are susceptible subpopulations that require consideration. 

Their benefits may be considerably higher than those of the average

member of the general population.

Each chapter contains a section titled “Causality and Special

Susceptibilities” that contains information gathered to address this issue. 

An exhaustive search was not carried out for these data, however, and new

information is being generated rapidly in this field. Consequently, there

may be susceptible subgroups not identified in this section. In addition,

there are usually pre-existing medical conditions that will increase

susceptibility to most diseases (as noted previously), such as a pre-existing

disease in the same organ.

Special susceptibilities are often indicated by higher-than-average rates of

the disease of interest. Increases in the rates of reported diseases may be

due to a variety of factors. Some of these indicate an increased

susceptibility; others are matters of personal choice and may not be

considered relevant to cost calculations. One way to approach this issue is

to evaluate increased susceptibility when it is based on an increased risk of

disease due to factors reasonably beyond the control of the subpopulation. 

Factors that are usually beyond the control of the individual that may cause

increased susceptibility include: 

• constitutional limitations (e.g., illnesses, genetic abnormalities, birth

defects such as enzyme deficiencies);

• concurrent synergistic exposures that cannot reasonably be

controlled (e.g., at home or in the workplace);

• normal constitutional differences (i.e., differences based on sex,

age, race, ethnicity, etc).

Other factors that are not usually considered beyond the individual’s

control include personal choices, such as smoking, drinking, and drug use. 

These factors may be included in an analysis depending on the goals of the

analysis. Which types of factors should be included in an analysis is a

policy decision. Personal choice typically does not include the place of

residence or work, since these are not reasonably changed by many people. 

For example, asthmatic smokers who increase their risk of asthma are not

discussed at length as susceptible subpopulations; however, asthmatic

residents of an area with high levels of acid aerosols may require additional

analysis of their risk of asthma and benefits of asthma avoidance. It may be

useful to evaluate the medical costs of people in the latter group using

different underlying risk factors than would be appropriate for the overall

U.S. population.
10 This type of analysis was begun in 1998 in response to specific needs regarding high-risk

subgroups. It is not contained in earlier chapters, but may be added in the future.

11 This type of analysis is complex because it requires an evaluation of the proportion of cases

expected in the population subgroup as well as in the overall population. This requires calculation of the

conditional probabilities of stomach cancer based on race. Because the overall stomach cancer rates

incorporate the rates for both blacks and non-blacks, the likelihood of occurrence in each of these two

groups would need to be determined. This information would be used with the racial distribution in the

target population to determine the estimated potential risk.

Chapter I.1 I.1-22 Introduction to the Cost of Illness Handbook

These types of considerations are not used directly in the cost calculations

presented in this handbook. Much of the information regarding special

susceptibilities is incorporated, however, into the medical information

provided in the background sections of each chapter. In addition,

sensitivity analyses in some chapters include an analysis of the impact on

subgroups at highest risk.10 The data may be used in a variety of ways,

depending on the nature of the benefits assessment.

The degree to which special susceptibilities should be considered in an

assessment depends on the extent of impact that is expected in the cost

analysis (e.g., whether the differences will be substantial or minimal), as

well as equity considerations. For example, the rate of stomach cancer in

African-Americans is much greater than in non-African-Americans. There

is no conclusive information regarding the cause of this increase, so it is

assumed that it may be due to a genetically determined increase in

susceptibility to stomach cancer. Because these differences are consistent

across the ages, there is no modification required in the per capita cost

estimates for stomach cancer. If an area that was predominantly AfricanAmerican was the subject of a benefits assessment, however, the increased

risk in that area would merit consideration in the benefits assessment. If

risk factors for the general population were used with the per capita costs,

then the impact on the area would be estimated incorrectly. Most chapters

contain some information regarding known increases in susceptibility. 

Some have considerable detail, such as the chapter on stomach cancer

(Chapter II.2) where basic information on differences in stomach cancer

rates based on race and sex from the National Cancer Institute are

provided. These data could be used by risk assessors or epidemiologists to

evaluate the potential for increased risk.11 Their results, together with the

economic data, could then be used in a benefits assessment. This same

approach may be used for any diseases for which a susceptible subgroup of

interest has been identified.

Link to Section I.1.B

Link to Chapter II.2
Chapter I.1 I.1-23 Introduction to the Cost of Illness Handbook

I.1.F Limitations

The limitations of the data provided in this handbook are related to two

primary constraints:

1) the scope of the analysis, and 

2) uncertainty regarding the data used in the analysis.

The scope of the analysis, described in the introduction to this chapter,

includes only direct medical costs. Many aspects of the willingness to pay

to avoid these illnesses are not covered in the handbook, including direct

non-medical costs and pain and suffering (see discussion in Section I.1.B

and Figure I.1-1). 

Link to Figure I.1-1

There are numerous sources of uncertainty associated with the values

presented in this handbook. The background and cost sections of the

chapters provide definitions and information on the “average” medical

experience and costs for a disease. Outside this experience, however,

numerous factors impact the costs associated with specific diseases and

lead to uncertainty in the cost estimates. The sources of uncertainty

specific to each disease cost analysis (i.e., the databases used in an analysis,

the methods of the analysis) are discussed in the individual disease

chapters. Those common to all diseases are discussed in this section.

I.1.F.1 Uncertainties Regarding the Market Value of Medical Goods and Services

As noted above, direct medical costs are provided in this handbook as a

component of WTP and may be used as a lower estimate of WTP. For a

variety of reasons, however, the price of medical services and the mix of

services purchased may not accurately reflect the market demand and value

for these services. These reasons are related to the nature of what is

purchased when buying medical services, and the way in which medical

services are paid for in the U.S. 

I.1.F.1.1 The Nature of Medical Service Purchases

The nature of what is being purchased is often unclear when obtaining

medical services. Although a specific service or good is usually being

obtained at a point in time (e.g., surgery, a pharmaceutical, an X-ray), the

ultimate goal of the purchase is invariably an improvement in health. The

latter, often purchased through multiple related services and goods, is

generally far more valuable to the individual than the individual service or

item. For example, when faced with a serious illness, individuals would
12 This discussion generally addresses people who prefer a cure over death. Although the latter

may occur, it is not the norm and is not directly relevant to determining willingness to pay for services to

improve health.

13 Alternatively, there is often opposition to high medical costs associated with prolonging life for

the very elderly, terminally ill, or those with certain types of health problems. 

Chapter I.1 I.1-24 Introduction to the Cost of Illness Handbook

expend the maximum funds they have available to avoid death or

permanent disability.12 

Just as individuals may be willing to bear almost any medical costs required

for serious illnesses, society is often willing to spend very large sums to

avoid illness or death among otherwise healthy individuals. Extensive and

expensive health programs for indigent populations illustrate the interest in

the overall health of the population. This may be both the provision of a

public good and a self-protective strategy. Likewise, societies are often

willing pay very large medical costs under special circumstances. For

example, communities have raised millions of dollars to provide cancer

treatments for a relatively small number of children. What a society or

individual would be willing to pay for medical services may be strongly

affected by a society’s response to potentially drastic consequences. The

willingness to pay very large medical costs to avoid dire consequences is

expressed both by the individual with the illness and by those who are

aware of the individual’s plight.13

There is an interactive relationship between what medical costs society is

willing to pay and standard medical practice (which dictates costs), which

often reflects societal values. This dynamic may further diminish individual

control over the purchase of medical services and their impact on the

market for medical services. When insurance companies, the government,

or medical practice standards determine access to care or determine what

constitutes appropriate treatment, individual choice may be limited; this

may also affect cost. For example, both the costs of treating a disease such

as breast cancer and access to care for that disease may be quite different

for patients of different ages or with different health status (i.e., AIDS vs

good health). 

I.1.F.1.2 The Sources of Payment for Medical Services

A second major source of possible inequality between medical costs and

market values is the system of medical payments in the U.S. The system

creates institutional reasons for a disjunction between costs, payments, and

WTP for both individuals and society. As Figure I.1-1 shows, there are

often a multitude of sources of payment for medical costs. In the case of

medical services, people have typically prepaid insurance premiums or

taxes (e.g., for Medicare and Medicaid) that are used as the source of

payment. This prepayment may affect the demand for and the costs of
14 As Figure I.1-1 shows, there are some direct payments of medical services by the patient;

however, full payment for major illnesses by a patient is relatively uncommon.

Chapter I.1 I.1-25 Introduction to the Cost of Illness Handbook

services at the time the service is rendered, since the funds have already

been expended. 

Link to Figure I.1-1

In addition, prepaid premiums or taxes are not designated for specific

services, but are held to be distributed on an as-needed basis (with need

being controversial in some cases). Consequently, insurance payments are

not provided equally to all premium holders due to differences in medical

services required. Thus, the premium holders have purchased an assurance

that their medical bills (or some portion of them) will be paid rather than

paying for a specific service. This is quite different than payment for a

specific treatment at the time it is needed based on decisions regarding its

value to the individual. There is no direct connection between payment for

and receipt of a good or service.14

When costs are high and exceed the amount of the premium (or individual

taxes), the excess is borne by a group rather than by the patient. This

system of payment also reinforces the concept that when the general public

purchases insurance or approves funding for public health programs, it is

buying some assurance of good health rather than specific services. 

Patients may be willing to pay more for an improvement in health status

than for a specific service. 

For some individuals and groups, the payment system is quite complex, and

determination of the costs of medical services and WTP is even more

difficult. For example, elderly patients, who comprise the majority of those

who suffer from cancer, chronic obstructive pulmonary diseases, heart

disease, and many other illnesses covered in this handbook, often have

multiple sources of payment, including Medicare (for which they often pay

premiums and taxes), private insurance, free clinic care for some services

(paid for by local funds), and direct out-of-pocket expenditures. 

I.1.F.1.3 Conclusions Regarding the Market Value

These factors distort the simple connection between the price paid and the

actual costs that exists for purchasing many other goods and services. 

Under these circumstances, it is difficult to determine precisely what an

average patient would be willing to pay. Although such uncertainties may

lead to an over- or underestimate of WTP, the illnesses in this handbook

are very serious in nature (i.e., either life-threatening or capable of resulting

in very debilitating conditions), and people are likely to be willing to pay

much more than they currently pay out-of-pocket or indirectly (e.g.,

through insurance premiums). The value to the afflicted individual and/or

friends and family of avoiding the anxiety, pain, and suffering associated
Chapter I.1 I.1-26 Introduction to the Cost of Illness Handbook

with the illness (see Figure I.1-1) may be considerably greater than those

cost components included in the cost-of-illness approach. 

Link to Figure I.1-1

Because the payment of medical costs comes from multiple sources, both

direct and indirect, the purchase of medical services is actually determined

by multiple and diverse groups. Those who have a role in determining

medical costs and standard services for illnesses include insurance premium

payers; taxpayers and their elected representatives (who are involved in

determining payments for publicly funded services); state, local, and

national agencies, whose staff are also publicly accountable; corporations

with stockholders; medical personnel; and others. The overall cost of

living, employment characteristics, and cost for durable goods also play a

role. Consequently, although there are disjunctions and complications in

the determination of medical costs, the diversity of decision-makers in the

cost-setting process provide some assurance that medical costs reflect the

preferences of society. 

I.1.F.2 Differences in Critical Patient Characteristics.

Some factors are related to individual characteristics. They introduce

uncertainty into the use of cost only if the population of concern (e.g., the

study population for a benefits assessment) has characteristics that differ

from those of the “average” members of the population with the disease. 

These factors include:

• the organ systems affected by the disease (e.g., which systems,

multiple versus single systems);

• the severity of the disease (may be related to the above);

• the general health of the patients aside from the disease in question;

• other complicating medical conditions in the patients; and

• the life expectancy of the patients (this affects the length of

treatment)

I.1.F.3 Geographic Differences in Medical Practices and Services

Other factors that impact costs are associated with medical practices and

services in a geographic area. These factors may differ substantially among

various areas of the U.S. For example, urban areas generally have higher

direct medical costs than rural areas. 
Chapter I.1 I.1-27 Introduction to the Cost of Illness Handbook

Factors of concern regarding differences in medical practices and services

include:

• the specific treatment protocols chosen;

• the hospital and professional fee rate structure in a particular area;

and

• the support systems that provide care at no cost (e.g., home care).

Access to care is a particularly difficult factor in evaluating medical costs

and has a complex role in their calculation. Consequently, is it usually

discussed only qualitatively as a source of uncertainty. Its actual cost

impacts are rarely known. Access to services varies on a geographic and

socioeconomic basis and often increases both risks and costs for

economically disadvantaged patients. For example, access to medical care

has been found to be a critical factor in survival among people with asthma,

with limited access to care being closely linked to poverty status in some

major cities. 

Access to care has multiple components. It includes the physical

availability of services. A one-hour bus trip to a clinic may be a major

impediment to care, and be replaced by the use of ambulance transport to

an emergency room rather than a doctor’s office because an “emergency”

is required to obtain transportation (given that the bus ride is not a

reasonable option for someone who is sick). Moderately ill people who

could be seen in a clinic may be seen in a much more expensive emergency

room due to lack of access to designated Medicare/Medicaid clinics. 

A second, and often more costly impact of limited access to care, is the

condition of the patient when he or she receives services. Access issues

may lead to delays in obtaining care so that disease management is poorer. 

This care differential impacts the outcome and often leads to higher

mortality (as mentioned above with respect to asthma). The overall costs

of this factor, in direct and indirect costs (including pain and suffering), is

substantial. The vast majority of deaths from asthma occur among children

and the elderly who are below the poverty line.

When evaluating benefits, some aspects of the impacts of access to care

and other problems related to socioeconomic status may be relevant,

especially for chronic low-level diseases (e.g., COPD, asthma,

cardiovascular diseases). They are also relevant to cancers in which the

late diagnosis, in part due to less frequent medical checkups, is often noted

as a contributing factor to the higher mortality rate among lower

socioeconomic groups. An example is the strong positive association

between the probability of mammograms and family income. The reduced

use of this diagnostic tool among poorer women is linked to their increased
Chapter I.1 I.1-28 Introduction to the Cost of Illness Handbook

risk of breast cancer being diagnosed at later stages of the disease. This

delay leads to a poorer overall survival, higher medical costs, and increases

in lost time.

As noted previously, differences in medical practices and services will be

relevant ONLY if a benefits analysis focuses on an area or population

subgroup within the U.S. where the practices and services differ from the

“average” in the U.S. Most cost estimates in the handbook are derived

from databases that cover a wide socioeconomic and geographic spectrum. 

I.1.F.4 Uncertainty Regarding the Application And/or Accuracy of Input Data

Varied data sources are used for most cost analyses. These sources range

from scientific papers reported in the medical economics literature to

census and National Cancer Institute (NCI) data regarding demographics

and background rates of mortality, cancer diagnosis, and patient survival. 

The quality and applicability of the input data are relevant to all uses of the

cost data. Uncertainty regarding the inputs to the cost estimates fall into

the following categories:

• accuracy of estimates from primary sources,

• accuracy of “background” cost estimates used with the disease cost

estimates to calculate the incremental costs,

• accuracy of life expectancy estimates for patients who are either

survivors or nonsurvivors of the disease,

• accuracy of estimates of the percent of survivors and nonsurvivors, 

• accuracy of the estimates of survival among people without the

disease (used for background calculations),

I.1.F.4.1 Geographically Representative Data

As noted previously, national data were sought to obtain the best

“average” estimate for each input parameter. Estimates were usually

obtained through the use of data on a cross-section of people with a similar

mix of ages, sexes, races, etc., to that of the overall U.S. population. Often

a subset of a national database was used, or the entire database for specific

years was obtained. This national approach provides a reasonably good

estimate of costs. As always with sampling, there is a small chance that the

data selected will not be entirely representative, thereby introducing some

uncertainty. This is not likely, however, to be a major source of

uncertainty.

Some diseases were evaluated based on data from a specific geographic

area. For example, some chapters on birth defects (e.g., cleft lip and
Chapter I.1 I.1-29 Introduction to the Cost of Illness Handbook

palate) were obtained from a detailed analysis conducted by Waitzman et

al. (1996) that used 18 databases in California to obtain a complex and

comprehensive description of direct and some indirect costs of the

disorders. California is economically and demographically diverse, and so,

as noted in the chapter, it is believed that the cost estimates are reasonable

approximations of a national average. Still, the use of location- or

population-specific data introduces additional uncertainty. When data were

used that generate this type of uncertainty, relevant concerns are described

in the chapter.

I.1.F.4.2 Treatment Estimates

As discussed previously, a few chapters rely on treatment protocols

provided by physicians to estimate medical costs. These protocols cause

uncertainty in estimating medical costs, due to the assumption that all

patients receive timely and adequate medical care, which is not always the

case in practice. Some patients don’t seek care, some delay treatment, and

others are treated for only a short time. These behaviors are due to a

variety of factors. Evaluating the impact of this approach on costs is

difficult because a delay in care, while reducing immediate costs, usually

leads to increased costs in treating a more severe form of the disease and a

longer disability period, or in early mortality and an associated increase in

lost time. Rather than determining the direction of impact on costs (higher

or lower), it is simply noted that the cost estimate based on a physician

protocol introduces additional uncertainty.

I.1.F.4.3 Conversions and Calculations

Other types of uncertainty are introduced by the use of data that are

relevant, but not expressed in the units required for this analysis. Agencies

and researchers typically provide data in a format that is most useful for

their goals; this often does not match the requirements for cost estimation. 

Consequently, the raw data obtained often require additional modifications

using inputs from multiple sources. For example, survival among cancer

patients is expressed as a relative survival rate (RSR) in the NCI databases. 

It was necessary to convert the relative survival rate to an absolute survival

rate to carry out essential cost calculations. RSRs incorporate a

background mortality rate from the general population, as well as other

inputs, in their derivation. Various sources were consulted for the inputs

(e.g., the U.S. Census Bureau, mortality probabilities from NCI) and the

absolute survival rate was calculated. This type of calculation, which is a

derivation of a critical value, introduces uncertainty regarding the result. 

The outcome is not likely to have substantial error, but there is not the

certainty that would be obtained if the absolute rates were available from a

primary source.
Chapter I.1 I.1-30 Introduction to the Cost of Illness Handbook

I.1.F.4.4 Changes in Medical Services Provision and Medical

Costs 

The most common source of uncertainty is introduced by the use of data

that are not “current.” There is no single definition of “current” because

the relevant concern is whether the cost estimates reflect ongoing practices

and costs. Medical approaches for some diseases have changed

considerably in recent years, while others remain very similar for many

years. Services and costs reflect changes and improvements in the

technical aspects of how medical care is delivered. 

In addition to technical changes in how medicine is practiced, there have

been numerous changes in the way medical services are provided and in

medical costs during the 1980s and 1990s. Medical cost containment is a

relatively recent focus of private sector payers (e.g., insurance companies,

managed care providers) and has been the subject of considerable effort at

the federal level since the outset of the Medicare and Medicaid programs. 

The rapidly escalating medical costs of the 1970s and 1980s led to a

national recognition of the need for medical cost containment. New

systems of care management and payment have evolved in recent years and

continue to evolve. Consequently, it is difficult to compare current costs

directly with those of the past. This is relevant to the costs presented in the

Handbook because many of the cost estimates are based on data collected

in past years. 

Changes in payment structures and cost containment efforts proceeded

hand-in-hand with changes in the way in which services are provided. In

many cases, cost containment is partially accomplished through limitations

on the types of services or the specialty of the physicians to which a patient

has access. Thus, cost control efforts have been directed both at slowing

the increase in cost for a specific service, and in limiting the access to

expensive services. The consumer price index (CPI) medical care

component is used in the Handbook to inflate costs obtained in past years

to the most recent year available. The CPI was designed to estimate the

increases in costs associated with a specific service or item. It does not

address the issue of access to services. Although there have been studies

of the impacts of access limitation and other cost containment strategies,

there is not a single agreed-upon value that can be applied to compare

either services for a specific disease, or costs for that disease over time,

independent of factors other than access limitation. 

Wicker et al (1999) contains a discussion of cost containment programs’

impact on patterns of care and the readmission of patients with respect to

children. They discussed utilization management (UM), which provides for

review and authorization of both inpatient and outpatient care for more

than 90 percent of enrollees in group insurance plans (HMOs, preferred

provide organizations, etc). Their study pointed out an ongoing problem

related to this cost reduction strategy: by limiting care through the review
Chapter I.1 I.1-31 Introduction to the Cost of Illness Handbook

process, UM decreases initial inpatient costs but increases the rate of

hospital readmission. This was noted in particular for low birth weight

infants and those with depression or drug or alcohol dependence problems

(Wicker et al., 1999). These are very common chronic conditions among

children and adolescents, and are also among the more costly conditions

due to their chronic nature. Consequently, the dynamic observed for these

conditions is potentially relevant to most chronic conditions. A similar

dynamic has been observed in adult patients, for whom delays in referrals

to specialists and specialized treatment led to more serious illnesses

requiring more costly care than would have originally been required. In the

most extreme cases, denial of services had led to death (and subsequent

court settlements).

What Wicker et al. and other studies suggest is that cost reductions using

resource limitation strategies may not reduce costs overall, at least in some

cases. In addition, the application of UM and other similar strategies varies

greatly in implementation, and its application is not universal. Making

simple assessments the impacts of trends in medical services, management,

and costs on the overall lifetime costs of an illness is therefore difficult. 

The Handbook attempts to clearly state both the source of cost data and

limitations in the methods of data collection, study design, and other

factors that may affect how the cost data can be applied currently. It is

often not known if the costs for an illness are over- or underestimates of

current costs. Where new treatments are known to be offered and their

likely cost impact is known, however, that information is provided (usually

qualitatively). 

When evaluating changes over time in costs and services, it is important to

consider all inputs to cost. For example, when the data on breast cancer

costs were collected, bone marrow transplants were not yet being done. 

Now they are offered for the most advanced cases of the disease and they

are very expensive. Because they are provided to a small percentage of

women with the disease, they will not have a substantial impact on the

overall costs; however, bone marrow transplants may slightly increase the

average cost of treatment. Balancing this is the fact that women receiving

this treatment are less likely to die. Consequently, any application of

mortality percentages and the value of statistical life (VSL) to breast cancer

patients may overestimate the mortality-associated costs. In addition, there

is some evidence that women are being diagnosed with breast cancer at

earlier stages, which decreases the risk of death but also increases the

direct medical costs because they are living longer and requiring additional

services. Given the difficulty in evaluating changes in services and costs

over time, and the extreme difficulty in obtaining a national average lifetime

medical cost for most diseases, the cost estimates provided in this

Handbook offer a reasonable approximation, with the limitations associated

with the estimates acknowledged.
15 Birth defects are included within “illnesses.”

16 Even a complete accounting of all costs of an illness will yield an underestimate of the true social

value of avoiding the illness, because it does not take into account the value of avoiding the pain and

suffering associated with the illness.

17 Estimates of the costs of an illness are usually used as lower-bound estimates of morbidity costs

rather than as estimates of the value of avoiding premature mortality from the illness. Estimates of the

value of avoiding premature mortality are generally substantially higher than cost of illness estimates. 

Appendix I.1-A I.1-A-1 Equations

Appendix I.1-A Equations Describing the Expected Present Discounted

Value of the Per Capita Lifetime Stream of Costs Associated with a

Given Illness 

Illnesses are costly in many ways and often over long periods of time.15 

Many illnesses result in costs for years after onset; some illnesses result in a

lifetime of costs. Some of these costs, such as hospitalization charges and

physician fees, are obvious. Other costs, such as the value of lost time due

to the illness, are less obvious but just as real. A complete accounting of

the total cost of an illness includes all the costs incurred as a result of the

illness from the time of onset to the time of cure or the death of the

individual — that is, the lifetime stream of costs associated with the

illness.16 

Properly estimating the total value of this lifetime stream of costs requires

understanding several key considerations, including:

• costs incurred at a later time should be discounted,

• there are several different kinds of cost, and

• the costs of an illness are incremental costs.

The lifetime stream of costs associated with an illness will vary from one

individual to another for a variety of reasons, including, for example, the

age of onset of the illness. For each year post-diagnosis, moreover, direct

costs can be incurred during that year only if the individual survives to that

year.17 If the individual dies in that year, then indirect costs are incurred. 

The number of years of survival post-diagnosis, however, will also vary

from one individual to another. A fourth consideration, then, is that:

• it is not “a lifetime stream of costs” that is of interest, but rather the

expected, or average, lifetime stream of costs. 

To estimate this average value, it is necessary to know the probabilities of

survival for each year post-diagnosis. 
Appendix I.1-A I.1-A-2 Equations

The expected present discounted value of per capita lifetime incremental

costs of an illness can be constructed from its component parts. Each of

the expressions or parameters used in this construction is explained in the

table below. When an expression is derived from other expressions and/or

parameters, the derivation is given in the table. All costs are average per

capita costs and are incremental (i.e., the costs of the illness beyond those

expected to be incurred by the same individual in the absence of the

illness). 
Appendix I.1-A I.1-A-3 Equations

costj

hm ' dcjmedical % dcjnonmedical % icjvlphm % icjvllthm

Table I.1.A-1: Estimation of the Expected Present Discounted Value of Per Capita Lifetime Incremental Costs of an Illness

Parameter Derivation 

The cost of heightened morbidity:

j number of years post-diagnosis (an index)

dcj

medical direct medical costs j years post-diagnosis

dcj

nonmedical direct nonmedical costs j years post-diagnosis

icj

vlphm indirect costs j years post-diagnosis: value of lost time due

to heightened morbidity, estimated as the number of units

of productive time (e.g., hours or days) lost in the jth year

post-diagnosis due to the illness times the value per unit

time.

icj

vllthm indirect costs j years post-diagnosis: value of lost leisure

time due to heightened morbidity, estimated as the

number of units of leisure time (e.g., hours or days) lost in

the jth year post-diagnosis due to the illness times the

value per unit time.

costj

hm total costs of heightened morbidity incurred j years postdiagnosis. Costj

hm is an average cost among all those with

the illness who survive j years post-diagnosis. Any of the

components of costj

hm may vary from one individual to

another because of factors such as sex or age.

The cost of premature mortality:

r discount rate, reflecting individuals’ positive rate of time

preference.

x age of onset of the illness

d age of death from the illness If death from the illness occurs j years post-diagnosis, d=x+j.

m expected age of death, in the absence of the illness
Table I.1.A-1: Estimation of the Expected Present Discounted Value of Per Capita Lifetime Incremental Costs of an Illness

Parameter Derivation 

Appendix I.1-A I.1-A-4 Equations

ic vlppm ' j

m

k'd

vpk

(1 % r)

k&d

ic vlltpm ' j

m

k'd

vltk

(1 % r)

k&d

costj

pm ' dcjmedical % icjvlppm % icjvlltpm

icj

vlppm ' j

m

k'd

vpk

(1 % r)

k&d

, d ' x%j

vpk value of time at age k (in the absence of the illness),

estimated as the number of units of time (e.g., days or

hours) of time at age k times the value per unit time.

vltk value of leisure time at age k (in the absence of the

illness), estimated as the number of units of leisure time

(e.g., days or hours) at age k times the value per unit time.

icvlppm indirect costs: value of lost time due to premature

mortality. This is the sum of discounted values of time for

each year that the individual would be expected to live in

the absence of the illness but did not live — i.e., from the

age at death (d) to the expected age at death (m).

icvlltpm indirect costs: value of lost leisure time due to premature

mortality. This is the sum of discounted values of leisure

time for each year that the individual would be expected to

live in the absence of the illness but did not live — i.e.,

from the age at death (d) to the expected age at death

(m).

costj

pm total costs of premature mortality for an individual who

dies j years post-diagnosis. Costj

pm is an average cost

among all those who die from the illness j years postdiagnosis. Any of the components of costj

pm may vary

from one individual to another because of factors such as

sex or age. As noted above, if death from the illness

occurs j years post-diagnosis, then age at death is d=x+j. 

Medical costs included in costj

pm are those medical costs

that would not have been incurred in the absence of death

from the illness (e.g., terminal care costs of cancer). 

where

 and similarly for icj

vlltpm
Table I.1.A-1: Estimation of the Expected Present Discounted Value of Per Capita Lifetime Incremental Costs of an Illness

Parameter Derivation 

Appendix I.1-A I.1-A-5 Equations

pdj'psj&1((1 & psj)

E(costj) ' psj(costj

hm % pdj

(costj

pm

costj,x

hm ' dcj,xmedical % dcj,xnonmedical % icj,xvlphm % icj,xvllthm

costj,x

pm ' dcj,xmedical % icj,xvlppm % icj,xvlltpm

Expected costs:

psj probability of surviving j years post-diagnosis

pdj probability of dying j years post-diagnosis

E(costj) expected costs incurred j years post-diagnosis. This is the

average cost of the illness j years post-diagnosis — the

average cost of heightened morbidity times the probability

of surviving j years post-diagnosis plus the average cost of

premature mortality times the probability of dying j years

post-diagnosis. 

Age-of-onset-dependent costs: The costs and probabilities of surviving or dying j years post-diagnosis may depend not only on j but on the age

of onset of the illness, or, equivalently, on the individual’s age (x+j) j years post-diagnosis. The probability of someone who gets lung cancer at

age 45 surviving to age 46, for example, may be very different from the probability of someone who gets lung cancer at age 70 surviving to age

71. The above parameters are therefore further refined below.

costj,x

hm total costs of heightened morbidity incurred j years postdiagnosis, given that age of onset is x. This is a

refinement of costj

hm which acknowledges that one or more

components of the costs of heightened morbidity may

depend not only on the number of years post-diagnosis but

also on the age of onset or, equivalently, on current age

(x+j).

costj,x

pm total costs of premature mortality for an individual who

dies j years post-diagnosis, given that age of onset is x. 

This is a refinement of costj

pm which acknowledges that the

components of the costs of premature mortality may

depend not only on the number of years post-diagnosis but

also on the age of onset, or, equivalently, on current age

(x+j).
Table I.1.A-1: Estimation of the Expected Present Discounted Value of Per Capita Lifetime Incremental Costs of an Illness

Parameter Derivation 

Appendix I.1-A I.1-A-6 Equations

pdj,x'psj&1,x((1 & psj,x)

E(costj,x) ' psj,x(costj,x

hm % pdj,x

(costj,x

pm

PDVECj,x'

E(costj,x)

(1 % r)

j

PDVECx' j

j'0

PDVECj,x' j

j'0

E(costj,x)

(1 % r)

j

psj,x probability of surviving j years post-diagnosis, given that

age of onset is x.

pdj,x probability of dying j years post-diagnosis, given that age

of onset is x.

E(costj,x) expected total costs incurred j years post-diagnosis, given

that age of onset is x. 

Discounted expected costs: Expected costs incurred j years post-diagnosis are discounted back to the time of diagnosis (onset) of the illness. 

PDVECj,x present discounted value of expected costs incurred j

years post-diagnosis, given age of onset x.

PDVECx present discounted value of the lifetime stream of

expected costs when age of onset is x. This is the sum of

discounted expected costs from onset of the illness at age

x until either cure or the death of the individual. 

px probability that the age of onset of the illness is x
Table I.1.A-1: Estimation of the Expected Present Discounted Value of Per Capita Lifetime Incremental Costs of an Illness

Parameter Derivation 

Appendix I.1-A I.1-A-7 Equations

EPDVEC ' jx'0

pxPDVECx' jx'0

pxj

j'0

E(costj,x)

(1 % r)

j

PDVECav' j

j'0

PDVECj,av' j

j'0

E(costj,av)

(1 % r)

j

PDVC

avg

hm ' j

n&1

j'0

costj,av

hm

(1 % r)

j

PDVC

avg

' j

n&1

j'0

costj,av

hm

(1 % r)

j

%

cost

n,av

pm

(1 % r)

n

EPDVEC expected present discounted value of lifetime costs, i.e.,

the average over all possible ages of onset. 

Approximations or alternatives to EPDVEC:

av the average age of onset of the illness

PDVECav present discounted value of the lifetime stream of

expected costs when age of onset is the average age of

onset. PDVECav is PDVECx , where age of onset is the

average age of onset; av. PDVECav is an approximation to

EPDVEC. 

n average number of years post-diagnosis at which cure or

death occurs

PDVCavg

hm present discounted value of the lifetime stream of costs of

heightened morbidity associated with the illness for the

“average individual” diagnosed with the illness. 

PDVCavg present discounted value of the lifetime stream of costs

(including both heightened morbidity and premature

mortality costs) associated with the illness for the “average

individual” whose age of onset is av and who dies from the

illness at n years post-diagnosis. PDVCavg is a

simplification of PDVECav. It sets psj,av = 1 for j<n and psj,av

= 0 for j$ n. 
Appendix I.1-A I.1-A-8 Equations

The hypothetical example below considers an “average individual” who

becomes ill at age 60 and who survives to age 68. The hypothetical

incremental costs incurred by this individual at each year post-onset, the

discounted age-specific costs, and the sum of these discounted costs (the

present discounted value of this average individual’s costs at the time of

onset) are shown in the table below. Because the individual dies of the

illness at age 68, the value of lost leisure time for each year that he or she

would otherwise have lived is discounted back to age 68 and the

discounted values summed ($95,009). 

For those individuals who ultimately die of an illness, it could be argued

that the value of a statistical life lost is the appropriate cost. This value

would subsume the cost-of-illness estimate. Based on evidence from

numerous value-of-life studies, the value of a statistical life far exceeds any

cost-of-illness estimates that might be derived from estimates of the four

cost components discussed above. For those individuals who do not die of

the illness, there will be no terminal care costs, nor will there be any lost

time or lost leisure time attributable to the individual dying prematurely. 

Costs incurred during a period of remission, however, could exceed those

for terminal cases, if the remission period is substantially longer.
Appendix I.1-A I.1-A-9 Equations

Table I.1.A-2: The Present Discounted Value of the Lifetime Stream of Hypothetical Costs of an

Illness of a Hypothetical Average Individual

Age

Costs

Agespecific

Costs

Discounte

d Agespecific

Costs**

Direct Indirect

Medical Nonmedical

Value of Lost

Time

Value of

Lost Leisure

Time

60* $30,000 $5,000 $20,000 $7,000 $62,000 $62,000

61 $10,000 $5,000 $20,000 $7,000 $42,000 $40,000

62 $2,000 $1,000 $200 $0 $3,200 $2,902

63 $2,000 $1,000 $200 $0 $3,200 $2,764

64 $2,000 $1,000 $200 $0 $3,200 $2,633

65 $2,000 $1,000 $200 $0 $3,200 $2,507

66 $2,000 $1,000 $0 $200 $3,200 $2,388

67 $2,000 $1000 $0 $200 $3,200 $2,274

68 $40,000 $500 $0 $95,009 $135,509 $91,718

Present discounted value of costs: $209,187

*Average age of onset. 

** Using a discount rate of 5 percent, discounted back to the age of onset. For example, to get the present

discounted value (at age of onset) of the costs at age 63, these costs are divided by (1+0.05)3
Chapter II.1 II.1-1 Carcinogenic Effects

CHAPTER II.1: INTRODUCTION TO THE COSTS OF CANCERS

Clicking on the sections below will take you to the relevant text.

II.1.A Description

II.1.B Concurrent Effects

II.1.C Causality

II.1.D Chemicals Associated with Cancer Induction

II.1.E Genotoxicity

II.1.F Selection of Diseases

II.1.G Prognosis

II.1.G.1 General Issues

II.1.G.2 Survival Estimates

II.1.H Typical Cancer Costs

II.1.H.1 Source

II.1.H.2 Modifications to the Data

II.1.H.3 Total Non-incremental Costs of Treatment Phases

II.1.H.4 Maintenance Phase Costs

II.1.H.5 Incremental Costs of Treatment Phases

II.1.H.6 Application to Specific Cancers

II.1.H.7 Conclusions Regarding Typical Cancer Cost Estimates

II.1.I Issues and Uncertainty in Cancer Medical Cost Estimation

II.1.I.1 New Treatments

II.1.I.2 Concurrent Effects
Chapter II.1 II.1-2 Carcinogenic Effects

CHAPTER II.1: INTRODUCTION TO THE COSTS OF CANCERS

This section of the handbook contains chapters that describe costs of

medical treatments for a variety of cancers that have been associated with

exposure to environmental agents. Cancer is one of the three leading

causes of death in the United States and throughout the world (Williams

and Weisburger, 1993). It is a serious illness that has been associated with

environmental exposures in both human and animal studies. Cancers often

have similar treatment options (e.g., radiation, chemotherapy, surgery,

reconstructive and physical therapy treatments), and generally require

long-term medical care. Most occur with much greater frequency in

individuals in the second half of life. 

This section contains an overview of the environmental causes of cancer

and general issues related to economic valuation of the medical treatment

of cancer. It also contains an estimate of the cost of a “typical” cancer case

and examples of how the typical cost estimates can be modified to obtain

more information on specific cancers (using liver and bone cancers as

examples). This chapter is followed by chapters containing medical cost

information on specific types of cancer that may be associated with

exposure to environmental agents. 

II.1.A. Description

Cancer is the common term for all malignant tumors and includes

carcinomas and sarcomas, depending on the tissue of origin. Cancer is

characterized by abnormal growth that preys on the host. It may

metasticize to other locations in the body and often leads to debilitation

and/or death if left untreated. A critical distinction among tumors is made

between benign and malignant tumors. Although benign tumors may be

medically important and sometimes become malignant (Robbins et al.,

1984), they are not considered cancerous, and so are not included in the

cost estimates presented in this section.

II.1.B. Concurrent Effects

Concurrent effects commonly occur with cancer. These effects usually

arise from two main causes: 1) as a result of a metastatic (spreading)

process, leading to cancers at more than one site in the body, 2) as a result

of the impaired health status of the cancer patient. Impaired health can

arise from either the cancer’s interference with normal functioning, or the

adverse effects associated with chemotherapy, radiation treatment, surgery,

or other medical treatments. Many of the side effects of cancer treatment

are well known. For example, the antineoplastic drug adriamycin causes

damage to the heart muscle. Radiation therapy may cause toxicity (e.g.,

sterility) and additional cancers while limiting the spread of cancer at the
Chapter II.1 II.1-3 Carcinogenic Effects

original site. A variety of other effects are associated with cancer

therapies. One focus in oncology is on balancing the toxic properties of the

anticancer therapies in the health portions of the body against the need to

cause toxicity to the tumor cells. 

Because there are no benign cancer therapies, and cancer is often a

metastatic process, there are invariably some costs associated with cancer

that are not considered when only the direct medical costs of treating the

primary cancer are considered. Some researchers (e.g. Baker et al., 1989

and 1991) have taken many of the costs of concurrent effects into account

by evaluating the costs associated with the treatment of cancer patients in

relation to medical costs of individuals without cancer (referred to as

background medical costs). When background costs are subtracted from

the total medical costs to cancer patients, the remaining incremental costs

to cancer patients include costs of treating side effects, as well as the

original cancer treatment costs. Baker et al.’s values are reported in

Chapters II.2., II.3, II.4, II.5, II.7, and II.8.

This incremental approach captures medical costs associated with side

effects that occur during treatment for the original cancer, but those that

occur at a later date may not be included. For example, medical costs

associated with a second cancer that occurs years later, induced by

radiation therapy, would not be included using this approach. There are

currently no very long-term follow-up data on these types of costs. This

omission is likely to lead to an underestimate of total medical costs.

II.1.C. Causality and Special Susceptibilities

Carcinogens may act directly in causing cancer (initiators), or with other

chemicals or individual characteristics to promote the development of

cancer (promoters). Both initiators and promoters increase cancer risk. 

Cancer involves a change in cells that eliminates the normal controls on the

growth of cells (Williams and Weisburger, 1993). Most carcinogens

interact with DNA to alter the basic genetic directions of cells. Common

characteristics of these carcinogens are that their effects are persistent,

cumulative, and delayed (Ibid). The delay in effects, often for decades,

make their identification and the quantification of their risks to humans

difficult. 

Although thousands of studies of the carcinogenicity of chemicals are

conducted, most are carried out in animals due to: 

1) the long delay after exposure in the development of tumors in

humans, as noted above;

2) ethical issues; 
1

 The absolute prohibition against exposure to non-beneficial chemicals (e.g., pharmaceuticals) that

exists for humans does not exist for animals, and most chemicals of toxicological interest continue to be

tested on animals. Ethical issues still persist, however, when animal studies are conducted, due to

procedures that raise serious ethical concerns. 

2

 Many specific criteria are used in determining whether a chemical is carcinogenic. See the

proposed cancer guidelines for more information (EPA 1996).

Chapter II.1 II.1-4 Carcinogenic Effects

3) costs of conducting human studies; and 

4) difficulties with the confounding effects of carcinogens not under

study.1

Animals are used because they provide a controlled set of subjects whose

exposure can be measured accurately. Due to their relatively short life

span, cancer can be observed and quantified in a reasonable amount of time

in animals, especially in rodents. They are typically given large doses

because this allows a relatively small number of animals to be used (e.g., 50

or 100) to obtain a statistically significant result. The results are then

scaled to a human dose and response. 

The chemical induction of cancer in animals is generally assumed to be

evidence that the chemical may pose cancer risks to humans. EPA’s

Proposed Guidelines for Cancer Risk Assessment state that: 

“The default assumption is that positive effects in animal

cancer studies indicate that the agent under study can have

carcinogenic potential in humans. Thus if no adequate

human data are present, positive effects in animal cancer

studies are a basis for assessing the carcinogenic hazard to

humans... The assumption is supported by the fact that

nearly all of the agents known to cause cancer in humans

are carcinogenic in animals in tests with adequate

protocols... Further support is provided by research on the

molecular biology of cancer processes, which has shown

that the mechanisms of control of cell growth and

differentiation are remarkably homologous among

species...” (EPA 1996). 

These proposed guidelines are very similar to those which have been in

force for the last decade (EPA 1986).2

Although the assumption is made that cancer induction in animals may

indicate cancer risk in humans, it is not assumed that cancer will occur in

the same organ(s) in humans as in animals (EPA 1996). In addition,

carcinogens often act non-specifically, being capable of acting on multiple

organ systems throughout the body. Consequently, most cancer studies
3

 When portal-of-entry effects or other location-specific interactions occur, cancer sites can be

more specifically predicted.

Chapter II.1 II.1-5 Carcinogenic Effects

cannot be used to determine the specific site where cancer is likely to occur

in humans, but can be used to strongly suggest that a cancer risk exists.3

Because positive cancer study results in animals may be relevant to many

types of cancer in humans, the results of cancer studies in animals are listed

in this introductory cancer chapter rather than in the individual cancer

chapters that deal with a specific organ (e.g., kidney cancer, lung cancer). 

II.1.D. Chemicals Associated with Cancer Induction

Table II.1-1 lists chemicals that have been associated with carcinogenic

effects in either animal or human studies, based on EPA’s review of the

carcinogenicity data. The chemicals listed in Table II.1-1 have been

identified as potential human carcinogens in one or more of EPA’s large

toxicity databases: HSDB, IRIS, or HEAST. The table, compiled in 1996,

is not a comprehensive list of all carcinogens.

The chemicals listed in Table II.1-1 are a sample of the potential

environmental agents associated with this disease. Although the table

contains many chemicals, it is incomplete for two reasons:

1. It does not include toxicological data from sources other than

HSDB, IRIS, and HEAST. The toxicological literature currently

available is vast, and a thorough review was beyond the scope of

this analysis. 

2. Many chemicals have not been tested, or the results of the tests are

inconclusive. Consequently, the human health effects of many

environmental hazards are unknown, especially at concentrations

found in the environment. 
Chapter II.1 II.1-6 Carcinogenic Effects

Table II.1-1. SUSPECTED CARCINOGENS LISTED IN IRIS, HEAST, AND HSDB

Chemicals are listed alphabetically and TRI chemicals as of August 2000 are shown with an asterisk. When

“compounds” of a metal were listed on TRI, all compounds of that metal in this table are considered to be TRI

chemicals. See text for discussion of inclusion criteria. This is not a comprehensive list of all carcinogens.

CHEMICAL SOURCE(S)

ACENAPHTHENE HSDB

ACENAPHTHYLENE HSDB

ACEPHATE* IRIS

ACRYLAMIDE* IRIS

ACRYLONITRILE* HSDB, IRIS

ALACHLOR* HEAST

ALDRIN* IRIS

ALKANOLAMINE SALTS, 2,4-D, HSDB

ALUMINUM* HSDB

ALUMINUM FLUORIDE HSDB

ALUMINUM OXIDE* HSDB

ALUMINUM SODIUM FLUORIDE HSDB

AMMONIUM CHROMATE HSDB

AMMONIUM DICHROMATE HSDB

AMOSITE HSDB

AMPICILLIN HSDB

ANILINE* IRIS

ARAMITE IRIS

ARSENIC* HSDB, IRIS

ARSENIC ACID* HSDB

ARSENIC PENTOXIDE* HSDB

ARSENIC TRIBROMIDE* HSDB

ARSENIC TRICHLORIDE* HSDB

ARSENIC TRIIODIDE* HSDB

ARSENIC TRIOXIDE* HSDB

ARSENIC TRISULFIDE* HSDB

ARSINE HSDB

ASBESTOS* HSDB

ASPHALT HSDB

ATRAZINE* HEAST

ATTAPULGITE HSDB

AZOBENZENE IRIS

BENZENE* HSDB, IRIS

BENZENE HEXACHLORIDE HSDB

BENZIDINE* HSDB, IRIS

BENZO(A)PYRENE* HSDB

BENZO(B)FLUORANTHENE* HSDB

BENZOTRICHLORIDE HSDB, IRIS

BENZOYL CHLORIDE* HSDB

BENZO[A]PYRENE IRIS

BENZYL CHLORIDE* IRIS

BERYLLIUM* HSDB, IRIS

BERYLLIUM CHLORIDE* HSDB

BERYLLIUM FLUORIDE* HSDB

BERYLLIUM HYDROXIDE* HSDB

BERYLLIUM NITRATE* HSDB

BERYLLIUM OXIDE* HSDB

BERYLLIUM PHOSPHATE* HSDB
Table II.1-1. SUSPECTED CARCINOGENS LISTED IN IRIS, HEAST, AND HSDB

Chemicals are listed alphabetically and TRI chemicals as of August 2000 are shown with an asterisk. When

“compounds” of a metal were listed on TRI, all compounds of that metal in this table are considered to be TRI

chemicals. See text for discussion of inclusion criteria. This is not a comprehensive list of all carcinogens.

CHEMICAL SOURCE(S)

Chapter II.1 II.1-7 Carcinogenic Effects

BERYLLIUM SULFATE* HSDB

BIS(2-CHLOROETHYL) ETHER* HEAST

BIS(2-CHLOROETHYL)SULFIDE HSDB

BIS(CHLOROETHYL)ETHER IRIS

BIS(CHLOROMETHYL) ETHER* HSDB, IRIS

BROMO-2-CHLORO-1,1,1-TRIFLUOROETHANE, 2- HSDB

BROMOCHLORODIFLUOROMETHANE* HSDB

BROMODICHLOROMETHANE IRIS

BROMOETHENE (VINYL BROMIDE)* HEAST

BROMOFORM* IRIS

BUTADIENE, 1,3-* HSDB

BUTYRIC ACID, 4-(2,4-DICHLOROPHENOXY) HSDB

CALCIUM ARSENATE HSDB

CALCIUM ARSENITE HSDB

CALCIUM CHROMATE HSDB

CAPTAFOL HEAST

CAPTAN* HEAST

CARBAZOLE HEAST

CARBON BLACK HSDB

CARBON TETRACHLORIDE* HSDB, IRIS

CHLORAMBUCIL HSDB

CHLORAMPHENICOL HSDB

CHLORANIL HEAST

CHLORDANE HSDB, IRIS

CHLORO-1,1,1,2-TETRAFLUOROETHANE, 2-* HSDB

CHLORO-1,3-BUTADIENE, 2- HSDB

CHLORO-2-FLUOROETHANE, 1- HSDB

CHLORO-2-METHYLANALINE, 4- HEAST

CHLORO-2-METHYLANILINE HYDROCHLORIDE HEAST

CHLORO-2-METHYLPHENOL, 4- HSDB

CHLOROBENZILATE* HEAST

CHLORODIFLUOROMETHANE* HSDB

CHLOROFORM* IRIS

CHLOROMETHANE* HEAST

CHLOROMETHYL METHYL ETHER* HSDB

CHLORONITROBENZENE, O- HEAST

CHLORONITROBENZENE, P- HEAST

CHLOROPENTAFLUOROETHANE HSDB

CHLOROTETRAFLUOROETHANE HSDB

CHLOROTHALONIL HEAST

CHROMIC ACID, CHROMIUM(3+) SALT HSDB

CHROMIC OXIDE HSDB

CHROMIC SULFATE HSDB

CHROMIC TRIOXIDE HSDB

CHROMITE HSDB

CHROMIUM* HSDB

CHROMIUM CHROMATE* HSDB

CHROMIUM DIOXIDE* HSDB

CHROMIUM TRIHYDROXIDE* HSDB

CHROMIUM(III) ACETATE* HSDB

CHROMOUS CHLORIDE HSDB
Table II.1-1. SUSPECTED CARCINOGENS LISTED IN IRIS, HEAST, AND HSDB

Chemicals are listed alphabetically and TRI chemicals as of August 2000 are shown with an asterisk. When

“compounds” of a metal were listed on TRI, all compounds of that metal in this table are considered to be TRI

chemicals. See text for discussion of inclusion criteria. This is not a comprehensive list of all carcinogens.

CHEMICAL SOURCE(S)

Chapter II.1 II.1-8 Carcinogenic Effects

CHROMOUS OXALATE HSDB

CHROMYL CHLORIDE HSDB

CHRYSOTILE ASBESTOS HSDB

CIS-DIAMINEDICHLOROPLATINUM HSDB

CLOMIPHENE HSDB

CLOZARIL HSDB

COAL TAR USP HSDB

COAL TAR CREOSOTE* HSDB

COAL TAR HSDB

COPPER* HSDB

CREOSOTE, WOOD* HSDB

CYANAZINE* HEAST

CYCLOPHOSPHAMIDE HSDB

D, 2,4-* HSDB

D BUTOXYETHYL ESTER, 2,4-* HSDB

D, BUTOXYPROPYL ESTER, 2,4-* HSDB

D BUTYL ESTER, 2,4-* HSDB

D CHLOROCROTYL ESTER, 2,4-* HSDB

D, DIMETHYLAMINE, 2,4-* HSDB

D ISOOCTYL ESTERS, 2,4-* HSDB

D ISOPROPYL ESTER, 2,4-* HSDB

D, PROPYLENE GLYCOL BUTYL ETHER ESTER, 2,4-* HSDB

DAUNORUBICIN HSDB

DDT HSDB

DI(2-ETHYLHEXYL)ADIPATE IRIS

DI(2-ETHYLHEXYL)PHTHALATE* IRIS

DIALLATE* HEAST

DIBENZ(A,H)ACRIDINE* HSDB

DIBENZ(A,J)ACRIDINE* HSDB

DIBENZO(A,E)PYRENE* HSDB

DIBENZO(A,H)PYRENE* HSDB

DIBENZO(A,L)PYRENE* HSDB

DIBENZO(C,G)CARBAZOLE, 7H-* HSDB

DIBROMO-3-CHLOROPROPANE, 1,2* HEAST

DIBROMOCHLOROMETHANE IRIS

DIBROMOETHANE, 1,2-* IRIS

DIBROMOTETRAFLUOROETHANE, 1,2- HSDB

DICHLORFOP-METHYL HSDB

DICHLORO-1,1,2-TRIFLUOROETHANE* HSDB

DICHLORO-1,1,1-TRIFLUOROETHANE, 2,2-* HSDB

DICHLORO-1,1,2,2-TETRAFLUOROETHANE, 1,2- HSDB

DICHLORO-1,1-DIFLUOROETHANE, 1,2-* HSDB

DICHLORO-1-FLUOROETHANE, 1,1-* HSDB

DICHLORO-2-BUTENE, 1,4-* HEAST

DICHLOROBENZENE* HSDB

DICHLOROBENZENE, 1,4-* HSDB

DICHLOROBENZENE, 1,2-* HSDB

DICHLOROBENZENE, 1,3-* HSDB

DICHLOROBENZENE, 1,4-* HEAST

DICHLOROBENZIDINE, 3,3'-* HSDB, IRIS

DICHLORODIFLUOROMETHANE* HSDB
Table II.1-1. SUSPECTED CARCINOGENS LISTED IN IRIS, HEAST, AND HSDB

Chemicals are listed alphabetically and TRI chemicals as of August 2000 are shown with an asterisk. When

“compounds” of a metal were listed on TRI, all compounds of that metal in this table are considered to be TRI

chemicals. See text for discussion of inclusion criteria. This is not a comprehensive list of all carcinogens.

CHEMICAL SOURCE(S)

Chapter II.1 II.1-9 Carcinogenic Effects

DICHLORODIPHENYL DICHLOROETHANE, P,P'- IRIS

DICHLORODIPHENYLDICHLOROETHYLENE, P,P'- IRIS

DICHLORODIPHENYLTRICHLOROETHANE, P,P'- IRIS

DICHLOROETHANE, 1,2-* IRIS

DICHLOROETHYLENE, 1,1- IRIS

DICHLOROMETHANE* HSDB, IRIS

DICHLOROPHENOL, 2,4-* HSDB

DICHLOROPROPANE, 1,2-* HEAST

DICHLOROPROPENE, 1,3- HSDB

DICHLOROTRIFLUOROETHANE* HSDB

DICHLORVOS* HSDB, IRIS

DIELDRIN IRIS

DIENESTROL HSDB

DIETHYLSTILBESTROL HEAST

DIMEHTYLBENZIDINE, 3,3-* HEAST

DIMETHOXYBENZIDINE, 3,3-* HEAST

DIMETHYL SULFATE* HSDB

DIMETHYLANALINE HYDROCHLORIDE, 2,4- HEAST

DIMETHYLANILINE, 2.4- HEAST

DIMETHYLCARBAMOYL CHLORIDE* HSDB

DINITROTOLUENE MIXTURE, 2,4-/2,6-* IRIS

DIOXANE, 1,4-* IRIS

DIPHENYLHYDRAZINE, 1,2-* IRIS

DIRECT BLACK 38* HEAST

DIRECT BLUE 6* HEAST

DIRECT BROWN *95 HEAST

EPICHLOROHYDRIN* HSDB, IRIS

ESTRONE HSDB

ETHANOL HSDB

ETHYL ACRYLATE* HEAST

ETHYL CARBAMATE HSDB

ETHYLENE GLYCOL DINITRATE HSDB

ETHYLENE OXIDE* HEAST, HSDB

ETHYLENE THIOUREA* HEAST

FERRIC ARSENATE HSDB

FERRIC OXIDE HSDB

FERROUS ARSENATE HSDB

FLUOROURACIL* HSDB

FOLPET* IRIS

FOMESAFEN* IRIS

FORMALDEHYDE* HSDB

FURAZOLIDONE HEAST

FURIUM HEAST

FURMECYCLOX IRIS

GASOLINE HSDB

GILSONITE HSDB

HCFC-123A * HSDB

HCFC-123B* HSDB

HCFC-124A* HSDB

HEMATITE HSDB

HEPTACHLOR* HSDB, IRIS
Table II.1-1. SUSPECTED CARCINOGENS LISTED IN IRIS, HEAST, AND HSDB

Chemicals are listed alphabetically and TRI chemicals as of August 2000 are shown with an asterisk. When

“compounds” of a metal were listed on TRI, all compounds of that metal in this table are considered to be TRI

chemicals. See text for discussion of inclusion criteria. This is not a comprehensive list of all carcinogens.

CHEMICAL SOURCE(S)

Chapter II.1 II.1-10 Carcinogenic Effects

HEPTACHLOR EPOXIDE IRIS

HEXACHLOROBENZENE* IRIS

HEXACHLOROBUTADIENE IRIS

HEXACHLOROCYCLOHEXANE, ALPHA- IRIS

HEXACHLOROCYCLOHEXANE, BETA- IRIS

HEXACHLOROCYCLOHEXANE, GAMMA- HEAST

HEXACHLOROCYCLOHEXANE, TECHNICAL IRIS

HEXACHLORODIBENZO-P-DIOXIN* IRIS

HEXACHLOROETHANE* IRIS

HEXAHYDRO-1,3,5-TRINITRO-1,3,5-TRIAZINE IRIS

HYDRAZINE* HSDB

HYDRAZINE/HYDRAZINE SULFATE* IRIS

ISOPHORONE IRIS

KEROSENE HSDB

LEAD ARSENATE* HSDB

LEAD CHROMATE* HSDB

LEAD PHOSPHATE* HSDB

LITHIUM CHROMATE HSDB

MAGNESIUM ARSENATE HSDB

MECHLORETHAMINE HSDB

MELPHALAN HSDB

MERCURY, ELEMENTAL* HEAST

METHALLENESTRIL HSDB

METHOXSALEN HSDB

METHOXY-5-NITROANILINE, 2- HEAST

METHOXYPSORALEN, 5- HSDB

METHYL ISOBUTYL KETONE* HSDB

METHYL-5-NITROANILINE, 2- HEAST

METHYLANILINE, 2- HEAST

METHYLANILINE HYDROCHLORIDE, 2- HEAST

METHYLENE BIS(N,N'-DIMETHYL)ANILINE, 4,4'- IRIS

MOLYBDATE ORANGE HSDB

NAPHTHYLAMINE, 2- HSDB

NICKEL* HSDB

NICKEL CARBONATE* HSDB

NICKEL CARBONYL* HSDB

NICKEL CHLORIDE* HSDB

NICKEL FORMATE* HSDB

NICKEL HYDROXIDE* HSDB

NICKEL OXIDE* HSDB

NICKEL SULFATE* HSDB

NITROFURAZONE HEAST

NITROPROPANE, 2-* HEAST

NITROQUINOLINE-N-OXIDE, 4- HSDB

NITROSO-DI-N-BUTYLAMINE, N-* IRIS

NITROSO-M-ETHYLUREA, N- HEAST

NITROSO-N-METHYLETHYLAMINE, N- IRIS

NITROSODI-N-PROPYLAMINE, N-* IRIS

NITROSODIETHANOLAMINE, N- IRIS

NITROSODIETHYLAMINE, N-** IRIS

NITROSODIMETHYLAMINE, N-* IRIS
Table II.1-1. SUSPECTED CARCINOGENS LISTED IN IRIS, HEAST, AND HSDB

Chemicals are listed alphabetically and TRI chemicals as of August 2000 are shown with an asterisk. When

“compounds” of a metal were listed on TRI, all compounds of that metal in this table are considered to be TRI

chemicals. See text for discussion of inclusion criteria. This is not a comprehensive list of all carcinogens.

CHEMICAL SOURCE(S)

Chapter II.1 II.1-11 Carcinogenic Effects

NITROSODIPHENYLAMINE, N-* IRIS

NITROSOPYRROLIDINE, N- IRIS

OCHRATOXIN A HSDB

ORYZALIN* HSDB

OXYPHENBUTAZONE HSDB

PENTABROMO-6-CHLOROCYCLOHEXANE, 1,2,3,4,5- HEAST

PENTACHLORONITROBENZENE HEAST

PENTACHLOROPHENOL* HSDB, IRIS

PENTACHLOROPHENOL, SODIUM SALT* HSDB

PETROLEUM ETHER HSDB

PHENOBARBITAL HSDB

PHENYLBUTAZONE HSDB

PHENYLENEDIAMINE, O- HEAST

PHENYLPHENOL, 2-* HEAST

POLYBROMINATED BIPHENYLS* HEAST

POLYCHLORINATED BIPHENYLS* IRIS

POLYVINYL CHLORIDE HSDB

POTASSIUM ARSENATE HSDB

POTASSIUM ARSENITE HSDB

PROCHLORAZ IRIS

PROPIONIC ACID, 2-(3-CHLOROPHENOXY) HSDB

PROPYL THIOURACIL HSDB

PROPYLENE OXIDE* IRIS

QUINOLINE* HEAST

RADIUM HSDB

RADON HSDB

SILICON DIOXIDE HSDB

SIMAZINE* HEAST

SODIUM ARSENATE HSDB

SODIUM ARSENITE HSDB

SODIUM CHROMATE HSDB

SODIUM DICHROMATE HSDB

SODIUM DIETHYLDITHIOCARBAMATE* HEAST

STREPTOZOTOCIN HSDB

STRONTIUM HSDB

STRONTIUM CHROMATE HSDB

T, 2,4,5- HSDB

TALC HSDB

TETRACHLORODIBENZO-P-DIOXIN, 2,3,7,8- * HSDB, HEAST

TETRACHLOROETHANE, 1,1,1,2-* IRIS

TETRACHLOROETHANE, 1,1,2,2-* IRIS

TETRACHLOROPHENOL, 2,3,4,6- HSDB

TETRACHLOROTOLUENE, PARA, ALPHA, ALPHA, ALPHA- HEAST

TETRACHLOROVINPHOS/(STIROFOS) HEAST

TETRAETHYL LEAD HSDB

THIO-TEPA HSDB

THORIUM DIOXIDE* HSDB

TITANIUM DIOXIDE HSDB

TOLUENE-2,4-DIAMINE HEAST

TOLUIDINE, P- HEAST

TOXAPHENE* HSDB, IRIS
Table II.1-1. SUSPECTED CARCINOGENS LISTED IN IRIS, HEAST, AND HSDB

Chemicals are listed alphabetically and TRI chemicals as of August 2000 are shown with an asterisk. When

“compounds” of a metal were listed on TRI, all compounds of that metal in this table are considered to be TRI

chemicals. See text for discussion of inclusion criteria. This is not a comprehensive list of all carcinogens.

CHEMICAL SOURCE(S)

Chapter II.1 II.1-12 Carcinogenic Effects

TP, 2,4,5- HSDB

TREMOLITE ASBESTOS HSDB

TRICHLOROANILINE, 2,4,6- HEAST

TRICHLOROANILINE HYDROCHLORIDE, 2,4,6- HEAST

TRICHLOROETHANE, 1,1,2-* IRIS

TRICHLOROFLUOROMETHANE* HSDB

TRICHLOROPHENOL, 2,4,5-* HSDB

TRICHLOROPHENOL, 2,4,6-* IRIS

TRICHLOROPROPANE, 1,2,3- HEAST

TRIFLURALIN* IRIS

TRIMETHYL PHOSPHATE HEAST

TRINICKEL DISULFIDE HSDB

TRINITROTOLUENE, 2,4,6- IRIS

URANIUM HSDB

URANYL ACETATE HSDB

URANYL NITRATE HSDB

URANYL SULFATE HSDB

VINCRISTINE HSDB

VINYL CHLORIDE* HEAST, HSDB

VITAMIN A HSDB

ZINC CHROMATE* HSDB

ZINC CHROMATE HYDROXIDE* HSDB

ZINC DICHROMATE* HSDB

ZINC POTASSIUM CHROMATE* HSDB

For these reasons, Table II.1-1 should not be used as a definitive source of

information on the links between chemicals and cancer. A comprehensive

literature search is necessary to identify the dose-response relationships

between chemicals of concern and this or other health effects.

The chemicals with asterisks in Table II.1-1 are TRI chemicals (subject to

reporting under the Toxics Release Inventory, Section 313 of the

Emergency Planning and Community Right-to-Know Act). When

“compounds” of a metal were listed on TRI, all compounds of that metal in

this table are considered to be TRI chemicals. Chemicals included on the

TRI due to their human health effects are known or reasonably anticipated

to cause either significant adverse acute health effects or chronic health

effects as a condition of their listing on TRI.

The route of exposure (e.g., oral, inhalation, dermal) is often considered

when evaluating whether a chemicals poses a carcinogenic risk. The routes

of exposure are not listed in Table II.1-1 for two reasons:
4

 Table II.1-1 contains both genotoxic and non-genotoxic carcinogens with the criteria for inclusion

being a positive carcinogenicity assay. A positive genotoxicity assay was the criterion for inclusion in

Table II.1-2.

5

 Not all carcinogens are genotoxic (e.g., hormonally-mediated carcinogens). See EPA (1996) for 

a discussion of this distinction. 

Chapter II.1 II.1-13 Carcinogenic Effects

1. A chemical that is carcinogenic by one route of exposure will

usually be assumed to be carcinogenic by other routes of exposure. 

EPA’s proposed cancer guidelines state that it is assumed “that an

agent that causes internal tumors by one route of exposure will be

carcinogenic by another route if it is absorbed by the second route

to give an internal dose” (EPA 1996). In effect, most carcinogens

will fall under this assumption under most circumstances.

2. This table provides preliminary information on many chemicals

identified as potential human carcinogens. Risk or health

assessment, however, requires considerably more information than

that provided in the table. Consequently, additional information

must be collected and evaluated by researchers to fully evaluate

cancer risks; an analysis of route-specific data is a part of this

evaluation.

In considering the potential impacts of carcinogens, it is useful to note that

a number of them are known to cross the placental barrier, and some

cancers are likely to be the result of this type of exposure (Williams and

Weisburger,1993). 

II.1. E. Genotoxicity

Genotoxicity assays usually provide information regarding a chemical’s

ability to interact with DNA. Genotoxicity may be associated with cancer

induction because, in most cases, the alteration in the cells’ normal

replication methods allows uncontrolled growth that characterizes cancer. 

Table II.1-2 contains a listing of chemicals associated with genotoxic

effects listed in a variety of sources.4 These chemicals have yielded

positive results in genotoxicity assays, which are usually cell-level studies

of a chemical’s interaction with the genetic material (DNA) within a cell

and/or its ability to cause mutations. Genotoxins are not all necessarily

carcinogenic to humans; however, genotoxicity indicates the potential for

actions that may cause cancer. Table II.1-2 contains only a small

percentage of all the chemicals that have had positive genotoxicity assays. 

As of 1990, the Environmental Mutagen Information Center in Oak Ridge,

Tennessee, maintained mutagenicity data on 21,000 chemicals

(Hoffmann,1991). The size of the database indicates the magnitude of the

chemicals of potential interest regarding their carcinogenic capabilities.5
Chapter II.1 II.1-14 Carcinogenic Effects

Chapter III.1 contains an additional discussion of genotoxicity relevant to

birth defects.

Link to III.I.C.4

Table II.1-2. CHEMICALS ASSOCIATED WITH GENOTOXIC EFFECTS 

DATA FROM HUMAN, ANIMAL, AND IN VITRO STUDIES ARE INCLUDED. 

CHEMICAL REFERENCES

ACETONE* 5

ACROLEIN* 4

ACRYLIC ACID* 7

ACRYLONITRILE* 5

ALACHLOR* 1

ALDICARB* 1

AMINOPTERIN 3

AMITRAZ* 6

AMITROLE* 5

ANTU 5

AROCLOR 1016 (A PCB)* 7

ARSENIC COMPOUNDS* 6

ARSENIC* 6

ASULAM 7

ATRAZINE* 9

AVERMECTIN B1 7

BENOMYL * 1,7

BENZENE* 5

BENZO(A)PYRENE* 14

BIORESMETHRIN 1

BISULFAN 14

BORIC ACID 5

BRADIFACOUM 1

BUSULFAN 3

BUTACHLOR 4

CADMIUM* 14

CAPROLACTAM 7

CAPTAFAL 6

CAPTAN* 7,6

CARBARYL* 6

CARBOFURAN* 6

CARBON TETRACHLORIDE* 1

CARBON DISULFIDE* 5

CARBOPHENOTHION 1

CHLORDANE* 12

CHLORDECONE 1

CHLORDIMEFORM 6

CHLORFENVINPHOS 6

CHLORMEQUAT 5

CHLOROBENZILATE* 7

CHLOROBIPHENYLS (INCLUDES PCBS)* 3

CHLOROFORM* 1

CHLOROPHACINONE 1

CHLOROPROPHAM 7

CHLOROTHALONIL* 1

CHLORPROPHONE 1

CHROMIUM* 16

COPPER SULFATE* 5
Table II.1-2. CHEMICALS ASSOCIATED WITH GENOTOXIC EFFECTS 

DATA FROM HUMAN, ANIMAL, AND IN VITRO STUDIES ARE INCLUDED. 

CHEMICAL REFERENCES

Chapter II.1 II.1-15 Carcinogenic Effects

COUMACHLOR 1

COUMAFURYL 1

COUMATETRALYL 1

CYANIDES* 1

CYCLOHEXANE* 5

CYCLOHEXANONE 5

CYCLOHEXIMIDE 5

CYCLOPENTAPYRENE 2

CYCLOPHOSPHAMIDE 14

CYHALOTHRIN* 7

2,4-D* 6

DALAPON 5

DECAMETHRIN 1

DEET (DIETHYLTOLUAMIDE) 5

DI(2-ETHYL HEXYL) ADIPATE 7

DIBROMOCHLOROPROPANE* 5,6

DICAMBA* 7

DICHLOBENIL 1

O-DICHLOROBENZENE* 1

P-DICHLOROBENZENE* 5

DICHLOROETHYL ETHER 5

1,3-DICHLOROROPENE (2,3 ON TRI) 5

DICHLORVOS* 13

DIETHYLSTILBESTROL (DES) 3

DIFENACOUM 1

DIMETHOATE* 6

DIMETHYL SULFOXIDE 5

DINOSEB 14

DIOXANE * 5

DIPHACINONE 1

DIPHENYLHYDANTOIN 3

DIQUAT 5

DISULFOTON 1

DIURON* 5

ENDRIN 6

EPICHLOROHYDRIN* 5

EPN 1

EPTC 7

ETHANOL 14

ETHYL BENZENE *

ETHYLENE DIBROMIDE 8,6

ETHYLENE DICHLORIDE* 5

ETHYLENE THIOUREA* 14

ETHYLENE OXIDE* 5

ETHYLNITROSUREA 3

EUGENAL 5

FENBUTATIN OXIDE* 1

FERBAM* 1

FLUOMETURON* 6

FLURPRIMIDOL 7

FLUTOLANIL 7

FOLPET* 8

FORMALDEHYDE* 5

GLYCEROL FORMAL 1
Table II.1-2. CHEMICALS ASSOCIATED WITH GENOTOXIC EFFECTS 

DATA FROM HUMAN, ANIMAL, AND IN VITRO STUDIES ARE INCLUDED. 

CHEMICAL REFERENCES

Chapter II.1 II.1-16 Carcinogenic Effects

GLYPHOSATE 7

HALOXYFOP METHYL 7

HEXACHLOROBENZENE* 5

HEXACHLOROPHENE* 1

LEAD* 14

LINDANE* 1

LINURON* 5

LITHIUM (TRI LISTED AS LITHIUM CARBONATE)* 3

MALATHION* 1

MALEIC HYDRAZIDE* 5

MANEB* 6

MCPA* 1

MERCURY* 7

MERCURY COMPOUNDS* 15

METALDEHYDE 5

METHIDATHION 1

METHIMAZOLE 3

METHOMYL 6

METHOXYCHLOR* 5,7

METHYL ETHYL KETONE (MEK) * 7

METHYL BROMIDE 1

METHYL METHACRYLATE* 5

METHYLCHOLANTHRENE* 14

METHYLENE CHLORIDE 5

METOLACHLOR 1,7

MEXACARBATE 1

MIREX 14

MNNG 3

MOLINATE* 1

NABAM* 5

NAPHTHALENES* 1

NAPROPAMIDE 7

NICKEL* 15

NICOTINES* 1

NITRATE* 7

NITRITE 7

NITROFEN* 4

NITROGUANIDINE 7

OXYFLUORFEN* 6

PARAQUAT* 5

PARATHION* 1

PCBS*

PENTACHLORONITROBENZENE 1

PENTACHLOROPHENOL* 1

PERCHLOROETHYLENE* 1

PERMETHRIN* 1

PHENMEDIPHAM 1

PHENOL* 1,7

O-PHENYLPHENOL* 5

PHOSMET 1

PICLORAM* 1

PIDRIN 7

PINDONE 1

PIPERONYL BUTOXIDE* 1
Table II.1-2. CHEMICALS ASSOCIATED WITH GENOTOXIC EFFECTS 

DATA FROM HUMAN, ANIMAL, AND IN VITRO STUDIES ARE INCLUDED. 

CHEMICAL REFERENCES

Chapter II.1 II.1-17 Carcinogenic Effects

PIRIMICARB 1

PIRIMIPHOS-ETHYL 1

PIRIMIPHOS-METHYL* 6

2-PIVALYL-1,3 INDANDIONE 1

PROPACHLOR* 4

PROPARGITE* 7

PROPHAM 1

PROPOXUR* 1

PROPYLENE OXIDE* 5

PROPYLENE DICHLORIDE 5

PYRAZON 1

PYRIDINE* 5

RADIONUCLIDES (ALPHA, BETA, & GAMMA EMITTERS) 3

RESMETHRIN* 7

RONNEL 1

ROTENONE 1

SODIUM CHLORATE 5

STRYCHNINE* 5

SULFUR DIOXIDE 5

TCDD 14

2,4,5-T 1

2,4,5-TP 1

TETRACHLORVINPHOS* 1

TETRACYCLINES 3

THIABENDAZOLE* 5

THIOPHANATE-METHYL 6* 6

THIRAM* 1

TOLUENE* 5

TOXAPHENE* 6

TRICHLORFON* 13

1,2,4-TRICHLOROBENZENE* 7

1,1,1-TRICHLOROETHANE* 5

TRICHLOROETHYLENE* 5

TRIDIPHANE 7

TRIFLURALIN* 6

TRIFORINE* 1

TRIMETHADONE 3

URETHANE* 14

VALPROIC ACID 3

VERNAM 7

WARFARIN* 1

WHITE PHOSPHORUS*

XYLENE* 5

ZINEB* 5

ZIRAM 1
Chapter II.1 II.1-18 Carcinogenic Effects

Table II.1-2. CHEMICALS ASSOCIATED WITH GENOTOXIC EFFECTS 

DATA FROM HUMAN, ANIMAL, AND IN VITRO STUDIES ARE INCLUDED. 

* = Listed in TRI as of August 2000 . When “compounds” of a metal were listed on TRI, all compounds of that

metal in this table are considered to be TRI chemicals

References

1. Cunningham and Hallenbeck (1985).

2. Archer and Livingston (1983).

3. Doull et al .(1980).

4. U.S. EPA 1983). 

5. U.S. Department of Health and Human Services, NIOSH (1983).

6. U.S. EPA (1983).

7. IRIS, U.S. EPA online database.

8. Clayton and Clayton (1982). 

9. Hayes (1982). 

10. Vettorazzi (1979). 

11. Council on Environmental Quality (1981).

12. International Agency for Research on Cancer (1979).

13. Chambers and Yarbrough (1982)

14. Key et al. (1977). 

15. Tice et al. (1996).

16. U.S. Department of Health and Human Services, ATSDR (1993). 

II.1.F. Selection of Diseases

The selection of cancers included in this section was based on input from a

variety of sources (as discussed in Chapter I.1). It is anticipated that

additional cancers will be added in the future.

Link to Chapter I.1

II.1.G. Prognosis

II.1.G.1 General Issues

Cancers vary widely in the course of the diseases. Some types of cancer

have a relatively good prognosis (e.g., non-Hodgkins lymphoma), with

most patients surviving the course of the disease. Others, such as lung

cancer, are much more often fatal. Although generalizations can be made

regarding the “average” prognosis for each cancer, the prognosis for

survival and the length of time over which treatment is required vary

among individuals, even for the same type of cancer. This variability is

observed for all types of cancer. Consequently, the cost estimates

presented in the chapters in this section utilize estimates of the average

survival rates to obtain representative estimates of the medical costs. 
6

 Mortality here refers to the risk that death will occur due to the illness under study, and can be

expressed as a rate (e.g., the percentage of all patients who ultimately die of the disease).

Chapter II.1 II.1-19 Carcinogenic Effects

In addition to the individual variability in survival, patterns in survival for

specific types of cancer are based on patient characteristics. For example,

elderly patients with breast cancer typically have slower tumor growth than

younger patients. There may also be differences related to gender and

race. Although this type of pattern evaluation was beyond the scope of this

handbook, it may have an impact on the cost of medical treatment. (When

information was available in texts reviewed for other purposes, survival

patterns are reported.) Consequently, if an analysis is being conducted on a

homogeneous population (similar age, ethnicity, etc.), then it is advisable to

survey the literature to determine if patterns in disease course or survival

exist that may be relevant to an economic evaluation.

II.1.G.2 Survival Estimates

It is often important to obtain estimates of survival and mortality that are as

accurate as possible because medical costs depend on the duration of

treatment and whether patients are survivors or nonsurvivors. For

example, the value of a statistical life may be used for nonsurvivors,

whereas the summed direct medical and other costs may be used for

survivors. Obtaining accurate estimates of mortality due to a disease is

difficult unless the disease has a very short duration prior to death.6 When

the illness is protracted, as it is for most cancers, it is necessary to evaluate

multiple years of vital statistics for patients to obtain reliable mortality

estimates. For many illnesses there are scant data of this type; however,

the National Cancer Institute (NCI) maintains this data for most cancers

through their Surveillance, Epidemiology, and End Results (SEER)

Program and database, which is available both on line and in documents

published through the Biometry Branch of NCI.

Survival and mortality data are reported in SEER as the Relative Survival

Rate (RSR) for each cancer for each year post-diagnosis. It is usually

reported for the years 1973 to 1993, but for rare cancers may only be

provided for five years post-diagnosis. The stomach cancer chapter in this

handbook contains a detailed discussion of RSRs, and their derivation. 

They are statistics based on the survival of cancer patients in relation to the

general population of the same age (hence the term “relative”). For

purposes of determining the percent of patients who are survivors and

nonsurvivors, a complex process that is described in the stomach cancer

chapter can be used to obtain a precise estimate of these percents. For

most uses, however, the RSRs provide a sufficiently close approximation
Chapter II.1 II.1-20 Carcinogenic Effects

of survival and mortality percents to be used without modification. An

example of a simplified approach to survival estimates is provided in the

discussion of bone and liver cancer in this chapter (Section II.1.H.6.4).

Links to Chapter II.2 for detailed discussion of RSRs and Section II.1.H.6.4

II.1.H Typical Cancer Costs

Although cancer costs among individuals vary widely, there are similarities

in the average costs reported for cancers. This section reports and analyzes

some of these costs. The data in this section may be useful when

evaluating a cancer for which cost data aren’t available (e.g., a rare cancer

such as bone cancer), or when the specific type of cancer is not known but

a cancer risk is projected (i.e. from an animal study) and a typical value is

sought. 

The cost estimate provided in this section is referred to as a “typical

cancer” cost rather than an average cost because it is not a statistical

average of all cancer costs. Rather, the estimate is based on the average

cost calculated from the only long-term study of cancer costs available

(Baker et al., 1989). The costs reported here cannot be represented as

average costs because they are not based on an average of either all cancers

or a random sample of cancers. Cost estimates are based on a group of

cancers that represent the vast majority of cancers that occur in the U.S.,

however, and so offer a reliable estimate of typical costs.

II.1.H.1. Source

The most recent source located for lifetime direct medical costs of a

number of cancers is Baker et al. (1989). Baker et al. evaluated the

continuous Medicare history sample file (CMHSF) from the Health Care

Financing Administration. The file contains a random sample of five

percent of all Medicare beneficiaries enrolled in 1974 in the United States,

and includes all Medicare activity from 1974 to 1981. They chose CMHSF

because: 

1) it is a nationally representative sample of the Medicare population

(five percent), covering over 1.6 million patients; 

2) it is longitudinal, dating from 1974 to 1981; and 

3) it captures the majority of medical expenses for each beneficiary.

Five Medicare files are included in the CMHSF, which cover:

1) inpatient hospital stays, 

2) skilled nursing facility stays, 

3) home health agency charges, 
7

 See Baker et al. (1989 and 1991) for further details.

8

 Although there are some exceptions to this generalization, such as non-melanoma type skin

cancers, very few cancers exist for which hospitalization is not required. (Medical costs for non-melanoma

skin cancers are provided in this handbook in Chapter II..6)

Link to Chapter II.6

Chapter II.1 II.1-21 Carcinogenic Effects

4) physicians’ services, and 

5) outpatient and other medical services.7 

Because CMHSF provides no indication of initial diagnosis, Baker et al.

assumed that disease onset occurred when a diagnosis of cancer was listed on

a hospitalization record following a minimum of one year without a cancer

diagnosis. This assumption is reasonable due to the high frequency of

hospitalization associated with these diseases (i.e., individuals diagnosed with

cancer would usually be hospitalized).8

Baker et al. assigned costs associated with each cancer to three postdiagnostic time periods:

• initial treatment, during the first three months following diagnosis;

• maintenance care, between initial and terminal treatment; and 

• terminal treatment during the final six months prior to death.

Initial treatment includes all diagnostic work, and any treatments provided

in the first three months after diagnosis. This treatment may include

radiation therapy, surgery, antineoplastic drugs, etc. Terminal care

includes care provided only in the last six months of life. The care may be

palliative or aggressive in nature and covers the spectrum of all potential

cancer treatments. Maintenance care is defined as that care provided

between the initial care phase and terminal treatment (for nonsurvivors) or

cessation of care (for survivors). Maintenance includes any care provided

after the first three months, excluding terminal care. It may include

surgery, continued aggressive treatment with radiation or chemotherapy,

diagnostics to determine the patient’s progress, or be limited to ongoing

monitoring and preventive therapies in cases where the cancer has been

minimized or eliminated. 

II.1.H.2. Modifications to the Data

There are a number of limitations to using Medicare data; these were

addressed by Baker et al. with a variety of strategies. As noted in Chapter

I.1, the amount paid for service may differ from the actual medical costs

because many insurers and federal programs either 1) pay only a portion of
Chapter II.1 II.1-22 Carcinogenic Effects

total costs or 2) pay more than actual costs to underwrite the care

providers’ losses due to underpayment from other sources. Baker et al.

used provider charges, rather than Medicare reimbursements (which

represent only a portion of most total charges), thus providing a more

accurate cost estimate. 

Link to Chapter I-1 

To improve the accuracy of the cost estimates, Baker et al. included the

costs of coinsurance, deductibles, and other cost components. They made

four adjustments to the cost estimates calculated from the CMHSF:

• First, charges were added for skilled nursing facilities (SNFs) not

covered by Medicare by multiplying the “length of stay” at an SNF

(computed from admission and discharge dates) by the average

daily SNF charge. 

• Second, the annual Medicare Part B deductible of $60 was added

to the reimbursed charges in the database. 

• Third, since Medicare pays only 80 percent of physicians’ charges,

Baker et al. scaled these reimbursements to 100 percent of

physicians’ charges to better reflect costs. 

• Finally, they inflated all dollar values to 1984 dollars using the

Medical Care component of the Consumer Price Index. 

Costs that were not included are outpatient prescription medications and

nursing home care below the skilled level. The Mor et al. (1990) analysis

of the CMHSF data notes that including costs incurred only after the initial

diagnosis omits costs associated with prediagnostic tests and treatment. 

Although these costs could be significant, substantial medical treatment

(e.g., tests requiring hospitalization) would also likely result in a diagnosis

and thus be included in Baker et al.’s estimates. This omission may lead to

an underestimate of costs by Baker et al. It is not likely to be substantial 

when viewed in the context of the overall costs of treatment.

II.1.H.3. Total Non-incremental Costs of Treatment Phases

Costs were evaluated for initial care and for each year post-diagnosis (i.e.,

the patient may have been in any year post-diagnosis to be included in the

analysis). Patients with an initial diagnosis of cancer prior to or during the

1974 to 1981 time period numbered 125,832. Thirteen types of cancer had

sufficient Medicare beneficiaries (more than 1,000) to be analyzed. 

Table II.1-3 lists the cancer types; the number of patients diagnosed; and

the costs of initial, maintenance, and terminal phases of care in 1984
Chapter II.1 II.1-23 Carcinogenic Effects

dollars. As Table II.1-3 shows, there is a relatively small variation in costs

among the cancers. Initial care costs vary by approximately a factor of 2,

continuing care by a factor of approximately 1.8, and terminal care by a

factor of approximately 1.3.

Table II.1-3 Cancer Types, Number of Study Subjects and Treatment Phase Costsa

Treatment Phase Costs in 1984 Dollarsb

Cancer Type (ICD9 Code) # Patients Initial

Maintenance

(per year) Terminal

Colorectal (153-154) 19,673 $14,190 $572 $15,776

Lung (162) 15,381 $12,916 $690 $15,565

Prostate (185) 14,002 $8,112 $560 $14,613

Breast (174) 12,486 $7,606 $483 $15,136

Bladder (188) 6,843 $8,470 $766 $18,577

Leukemia (204-208) 3,740 $9,068 $676 $19,777

Pancreas (157) 3,231 $14,009 $677 $14,790

Stomach (151) 3,228 $14,443 $660 $16,132

Uterine corpus (182) 3,042 $9,260 $424 $17,623

Kidney (189) 1,953 $12,608 $670 $19,302

Ovary (183) 1,605 $11,055 $647 $18,650

Uterine cervix (180) 1,448 $8,979 $493 $16,414

Melanoma (172) 1,105 $6,954 $488 $16,194

Mean Costs $10,590 $600 $16,811

a. Based on Baker et al., 1989. These are non-incremental and not discounted.

b. See text for definitions of treatment phases.

II.1.H.4. Maintenance Phase Costs

One complicating factor in evaluating cancer costs using the Baker et al.

data is determining a value for maintenance care. As Table II.1-3 shows,

this value is reported as a yearly cost. The duration of maintenance care

for each cancer is not provided by the authors. It should be noted that

maintenance care refers to a time period rather than to the nature of the

care, and may include diagnostic tests, surgery, care during relapses, etc.,

and any other care provided more than three months after diagnosis and

more than six months prior to death due to the cancer (but not due to other

causes). Consequently, costs of maintenance care can vary widely among

patients. It may occur for only a few months or for decades, due to

variations in human disease patterns, disabilities, etc.
9

 For example, the average age of diagnosis for most cancers is about 70 years. At this age the

average member of the general population has a life expectancy of 14 years. Patients may incur additional

costs over the full course of their lifespan.

Chapter II.1 II.1-24 Carcinogenic Effects

A variety of strategies can be used to estimate an average maintenance

period. The most precise would be to determine the average length of

maintenance care for survivors and non-survivors of different ages, either

from the literature or through a national survey of medical practitioners for

each type of cancer. Literature has not been located with statistics on

maintenance care durations, and a survey of practitioners would be timeconsuming, expensive, and have considerable uncertainty. It would be

necessary to ascertain both how long a patient would be expected to live

(for both survivors and non-survivors) and how long they would receive

care if they lived for an extended time period. Some patients would not

live as long as the “recommended” period of maintenance care, due to

either death from cancer or from some other cause (i.e., background

mortality). The typical cancer costs estimated in this section are to be used

primarily for rare cancers that lack data; consequently, the necessary

information on mortality and care is not generally available.

Given the unknowns, some simplifying assumptions were made to estimate

maintenance costs for purposes of this “typical cancer” analysis. Rather

than evaluate maintenance care for each cancer separately, an average

duration of care was selected and an average cost calculated. Two

simplifying assumptions were used:

1) It was assumed that the average patient (survivors and nonsurvivors

combined) receives five years of maintenance care post-diagnosis. 

2) Terminal costs were assumed to be applicable to 50 percent of

patients (a 50 percent mortality rate); survival actually varies

widely by cancer type. 

Many patients will survive beyond the five-year maintenance period

assumed in this analysis and continue to incur cost due to diagnostic tests,

drugs, etc.9 Five years, however, is a reasonable estimate for follow-up

when non-survivors are included. Most cancers have a relatively high

mortality rate, as reflected in the 50 percent mortality rate used as an

assumption in this analysis. As a result of the two assumptions listed

above, the average maintenance cost for five years was added to the initial

costs plus one half of the terminal costs to obtain an estimate of the total

cost. 
Chapter II.1 II.1-25 Carcinogenic Effects

II.1.H.5. Incremental Costs of Treatment Phases

The costs shown in Table II.1.3 are all medical costs incurred by a patient

with a cancer diagnosis. Consequently, the costs must be adjusted for

background medical expenses to obtain the incremental costs of cancer

treatment. Baker et al. (1991) provides an estimated background cost per

year of $2,988 (in 1984 dollars). The costs of each treatment phase were

adjusted for background costs, based on the duration of the treatment

phase, and the assumptions regarding maintenance care and survival

discussed above in sections II.1.H.3 and II.1.H.4. For example, the initial

care, which covers a three-month period, has a background medical cost of

$747 ($2,988 per year × 3/12 months). This background cost was

subtracted from the total cost for initial care of $10,590, to obtain an

incremental cost of $9,843. 

Link to Sections II.1.H.3 and II.1.H.4

The costs have also been updated to 1996 using the Medical Care

Component of the Consumer Price Index (1984:1996 = 2.14 ). The results

are shown in Table II.1-4. The final value in the table, $82,581, is the

undiscounted estimate of the lifetime incremental direct medical costs for a

cancer case. 

Depending on how this value is to be used, it may be possible to adjust the

cost components to better reflect the cancer(s) of interest. For example, if

it is known that there is a substantially higher mortality rate (50 percent

was used here), then the terminal cost component could be adjusted

accordingly. Any application should clearly state that this value was based

on numerous assumptions and represents and average of many, but not all,

cancers that occur in the U.S.
Chapter II.1 II.1-26 Carcinogenic Effects

Table II.1-4 Incremental Undiscounted Direct Medical Costs for a Typical Cancer

Treatment Phase

Total Medical

Costs (1984$)

Incremental

Medical Costsa

Incremental

Medical Costs

in 1996

Dollarsb

Lifetime

Incremental

Costsc

Initial (3 months) $10,590.00 $9,843.00 $21,064.02 $21,064.02

Maintenance $600.46

(per month)

$351.46

(per month)

$752.12

(per month)

$45,127.46

(5 years)

Terminal (6 months) $16,811.46 $15,317.46 $32,779.36 $16,389.68

Total Lifetime Costs in 1996 Dollarsd $82,581.16

a Adjusted for background medical costs of $2,988 per year (1984$), or $249 per month.

b Adjusted from 1984 to 1996 dollars using the medical care component of the Consumer Price Index

(1984:1996=2.14).

c Five years of maintenance care were assumed and a mortality rate of 50 percent was assumed (i.e., the

terminal care costs were multiplied by .5). See text for discussion.

d These costs can be updated to the current year using inflation factors accessible by clicking below.

Link to inflation factors

II.1.H.6. Application to Specific Cancers

II.I.H.6.1 Method 

A more precise approach can be taken for specific cancers, if necessary,

when sufficient statistics are available. The typical costs per treatment

phase discussed above are used, with the maintenance phase and terminal

care evaluated in more detail. The following components were used:

1) initial care — all patients receive initial care, so there are no

modifications made to this phase’s costs. 

2) maintenance care — the length of the maintenance phase was

estimated based on the survival probability of people of the average

age of diagnosis. This duration of care was used to estimate costs

for this phase.

Two specific cancers were evaluated, bone and liver cancer, in response to

specific requirements of the Agency for an upcoming rule requiring benefits

evaluations. The rule required only the direct medical costs for survivors

of bone and liver cancer because the value of a statistical life (VSL) was to

be used for nonsurvivors. The percentage of survivors and nonsurvivors

for these cancer are discussed in Section II.I.H.6.4 below. Cost

estimations were made using steps above. Two different approaches to

estimating maintenance costs were used to illustrate alternative methods. 
Chapter II.1 II.1-27 Carcinogenic Effects

As noted above, the initial care costs shown in Table II.1-4 were used

without modification for the costs of this phase. To determine the

estimated cost for the maintenance period care for survivors, the length of

the maintenance period was evaluated using two statistics: 

1) the average ages at diagnosis for the two cancers were determined

using the National Cancer Institute’s SEER database, as described

in Section II.1.G.2 above. The percent of all patients diagnosed in

each age group was used to calculate the mean age at diagnosis

(this is illustrated graphically in the stomach cancer chapter). 

Link to Chapter II.2

Link to Chapter II.1.G.2

The average age at diagnosis for bone and liver cancer were

determined to be 69 and 66 years, respectively.

2) The life expectancy of an average individual in the general

population was determined for the two ages of diagnosis listed

above from vital statistics data (accessed in 1998 from National

Center for Health Statistics web site). They were determined to be

14.8 years (rounded to 15 years) for a 69-year-old bone cancer

patient, and 16.7 years (rounded to 17 years) for a 66-year-old liver

cancer patient. It was assumed that the life expectancy of 

survivors is the same as that of the general population. In reality,

the treatments for cancer, including radiation, antineoplastic drugs,

etc., have toxic effects that may shorten the lives of cancer patients. 

There are not sufficient data on these effects to quantitatively

determine the impact.

II.I.H.6.2 Approach I. 

The full term of care was assumed to be ten years. This duration is

reasonable because nonsurvivors were not included, and the life expectancy

at the average ages of diagnosis (66 and 69 years) is considerable (15 to

17 years). Additional care associated with cancer may not be required over

the full remaining life of the individual. The first-year costs consisted of

initial care costs ($21,064) and nine months of maintenance care ($753,12

× 9 = $6,769). (See Table II.1-4 for incremental costs for each phase of

care.) The remaining nine years of maintenance care were added to initial

costs to obtain the total estimated lifetime direct medical costs. 

II.I.H.6.3 Approach II. 

The maintenance phase was assumed to be equal to the life expectancy of

the general population at the average age of diagnosis, minus three months

of initial care. As in Approach I, the first year costs consisted of initial care

costs and nine months of maintenance care. The remaining years of life

(i.e., life expectancy at the average age at diagnosis minus the first year of
Chapter II.1 II.1-28 Carcinogenic Effects

services) were multiplied by the annual maintenance care cost and added

to initial costs to obtain the total estimated lifetime direct medical cost (i.e.,

14 years for bone cancer and 16 years for liver cancer). This approach is

reasonable because patients may require maintenance care over their

remaining lifetime due to the drastic nature of most cancers, and the likely

concurrent effects induced by surgery, radiation, and chemotherapy.

In the absence of accurate long-term treatment information for survivors,

either approach may be used. They are both offered to provide a range of

options for economists and to illustrate the impact of altering assumptions

regarding care on medical cost estimates. 

The results obtained using both approaches are shown in Table II.1-5 using

discount rates of 0, 3, 5, and 7 percent. Bone cancer lifetime medical cost

estimates for survivors range from $109,052 to $154,189 (undiscounted). 

Liver cancer lifetime medical cost for survivors range from $109,052 to

$172,240 (undiscounted). 

As the results indicate, maintenance care costs are a major portion of total

medical costs for survivors. Differing assumptions regarding the duration

of time over which these costs will occur lead to differences in overall

lifetime cost estimates that are not trivial ($87,000 versus $151,000,

undiscounted). These differences are relatively small, however, when

contrasted with costs associated with the value of a statistical life

(approximately $5,000,000). Although it is important to obtain medical

cost estimates that are as precise as possible, in the case of fatal cancers

(where the VSL is used for some patients) the differences between

Approach I and Approach II do not substantially alter the final results of a

benefits assessment. 

As noted above, these costs are for survivors of the diseases only. It is

relatively simple to calculate the costs for nonsurvivors if data are located

on the timing of death. Terminal care costs are listed in Table II.1-4 and

can be used, with the appropriate maintenance care costs, to estimate direct

medical costs for nonsurvivors. Note that the maintenance costs estimated

for survivors should not be used because they are likely to have a much

longer duration of care than do nonsurvivors.
Chapter II.1 II.1-29 Carcinogenic Effects

Table II.1-5 Estimated Incremental Direct Medical Costs for Bone and Liver Cancer Survivorsa (1996 dollars)b

Type of

Cancer and

Approach a

Age at

Diagnosis

Life

ExpectancyInitial Care

Costs Maintenance Care Costs Total Lifetime Costs

Discount

Rates: 0

3 5 7 Discount

Rates: 0

3 5 7

Bone 69 15 $21,064

 Approach I 87,988 77,042 70,920 65,572 $109,052 98,106 91,988 86,636

 Approach II 133,125 108,721 96,108 85,700 $154,189 129,785 117,172 106,764

Liver 66 17 21,064

 Approach I 87,988 77,042 70,920 65,572 $109,052 98,106 91,988 86,636

 Approach II 151,176 120,138 104,584 92,029 $172,240 141,202 125,648 113,093

a. See text for discussion of approaches.

b. These costs can be updated to the current year using inflation factors accessible by clicking below.

Link to inflation factors
Chapter II.1 II.1-30 Carcinogenic Effects

II.1.H.6.4 Liver and Bone Cancer Survival Estimates

Because the VSL is sometimes used for nonsurvivors of bone and liver

cancer, it is important to estimate the survival and mortality rates for these

cancer patients. This was done using the RSR data from NCI as discussed

in Section II.1.G.2 and presented in detail in Chapter II.2. Because the

cost estimates for these two cancers are not precise (the costs for a

“typical” cancer case were used, as described above), it was determined

that the RSRs provided a reasonable approximation of the survival rate. 

Link to Section II.1.G.2 and Chapter II.2

Ideally, one would determine the lifetime mortality impacts of these cancers

on patients, which would require a lifetime follow-up. These data are not

available. NCI provides a twenty-one year database (1973-1993) of the

survival experience of liver cancer patients. That database was used in this

analysis and provides a lower-bound estimate of mortality impacts. (It may

slightly underestimate mortality because increased deaths may occur

beyond the twenty-first year post-diagnosis. This increase, however, is not

likely to be substantial.) 

Bone cancer, which is rarer and less well studied, is included in the NCI

grouping “bone and joint cancers.” Consequently, the survival estimates

are less precise for bone cancer. In addition, the RSR was available only

for five years post-diagnosis for this group of cancers. The actual mortality

rate is very likely to be greater than that observed at five years because

mortality is typically elevated for more than five years post-diagnosis. 

Mortality will therefore be underestimated. Unfortunately, the dynamics of

survival and relapse differ considerably among cancers, so it is not possible

to estimate the longer-term survival for bone cancer based on mortality

patterns for other cancers. 

The NCI RSR data indicate that the survival rate for liver cancer is

approximately 2.6 percent, indicating a 97.4 percent mortality rate (after 21

years). The bone and joint cancer survival rate is estimated to be 64.3

percent, indicating a 35.7 percent mortality rate (after five years).

II.1.H.7 Conclusions Regarding Typical Cancer Cost Estimates

There is clearly uncertainty when a “typical” cancer approach is used. As

Table II.1-3 shows, however, there are relatively small differences among

the medical costs of various cancers when contrasted with the uncertainty

in risk estimations, changes in medical care and survival, and uncertainty

associated with other parameters in a benefits assessment. The value in

Table II.1-4 and approaches described above provide a means to obtain an

estimate of cancer medical costs that may be useful in a benefits evaluation

when limited data are available to support a full and detailed analysis of

medical costs. 
Chapter II.1 II.1-31 Carcinogenic Effects

II.1.I Issues and Uncertainty in Cancer Medical Cost Estimation

Chapter I.1 contains a detailed discussion of numerous sources of

uncertainty in medical cost estimation. Most issues related to estimating

medical costs of specific types of cancer are discussed in the individual

chapters, which also contain a detailed presentation of the methodologies

used to estimate costs. Some issues are common to all cancers and are

briefly discussed in this section. This section also contains the estimated

lifetime medical costs for a “typical” cancer case. In addition, there are

some uncertainties and issues that are particularly problematic for cancer

cost estimation. These issues, discussed below, include new treatments

that are developed (with attendant changes in cost) and concurrent effects

associated with either the occurrence of the cancer or medical treatments

for cancer.

Link to I.1.F: Limitations

II.1.I.1 New Treatments

The costs of new treatments are of particular concern in cancer therapy,

because they may be very expensive, and because what is considered

experimental at one time may soon become the treatment norm. For

example, advances have been made very rapidly during the 1990s in the

treatment of advanced stages of breast cancer. In the past, the prognosis

was poor for advanced stages and the treatments limited. Consequently,

economic valuations might include a value of life estimate rather than a

medical cost estimate as the predominating cost factor. In recent years,

however, more expensive and effective treatments, such as bone marrow

transplants and new pharmaceuticals, have shifted the balance for this

disease somewhat toward improved survival with a corresponding increase

in medical costs. As a result of this dynamic, it is appropriate for an

economic evaluation to include a review of recent literature to determine

whether new treatment approaches with substantially different costs are

being employed for a specific disease. 

II.1.I.2 Concurrent Effects

As noted in Section II.1.B. above, concurrent effects are of particular

concern for certain types of illnesses, including cancer and developmental

effects (discussed in the next section). Cancer has a unique ability to

metasticize, leading to multiple types of cancer in an individual. Cancer

may also interfere with the functioning of various organs in the body,

requiring medical attention above and beyond the cancer-limiting

treatments. Finally, the treatments themselves, which often include ionizing

radiation and highly toxic chemotherapeutics, may cause serious illnesses,

including cancers at other sites in the body, impairment of the immune

system, disabilities, and damage to the nervous system or other organs. 
Chapter II.1 II.1-32 Carcinogenic Effects

When data are not available on concurrent effects, and the chapter indicates

that they are likely to occur (as is the case for all cancers), the medical cost

estimates provided will underestimate total medical costs. This discrepancy

should be noted when the costs are used.

All of these concurrent effects may occur during or significantly after the

cancer occurrence. It is beyond the scope of this handbook to include a

discussion of the multiple associated diseases that can arise from a specific

cancer. This information may be important, however, to a comprehensive

economic analysis. Where data are available regarding concurrent effects,

they are described briefly in the cancer chapters. In addition, readers are

urged to consult with the medical and toxicological sources providing the

basic health risk information, in order to obtain additional data on likely

concurrent effects arising from the diseases or their treatment. 

Some cancer cost evaluations, such as those based on Baker et al. (i.e.,

lung, breast, liver, kidney, bladder, colorectal, and the “typical” cancer

costs estimated in this chapter in the previous section) include all estimates

of the incremental medical costs associated with a cancer diagnosis. These

values are calculated by summing all medical costs and subtracting the

background costs to obtain incremental costs. Using this approach, costs

are included that may be cancer-related, but not specifically designed to

address cancer. For example, immune-suppressed patients who are

receiving radiation therapy may have greater costs associated with

infectious diseases. The additional required services are due to cancer, but

are not specifically designed to mitigate the cancer. Including these costs

provides a more comprehensive and realistic estimate of the total medical

cost of the disease.
Chapter II.4 II.4-1 Cost of Kidney Cancer

CHAPTER II.4. COST OF KIDNEY CANCER

Clicking on the sections below will take you to the relevant text.

II.4.A Background

II.4.A.1 Description

II.4.A.2 Concurrent Effects

II.4.A.3 Causality

II.4.A.4 Treatments and Services

II.4.A.5 Prognosis

II.4.B. Costs of Treatment and Services

II.4.B.1 Methodology

II.4.B.2 Results

II.4.B.3 Limitations

II.4.C. Conclusions
Chapter II.4 II.4-2 Cost of Kidney Cancer

CHAPTER II.4. COST OF KIDNEY CANCER

II.4.A Background

This chapter contains a discussion of the methods used and results of 

estimating the direct medical costs incurred by kidney cancer patients. It

does not include information on elements such as indirect medical costs,

pain and suffering, lost time of unpaid caregivers, etc. The reader is

referred to Chapter I.1 for a discussion of the cost estimation methods and

cost elements that are relevant to all benefits estimates. In addition,

Chapter II.1 contains information regarding cancer causality, a list of

known and suspected carcinogens, and information on cancer cost

estimation.

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and II.1

Link to inflation factors

II.4.A.1 Description

Kidney cancer is a malignancy within the kidneys and may be localized or

have spread to multiple sites (Bennet and Plum 1996). It represents one to

three percent of all adult cancers in the United States (Javadpour 1984,

Klein et al., 1993). Kidney cancer occurs most frequently in individuals in

their fifties through seventies, with two to three times as many males as

females developing the disease (NCI 1994, Javadpour 1984, Klein et al.,

1993, Montie et al., 1990). Approximately 25,300 new cases of kidney

cancer were diagnosed in 1991 in the U.S. (NCI 1994). 

According to the National Cancer Institute (NCI 1994), the incidence of

kidney cancer in the U.S. has increased by over 30 percent over the past 20

years, from a rate of 6.7 per 100,000 in 1973 to 8.8 per 100,00 in 1991. 

Although this increase may be attributed in part to improved detection

techniques, a concurrent rise in mortality due to kidney cancer indicates

that there has been a real increase in disease incidence in the U.S. over time

(McCredie 1994). Reported rates of kidney cancer incidence and mortality

have increased worldwide in the past decades, particularly in more

industrialized countries. According to McCredie (1994), kidney cancer is

likely to become the most common urinary cancer in the coming decades,

and one of the major cancers of affluent societies, unless its etiology can be

better identified and addressed. 
Chapter II.4 II.4-3 Cost of Kidney Cancer

II.4.A.2 Concurrent Effects

No data were located indicating that concurrent effects unrelated to kidney

cancer or its treatment were likely to occur with this disease. Secondary

cancers and other adverse health effects may occur due to treatment and

therapy. These can incur added medical costs not considered in this

chapter. 

II.4.A.3 Causality

Carcinogens suspected of causing renal cancer in human study groups

include hormones, radiation, certain viruses, tobacco smoking, phenacetincontaining analgesics, paracetamol, obesity and hypertension (or drugs

used for their treatment), asbestos, and renal injury (Javadpour 1984,

McCredie 1994). Kidney cancer has been induced in experimental animals

via exposure to chemical, physical, viral, and hormonal agents; radiation;

and dietary deficiencies (Konishi et al., 1994, Javadpour 1984). 

Epidemiological data show significantly greater frequencies of kidney

cancer in cigar smokers, smokers with occupational exposures to cadmium,

petroleum industry workers, and possibly workers with occupational

exposures to lead. Kidney toxins, such as unleaded gasoline, have

demonstrated carcinogenic potential in chronic bioassays in animals

(Konishi et al., 1994). Other risk factors appear to be linked to a more

affluent lifestyle, including diet; and perhaps to increasing industrial

exposure in some localities (McCredie 1994). As is often the case with

cancers, however, it is difficult to prove causality. McCredie (1994), for

example, hypothesizes that the general effect of changes in standard of

living is a significant cause of the increased incidence of kidney cancer.

Table II.1-1 in Chapter II.1 contains a list of chemicals known to cause or

suspected of causing cancer (as reported in the EPA databases IRIS,

HEAST, and HSDB). Most chemicals in the table were carcinogenic in

animal studies. These studies do not provide organ-specific data because it

is not generally assumed that cancer induction will always occur at the

same site in humans as in animals. Consequently, the chemicals listed in

Table II-1 may cause kidney cancer and/or other types of cancer. 

Evaluation of the likelihood of this occurrence would require additional

research (risk assessment). 

Link to Table II.I-1
Chapter II.4 II.4-4 Cost of Kidney Cancer

II.4.A.4 Treatments and Services

Kidney cancer is slow to develop, and may reach relatively advanced stages

before detection. Symptoms may include fever, weight loss, generalized

weakness, abdominal pain, abnormal increases in red blood cells or blood

calcium levels, anemia, bloody urine, cardiac enlargement, or liver

dysfunction without evidence of liver cancer. Advances in diagnostic

techniques, such as bone scanning, chest tomography, computed

tomography (CT), ultrasonography, and magnetic resonance imaging

(MRI) have greatly improved the diagnosis of kidney cancer, though have

not yet increased survival rates (Javadpour, 1984). 

The only effective therapy for kidney cancer is surgical excision (often

involving removal of the kidney, adrenal gland, associated fat, and regional

lymph nodes) before it has a chance to spread to other organs or

metastasize to distant sites in the body (Javadpour 1984, Klein et al.,

1993). Chemotherapy, radiotherapy, and hormone therapy have all proven

ineffective as a systemic treatment for kidney cancer. Immunotherapy (also

known as biologic response modifier (BRM) therapy), though still

experimental, may prove valuable in treating advanced kidney cancer (Klein

et al., 1993, Montie et al., 1990). 

II.4.A.5 Prognosis

Overall, the five-year survival rate in the U.S. for all kidney cancer patients

is only about 54 percent (McCredie 1994) and the six-year survival is

approximately 50 percent (NCI, 1998, based on patients diagnosed in

1987). Kidney cancer can and does metastasize to most areas of the body,

most commonly the lymph nodes, lungs, liver, and bones (Montie et al.,

1990). More than half of all new patients are diagnosed with regionally

advanced or metastatic kidney cancer (Klein et al., 1993). Although kidney

cancer can include spontaneous regressions and long survival in the

presence of metastatic disease, there is currently no effective treatment of

metastatic kidney cancer, and prognosis for these patients is very poor

(Javadpour 1984, Montie et al., 1990). Patients with advanced kidney

cancer face a median survival of ten months and a one to two percent

chance of surviving five years or more (Klein et al., 1993). 

II.4.B. Costs of Treatment and Services

II.4.B.1 Methodology

This chapter estimates the per-patient lifetime direct medical costs of

treating kidney cancer based on the work of Baker et al. (1989 and 1991). 

Baker et al. used the Continuous Medicare History Sample File (CMHSF)

to estimate average per-patient medical costs of treating kidney cancer. 

They chose CMHSF because: (1) it is a nationally representative sample of
1

 See Baker et al., 1991 for further details.

Chapter II.4 II.4-5 Cost of Kidney Cancer

the Medicare population (5 percent), covering over 1.6 million patients; (2)

it is longitudinal, dating from 1974 to 1981; and (3) it captures the majority

of medical expenses for each beneficiary.

Five Medicare files are included in the CMHSF, which cover:

1) inpatient hospital stays, 

2) skilled nursing facility stays, 

3) home health agency charges, 

4) physician services, and

5) outpatient and other medical services.1 

Baker et al. calculated the average medical costs of Medicare patients with

kidney cancer, as well as the average medical costs of a randomly-selected

sample of Medicare patients without cancer (i.e., baseline costs). To

estimate costs attributable to kidney cancer, this report subtracts baseline

costs from the costs of patients with kidney cancer. An alternative

approach would have been to examine the medical services used by patients

with kidney cancer and make judgments, based on the nature of each

service, about whether its use was attributable to kidney cancer. This

second method is more complicated and requires that the motivation for

medical services be inferred. 

Because CMHSF provides no indication of initial diagnosis, Baker et al.

assumed that a kidney cancer diagnosis appearing on a hospitalization

record after a minimum of one year without a kidney cancer diagnosis

indicated disease onset. This assumption would seem to hold true for a

majority of cases because of the high frequency of surgery and

hospitalization associated with initial treatment of kidney cancer (Klein et

al., 1993). Only patients with an initial diagnosis during the years covered

by the database were included. 

The number of Medicare beneficiaries included in the kidney cancer subset

of the CMHSF, as defined by Baker et al., was 1,953. The random subset

of non-cancer patients, called the “co-morbidity subset” by the authors,

consisted of every 16th beneficiary contained in the CMHSF who had not

been hospitalized for cancer. Given that the CMHSF database contains

approximately 1.6 million accounts, the co-morbidity subset represents

about 100,000 individuals. 

Baker et al. estimated total costs associated with three phases of treatment:
2

 Where no discharge date was given, Dec 31, 1981 (the end of the file) was used as the discharge

date. This likely underestimates SNF stays and therefore overall costs for some patients.

Chapter II.4 II.4-6 Cost of Kidney Cancer

Initial: all costs appearing on a beneficiary’s record for up to three months

following diagnosis; 

Terminal: all costs appearing on a beneficiary’s record within six months

of death; and 

Maintenance (intermediate phase): all costs incurred between these two

periods (calculated as an average monthly cost).

These periods differ significantly in intensity and cost of related medical

care. Initial therapy generally includes intensive diagnostic testing and

surgical removal of the tumor, incurring very high medical costs over the

approximately three months following initial diagnosis. If this treatment is

successful, a cancer patient will undergo a period of remission, during

which little medical treatment is given apart from monitoring for potential

cancer recurrence. 

For the approximately fifty percent (NCI 1994) of patients who eventually

die of kidney cancer, a third phase of intensive terminal care (involving

further surgery, radiation, and/or other measures to alleviate symptoms)

takes place over approximately the last six months of their lives, which

again incurs substantial medical costs. According to Baker et al., the

pattern of initial, maintenance, and terminal care treatment phases is

apparently little affected by differences in total survival time of the patient;

the major difference is in the length of the maintenance phase (Baker et al.,

1991). Because Baker et al. (1989) calculated monthly maintenance phase

costs but not the duration of the maintenance phase, this report calculates

average lifetime maintenance phase costs based on survival rate data.

Baker et al. made four adjustments to the cost estimates calculated from

the CMHSF. First, they added charges for skilled nursing facilities (SNFs)

that were not covered by Medicare by multiplying the “length of stay” at an

SNF (computed from admission and discharge dates) by the average daily

SNF charge.2 Second, they added the annual Medicare Part B deductible

of $60 to the reimbursed charges in the database. Third, since Medicare

only pays 80 percent of physicians’ charges, they scaled these

reimbursements up to 100 percent of physician charges to better reflect

social costs. Finally, they inflated all dollar values to 1984 dollars using the

Medical Care component of the Consumer Price Index. 
3

 Co-morbidity charges of $249 per month were reported in Baker et al.’s analysis of breast and

lung cancer (1991). The charges represent medical costs for a random sample of the Medicare population

without cancer with age distribution matching that of the breast and lung cancer subsets. Co-morbidity

charges for a sample matching the age distribution of the population with kidney cancer may vary slightly.

Chapter II.4 II.4-7 Cost of Kidney Cancer

II.4.B.2 Results

II.4.B.2.1 Treatment Phase Costs

Costs were estimated for each treatment phase, using the methodology

described above for Baker et al. Their cost estimates are given in 1984

dollars. Table II.4-1 shows average undiscounted total (non-incremental)

charges incurred over the three phases of kidney cancer treatment. The

comorbidity charges corresponding to the duration of each treatment

period are also listed.

Table II.4-1

Average Patient Charges Per Treatment Phase of Kidney Cancer, in 1984 dollars 

Kidney cancer treatment charges Co-morbidity chargesa

Initial

(Total Over 3

Months)

$12,608 $747

Maintenance

(Average per

Minth)

$670 $249

Terminal

(Total Over 6

Months)

$19,302 $1,494

Source: Baker, et al., 1989 and 1991 (for background costs).

a

 From Baker et al. (1991) This is the average cost of medical care for patients not

undergoing treatment for cancer.

Table II.4-1 also includes co-morbidity charges (i.e., baseline charges) from

Baker et al. (1991). Co-morbidity charges for initial, maintenance, and

terminal phase treatment are $747 total, $249/month, and $1,494 total,

respectively.3 These charges are subtracted from the charges associated

with kidney cancer to yield net charges for the treatment of kidney cancer. 

Baker et al. (1989) provides only summary charges for each of the

treatment phases; cost associated with each of the treatment components

(i.e., inpatient hospital stays, skilled nursing facility stays, home health

agency charges, physician services, outpatient services, and other medical

services) were not listed in the report. 
4

 The relative survival rate (RSR) is an approximation of the survival rate, adjusted for

background mortality. For a detailed discussion of RSR see Chapter II.2.

Link to Chapter II.2

Chapter II.4 II.4-8 Cost of Kidney Cancer

II.4.B.2.2 Lifetime Cost Estimates 

Lifetime costs of treating kidney cancer were calculated using the following

information:

1. the charges per phase (presented above), 

2. an estimate of the average length of the maintenance phase of

treatment, and 

3. the percentage of patients who survive the disease. 

Survival data from the National Cancer Institute (NCI) indicate that

approximately 50 percent of the patients who die of kidney cancer do so

within one year of diagnosis. The NCI data cover a diagnostic period from

1974 to 1981. Although survival rates have improved, the distribution of

the occurrence of death is not expected to have changed substantially. This

is supported by Klein et al (1993), who found that more than half of all

new cases are diagnosed with regionally advanced or metastatic disease. 

The median survival for patients with metastatic disease is approximately

ten months (Klein et al. 1993). The terminal charges are therefore assumed

to occur within one year of diagnosis, on average.

It is more difficult to determine the average period of maintenance. NCI

data indicate that the average relative survival rate is 49.8 percent at six

years after diagnosis.4 For the purposes of this analysis the average life

span for a person diagnosed with kidney cancer was assumed to be six

years post-diagnosis. Using this value, the average maintenance period

was assumed to be 5.25 years, after adjusting for initial care and terminal

care. Many patients will receive a longer or shorter period of maintenance

care; however, this is a reasonable estimate based on available information.

This approach is an approximation, and may be refined in the future. It is

likely to underestimate medical costs due to the improved prognosis and

survival duration of kidney cancer patients in recent years leading to longer

periods of maintenance care.

To determine the average lifetime incremental medical costs associated

with kidney cancer, the following calculations were used: 

Initial phase costs attributable to kidney cancer were calculated using

$12,608 in gross charges from Table II.4-1 minus $747 in co-morbidity

charges to obtain a cost of $11,861. 
Chapter II.4 II.4-9 Cost of Kidney Cancer

Maintenance period charges were first calculated at $670/month from

Table II.4-1 multiplied by 63 months or 5.25 years. Sixty-three months

were estimated as the maintenance period based on a six-year average postdiagnosis survival, minus three months initial phase and six months terminal

phase care. The average co-morbidity charges of $15,687 ($249/month

multiplied by 63 months) for the maintenance phase were subtracted from

the gross maintenance phase costs to obtain undiscounted annual

maintenance phase charges attributable to kidney cancer of $26,523. 

Terminal costs attributable to kidney cancer were estimated by subtracting

co-morbidity charges of $1,494 from $19,302 (the gross charges for

terminal care for kidney cancer patients) to obtain an incremental cost of

$17,808. As noted previously, approximately 50 percent of patients with

kidney cancer ultimately die of the disease. Therefore the terminal costs

were multiplied by .5 to obtain an estimated average cost for this phase of

$8,904.

Total Costs. Table II.4-2 shows Baker et al.’s values for the incremental

medical costs for each phase. The total costs were modified by the

comorbidity costs (as shown in Table II.4-1).

Table II.4-2

Average Incremental Per Patient Charges in 1984 dollars (undiscounted)

Incremental Costs Total cost

Initial (3 months care) $11,861

Maintenance ( 5.25 years care a) $26,523

Terminal (6 months careb) $8,904

$11,861 $47,288

Source: Table II.4-2, modified per text to obtain incremental charges.

a

 Six-year assumed life span minus 3 months of initial treatment and 6 months of

terminal treatment.

b

 Terminal costs are incurred by only 50 percent of patients and were adjusted

accordingly.

The costs shown in Table II.4-2 were used to calculate the discounted

incremental per capital direct medical costs in 1996 dollars (based on the

Consumer Price Index ratio (CPI-U) for medical care, 1996:1984=2.14). 

Both initial phase and terminal phase charges are present values because

they occur in the first year post-diagnosis. Those patients who will die of

kidney cancer do so, on average, within ten months of diagnosis. As

noted previously, terminal charges were adjusted to reflect the fact that

approximately 50 percent of patients incur terminal charges. Maintenance

care is assumed to be provided over a period of 5.25 years and is

discounted accordingly. (This calculation may be modified in the future as
Chapter II.4 II.4-10 Cost of Kidney Cancer

additional information is obtained on the duration of maintenance care.) 

Present value maintenance phase charges are: 

$26,523 using a zero percent discount rate

$24,747 using a three percent discount rate

$23,682 using a five percent discount rate

$22,702 using a seven percent discount rate

The undiscounted initial and terminal costs were summed with the various

discounted maintenance care charges to obtain the total incremental per

capita medical costs, as shown in Table II.4-3.

Table II.4-3

Incremental Direct Medical Costs of Lifetime per Capita Treatment of Kidney

Cancer in 1984 and 1996 Dollars with Various Discount Rates a (1996:1984 =

2.14)

Present Value of Attributable Charges (Discount Rate %)

0 3 5 7

Lifetime Charges

1984 dollars

47,288 45,512 44,417 43,467

Lifetime Charges

1996 dollarsd

96,916 97,396 95,117 93,019

a

 Treatment components are discounted based on when they occur in the course of

treatment. See text for discussion.

The costs presented in this chapter were current in the year the chapter was written. They

can be updated using inflation factors accessible by clicking below.

Link to inflation factors

II.4.B.3 Limitations

There are many limitations in cancer cost estimation. Those common to

most cancers are discussed in the introductory cancer chapter: II.2. 

Link to Chapter II.2

There are a number of limitations to the use of the Baker et al. data, many

of which the authors have noted. These limitations are primarily related to

the use of CMHSF (Medicare) data. First, Medicare does not cover all

potential kidney cancer patients; it covers only most persons 65 and over,

disabled persons entitled to Social Security cash benefits for at least 24
5

 This figure represents those enrolled in Medicare Part A; 95 percent of those enrolled in Medicare

Part A choose also to enroll in Medicare Part B.

Chapter II.4 II.4-11 Cost of Kidney Cancer

months, and most persons with end-stage kidney disease (Baker et al.

1991). All patients not covered by Medicare are excluded from the

database, including all non-disabled people under 65 and those over 65

using private health insurance. Given that approximately half of all kidney

cancer patients are under 65 (NCI 1994), the CMHSF excludes a

significant number of younger patients. Approximately 95 percent of

Americans 65 and over, however, are enrolled in Medicare (Baker et al.

1991).5 Differences in medical costs incurred by senior citizens not using

Medicare, or using it for only a portion of their costs, could lead to an

underestimate of medical costs. 

Medicare also does not cover self-administered drugs, intermediate nursing

care, long-term nursing care, and expensive, extraordinary treatments (such

as bone marrow transplants). For some patients these may represent

significant percentages of their total treatment costs. To the extent that 1)

younger patients receive more aggressive (and therefore more expensive)

medical treatment for kidney cancer and 2) Medicare beneficiaries use

medical care not covered by Medicare, the values in the CMHSF database

will underestimate medical costs.

A minor drawback of the Baker et al. data is due to the researchers’

inability to identify cancer patients in CMHSF whose diagnosis and first

course of therapy did not involve hospitalization. For most kidney cancer

patients the first course of therapy involves major surgery. Consequently,

the omission of non-hospitalized patients is likely to result in a negligible

underestimate of medical costs.

The reliability of the data contained in the CMHSF database varies. An

independent analysis of CMHSF performed in 1977 by the Institute of

Medicine of the National Academy of Sciences found that the frequency of

discrepancies in principal diagnoses varied among diseases (Baker et al.,

1991). It is unclear whether the presence of misnamed diagnoses contained

in CMHSF potentially increase or decrease the resultant cost estimates.

Since Baker et al. include only those costs after the initial diagnosis, they

omit costs associated with prediagnostic tests and treatment. Although

these costs could be significant, substantial medical treatment (e.g., tests

requiring hospitalization) would also likely result in a diagnosis and thus be

included in Baker et al.’s analysis. This omission likely causes the values

generated by Baker et al. to somewhat underestimate direct medical costs

from the treatment of kidney cancer.

Another limitation to using the Baker data is its age. The most recent data

used by Baker is more than a decade old. Although many aspects of
Chapter II.4 II.4-12 Cost of Kidney Cancer

treatment have remained constant, new diagnostic methods and treatments

such as immunotherapy have potentially increased lifetime treatment costs.

Improved diagnostic procedures such as CT scans, ultrasonography, and

MRI (McCredie 1994) have led to earlier diagnoses and treatment. The

lack of data on new treatment methods may cause costs to be

underestimated.

Age of the data is also a problem with regard to survival statistics. NCI

maintains current survival information, but the survival prospects for a

patient diagnosed now are better than in previous decades. Since longterm survival can only be evaluated retrospectively, there is uncertainty in

estimations of survival for current patients based on past survival patterns.

An additional limitation of this analysis is that medical costs incurred as a

result of kidney cancer, but not considered by Baker et al., may arise as a

result of treatment for kidney cancer. Secondary cancers and other adverse

health effects may occur due to radiation, chemotherapy treatment, and

other therapies. These effects may occur substantially after the cancer

treatment has been completed and can incur added medical costs not

considered in this chapter. 

One limitation of the cost estimates that is directly related to the analytical

method used in this chapter is the lack of a yearly sequential analysis of

costs. A more precise method for estimating direct medical costs would

include year-to-year information on treatment and survival, with costs

determined using an estimate of the proportion of patients surviving each

year and those who died due to natural causes or kidney cancer. When this

chapter was developed, that method was not yet in use for this handbook.

(See Chapter III.2 for a more complete discussion of the new method.) 

Average durations of treatment and survival were used in this analysis and

are likely to provide a good approximation of the costs that would be

obtained through a more detailed and complex analysis.

Link to Chapter II.2

II.4.C. Conclusions

Overall, despite the limitations described above, Baker’s analysis of the

CMHSF data represents the most nationally-representative per-patient

lifetime estimate of the direct medical costs of treating kidney cancer

available. Their cost estimates are based on sound criteria and reasonably

current data, since the treatment of kidney cancer has not changed

substantially since Baker et al.’s analysis. The authors have made

adjustments for many of the factors that can be quantitatively modified

(e.g., Medicare’s underpayment for services). 
Chapter II.4 II.4-13 Cost of Kidney Cancer

Because more of the uncertainties in their analysis appear to underestimate

costs (e.g., population covered, changes in treatment, and omission of prediagnostic costs), the net result is a likely underestimation of actual direct

medical costs. This tendency toward underestimation can be noted when

using the cost estimates in this chapter in a benefits assessment.
Chapter II.5 II.5-1 Cost of Lung Cancer

CHAPTER II.5: COST OF LUNG CANCER 

Clicking on the sections below will take you to the relevant text.

II.5.A Background

II.5.A.1 Description

II.5.A.2 Concurrent Effects

II.5.A.3 Causality & Special Susceptibilities

II.5.A.4 Treatments and Services

II.5.A.5 Prognosis

II.5.B Costs of Treatment and Services

II.5.B.1 Methodology

II.5.B.2 Results of Medical Cost Analysis

II.5.B.3 Other Studies 

II.5.C Uncertainties and Limitations

II.5.C.1 Uncertainties Surrounding Key Inputs to the Analysis

II.5.C.2 Scope of the Analysis
Chapter II.5 II.5-2 Cost of Lung Cancer

CHAPTER II.5: COST OF LUNG CANCER 

This chapter contains a discussion of the methods used and results of 

estimating the direct medical costs incurred by lung cancer patients. It

does not include information on elements such as indirect medical costs,

pain and suffering, lost time of unpaid caregivers, etc. The reader is

referred to Chapter I.1 for a discussion of the cost estimation methods and

cost elements that are relevant to all benefits estimates. In addition,

Chapter II.1 contains information regarding cancer causality, a list of

known and suspected carcinogens, and information on cancer cost

estimation. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and II.1

Link to inflation factors

II.5.A Background

II.5.A.1 Description

Lung cancer is the most frequent cause of cancer death in men and women

in the United States (Feld et al., 1995). There were approximately 173,000

cases of lung cancer diagnosed in 1994 in the United States and

approximately 150,000 lung cancer deaths occurred in that year (NCI,

1998). The increase in overall deaths per year from 18,000 in 1950 and

125,000 in 1988 to the current level is due, in part, to a more than five-fold

increase in lung cancer death rates (per 100,000) among women. This

increase is likely to be due to increased smoking rates (Bennett and Plum,

1996). Lung cancer is fatal in over 88 percent of all cases (NCI, 1998).

Lung cancer is a malignancy within the lungs and may be localized or have

spread to multiple sites (Bennet and Plum 1996). All types of lung cancer

likely originate from a common pluripotent stem cell. There are four types

of lung cancer: squamous (epidermoid), adenocarcinoma, large cell, and

small cell (oat cell). The first three types are often grouped together as

non-small cell lung cancer (NSCLC). These three types, which comprise

75 to 80 percent of all lung cancers, have different natural histories and

respond differently than small cell lung cancer to therapies. There are also

very rare types of lung cancer (with an approximate incidence of two

percent) that include adenosquamous mixed tumor or mixed small cell and

non-small cell histologies (Feld et al., 1995). Survival data from the

National Cancer Institute (1998) and cost data from Baker et al. (1989)

that are used in this chapter do not provide quantitative information for 

different types of lung cancer. Consequently, this chapter contains an
1The above information is not currently used in a manner that alters the survival or costs associated

with lung cancer.

Chapter II.5 II.5-3 Cost of Lung Cancer

evaluation of all types of lung cancer in aggregate. In addition, most risk

assessments that would be used in evaluating benefits do not specify the

type of lung cancer. If a specific type of lung cancer is of concern, Feld et

al. (1995) may be consulted for additional information regarding prognostic

information and treatment; however, the quantitative data are limited. 

New discoveries may, have an impact on the diagnosis and understanding

of the causality of lung cancer in the future. Cytogenic abnormalities have

been demonstrated in lung cancer cells including lesions in chromosome

region 3p, which occurs as an early event in the biology of the tumor. 

Mutation of the p53 gene is the most frequently identified genetic change in

human lung cancer. Activated proto-oncogenes are seen in lung cancer

and may arise from point mutations in the level of expression. Some of the

above changes may be used in the future for early detection of lung cancer. 

Screening programs in the past, using more traditional diagnostic measures,

have not been successful in reducing lung cancer mortality among study

participants (Feld et al., 1995). 1 

Lung cancer occurs with much greater frequency among the elderly, which

is typical of most cancers. The average age at diagnosis is approximately

68 years. Less than two percent of lung cancers are diagnosed before the

age of 40 and five percent are diagnosed over the age of 85 (NCI, 1998).

The distribution of the age at diagnosis of lung cancer is shown in Figure

II.5-1. The steep incline in the probability of lung cancer diagnosis is clear

in this diagram, with a peak around 68 years of age. Approximately 50

percent of all lung cancer cases are diagnosed in the relatively small age

interval of 60 to 75 years. The data used to generate Figure II.5-1 are

shown in Table II.5-1. The cumulative percents of lung cancer at various

ages were calculated using the population-weighted distribution of

occurrence. 
Chapter II.5 II.5-4 Cost of Lung Cancer

Figure II.5-1

Table II.5-1. Age-specific Incidence of Lung Cancer

Age Group

Age-specific Rate of

Diagnosis Per

100,000

Percent of All Lung

Cancer Occurring in

Age Group

Cumulative Percent

of Lung Cancer

0 - 14 0.0 0.0 0.0

15 - 34 2.8 0.30 0.34

35 - 39 5.2 0.7 1.0

40 - 44 13.0 1.5 2.5

45 - 49 34.5 3.3 5.8

50 - 54 77.7 5.9 11.8

55 - 59 141.0 8.9 20.7

60 - 64 226.7 13.2 33.9

65 - 69 321.5 18.6 52.5

70 - 74 375.2 19.0 71.5

75 - 79 391.1 14.9 86.4

80 - 84 349.3 8.8 95.2

85+ 233.4 4.8 100.0

Based on NCI, 1998

The age-specific incidence data were used in the Section B medical cost

calculations. Data on incidence and age at diagnosis were obtained from

NCI’s Surveillance, Epidemiology, and End Results (SEER) reports and

tables, obtained online in 1998 through the NCI Website at: http://wwwseer.ims.nci.nih.gov.
Chapter II.5 II.5-5 Cost of Lung Cancer

II.5.A.2 Concurrent Effects

As with all cancers, lung cancer may spread to other organs. In addition,

treatment of cancer, which usually includes chemotherapy, radiation, and

surgery, has numerous adverse side effects and may, in itself, lead to death. 

For example, vinca alkaloids, used in lung chemotherapy, cause peripheral

neuropathy in some patients. Radiation treatments of cancer have led to

increased risks of other types of cancer, sterility, etc. Surgery, especially

the removal of a lung, may cause long-term changes in health status,

including reduced capacity or increased susceptibility to respiratory disease

that may lead to death. These effects are associated with additional

medical costs not considered in this chapter.

There is a strong link between lung cancer and smoking. Lung cancer

patients are much more likely to have smoked than people who have not

been diagnosed with lung cancer. Smoking is also associated with

increased risks of many other diseases, including other cancers. There is

no indication, however, that lung cancer causes these other diseases. The

simultaneous or sequential occurrence of the diseases are likely due to their

common causal link to smoking.

No data were located indicating that concurrent effects unrelated to lung

cancer or its treatment were likely to occur as a result of this disease,

although the same pollutants that cause lung cancer, especially respiratory

irritants (e.g., silica, nickel), may cause other adverse effects. These effects

can incur added medical costs not considered in this chapter. The risk

assessment that serves as the basis for a benefits evaluation should include

all adverse effects that are anticipated to result from exposure to the agent

of interest.

II.5.A.3 Causality & Special Susceptibilities

As noted above, lung cancer is caused by exposure to tobacco smoke. It is

also associated with certain air pollutants, such as radon and silica, and

chemical pollutants. Table II-1 in Chapter II contains a list of chemicals

known to cause or suspected of causing cancer (as reported in the EPA

databases IRIS, HEAST, and HSDB). Most chemicals in the table were

carcinogenic in animal studies. These studies do not provide organ-specific

data because it is not generally assumed that cancer induction will

necessarily occur at the same site in humans as in animals. Consequently,

the chemicals listed in Table II-1 may cause lung cancer and/or other types

of cancer. Evaluation of the likelihood of this occurrence would require

additional research (risk assessment).

Link to Table II.1-1
Chapter II.5 II.5-6 Cost of Lung Cancer

NCI provides age-, sex-, and race-specific data regarding diagnosis of lung

cancer from 1990 to 1994, which may be used to evaluate susceptibilities

among population subgroups. The data must be used with care because

diagnostic rates indicate occurrence only, and may, or may not indicate

differences in susceptibility. See Chapter I.1 for a more detailed discussion

of susceptibilities. 

Link to Chapter I.1

NCI lung cancer diagnosis and mortality data show higher diagnosis and

death rates among men than women. Lung cancer rates have been

declining over the past 22 years among males under 65 years of age,

however, while. lung cancer has been increasing in women. These

dynamics have been attributed to a tapering off of smoking rates in males

and a rapidly increasing rate of smoking among women in recent decades

(NCI, 1998). 

The rate of diagnosis among black males in 1994 was approximately 50

percent higher than among white males, which cannot be fully explained by

smoking differences. The increased rate of lung cancer among black males

may be due to exposure to pollutants in the workplace or ambient

environment, exposure to carcinogens through other sources, or an

inherently greater susceptibility to lung cancer among blacks (NCI, 1998).

Some genetic factors have been identified that may increase the risk of lung

cancer. Individuals who metabolize debrisoquine readily, as well as those

lacking the MU phenotype of glutathione transferase, have an increased

lung cancer risk. There is also evidence for Mendelian inheritance of lung

cancer, indicating the importance of family history (Feld et al., 1995).

II.5.A.4 Treatments and Services

As noted above, lung cancer is usually treated with surgery,

chemotherapy, and/or radiation, depending on the type of lung cancer, the

stage of cancer at diagnosis, patient health, and other factors. The

treatment of lung cancer can be defined more precisely by histologic type

and specific location of the cancer in the lung. In this analysis, which is

concerned with the average cost for all lung cancers, all histologic types

and sub-sites are considered together. 

Treatment is carried out in phases including initial diagnosis, initial

treatment, follow-up and maintenance treatment, and, for those who do not

survive, terminal treatment and palliative care. Some components of each

treatment are unique to each phase, but most medical activities and services

may occur more than once over the course of the disease from diagnosis to

death or cure. For example, X-rays may be used in diagnosis, to provide

ongoing status updates, to assist in determining initial and subsequent

surgical and other treatment interventions, etc. 
Chapter II.5 II.5-7 Cost of Lung Cancer

Initial diagnostic activities may include an evaluation of signs and

symptoms, chest X-rays, computed tomography (CT) of the chest,

magnetic resonance imaging (MRI) of the chest, sputum cytological

analysis, percutaneous aspiration of pulmonary nodules, bronchoscopy,

mediastinoscopy, thorascopy, thoracotomy, and other procedures. Staging

of the disease occurs during this phase and is critical to determination of

subsequent medical actions (Feld et al., 1995). Surgery is usually

performed, and is associated with a relatively low mortality rate. Radiation

and/or chemotherapy may be done with or without surgery. In many

patients cancer has spread to the central nervous system, abdomen, bone

marrow, and other areas, requiring additional treatment strategies (Feld et

al., 1995). 

Due to its poor prognosis, most patients receive terminal care. This care

may include a variety of medical services, long-term care in a nursing

facility, palliative care, family counseling, etc.

II.5.A.5 Prognosis

II.5.A.5.1 Background

As noted above, the overall prognosis for lung cancer patients is poor, with

an average of 88 percent of patients dying of the disease within 10 years. 

Most deaths from lung cancer occur in the first four years, and

approximately 60 percent of all patients die during the first year (NCI,

1998). Patients with early stages (I and II) of the disease have a 40 to 85

percent five-year survival rate (Bennet and Plum, 1996). Unfortunately,

most diagnoses occur at later stages of the disease. Factors such as tumor

size and location, histology, involvement of nodes, and the spread of cancer

to other tissues affect outcome. Numerous new biochemical and

immunological tests are used to provide additional information on the likely

outcome (Feld et al., 1995). 

II.5.A.5.2 Relative Survival Rates (RSRs)

The NCI SEER data reports were accessed online to obtain information

regarding mortality and survival probabilities and the duration after

diagnosis until death (NCI, 1998). Basic survival statistics on lung cancer

are provided in this section because they relate to prognosis. Methods

used to convert the NCI statistics to survival probabilities are discussed

briefly in this section and in detail in Chapter II.2 on stomach cancer. 

Link to Chapter II.2

NCI provides the RSR for each year post-diagnosis. The RSR is the

number of observed survivors among these patients, divided by the number
2

 All vital statistic data in this document applicable to the general population were obtained from

the National Center for Health Statistics (NCHS) Vital Statistics in the United States (NCHS, 1993).

Chapter II.5 II.5-8 Cost of Lung Cancer

RSR '

observed survival rate among cancer patients

survival rate among age& and sex&matched cohort in the general population

of “expected” survivors among persons with the same age and gender in

the general population (observed/expected). The equation for this is:

The RSR takes into account that there are competing causes of death that

increase with age. The RSR for lung cancer patients during the first year postdiagnosis is 41 percent (NCI, 1998). A person with lung cancer would

therefore have, on average, a one-year survival probability that is 41 percent

of someone of the same age and gender in the general population. The RSRs

provided by NCI for each year post-diagnosis are averages over all ages at

diagnosis. An evaluation of the RSRs over the past 20 years indicates that

they have increased by about 33 percent, with most of the progress occurring

in the early 1970s (NCI, 1998). The most current information, the rates for

1988 through 1993, was used for the first through fifth years post-diagnosis

Ten years of data were used to estimate survival for the sixth through tenth

years post-diagnosis due to the need for a longer time span. Table II.5-2 lists

the average RSRs for lung cancer for the first ten years post-diagnosis. The

RSRs shown in Table II.5-2 were used to derive survival probabilities for lung

cancer patients for each of the first ten years post-diagnosis.2

Table II.5-2. Average RSRs* for Lung Cancer for the First 10 

 Years Post Diagnosis

Years Post-Diagnosis (n)

Average RSR for n Years

Post-Diagnosis

1 0.41

2 0.24

3 0.18

4 0.15

5 0.14

6 0.12

7 0.12

8 0.11

9 0.10

10 0.10

*The average RSR for each year post-diagnosis is the average of a set of

RSRs reported by NCI (1998) as described in the text above.
3

 This difference becomes clear in the extreme case in which the probability of dying of an illness is

extremely high. Suppose, for example, that the probability of dying of all causes except for illness X is

0.025 in the general population. Suppose that in a cohort of patients diagnosed with illness X, the

probability of dying from illness X in the first year post-diagnosis is 0.99. If the probability of dying of

other causes in this cohort equaled that in the general population (0.025), then the probability of someone in

the cohort dying would be greater than 1.0.

4Ten years is a generous follow-up period during which most individuals who will die of lung

cancer have done so. It is also used as a reasonable maximum duration of maintenance care and treatment

for those who do not die of lung cancer.

Chapter II.5 II.5-9 Cost of Lung Cancer

Although most lung cancer patients will die of lung cancer, some may die

of other causes. The probability of a lung cancer patient dying of causes

other than lung cancer cannot be assumed to be the same as the probability

of someone in the general population dying of other causes, particularly in

the first few years post-diagnosis, when a lung cancer patient’s probability

of dying of lung cancer is quite high.3 

The probability of a lung cancer patient dying of lung cancer and the

probability of a lung cancer patient dying of some cause other than lung

cancer in the nth year post-diagnosis, given survival to the nth year, were

each derived from two known probabilities: 

1) the probability of a lung cancer patient surviving through the nth year

post-diagnosis, given survival to the nth year, and 

2) the probability of a lung cancer patient dying of causes other than lung

cancer in a matched cohort in the general population. 

The derivation is explained in detail in the Appendix to Chapter II.2. 

Link to Chapter II.2, Appendix II.2-A

Because each of the known probabilities depends on the number of years postdiagnosis and (minimally) on age at diagnosis, the derived probabilities were

calculated for each of the ten years post-diagnosis and for the average age at

diagnosis (68 years).4 The following probabilities are shown in Table II.5-3:

1) survival through the nth year, 

2) dying of lung cancer during the nth year, and 

3) dying of some other cause during the nth year.

Probabilities of survival and dying of all causes among all members of the

general population aged 68 were obtained from the National Center for

Health Statistics (NCHS) Vital Statistics in the United States (NCHS,
Chapter II.5 II.5-10 Cost of Lung Cancer

1993). These probabilities are also shown in Table II.5-3. The values in

this table are used in Section II.5.B to calculate the expected medical costs

of lung cancer patients.

Table II.5-3. Probabilities of Survival and Mortality for Lung Cancer Patient Diagnosed at Age

68a

Years postdiagnosis

(n)

A Cohort in the General

Population (Matched) A Cohort of Lung Cancer Patients

Probability

of

surviving n

years

Probability

of dying in

nth year of

causes

other than

lung

cancer,

given

survival to

the nth

yearb

Relative

Survival

Ratec

Probability

of

surviving

through

the nth

year postdiagnosisd

Probability

of dying of

lung

cancer in

the nth

year postdiagnosise

Probability

of dying of

other

causes in

the nth

year postdiagnosisf

0 1.000 --- --- 1.0 --- ---

1 .977 .023 .41 .401 .586 .014

2 .953 .025 .24 .229 .165 .007

3 .928 .027 .18 .167 .057 .005

4 .901 .029 .15 .135 .028 .004

5 .872 .031 .14 .122 .009 .004

6 .843 .034 .12 .101 .018 .003

7 .812 .037 .12 .097 .000 .003

8 .779 .040 .11 .086 .008 .003

9 .745 .044 .10 .075 .008 .003

10 .710 .047 .10 .071 .000 .003

a. The survival and mortality probabilities for lung cancer patients presented here are derived from the RSRs

obtained from NCI and the survival probabilities for a matched cohort in the general population. They are

therefore only estimates of the underlying population survival and mortality probabilities for lung cancer patients. 

Whereas the underlying population probabilities are likely to follow a smooth trend (over years post-diagnosis),

the estimates exhibit some of the “bumpiness” around that trend that typically results from normal sampling

variability. This variability will also be true of any other probabilities (such as the conditional probabilities

discussed below) that are derived from the estimated probabilities shown here.

b. The probabilities in the general population of dying from lung cancer are 0.000256 in the 70-74 year age

group, and 0.000348 in the 75-79 year age group. The probabilities in column (3) were derived by subtracting

these probabilities from the corresponding probabilities of dying from any cause in the nth year, given survival to

the nth year.

c. From Table II.5-2.

d. See Chapter II.2 for an explanation of the derivation of these probabilities.
5

 Studies were located that used more recent cost data than the data used in this analysis. Serious

limitations existed, however (data were incomplete), and so the studies were not used. They are reported in

the “Other Studies” section at the end of Section B.

Chapter II.5 II.5-11 Cost of Lung Cancer

II.5.B Costs of Treatment and Services

II.5.B.1 Methodology

II.5.B.1.1 Overview

There is no single typical case or treatment pattern for lung cancer because

of individual differences in the stage of cancer at diagnosis, multiple

treatment options, patient health and age, and other factors; however,

average costs can be calculated. Treatment of lung cancer may occur over

a brief or extended period of time, and costs may be limited or substantial. 

Lung cancer has a relatively high mortality rate of 88 percent, as discussed

in Section A. The medical costs of those who die of the disease are usually

very different than for those who survive (this is discussed in more detail in

Chapter I.1). This chapter therefore provides costs for the “average” lung

cancer patient, as well as for survivors and nonsurvivors as separate patient

groups. 

Link to Chapter I.1

II.5.B.1.2 Medical Cost Data

II.5.B.1.2.1 Sources

Medical cost data would ideally be obtained on current medical

expenditures. Although data files are maintained by public and private

sector sources, they are not readily available. In addition, to obtain reliable

cost estimates it is necessary to evaluate very large databases of charges

from a variety of sources. This activity was not practical for the

development of this chapter. A data search was conducted to locate

information in the medical economics literature regarding medical costs

associated with lung cancer. In addition to a literature search, most federal

agencies dealing with cancer, disabilities, medical costs and their

management, and related issues were contacted for information and the

various federal databases were discussed with senior staff at these agencies.

Very recent cost data were not located.5 Current (1994) cancer data were

obtained regarding incidence and survival (as reported in Section II.5.A,

above), and were used with cost data from the 1980s described below. The

cost estimates presented in this section are based primarily on the work of

Baker et al. (1989) and Hartunian et al. (1981) and on two sources of

statistical data: the National Cancer Institute (1998) and Vital Statistics of

the United States, 1993 (NCHS, 1997). These data were evaluated and

cost elements were used to calculate lifetime estimates of the direct medical

costs due to lung cancer. 
6

 See Baker et al. (1989 and 1991) for further details. Baker et al. (1991) contains additional

descriptive data regarding the database and methods used for the cost analysis; however, it does not contain

cost data for lung cancer.

Chapter II.5 II.5-12 Cost of Lung Cancer

Based on the 1997 review of the medical literature carried out for the

development of this chapter, there do not appear to be widely-adopted new

treatment methods for lung cancer that substantially alter either the medical

costs or the survival rates for most patients. Consequently, the cost

estimates presented in this chapter may be considered appropriate under

most circumstances (e.g., regional costs may vary). 

II.5.B.1.2.2 Baker et al.’s Cost Estimation Method

Baker et al. (1989) used the Continuous Medicare History Sample File

(CMHSF) to estimate the per-patient average lifetime medical cost of

treating lung cancer based on data files from 1974 to 1981. They chose

CMHSF because: 

1) it is a nationally representative sample of the Medicare population

(five percent), covering over 1.6 million patients; 

2) it is longitudinal, dating from 1974 to 1981; and 

3) it captures the majority of medical expenses for each beneficiary.

Five Medicare files are included in the CMHSF, which cover:

1) inpatient hospital stays, 

2) skilled nursing facility stays, 

3) home health agency charges, 

4) physicians’ services, and 

5) outpatient and other medical services.6

Costs that were not included are outpatient prescription medications and

nursing home care below the skilled level. 

Because CMHSF provides no indication of initial diagnosis, Baker et al.

assumed that disease onset occurred when a diagnosis of lung cancer was

listed on a hospitalization record following a minimum of one year without

a lung cancer diagnosis. This assumption is reasonable due to the high

frequency of hospitalization associated with the disease (i.e., individuals

diagnosed with lung cancer would be hospitalized). Only patients with an

initial diagnosis during the years covered by the database (1974-1981) were

included. 
Chapter II.5 II.5-13 Cost of Lung Cancer

Costs associated with lung cancer were assigned to three post-diagnostic

time periods:

• initial treatment, during the first three months following diagnosis;

• maintenance care, between initial and terminal treatment; and 

• terminal treatment during the final six months prior to death.

As noted in Chapter I.1, the amount paid for service may differ from the

actual medical costs because many insurers and federal programs either 1)

pay only a portion of total costs or 2) pay more than actual costs to

underwrite the care providers’ losses due to underpayment from other

sources. 

Link to Chapter I.1

Baker et al. used provider charges, rather than Medicare reimbursements

(which represent only a portion of most total charges), thus providing a

more accurate cost estimate. To improve the accuracy of the cost

estimates, Baker et al. included cost data on coinsurance, deductibles, and

other cost components. They made four adjustments to the cost estimates

calculated from the CMHSF. First, charges were added for skilled nursing

facilities (SNFs) not covered by Medicare by multiplying the “length of

stay” at an SNF (computed from admission and discharge dates) by the

average daily SNF charge. Second, the annual Medicare Part B deductible

of $60 was added to the reimbursed charges in the database. Third, since

Medicare pays only 80 percent of physicians’ charges, Baker et al. scaled

these reimbursements to 100 percent of physicians’ charges to better reflect

social costs. Finally, they inflated all dollar values to 1984 dollars using the

Medical Care component of the Consumer Price Index. 

II.5.B.1.2.3 Cost Estimates by Treatment Period

Medical costs associated with the initial, maintenance, and terminal cancer

care treatment periods were itemized in Baker et al. (1989) and are shown

in Table II.5-4. The 1989 paper did not report incremental costs or the

costs of other medical services that would be anticipated to occur while the

patient was receiving cancer treatment (i.e., co-morbidity/background

costs). In order to estimate the incremental costs, a co-morbidity cost of

$2,988 per year (1984 dollars) from Baker et al. (1991) was used in this

analysis. (This is equivalent to $6,394 in 1996 dollars using the CPI

multiplier of 2.14 for 1984 to 1996.) The co-morbidity cost was pro-rated

for this analysis using the specified durations for the initial (three-month)

and terminal (six-month) treatment periods. 

Table II.5-4 lists the incremental costs calculated for the three treatment

periods. Total costs are reported for the initial and terminal care periods. 

Annual costs for the maintenance period are shown and are further

discussed in the “Lifetime Costs” section below. Using the Medical Care
Chapter II.5 II.5-14 Cost of Lung Cancer

component of the Consumer Price Index (CPI-U), all costs are inflated to

1996 dollars for purposes of this handbook. (The adjustment factor for

1984 to 1996 is 2.14; Bureau of Labor Statistics.) 

Table II.5-4. Average Per Patient Costs for the Three Periods of

Treatment for Lung Cancer in 1996 dollars 

Costs adjusted for inflation using the Medical Care component of the

Consumer Price Index (CPI-U) 1996:1984 = 2.14 (Bureau of Labor)

Treatment Period

Incremental Cancer Treatment

Cost

Initial

(3 months)

$26,042

Maintenance (per year) $11,325

Terminal

(6 months)

$30,112

(Based on Baker et al., 1989, with comorbidity charges from Baker et al., 1991. 

II.5.B.1.3 Calculation of Lifetime Cost Estimates for the

“Average” Lung Cancer Patient

This section contains a discussion of the calculation of lifetime medical

costs for the “average” lung cancer patient. Sections that follow discuss

methods and results of calculations for estimating costs for survivors and

nonsurvivors of lung cancer separately. These separate approaches were

used to address specific requirements of different activities that EPA

carries out using direct medical cost data. Although Baker et al. (1989)

provide useful cost estimates for the three treatment periods, they do not

provide information on two critical aspects of medical costs: 

1) costs for survivors versus nonsurvivors of lung cancer. These values

may differ substantially. For example, survivors would not have

terminal care costs and may receive maintenance services for an

extended time period; and 

2) estimates of the duration of the maintenance periods. 

Data regarding age at diagnosis of lung cancer were obtained from NCI

(1998). Survival and mortality probabilities for each year post-diagnosis

were derived from relative survival rates obtained from NCI (1998), as

discussed in Section II.5.A.5.2. 

Link to Section II.5.A.5.2

This information was used to address many time-related medical cost

issues. For some aspects of the analysis, however, detailed information
Chapter II.5 II.5-15 Cost of Lung Cancer

was not available and average values have been used as a reasonable

approximation (e.g., a ten-year maintenance period was assumed for

survivors of lung cancer). When average values or other assumptions are

used in this analysis, they are so noted. 

As previously noted, there are not substantial differences in survival related

to age at diagnosis, and NCI does not provide age-specific RSRs for each

year post-diagnosis. Consequently, it was assumed for this analysis that the

relative survival rates for lung cancer were the same for all ages. The

survival and mortality probabilities for lung cancer patients, which are

incorporated into calculations of expected medical costs as discussed

below, are based on this assumption.

The analysis assumes that death always occurs midyear. All lung cancer

patients are therefore assumed to incur the costs of initial treatment during the

first three months of the illness. The costs incurred after that during the first

year depend on whether the patient:

(1) survives through the year, 

(2) dies of lung cancer during the year, or 

(3) dies of some other cause during the year. 

Patients who survive through the year incur the costs of initial treatment

($26,042) during the first three months, and then incur nine months’ worth of

maintenance care costs (0.75 × $11,325 = $8,494) during the remainder of

the year. The total cost incurred during the first year by those patients who

survive the year is therefore $26,042 + $8,493 = $34,535. 

Lung cancer patients who die of lung cancer during the first year incur the

initial treatment cost and then incur terminal care costs for the remaining three

months of their lives (because those who die are assumed to die midyear).

Total costs during the first year post-diagnosis in this case are therefore

$26,042 + (0.5 × $30,112) = $41,098. 

Finally, the small percentage of lung cancer patients who die of causes

other than lung cancer during the first year post-diagnosis incur the initial

treatment costs and then incur three months’ worth of maintenance care

costs. Total first-year costs for these patients are therefore $26,042 + 0.25

× $11,325 = $34,536. 

The expected medical costs for lung cancer patients during the first year

post-diagnosis, then, may be expressed as:
Chapter II.5 II.5-16 Cost of Lung Cancer

Expected First-Year Cost: initial treatment costs +

[maintenance care costs for nine months × probability of

survival through first year + terminal care costs for three

months × probability of dying of lung cancer during first

year + maintenance care costs for three months ×

probability of dying of other causes during the first year]

Example: Expected first-year medical costs of a lung cancer patient

diagnosed at age 68

As noted above, all lung cancer patients incur an initial treatment cost of

$26,042. Those who survive through the year also incur maintenance care

costs for the remaining three quarters of the year. The total first-year costs

of those who survive the year are: 

Initial treatment: $26,042

Maintenance treatment: $8,493 (.75 × $11,325)

_________________________________________________

Total First-Year Cost $34,535

More than half of lung cancer patients die of lung cancer during the first

year. Those who do will incur the initial treatment costs plus half of the

terminal care costs. The total first-year costs of those who die of lung

cancer during the year are: 

Initial treatment: $ 26,042

Terminal care: $15,056 (.50 × $30,112)

_________________________________________________

Total First-Year Cost $41,098

Finally, a small percentage of patients will die of competing illnesses during

the first year. Because those who die of causes other than lung cancer are

assumed to die at the midpoint of the year, costs during the first half of the

year are assumed to consist of the initial treatment costs for three months,

plus three months of maintenance care costs as follows:

Initial treatment: $26,042

Maintenance treatment: $2,831 (.25 × $11,325)

__________________________________________________

Total First-Year Cost $28,873

For each subsequent year, costs consist entirely of maintenance care costs

for those who survive the year. For those who do not survive the year,

costs depend on whether death was due to lung cancer or other causes. 

For those who die of lung cancer during the nth year, costs incurred that

year consist of six months of terminal care costs, or $30,112. For those
Chapter II.5 II.5-17 Cost of Lung Cancer

$26,042 % ($11,325 × 0.75 × ps1) % ($11,325 × 0.25 × pm1

o

) % ($30,112 × 0.5 × pm1

sc)

%j

10

y'2

(ps

y

×

$11,325

(1 % r)

y&1

) % (pmy

o ×

$5,663

(1 % r)

y&1

) % (pmy

sc ×

$30,112

(1 % r)

(y&1)

)

who die of other causes during the nth year, there are six months of

maintenance care costs, or 0.5 × $11,325 = $5663.

The expected first-year medical cost incurred by the “average” lung cancer

patient diagnosed at age 68 is a weighted average of the costs of those who

survive the first year, those who die of lung cancer during the first year,

and those who die of other causes during the first year, where the weights

are the probabilities of each of these occurrences. The weighted average

medical cost were calculated for ten years post diagnosis, and expected

costs were summed over the ten years. This was assumed to be a

reasonable period over which additional medical costs associated with lung

cancer (i.e., maintenance care costs) would be incurred by lung cancer

patients. In reality, there may be follow-up care and continued testing over

a longer period; however, no data were available regarding those costs. 

They would certainly be less than $11,325 per year. 

The expected medical costs for lung cancer patients during the nth year

post-diagnosis, for n>1, then, may be expressed as: 

Expected nth Year (n>1) Cost: [maintenance care cost for

one year × probability of survival through nth year +

terminal care cost for six months × probability of dying of

lung cancer during the nth year + maintenance care cost for

six months× probability of dying of other causes during the

nth year]

Expected Lifetime Cost = Expected first-year cost + the sum

of the (discounted) expected subsequent-year costs 

The first year of treatment is calculated differently from other years

because the first three months of that year are spent in “initial” treatment,

and the costs for that period of intensive medical care and surgery are

calculated separately.

The mathematical equation for the expected lifetime medical costs incurred

by the “average” lung cancer patient over a ten-year period is:

Where: y = the year post-diagnosis,

ps = the probability of surviving through the year,

pmsc = the probability of dying of lung cancer during the year
7

 Nonsurvivors include only those who die of lung cancer and do NOT include those who die of

any other causes.

Chapter II.5 II.5-18 Cost of Lung Cancer

pmo = the probability of dying from other causes during the

year,

r = the discount rate

The cost estimates for each year post-diagnosis and the estimate of

undiscounted expected total cost for a ten year period are shown in Table

II.5-5 for the “average” lung cancer patients diagnosed at age 68. The

survival and mortality probabilities necessary for the calculations of costs

are shown in Table II.5-3. 

Link to Table II.5-3

II.5.B.1.4 Calculation of Lifetime Cost Estimates Separately

for Lung Cancer Survivors and Nonsurvivors

II.5.B.1.4.1 Survivors and Nonsurvivors

As noted above, there are differences in medical services provided to lung

cancer patients who survive the disease (survivors) versus those who die of

the disease (nonsurvivors). Based on cost estimates by Baker et al. (1989),

terminal care is provided for approximately six months to terminally ill

cancer patients. The costs to nonsurvivors for this care ($30,112) is

considerably higher than costs for survivors who receive maintenance care

for the same period of time ($5,662).7 

EPA may use the value of a statistical life (VSL) for nonsurvivors, and thus

separate costs for survivors and nonsurvivors were calculated. The method

shown above to calculate costs for the “average” patient uses the

unconditional probabilities of survival and mortality listed in Table II.5-3. 

The method used to calculate costs for survivors and nonsurvivors

separately requires the probabilities that are conditional on being either a

survivor or nonsurvivor of lung cancer.
Chapter II.5 II.5-19 Cost of Lung Cancer

Table II.5-5. Expected Costs of Medical Services (in 1996$) for Lung Cancer Patients 

(Age of Onset = 68)

Medical Costs in the nth Year (undiscounted)

Years PostDiagnosis (n)

if survive

through the

nth year

if die of

lung cancer

in the nth

year

if die of other

causes in the nth

year

Expected Medical

Costs for the nth Year

Post-Diagnosis 

 (Discounted)

1

b 34,535 41,098 28,873 38,300

2 11,325 30,112 5.662 7,601

3 11,325 30,112 5,662 3,636

4 11,325 30,112 5,662 2,393

5 11,325 30,112 5,662 1,684

6 11,325 30,112 5,662 1,694

7 11,325 30,112 5,662 1,133

8 11,325 30,112 5,662 1,239

9 11,325 30,112 5,662 1,101

10 11,325 30,112 5.662 831

Expected Total Cost Through the 10th Year Post-Diagnosis for a Lung

Cancer Patient Diagnosed at Age 68

59,612

a. The probabilities listed in this table are from Table II.5-3. The costs are listed in Table II.5-4.

b. First-year costs include the charge for “initial” therapy ($26,042). The duration of maintenance care is adjusted

accordingly (see text for discussion).

c. Calculated using the probabilities in Table II.5-3 and the costs in Columns (5), (6), and (7) of this table.

The conditional probability of a lung cancer nonsurvivor dying in the nth

year is the number of nonsurviving lung cancer patients who die of lung

cancer during the nth year divided by the total number of lung cancer

nonsurvivors. Likewise, the conditional probability of a lung cancer

survivor dying in the nth year is the number of surviving lung cancer

patients who die of lung cancer during the nth year divided by the total

number of lung cancer survivors. A detailed explanation of the derivation

of these values is provided in Chapter II.2. The conditional probabilities of

survival and mortality for survivors and nonsurvivors of lung cancer are

given in Table II.5-6.

Link to Chapter II.2
Chapter II.5 II.5-20 Cost of Lung Cancer

Table II.5-6. Conditional Probabilities of Survival and Mortality for Survivors and Nonsurvivors

of Lung Cancer (Age of Onset = 68) a

Years PostDiagnosis

 (n)

Lung Cancer Survivors Lung Cancer Nonsurvivors

Conditional probability of: Conditional probability of:

Surviving

through the nth

year

Dying of some

other cause

during the nth

year

Surviving

through the nth

year

Dying of lung

cancer during

the nth year

1 .886 .114 .334 .666

2 .829 .056 .146 .188

3 .791 .039 .081 .065

4 .758 .033 .050 .032

5 .727 .030 .039 .011

6 .699 .029 .019 .020

7 .671 .028 .019 .000

8 .643 .028 .009 .009

9 .616 .027 .00 .009

10 .589 .027 .00 .000

a. As noted for Table II.5-3, the survival and mortality probabilities for lung cancer patients presented here are

derived from the relative survival rates obtained from NCI and the survival probabilities for a matched cohort in

the general population. They are therefore only estimates of the underlying population survival and mortality

probabilities for lung cancer patients. Whereas the underlying population probabilities are likely to follow a

smooth trend (over years post-diagnosis), the estimates exhibit some of the “bumpiness” around that trend that

typically results from normal sampling variability. This variability will also be true of any other probabilities (such

as the conditional probabilities discussed below) that are derived from the estimated probabilities shown here. 

II.5.B.1.4.2 Calculation of Lifetime Cost Estimates for Lung

Cancer Survivors

As shown in the example portion of Section II.5.B.1.3, cost estimates are

calculated by summing the costs of the different treatment phases over the

lifetime of the lung cancer patient. The expected medical costs for lung

cancer survivors during the first year post-diagnosis may therefore be

expressed as:

Expected First-Year Cost: initial treatment costs +

[maintenance care costs for nine months × probability of

survival through first year + maintenance care costs for

three months × probability of dying of other causes during

the first year]
Chapter II.5 II.5-21 Cost of Lung Cancer

$26,042 % pm1

s × 0.25 ($11,325) % ps1s × .75 × $11,325

% j

10

y ' 2

ps

y

s $11,325

(1 % r)

y&1

% pmy

s $5,662

(1 % r)

y&1

The expected medical costs for lung cancer survivors during the nth year

post-diagnosis, for n>1, then, may be expressed as: 

Expected nth Year (n>1) Cost: [maintenance care cost for 1

year × probability of survival through nth year +

maintenance care cost for six months × probability of dying

of other causes during the nth year]

Expected Lifetime Cost = Expected first-year cost + the sum

of the (discounted) expected subsequent-year costs

Note that the probabilities used in these calculations are the conditional

probabilities given in Table II.5-6. They are conditional on the lung cancer

patient not dying of lung cancer. 

Using the initial, maintenance, and terminal care costs from Table II.5-6,

the mathematical equation for the lifetime costs incurred by lung cancer

survivors is:

where: y = the year post-diagnosis 

pss = the conditional probability of survival for that year,

conditional on being a survivor of lung cancer

pms = the conditional probability of mortality for that year,

conditional on being a survivor of lung cancer

r = the discount rate.

The expected medical costs for lung cancer survivors for each year postdiagnosis, as well as the expected total medical costs over ten years postdiagnosis, are shown in Table II.5-7.
Chapter II.5 II.5-22 Cost of Lung Cancer

Table II.5-7. Expected Undiscounted Costs of Medical Services (in 1996$) for

Survivors of Lung Cancer (Age of Onset = 68)

Years

PostDiagnosis

(n)

Medical Costs Through the 10th Year Post-diagnosisa (undiscounted)

Medical Cost if

Survive Through

the nth Year

Medical Cost if Die

of other Causes in

the nth Year

Total Cost Based on

Weighted Averagec

1

d 34,535 28,873 33,889

2 11,325 5,662 9,713

3 11,325 5,662 9,173

4 11,325 5,662 8,768

5 11,325 5,662 8,411

6 11,325 5,662 8,077

7 11,325 5,662 7,756

8 11,325 5,662 7,438

9 11,325 5,662 7,124

10 11,325 5,662 6,818

Expected Total (Undiscounted) Cost Through the

10th Year Post-Diagnosis:

107,167

a. Costs are based on data reported in Table II.5-4, adapted from Baker et al., 1989.

b. Probabilities of survival and mortality, taken from Table II.5-6, are conditional on surviving

lung cancer.

c. Weighted average of the costs incurred by survivors who survive the year and the costs

incurred by survivors who die of other causes during the year. Weighting is based on the

conditional probabilities provided in Table II.5-6.

d. Costs during the first year include a charge for “initial” therapy ($26,042), and the duration

of maintenance or terminal care is adjusted accordingly. See text for discussion.

II.5.B.1.4.3 Calculation of Lifetime Cost Estimates for Lung

Cancer Nonsurvivors

Nonsurvivors of lung cancer will incur initial, maintenance, and terminal

costs. Their lifetime medical costs associated with the disease can be

calculated from the costs per treatment period shown in Table II.5-4 and

the conditional probabilities for nonsurvivors of lung cancer shown in Table

II.5-6. 

As Table II.5-6 indicates, most lung cancer patients who will ultimately die

of lung cancer do so in the first few years post-diagnosis. About 85

percent die in the first two years. Deaths from lung cancer after the first

four years are minimal. As with lung cancer survivors, medical costs for

nonsurvivors each year post-diagnosis were calculated as a weighted

average of the costs incurred by those who survive the year and those who

die (of lung cancer) during the year. 
Chapter II.5 II.5-23 Cost of Lung Cancer

$26,042 % pm1

ns × 0.5 ($30,112) % ps1ns × .75 × $11,325

% j

10

y ' 2

ps

y

ns $11,325

(1 % r)

y&1

% pmy

ns $30,112

(1 % r)

y&1

It was assumed that those who die during a year receive six months of care

(as was done for the survivors above). It was also assumed that terminal

care lasting six months would be provided to all nonsurvivors. Therefore,

unless death occurred during the first year, when initial care was assumed

to occur, the care costs which were assigned to the last year of life were

terminal costs. If death occurred during the first year post-diagnosis, it

was assumed that initial care and three months (one-half of the total) of

terminal care were provided.

The general description of medical costs for nonsurvivors may be

expressed as:

Expected First-Year Cost: [initial costs + one-half terminal

costs] × probability of mortality during the first year +

[initial costs + maintenance care costs for nine months] ×

probability of survival for first year 

Expected nth Year (n>1) Cost: maintenance care cost for 1

year × probability of survival through nth year + terminal

costs × probability of mortality in nth year

Expected Lifetime Cost = Expected first-year cost + the sum

of the (discounted) expected subsequent year costs 

As with the cost calculations for lung cancer survivors, the probabilities

used in these cost calculations are the conditional probabilities given in

Table II.5-6: in this case, conditional on dying of lung cancer.

Using the initial, maintenance, and terminal care costs from Table II.5-6,

the mathematical equation for the expected lifetime costs incurred by

nonsurvivors is: 

where: y = the year post-diagnosis

psns = the conditional probability of survival for that year,

conditional on being a nonsurvivor of lung cancer

pmns = the conditional probability of mortality for that year,

conditional on being a nonsurvivor of lung cancer

r = the discount rate.
Chapter II.5 II.5-24 Cost of Lung Cancer

The costs are summed over all years from diagnosis to death. Maintenance

care costs are not added in the last year of life because during the six

months that are assumed to constitute this period the patient is assumed to

receive terminal care. (The discounted results are shown in the “Results”

section that follows.) The approach is the same as that shown in the

example in Section II.5.B.1.3 When the costs for each year are summed

over a period of ten years post-diagnosis, during which essentially all

patients who will die of lung cancer have done so, the total cost per

nonsurvivor is obtained. These costs are shown in Table II.5-8. 

Link to Section II.5.B.1.3

The results shown above can be used to calculated costs for an “average” lung

cancer patient, from the costs calculated for survivors and nonsurvivors. The

expected medical costs of a lung cancer patient can be calculated as a

weighted average of the expected costs of survivors and nonsurvivors of lung

cancer. This approach, which was not used to calculated costs for the

“average” patient in this chapter, yields the same results as the approach

shown in Section II.5.B.1.3. A discussion of why these to approaches yield

the same results is provided in Chapter II.2 (Section II.2.B.2.3). In brief, the

approach used in this chapter for the average patient uses cost data for all

patients, weighted by their average utilization of services. If the survivor and

nonsurvivor data were used, which incorporates utilization of services, cost

results obtained through separate calculations for the two subgroups are

simply re-aggregated based on each group’s proportional contribution to the

cost.

Link to Chapter II.2.B.2.3
Chapter II.5 II.5-25 Cost of Lung Cancer

Table II.5-8. Expected Undiscounted Costs of Medical Services (in 1996$) for

Nonsurvivors of Lung Cancer (Age of Onset = 68) 

Years PostDiagnosis

(n)

Medical Costs Through the 10th Year Post-diagnosisa

(undiscounted)

Medical Cost if

Survive Through the

nth Year

Medical Cost if Die

in the nth Year

Total Cost Based

on Weighted

Averagec

1

d

34,535 41,098 38,905

2 11,325 30,112 7,311

3 11,325 30,112 2,877

4 11,325 30,112 1,519

5 11,325 30,112 761

6 11,325 30,112 818

7 11,325 30,112 224

8 11,325 30,112 389

9 11,325 30,112 274

10 11,325 30,112 9

Expected Total (Undiscounted) Cost Through the 10th Year PostDiagnosis:

53,088

a. Costs are based on data reported in Table II.5-5, adapted from Baker et al., 1989.

b. Probabilities of survival and mortality, taken from Table II.5-6, are conditional on dying of lung

cancer within 10 years post-diagnosis.

c. Weighted average of costs incurred by nonsurvivors who survive the year and those who die

during the year. Weighting is based on the conditional probabilities shown in Table II.5-6.

d. Costs during the first year include “Initial” therapy ($26,042) , and pro-rated maintenance or

terminal care. See text for discussion.

II.5.B.2 Results of Medical Cost Analysis

The per patient lifetime direct medical costs calculated for the “average”

lung cancer patient (as shown in Table II.5-5), lung cancer survivors (as

shown in Table II.5-7) and lung cancer nonsurvivors (as shown in Table

II.5-8) diagnosed at age 68 are listed in Table II.5-9. Undiscounted costs

and costs discounted at three, five, and seven percent back to year one

(time of diagnosis) are shown. Discounting was carried out for ten years

following diagnosis (which, for nonsurvivors, comprises the full duration of

treatment time because virtually all patients that are going to die of lung

cancer do so within ten years) and comprises the assumed full duration of

maintenance care for survivors. 
Chapter II.5 II.5-26 Cost of Lung Cancer

Table II.5-9. Incremental Per-capita Medical Costs for the Average Lung Cancer Patient,

Survivors, and Nonsurvivors (Diagnosed at Age 68) Undiscounted and Discounted at 3, 5, and

7 Percent ($1996)

Patient Group Discount Rate

Undiscounted 3% 5% 7%

Survivors $107,167 $97,822 $92,572 $87,966

Nonsurvivors $53,088 $52,215 $51,692 $51,211

Average Patient $59,612 $57,716 $56,624 $55,645

See text for a definitions of patient groups.

The results show much higher costs for survivors than nonsurvivors, due

primarily to their ongoing maintenance care. It is noted that although a

ten-year maintenance period for lung cancer survivors is assumed (with

adjustment for background mortality that reduces utilization), the actual

average period of maintenance is not known and is likely to vary

considerably among individuals, depending on age, health status, access to

care, and other factors. Most lung cancer patients (88 percent) die of the

disease, and their costs are the major cost element in determining the

“average” patient costs. The uncertainty surrounding the period of

maintenance care for survivors therefore does not have a substantial impact

on the cost estimates for the “average” patient.

II.5.B.3 Other Studies 

The results of these studies are examined: Mor et al. (Draft 1990),

Hartunian et al. (1981), Oster et al. (1984), Riley et al., (1995). The Baker

et al. study has a combination of characteristics of study design and data

quality that makes it preferable to the other studies, as discussed below.

II.5.B.3.1 Mor et al.

The Mor et al. (1990) study tracked prospectively eligible Medicare

beneficiaries in Rhode Island from 1984-1986 by “examining pathology

reports in nine Rhode Island hospitals.” The medical records were linked

to Medicare inpatient and outpatient claims data. Medicare claims files

were reviewed, and the charges associated with lung cancer were

aggregated for the first year post-diagnosis. The study has three limitations

that make it less appropriate for use than the Baker et al. study: 

1) the study was limited to Medicare beneficiaries in Rhode Island; 

2) the study has not yet been submitted to a refereed journal;

3) the study covers only one year of treatment;

4) costs are only those reimbursed by Medicare, rather than all costs.
Chapter II.5 II.5-27 Cost of Lung Cancer

The study does, however, use more recent data than those used by Baker

et al. Mor et al.’s estimates for the cost of lung cancer in the first year

after diagnosis (i.e., lifetime cost, since the majority of lung cancer patients

survive less than one year) is $40,051 (inflated from 1986 to 1996 dollars

using the CPI-U for Medical Care). This value agrees closely with the

results of Baker et al.’s work.

II.5.B.3.2 Hartunian et al.

Hartunian et al.’s (1981) method of estimating the costs of illness has been

discussed in Chapter I.1. The authors defined expected treatment on a

yearly basis, developed annual costs of the treatment, and combined the

cost data with survival data. Using this method, they estimated the costs

of cancer at eight sites, including cancer of the respiratory system. 

Link to Chapter I.1

Hartunian et al. estimated the costs of inpatient stays for respiratory cancer

using a 1976 study by Scotto and Chazze, in which 6,332 newly diagnosed

cancer patients were followed over a two-year period to establish

hospitalization and payment patterns. For other costs, the authors relied on

a questionnaire, called the Patient Interview Book (PIB), delivered as part

of the Third National Cancer Survey. Using the PIB, about 8,500 cancer

patients or surviving relatives were interviewed regarding the costs of nonhospital medical services. The PIB presents the proportional distribution of

total medical expenditures between hospital and non-hospital charges. 

Applying these proportions to the hospital costs from Scotto and Chiazze,

Hartunian et al. estimated non-hospital costs. Hartunian et al. presented

their estimates of the present value of total direct costs of respiratory

cancers in 1975 dollars, discounted by six percent, by the age of onset for

males and females. Inflated to 1996 dollars using the CPI-U for Medical

Care (Bureau of Labor Statistics), their cost estimates, which approximate

Baker et al.’s estimates are:

Males

 Age 65-74 $37,201

 Age 75+ $34,821

Females

 Age 65-74 $36,838

 Age 75+ $34,508

The Hartunian data are quite old (over 20 years) and both survival and

treatment methods have changed since that time. 
Chapter II.5 II.5-28 Cost of Lung Cancer

II.5.B.3.3 Oster et al.

Oster et al. (1984) estimated the cost of lung cancer as part of an analysis

of the cost of smoking. Their methodology followed that laid out by

Hartunian et al. Annual cost estimates were multiplied by survival rates

and discount factors and summed to arrive at a present value of the direct

costs of treating lung cancer. Oster et al.’s cost estimates were presented

in 1980 dollars for all ages. Using the CPI-U for Medical Care (Bureau of

Labor Statistics), these prices are inflated to 1996 dollars. The resulting

cost estimates (using a discount rate of three percent) are:

Males $57,861

Females $60,047

Although these estimates are substantially higher than the Baker et al.,

estimate, Oster et al.’s estimate of the cost of a lung cancer patient who

survives between zero and one year past disease onset is $45,013 in 1996

dollars. This cost estimate is similar to that developed based on Baker et

al. A potential explanation for the remaining difference in the cost

estimates is that Oster et al. assume that all patients incur the same costs in

their first year of disease regardless of their survival period. This cost

scheme may be realistic, but it is also possible that patients with relatively

long survival periods were diagnosed with less advanced cancer cases. 

These cancer cases may require less extensive treatment and may therefore

be associated with lower first-year costs.

II.5.B.3.4 Riley et al

A study of medicare payments from diagnosis to death in elderly cancer

patients was carried out by Riley et al. (1995). The cost estimates are

based on Medicare payments only, which do not include: most nursing

home care, home health care, pharmaceuticals unless supplied for

inpatients, out-of-pocket expenses, deductibles, charges in excess of

Medicare paid by other sources (e.g., coinsurance), and other related

medical services that are not covered by Medicare. 

Medicare patients younger than 65 were not included, and the average age

at diagnosis of the lung cancer cohort was 73.6 years, in contrast with the

68-year national average. Riley et al. note that patients diagnosed at

younger ages have higher costs. In addition, those diagnosed at earlier

stages have a better prognosis, but may have higher medical costs (due to

longer continuing care). 

Medical costs are reported for all patients who were diagnosed with lung

cancer, regardless of other diseases or their ultimate causes of death. Due

to the link between lung cancer, smoking, and numerous other diseases,

this method is especially problematic because costs associated with other

illnesses may be commingled with the lung cancer costs. 
Chapter II.5 II.5-29 Cost of Lung Cancer

The background cost per year for medical services was estimated by Riley

et al. to be $2,250 ($3,154 in 1996 dollars), based on the experience of all

people over the age of 65 who received Medicare-compensated care. The

study excluded those costs that occur during the last year of a person’s life. 

Consequently, the estimated background value may underestimate

background costs, especially as age and associated mortality risks increase

over the age of 65. 

Riley et al. estimated that the total average Medicare payment from

diagnosis to death for persons diagnosed with lung cancer was $29,184 in

1990 dollars ($40,908 in 1996 dollars). This value is considerably lower

than the estimates obtained from Baker et al. The difference is most likely

due to the exclusion of many costs that are not covered by Medicare and

the various other factors described above. Due to these limitations, the

Riley et al. study is not recommended for a benefits evaluation.

II.5.C Uncertainties and Limitations

As noted periodically in the above discussion, there is uncertainty

surrounding various aspects of the analysis. Information concerning some

inputs to the analysis was often limited. Although a complete uncertainty

analysis is beyond the scope of this work, the significant sources of

uncertainty are discussed. Limitations of the scope of the analysis are also

discussed.

II.5.C.1 Uncertainties Surrounding Key Inputs to the Analysis

II.5.C.1.1. Analysis of Medical Costs

The cost estimates based on Baker et al. (1989, 1991) have a number of

limitations, many of them noted by Baker et al. (1991) and Mor et al.

(1990) and Mor (1993). Most of these limitations arise from the use of

CMHSF. Medicare data have five limitations that decrease its value for

calculating the average lifetime direct medical costs of treating lung cancer. 

First, Medicare covers medical services for only most persons age 65 and

over, disabled persons entitled to Social Security cash benefits for at least

24 months, and most persons with end-stage renal disease. All patients not

covered by Medicare are excluded from the database, including all nondisabled women under 65, and women over 65 using private health

insurance (Baker et al. 1991). 

Given that diagnosis of lung cancer occurs before age 65 in 34 percent of

patients (NCI, 1998), the CMHSF excludes a significant number of

younger patients. According to Mor et al., treatment for younger women

tends to be more intensive (and therefore more costly per unit time) than

treatment for older women, though older women tend to have longer

hospital stays. Because these differences counteract each other, the
8

 This figure represents those enrolled in Medicare Part A; 95 percent of those enrolled in Medicare

Part A choose also to enroll in Medicare Part B.

Chapter II.5 II.5-30 Cost of Lung Cancer

omission of younger women from the analysis is not expected to affect the

results substantially. In addition, the majority of senior citizens are enrolled

in Medicare (Ibid); differences in medical costs incurred by senior citizens

not using Medicare should have little effect on overall cost estimates.8

Medicare also does not cover self-administered drugs, intermediate nursing

care, long-term nursing care, and some expensive new treatments (such as

bone marrow transplants). For some patients these may represent

significant percentages of total treatment costs. Most direct medical costs,

however, appear to be covered by the CMHSF database and are included in

Baker et al.’s analysis. In addition, Baker et al. made adjustments for some

cost elements not covered by Medicare (see Section B).

Another drawback is that Baker et al. were not able to identify lung cancer

patients in CMHSF whose diagnosis and first course of therapy did not

involve hospitalization. In an analysis of Rhode Island lung cancer patients

covered by Medicare, Mor et al. determined that a small percentage of 

lung cancer patients were initially diagnosed without hospitalization, and

had substantially lower initial and subsequent treatment costs (Mor et al.

1990). This omission likely causes average treatment costs to be

overestimated, though by relatively little.

A fourth drawback is that Baker et al. (1989) provides no information

concerning the duration of the maintenance period for lung cancer. The

analysis in this chapter assumed that lung cancer survivors incur

maintenance care costs for ten years. If the average duration of

maintenance care among survivors of lung cancer is shorter (longer) than

ten years, then the estimates of the costs incurred by survivors would be

biased upward (downward). This bias is less of an issue for nonsurvivors’

costs because the great majority of lung cancer nonsurvivors die within the

first few years. Because most lung cancer patients (about 88 percent) are

ultimately nonsurvivors, the duration of the maintenance period is of

somewhat less importance for lung cancer patients than for the 12 percent

who ultimately survive the illness.

A fifth drawback is that the data used by Baker are from the period 1974 to

1981. This limitation causes uncertainty regarding changes in treatment

methods and costs.

Finally, the reliability of the data contained in the database used by Baker et

al. varies. An independent analysis of CMHSF performed in 1977 by the

Institute of Medicine of the National Academy of Sciences found that the

frequency of discrepancies in principal diagnoses varied among diseases

(Baker et al., 1991). It is unclear whether the presence of misnamed
Chapter II.5 II.5-31 Cost of Lung Cancer

diagnoses contained in CMHSF potentially increases or decreases the

resultant cost estimates.

Overall, despite the limitations described above, Baker’s analysis of the

CMHSF data represents the most nationally-representative, per-patient

lifetime estimate of the direct medical costs of treating lung cancer to date. 

Their cost estimates are based on sound criteria. Some data limitations

underestimate costs and others overestimate costs; the sum of the data

limitations therefore decrease the magnitude of error. More of the

uncertainties in their analysis appear to underestimate costs, however; the

net result is a likely underestimation of actual direct medical costs.

Although there are some uncertainties associated with the estimation of the

survival and mortality probabilities used in the calculation of expected

medical costs and lost time (discussed below), these uncertainties are likely

to be relatively small. As noted in the text, NCI RSRs used to estimate

survival and mortality for this analysis are based on the survival experience

of a large group of lung cancer patients considered in relation to the

survival experience of the general population. Although age-specific RSRs

for each year post-diagnosis are not available, the age-specific five-year

RSRs provided by NCI (1998) suggest that there is relatively little variation

in RSRs across ages at diagnosis for lung cancer patients. 

An additional limitation of this analysis is that medical costs incurred as a

result of lung cancer, but not considered by Baker et al., may arise as a

result of treatment for lung cancer. Secondary cancers and other adverse

health effects may occur due to radiation, chemotherapy treatment, and

other therapies. These effects may occur substantially after lung cancer

treatment has been completed, and can incur added medical costs not

considered in this chapter. 

Data have not yet been located regarding the average duration of

maintenance care. For purposes of this analysis, ten years of follow-up

care was assumed to be reasonable due to the severity of the disease and

the consequences of lung surgery. This assumption may be revised in the

future if data are located.

II.5.C.2 Scope of the Analysis

The analysis in this chapter was confined to direct medical costs by the

patient. As noted in Chapter I.1, willingness-to-pay has many other cost

elements. 

Link to Chapter I.1
Chapter II.5 II.5-32 Cost of Lung Cancer

The analysis does not include time lost by the patient and his or her family

and friends who provide care, pain and suffering on the part of the patient

and his or her family and friends, changes in job status among previously

employed patients, training for new job skills due to physical limitations, or

medical costs incurred after the ten-year maintenance period. These cost

elements may comprise a substantial portion of the total cost of lung

cancer. 
Chapter II.7 II.7-1 Cost of Colorectal Cancer

CHAPTER II.7: COST OF COLORECTAL CANCER 

Clicking on the sections below will take you to the relevant text.

II.7.A. Background

II.7.A.1. Description

II.7.A.2. Concurrent Effects

II.7.A.3. Causality & Special Susceptibilities

II.7.A.4. Treatments and Services

II.7.A.5. Prognosis

II.7.B. Costs of Treatment and Services

II.7.B.1. Methodology

II.7.B.2. Results of Medical Cost Analysis

II.7.B.3. Other Studies 

II.7.C. Uncertainties and Limitations

II.7.C.1. Uncertainties Surrounding Key Inputs to the Analysis

II.7.C.2. Scope of the Analysis
1

 Survivors are those who do not die of this specific disease. This chapter was prepared in

response to EPA’s specific requirement for a proposed rule. Because they were using the value of a

statistical life (VSL) for those who die of the disease, they required only cost data for disease survivors.

Sources provided in the chapter can be used to calculate medical costs for nonsurvivors, if required.

Chapter II.7 II.7-2 Cost of Colorectal Cancer

CHAPTER II.7: COST OF COLORECTAL CANCER 

This chapter contains a discussion of the methods used to estimate and the

results of estimating the direct medical costs incurred by surviving

colorectal cancer patients.1 It does not include information on elements

such as indirect medical costs, pain and suffering, lost time of unpaid

caregivers, etc. The reader is referred to Chapter I.1 for a discussion of the

cost estimation methods and cost elements that are relevant to all benefits

estimates. In addition, Chapter II.1 contains information regarding cancer

causality, a list of known and suspected carcinogens, and information on

cancer cost estimation.

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapter I.1 and II.1

Link to inflation factors

Survival data from the National Cancer Institute (NCI, 1998) and cost data

from Baker et al (1989) that are used in this chapter do not provide

quantitative information for different types of colorectal cancer. 

Consequently, this chapter contains an evaluation of all types in aggregate. 

In addition, most risk assessments used in evaluating benefits do not

specify the type of colorectal cancer.

II.7.A. Background

II.7.A.1. Description

Colorectal cancers are malignancies of the colon or rectum. They are most

often adenocarcinomas that are thought to develop through genetic

alterations in the cells. Colorectal cancers can be differentiated, based on

the site of the tumor(s). As noted above, however, they are considered as

a single cancer type for this cost analysis.

Most cases of colorectal cancer occur among the elderly, which is typical

of cancer. The average age at diagnosis is 70.4 years. Less than two

percent of colorectal cancers are diagnosed before the age of 40, and 42

percent are diagnosed over the age of 75 (NCI, 1998). The age

distribution at diagnosis of colorectal cancer is shown in Figure II.7-1. The
Chapter II.7 II.7-3 Cost of Colorectal Cancer

steep incline in the probability of diagnosis is clear in this diagram, with a

peak around 70 years of age. The data used to generate Figure II.7-1 are

shown in Table II.7-1. The cumulative percents of colorectal cancer at

various ages were calculated using the population-weighted distribution of

occurrence. These percents are also shown in Table II.7-1. Approximately

60 percent of all colorectal cancer cases are diagnosed in the relatively

small age interval of 70 to 85 years.

Figure II.7-1

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0-4 5-9 10-

14

15-

19

20-

24

25-

29

30-

34

35-

39

40-

44

45-

49

50-

54

55-

59

60-

64

65-

69

70-

74

75-

79

80-

84

85+

Age of Diagnosis

Probability

The age-specific incidence data were used in Section II.7.B medical cost

calculations. Data on incidence and age at diagnosis were obtained from

NCI’s Surveillance, Epidemiology, and End Results (SEER) reports and

tables, obtained on line through the NCI web site at: http://wwwseer.ims.nci.nih.gov in 1998. 
Chapter II.7 II.7-4 Cost of Colorectal Cancer

Table II.7-1. Age-specific Incidence of Colorectal Cancer

Age Group

Age-specific Rate of

Diagnosis Per

100,000

Percent of All

Colorectal Cancer

Occurring in Age

Group

Cumulative Percent

of Colorectal Cancer

0 - 14 0.1 0.0 0.0

15 - 34 5.5 0.8 0.8

35 - 39 6.4 1.0 1.8

40 - 44 12.7 1.7 3.5

45 - 49 24.7 2.8 6.3

50 - 54 49.9 4.5 10.8

55 - 59 88.4 6.6 17.5

60 - 64 140.3 9.7 27.2

65 - 69 206.4 14.1 41.3

70 - 74 281.5 16.9 58.3

75 - 79 367.8 16.6 74.9

80 - 84 457.5 13.7 88.6

85+ 473.1 11.4 100.0

Based on NCI, 1998

II.7.A.2. Concurrent Effects

As with all cancers, colorectal cancer may spread to other organs. 

Colorectal cancer often spreads to distant sites, involving regional lymph

nodes, or to the liver or lung (Abeloff et al., 1995). In addition, treatment

of cancer, which usually includes chemotherapy, radiation, and surgery, has

numerous adverse side effects and may in itself lead to death. Radiation

treatments of cancer have led to increased risks of other types of cancer,

sterility, etc. Surgery may cause long-term changes in health status that

may also lead to death. These effects are associated with additional

medical costs not considered in this chapter.

The material herein was specifically developed for the U.S. EPA for use in

the analysis of a particular Rule, and does not include information

regarding additional medical costs incurred from concurrent effects of

colorectal cancer or its treatment.

II.7.A.3. Causality & Special Susceptibilities

Dietary, environmental, and heriditary factors are important in colorectal

cancer causality (Abeloff et al., 1995). Table II.1-1 in Chapter II.1

contains a list of chemicals known to cause or are suspected of causing

cancer (as reported in the EPA databases IRIS, HEAST, and HSDB). 

Most chemicals in the table were carcinogenic in animal studies. These

studies do not provide organ-specific data because it is not generally

assumed that cancer induction will necessarily occur at the same site in

humans as in animals. Consequently, the chemicals listed in Table II.1-1
Chapter II.7 II.7-5 Cost of Colorectal Cancer

may cause colorectal cancer and/or other types of cancer. Evaluation of

the likelihood of this occurrence would require additional risk assessment

research.

Link to Table II.1-1

Epidemiologic studies worldwide have documented a direct correlation

between colorectal cancer mortality and per capita consumption of calories,

meat protein, and dietary fat and oil (Mayer, 1998). Other risk factors

include hereditary syndromes (as many as 25 percent of colorectal cancer

patients have a family history of the disease), and inflammatory bowel

disease (colorectal cancer risk is relatively small among this population

during the first ten years of the disease, but it increases at a rate of

approximately 0.5-1 percent per year) (Mayer, 1998). Various syndromes

affecting the intestine are linked to a much higher risk of colorectal cancer,

and both primary and secondary mutations are found in about 15 percent of

cases. In addition to genetic alterations, abnormal DNA methylation is an

important factor in colorectal cancer. There has been, and continues to be,

intensive study of the genetic aspects of this disease (Abeloff et al., 1995).

Colorectal cancer generally affects the over-50-year-old population. Most

colorectal cancers, regardless of etiology, are believed to arise from

adenomatous polyps, which have been found in the colons of

approximately 30 percent of middle-aged or elderly people. Less than one

percent of these polyps, however, ever become malignant (Mayer, 1998)

Other risk factors include prior history of breast, ovarian, endometrial,

genital, colon, or bladder cancer.

NCI provides age-, sex-, and race-specific data regarding diagnosis of

colorectal cancer from 1990 to 1994, which may be used to evaluate

susceptibilities among population subgroups. The data must be used with

care, however, because diagnostic rates indicate occurrence only, and may

or may not indicate differences in susceptibility. See Chapter I.1 for a

more detailed discussion of susceptibilities. 

Link to Chapter I.1

NCI colorectal cancer diagnosis and mortality data show higher diagnosis

and death rates among men than women. From the 1973 to 1994 time

period, males generally had a 50 percent higher mortality rate than females. 

Over the time period of 1978-1994, black women consistently showed

higher incidence rates than white women. The percent change from 1973

to 1994 were +14 percent and -11 percent, respectively.

The rate of diagnosis among black males from 1973-1994 was higher than

that in the white male. Over the period 1973 to 1994, incidence rates

among black men increased 34 percent, while it dropped five percent in
Chapter II.7 II.7-6 Cost of Colorectal Cancer

white men. A similar trend was also observed of mortality rates over that

same time period. 

II.7.A.4. Treatments and Services

Colorectal cancer is usually treated with surgery, chemotherapy, and/or

radiation, depending on the type of colorectal cancer, the stage of cancer at

diagnosis, patient health, and other factors. The treatment is defined more

precisely by histologic type and specific location of the cancer. In this

analysis, all histologic types and sub-sites are considered together. Most

surgery involved en bloc resection, which entails removing large sections of

the intestinal tract. This procedure may be modified if cancer has not

spread to regional lymph nodes (Abeloff et al., 1995). Treatment for this

type of cancer often requires permanent lifestyle changes due to the nature

of the surgical intervention required.

Treatment is carried out in phases including initial diagnosis, initial

treatment, follow-up and maintenance treatment, and, for those who do not

survive, terminal treatment and palliative care. Although there are some

components of each treatment that are unique to each phase, most medical

activities and services may occur more than once over the course of the

disease from diagnosis to death or cure. For example, X-rays may be used

in diagnosis, to provide ongoing status updates, to assist in determining

initial and subsequent surgical and other treatment interventions, etc.

Initial diagnostic activities may include an evaluation of signs and

symptoms, X-rays and other types of imaging, laboratory tests, and other

procedures. Staging of the disease occurs during this phase and is critical

to determination of subsequent medical actions (Feld et al., 1995). Surgery

is usually performed, as well as radiation and/or chemotherapy. In some

patients, cancer has spread to other organs requiring additional treatment

strategies. Colorectal cancer is fatal in approximatley 50 percent of

patients. Consequently, most patients receive terminal care that may

include a variety of medical services, long-term care in a nursing facility,

palliative care, family counseling, etc.

II.7.A.5. Prognosis

Cancer of the large bowel is the second highest cause of cancer death in the

U.S. Although approximately 70-80 percent of all patients survive

colorectal cancer for three years following diagnosis (NCI, 1998),
2

 The SEER data reports were accessed online to obtain information regarding mortality and

survival probabilities (RSRs) (NCI, 1998). The RSR is the number of observed survivors among these

patients, divided by the number of “expected” survivors among persons with the same age and gender in the

general population (observed/expected). The RSR takes into account that there are competing causes of

death that increase with age. Methods used to convert the NCI statistics to survival probabilities are

described in detail in Chapter II.2.

Link to Chapter II.2

Chapter II.7 II.7-7 Cost of Colorectal Cancer

approximately 47 percent of patients die of colorectal cancer within ten

years of diagnosis (53 percent survive).2 This value is used as a reasonable

approximation of the lifetime mortality rate in later sections of this chapter.

Factors such as tumor size and location, histology, involvement of nodes,

and the spread of cancer to other tissues affect outcome. As with other

cancers, the prognosis of colorectal cancer is determined partially by the

occurrence of cancer at other sites. When it has metasticized, the survival

rate is poorer. As noted above, colorectal cancer generally spreads to

distant sites, involving regional lymph nodes or the liver. The latter is

reportedly the initial site of distant cancer spread in 33 percent of recurring

colorectal cancer patients, and involved in over 66 percent of such patients

at their time of death. In fact, colorectal cancer rarely disseminates to the

lungs, bone, or brain without hepatic involvement first. The median

survival duration for colorectal cancer-associated liver metastases ranges

from 6-9 months to 24-30 months (Mayer, 1998).

The prognosis for this cancer has improved in recent decades. An

estimated six to eight percent increase in survival over the past two

decades has been reported (Abeloff et al., 1995). The change has been

attributed to earlier detection and a decrease in treatment-related mortality. 

The mortality rates among African-American patients are typically higher

than within other racial groups.

II.7.B. Costs of Treatment and Services

II.7.B.1. Methodology

II.7.B.1.1 Overview 

As noted above, this chapter examines the direct medical cost for the

“average” colorectal cancer survivor and does not include nonsurvivors of

colorectal cancer. 

II.7.B.1.2 Medical Cost Data

II.7.B.1.2.1 Sources

Medical cost data would ideally be obtained on current medical

expenditures. Although data files are maintained by public and private

sector sources, they are not readily available. In addition, it is necessary to

evaluate very large databases of charges from a variety of sources to obtain
3

Studies were located that used more recent cost data than were used in this analysis. The studies

were not used due to serious limitations (e.g., data were incomplete). The studies are reported in the “Other

Studies” section at the end of Section II.7.B.

Chapter II.7 II.7-8 Cost of Colorectal Cancer

reliable cost estimates. That method was not practical for the development

of this chapter. A data search was conducted to locate information in the

medical economics literature regarding medical costs associated with

colorectal cancer. In addition to a literature search, most federal agencies

dealing with cancer, disabilities, medical costs and their management, and

related issues were contacted for information; the various federal databases

were discussed with senior staff at these agencies. Very recent cost data

were not located.3 Current (1994) cancer data were obtained regarding

incidence and survival (as reported in Section II.7.A, above), and were

used with cost data from the 1980s, described below.

The cost estimates presented in this section are based primarily on the work

of Baker et al. (1989) and Hartunian et al. (1981) and on two sources of

statistical data: the National Cancer Institute (1998) and Vital Statistics of

the United States, 1995, Preprint of Volume II, Mortality, Part A Section 6

Life Tables (NCHS, 1998). These data were evaluated and cost and time

elements were used to calculate lifetime estimates of the direct medical

costs due to colorectal cancer. Based on a 1998 review of the literature,

carried out for the development of this chapter, there do not appear to be

new treatment methods for lung cancer that alter either the medical costs

or the survival rates for most patients substantially. Consequently, the cost

estimates presented in this chapter may be considered appropriate under

most circumstances (e.g., regional costs may vary). 

II.7.B.1.2.2 Baker et al.’s Cost Estimation Method

Baker et al. (1989) used the Continuous Medicare History Sample File

(CMHSF) to estimate the per-patient average lifetime medical cost of

treating lung cancer based on data files from 1974 to 1981. They chose

CMHSF because: 

1) it is a nationally representative sample of the Medicare population

(five percent), covering more than 1.6 million patients; 

2) it is longitudinal, dating from 1974 to 1981; and 

3) it captures the majority of medical expenses for each beneficiary.

Five Medicare files are included in the CMHSF, which cover:

1) inpatient hospital stays, 

2) skilled nursing facility stays, 

3) home health agency charges, 
4

 See Baker et al. (1989 and 1991) for further details. Baker et al. (1991) contains additional

descriptive data regarding the database and methods used for the cost analysis; however, it does not contain

cost data for lung cancer.

Chapter II.7 II.7-9 Cost of Colorectal Cancer

4) physicians’ services, and 

5) outpatient and other medical services.4

Costs that were not included are outpatient prescription medications and

nursing home care below the skilled level. 

Because CMHSF provides no indication of initial diagnosis, Baker et al.

assumed that disease onset occurred when a diagnosis of colorectal cancer

was listed on a hospitalization record following a minimum of one year

without a colorectal cancer diagnosis. This assumption is reasonable due

to the high frequency of hospitalization associated with the disease (i.e., 

individuals diagnosed with colorectal cancer would be hospitalized). Only

patients with an initial diagnosis during the years covered by the database

(1974-1981) were included. 

Costs associated with colorectal cancer were assigned to three postdiagnostic time periods:

• initial treatment, during the first three months following diagnosis;

• maintenance care, between initial and terminal treatment; and 

• terminal treatment, during the final six months prior to death.

As noted in Chapter I.1, the amount paid for service may differ from the

actual medical costs because many insurers and federal programs either 1)

pay only a portion of total costs or 2) pay more than actual costs to

underwrite the care providers’ losses due to underpayment from other

sources. Baker et al. used provider charges, rather than Medicare

reimbursements (which represent only a portion of most total charges),

thus providing a more accurate cost estimate. 

To improve the accuracy of the cost estimates, Baker et al. included cost

data on coinsurance, deductibles, and other cost components. They made

four adjustments to the cost estimates calculated from the CMHSF. First,

charges were added for skilled nursing facilities (SNFs) not covered by

Medicare by multiplying the “length of stay” at an SNF (computed from

admission and discharge dates) by the average daily SNF charge. Second,

the annual Medicare Part B deductible of $60 was added to the reimbursed

charges in the database. Third, since Medicare pays only 80 percent of

physicians’ charges, Baker et al. scaled these reimbursements to 100

percent of physicians’ charges to better reflect social costs. Finally, they

inflated all dollar values to 1984 dollars using the Medical Care component

of the Consumer Price Index. 
Chapter II.7 II.7-10 Cost of Colorectal Cancer

II.7.B.1.2.3 Cost Estimates by Treatment Period

Medical costs associated with the initial, maintenance, and terminal cancer

care treatment periods were itemized in Baker et al., 1989. These figures

are reported as incremental costs in Table II.7-2, because the 1989 paper

did not specifically report incremental costs or the costs of other medical

services anticipated to occur while the patient was receiving cancer

treatment (i.e., co-morbidity/background costs). To estimate the

incremental costs, a co-morbidity cost of $2,988 per year (1984 dollars)

from Baker et al. (1991) was used in this analysis.

The total cost for the initial three-month treatment period is reported in

Table II.7-2, which includes the pro-rated co-morbidity cost for that threemonth time period. Annual costs for the maintenance period are also

shown and are further discussed in the “Lifetime Cost Estimates” section

below (see II.7.B.1.3). Note that only the initial and maintenance costs are

relevant to this analysis on colorectal cancer survivor population. 

Nonsurvivors, and hence terminal treatment costs, are not further

addressed herein. 

Using the Medical Care component of the Consumer Price Index (CPI-U),

all costs were inflated to 1996 dollars for purposes of this handbook. For

example, the 1984 annual co-morbidity cost of $2,988 would be equivalent

to $6,394 in 1996 dollars, using the CPI adjustment multiplier factor of

2.14 for the period 1984 to 1996.

Table II.7-2. Average Per Patient Costs for the Treatment Periods for

Colorectal Cancer (in 1996$)

Costs adjusted for inflation using the Medical Care component of the

Consumer Price Index (CPI-U) 1996:1984 = 2.14 (Bureau of Labor Statistics)

Treatment Period

Incremental Cancer Treatment

Cost

Initial

(3 months)

$28,768

Maintenance (per year) $8,295

Terminal

(6 months)

$30,563

(Based on Baker et al., 1989, with co-morbidity charges from Baker et al., 1991.

II.7.B.1.3 Calculation of Lifetime Cost Estimates for the

“Average” Colorectal Cancer Survivor

This section contains a discussion of the calculation of lifetime medical

costs for the “average” colorectal cancer patient, identified in this analysis

as an individual diagnosed at age 70.4 (the average age of colorectal cancer

diagnosis from SEER, NCI 1998), with a life expectancy period of 13.8

years beyond that age (as determined by linear interpolation of NCHS 1998
Chapter II.7 II.7-11 Cost of Colorectal Cancer

data for the years 70 and 71). The approach described below was used to

address specific EPA rulemaking requirements of the direct medical cost

data. It therefore focuses specifically on the lifetime costs of colorectal

cancer survivors over the life expectancy period from the average age of

diagnosis. As in the previous chapters of this handbook, lifetime costs for

nonsurvivors or for other compounding illnesses will not be presented.

The analysis assumes that death may occur only after the full life expectancy

period from the average age of diagnosis has elapsed. All patients are

therefore assumed to incur initial treatment costs during the first three-month

period of the illness as defined by Baker et al. (1989). The costs incurred

during the remaining months of the first year of illness are calculated by prorating the annual maintenance costs. For example, in the first year, the

average colorectal cancer survivor incurs the costs of initial treatment

($28,768) over the first three months, and then incurs nine months’ worth of

maintenance care costs ($8,295 × 0.75 = $6,221) (see Table II.7-2). The total

cost of colorectal cancer incurred during the first year to survivors is therefore

$28,768 + $6,221 = $34,989, representing the intensive medical care

treatment a patient would initially receive. 

The expected medical costs for colorectal cancer patients during the first year

post-diagnosis, then, is defined as:

Expected First-Year Cost: initial treatment costs over a threemonth period + maintenance care costs for nine months 

Example: Expected first-year medical costs of a colorectal cancer patient

diagnosed at age 70.4

As noted above, all colorectal cancer patients incur an initial treatment cost

of $28,768. Those who survive through the year also incur maintenance

care costs for the remaining three quarters of the year. Recall from above

that the total first-year costs of those who survive the year were: 

Initial treatment: $28,768

Maintenance treatment: $6,221 ($8,295 × 0.75)

_________________________________________________

Total First-Year Cost $34,989

For each subsequent year post-diagnosis, medical costs consist entirely of

annual maintenance care costs. 

In this analysis, each patient would incur 13.8 years of maintenance costs,

assumed to be a reasonable average period over which additional medical

costs associated with colorectal cancer would also be incurred.
Chapter II.7 II.7-12 Cost of Colorectal Cancer

$28,768 % ($8,295 × 0.75) % j

13

y'2

(

$8,295

(1 % r)

y&1

) % ($8,295 × 0.8)

The expected medical costs for lung cancer patients during the nth year

post-diagnosis, for n>1, then, is defined as: 

Expected nth Year (n>1) Cost: maintenance care cost for the year,

pro-rated as necessary.

Maintenance care costs are not assumed at full value in the last year (i.e., in

the fourteenth year) of life expectancy. The treatment costs must be prorated based on how long a colorectal cancer survivor is anticipated to live

in the final year of expected life. As previously discussed, linear

interpolation of life expectancy data between the ages of 70 and 71 resulted

in a forecast of 13.8 years, which means that only 80 percent of the annual

maintenance costs ($8,295 × 0.80) will be incurred by the patient, or

$6,636.

The expected lifetime or total cost to a colorectal cancer survivor is

subsequently derived by summing all the expected medical costs over the

entire period from diagnosis to death.

Expected Lifetime Cost = Expected first-year cost + the sum of the

(discounted) expected subsequent-year costs 

Using the initial treatment and maintenance costs listed in Table II.7-2, the

mathematical equation for the expected lifetime medical costs incurred by

the “average” colorectal cancer survivor over a 13.8-year period may be

expressed as:

Where: y = the year post-diagnosis, and

r = the discount rate.

The cost estimates for each year post-diagnosis and the estimate of

expected undiscounted and discounted (at three, five, and seven percent)

total costs for a fourteen- year period are shown in Table II.7-3 for the

“average” colorectal cancer survivor diagnosed at age 70.4.
Chapter II.7 II.7-13 Cost of Colorectal Cancer

Table II.7-3. Expected Costs of Medical Services (in 1996$) for Surviving Colorectal

Cancer Patients (Age of Onset = 70.4) Over a Life Expectancy Period of 13.8 Years

Years

PostDiagnosis

(n)

Expected

Medical Costs in

the nth Year

Post-Diagnosis

(Undiscounted)a

Expected Medical

Costs in the nth

Year PostDiagnosis

(Discounted 3%)

Expected Medical

Costs in the nth

Year PostDiagnosis

(Discounted 5%)

Expected Medical

Costs in the nth

Year PostDiagnosis

(Discounted 7%)

1

b $34,989 $34,989 $34,989 $34,989

2 8,295 8,053 7,900 7,752

3 8,295 7,818 7,523 7,245

4 8,295 7,591 7,165 6,771

5 8,295 7,370 6,824 6,328

6 8,295 7,155 6,499 5,914

7 8,295 6,947 6,190 5,527

8 8,295 6,744 5,895 5,165

9 8,295 6,548 5,614 4,828

10 8,295 6,357 5,347 4,512

11 8,295 6,172 5,092 4,217

12 8,295 5,992 4,850 3,941

13 8,295 5,818 4,619 3,683

14c 6,636 4,519 3,519 2,754

Expected

Total

Costd

$141,160 $122,072 $112,026 $103,624

a. The undiscounted initial and maintenance costs used in this table are from Table II.7-2, as adapted

from Baker et al., 1989. Link to Table II.7-2 

b. First-year costs include the charge for “initial” therapy ($28,768) and an adjusted maintenance cost

pro-rated for the initial year (see text for discussion).

c. Final-year costs are pro-rated according to the average life expectancy (13.8 years) at the average

age of diagnosis (70.4) (see text for discussion).

d. Sums may not equal reported totals due to rounding.
Chapter II.7 II.7-14 Cost of Colorectal Cancer

II.7.B.2. Results of Medical Cost Analysis

The per-patient lifetime direct medical costs calculated for the “average”

colorectal cancer patient (as shown in Table II.7-3), diagnosed at age 70.4

are listed in Table II.7-4. 

Undiscounted costs and costs discounted at three, five, and seven percent,

are shown. Discounting was carried out for 14 years following diagnosis,

which represents the full duration of treatment and maintenance care

duration and the life expectancy at that age.

Table II.7-4. Summary of Total Costs of Medical Services (in 1996$)

for Surviving Colorectal Cancer Patients

Undiscounted Discount Rate

3 5 7

$141,160 $122,072 $112,026 $103,624

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

below.

Link to inflation factors

The actual average period of maintenance is not known and is likely to vary

considerably among individuals, depending on age, health status, access to

care, and other factors. For the EPA requirements under which this

analysis was developed, however, this method is assumed to represent the

average colorectal survivor.

II.7.B.3. Other Studies 

Riley et al. (1995) studied cancer costs, but their results are not

recommended due to characteristics of their study design and data quality. 

They studied Medicare payments from diagnosis to death in elderly cancer

patients. Cost estimates presented in the paper were based only on

Medicare payments, data that do not include most nursing home care,

home health care, pharmaceuticals unless supplied for inpatients, out-ofpocket expenses, deductibles, charges in excess of Medicare paid by other

sources (e.g., coinsurance), and other related medical services not covered

by Medicare. 

Medicare patients younger than 65 years old were not included, and the

average age at diagnosis of the colorectal cancer cohort was 76.2 years, in

contrast with the national average of 70.4. Riley et al. noted that patients

diagnosed at younger ages often incurred higher costs. In addition, those
Chapter II.7 II.7-15 Cost of Colorectal Cancer

diagnosed at earlier stages had a better prognosis, but may have had higher

medical costs (due to longer continuing care).

Medical costs were reported for all patients diagnosed with colorectal

cancer, and did not differentiate between colorectal cancer costs and those

of other diseases. Determination of colorectal medical costs were

calculated by subtracting background costs. The background cost per year

for medical services was estimated by Riley et al., based on the experience

of all people over the age of 65 who received Medicare-compensated care. 

This value was estimated to be $2,250 in 1990 dollars ($3,154 in 1996

dollars, using the CPI 1990-1996 multiplier of 1.4). This estimate excluded

costs that occurred during the last year of a person’s life. Consequently,

the estimated background value reported may underestimate background

costs and this omission would lead to a slight overestimate of incremental

costs.

Riley et al. estimated that the total average incremental Medicare payment

from diagnosis to death for persons diagnosed with colorectal cancer was

$51,865 in 1990 dollars ($72,611 in 1996 dollars). This estimate is

considerably lower than the estimates obtained from Baker et al. The

difference is most likely due to the exclusion of many costs that are not

covered by Medicare, in addition to the various other factors described

above. As a result of such limitations, the Riley et al. study is not

recommended for a benefits evaluation.

II.7.C. Uncertainties and Limitations

There are many limitations in cancer cost estimation. Those common to

most cancers are discussed in the introductory cancer chapter: II.1

Link to Chapter II.1

Several aspects of this analysis contain underlying uncertainties based

mainly on the limited information concerning some analytical inputs. A

discussion of the uncertainty and limitations regarding the data sources of

the analysis (Section II.7.C.1) and the scope of the analysis (Section

II.7.C.2) follows below. 

II.7.C.1. Uncertainties Surrounding Key Inputs to the Analysis

II.7.C.1.1. Analysis of Medical Costs

The cost estimates based on Baker et al. (1989, 1991) have a number of

limitations, many of them noted in Baker et al., 1991. Most of these

limitations are related to the use of CMHSF. Medicare data have five

limitations that decrease their value for calculating the average lifetime

direct medical costs of treating lung cancer. First, Medicare covers
Chapter II.7 II.7-16 Cost of Colorectal Cancer

medical services for most persons age 65 and over, disabled persons

entitled to Social Security cash benefits for at least 24 months, and most

persons with end-stage renal disease. All patients not covered by Medicare

are excluded from the database, including all non-disabled women under

65, and women over 65 using private health insurance (Baker et al., 1991). 

Medicare also does not cover self-administered drugs, intermediate nursing

care, long-term nursing care, and some expensive new treatments (such as

bone marrow transplants). For some patients these may represent

significant percentages of total treatment costs. Most direct medical costs,

however, appear to be covered by the CMHSF database and are included in

Baker et al.’s 1989 analysis. In addition, Baker et al. made adjustments for

some cost elements not covered by Medicare (see Section II.7.B). Another

drawback is that Baker et al. were not able to identify colorectal cancer

patients in CMHSF whose diagnosis and first course of therapy did not

involve hospitalization.

A fourth drawback is that Baker et al. (1989) provide no information

concerning the duration of the maintenance period for colorectal cancer. 

The analysis in this chapter assumed that colorectal cancer survivors incur

maintenance care costs for 13.8 years. If the average duration of

maintenance care among survivors of lung cancer is shorter (or longer)

than 13.8 years, the estimates of the costs incurred by survivors would be

biased upward (or downward).

A fifth limitation with using Medicare data is that the data used by Baker

are from the period 1974 to 1981. The age of the data causes uncertainty

regarding changes in treatment methods and costs.

The reliability of the data contained in the database used by Baker et al.

also varies. An independent analysis of CMHSF performed in 1977 by the

Institute of Medicine of the National Academy of Sciences found that the

frequency of discrepancies in principal diagnoses varied among diseases

(Baker et al. 1991). It is unclear, however, whether the presence of

misnamed diagnoses contained in CMHSF potentially increases or

decreases the resultant cost estimates.

Overall, despite the limitations described above, Baker et al.’s analysis of

the CMHSF data represents the most nationally-representative, per-patient

lifetime estimate of the direct medical costs of treating colorectal cancer to

date. Their cost estimates are based on sound criteria. Because some of

the data limitations underestimate costs and others overestimate costs, the

sum of the data limitations decreases the magnitude of error. More of the

uncertainties in their analysis appear to underestimate costs, however, and

poses the problem that the net result may likely be an underestimation of

actual direct medical costs.
Chapter II.7 II.7-17 Cost of Colorectal Cancer

Although there are some uncertainties associated with the estimation of the

survival and mortality probabilities used in the calculation of expected

medical costs (discussed below), these uncertainties are likely to be

relatively small. As noted in the text, NCI RSRs used to estimate survival

and mortality for this analysis are based on the survival experience of a

large group of colorectal cancer patients considered in relation to the

survival experience of the general population. Although age-specific RSRs

for each year post-diagnosis are not available, the age-specific five-year

RSRs provided by NCI (1998) suggest that there is relatively little variation

in RSRs across ages at diagnosis. 

An additional limitation of this analysis is that medical costs incurred as a

result of colorectal cancer, but not considered by Baker et al., may arise as

a result of treatment. Secondary cancers and other adverse health effects

may occur due to radiation, chemotherapy treatment, and other therapies. 

These effects may occur substantially after colorectal cancer treatment has

been completed and can incur added medical costs not considered in this

chapter. Data have not yet been located regarding the average duration of

maintenance care. For purposes of this analysis, an approximately 14-year

period of follow-up care was assumed to be reasonable, due to the severity

of the disease and the consequences of colorectal surgery. This assumption

may be revised in the future if data are located.

II.7.C.2. Scope of the Analysis

The analysis in this chapter was confined to direct medical costs by the

patient. As noted in Chapter I.1, willingness-to-pay has many other cost

elements. The analysis does not include time lost by the patient or their

family and friends who provide care. Also omitted from cost of illness

estimates are pain and suffering on the part of the patient or their family

and friends, changes in job status among previously employed patients,

training for new job skills due to physical limitations, or medical costs

incurred after the ten-year maintenance period. These cost elements may

also comprise a substantial portion of the total cost of colorectal cancer.

Link to Chapter I.1
Chapter II.8 II.8-1 Cost of Bladder Cancer

CHAPTER II.8. COST OF BLADDER CANCER

Clicking on the sections below will take you to the relevant text.

II.8.A Background

II.8.A.1 Description

II.8.A.2 Concurrent Effects

II.8.A.3 Causality & Special Susceptibilities

II.8.A.4 Treatments and Services

II.8.A.5 Prognosis

II.8.B Costs of Treatments and Services

II.8.B.1 Methodology

II.8.B.2 Results of Medical Cost Analysis

II.8.B.3 Other Studies 

II.8.C Uncertainties and Limitations

II.8.C.1 Uncertainties Surrounding Key Inputs to the Analysis

II.8.C.2 Scope of the Analysis
Chapter II.8 II.8-2 Cost of Bladder Cancer

CHAPTER II.8. COST OF BLADDER CANCER

II.8.A Background

This chapter contains a discussion of the methods used and results of

estimating the direct medical costs incurred by bladder cancer patients. It

does not include information on elements such as indirect medical costs,

pain and suffering, lost time of unpaid caregivers, etc. The reader is

referred to Chapter I.1 for a discussion of the cost estimation methods and

cost elements that are relevant to all benefits estimates. In addition,

Chapter II.1 contains information regarding cancer causality, a list of

known and suspected carcinogens, and information on cancer cost

estimation. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and II.1

Link to inflation factors

II.8.A.1. Description

Bladder cancers are tumors that arise from the transitional cell lining of the

urinary tract. These are a part of a larger group of tumors that are all

related and are referred to as urothelial cell cancers. Urothelial cell cancers

may occur in the kidneys, ureter, bladder, urethra, and the ducts of the

prostate. The most common of these, bladder cancer, is the only cancer

discussed in this chapter. Ninety percent of urothelial cell tumors are

transitional cell carcinomas, with the remainder composed of squamous cell

carcinomas and adenocarcinomas (Bennett and Plum, 1996). 

Although a small percentage of bladder cancers differ somewhat from the

majority in their cell origin or composition, this chapter contains an

evaluation of all types of bladder cancer in aggregate. In addition, most

risk assessments that would be used in evaluating benefits do not specify

the type of bladder cancer. If a specific type of bladder cancer is of

concern, Bennett and Plum (1996) may be consulted for additional

information regarding prognostic information and treatment; however, the

quantitative data are limited. 

Bladder cancer is a common cause of cancer death in men and women in

the U.S. (Feld et al., 1995), accounting for two percent of all cancer cases

in the U.S.(Abeloff et al., 1995). Approximately 51,200 cases of bladder

cancer were diagnosed in 1994 in the United States; approximately 10,600

bladder cancer deaths occurred in that year (Bennett and Plum, 1996). In
1

 Data on incidence and age at diagnosis were obtained from the National Cancer Institute’s (NCI)

Surveillance, Epidemiology, and End Results (SEER) reports and tables. These data were obtained online

through the NCI web site at: http://www-seer.ims.nci.nih.gov in 1999.

2

 Racial designations are listed as specified by NCI.

Chapter II.8 II.8-3 Cost of Bladder Cancer

1996 the incidence rate was 27.7 per 100,000 in men and 7.4 in women

(NCI, 1999).1 The highest risk group are white men over the age of 64,

who have an incidence rate of 217.8 per 100,000 (NCI, 1999).

The incidence of bladder cancer has increased overall by 7.7 percent

between 1973 and 1996, due primarily to a 14.5 percent increase among

those over the age of 64. The most dramatic increase has occurred among

women, with a 22.6 percent increase in white women and a 24.8 percent

increase among black women.2 As discussed under “causality” below, this

increase may be due to the increased rate of smoking among women. 

Incidence rates among black and white men over the age of 65 during the

1973 to 1996 interval have also increased substantially: 24.0 and 22.6

percent, respectively. Fortunately, this trend toward increased incidence

has turned around slightly in very recent years (1992-1996) (NCI, 1999).

During the period 1973 to 1996, there has been a small drop in the

incidence of bladder cancer among those under the age of 65 years (3.4

percent), driven solely by a decline in bladder cancer among white men and

black women under the age of 65 years. Mortality rates have also

decreased (discussed under prognosis, below). 

Bladder cancer is observed in three times as many men as women. As with

most cancers, it also occurs with much greater frequency among the

elderly. The average age at diagnosis is between 70 and 75 years. Less

than 1.6 percent of bladder cancers are diagnosed before the age of 40, and

21.7 percent are diagnosed over the age of 85 (NCI, 1999). The age

distribution at diagnosis of bladder cancer is shown in Figure II.8-1. The

steep incline in the probability of bladder cancer diagnosis with age is clear

in this diagram. The data used to generate Figure II.8-1 are shown in

Table II.8-1. The cumulative percents of bladder cancer at various ages

were calculated using the population-weighted distribution of occurrence;

these are also shown in Table II.8-1. The age-specific incidence data were

used in the Section II.8.B medical cost calculations.
3

 The source of direct medical costs for this chapter (Baker et al., 1979 and 1981) include all

medical costs for cancer patients, minus usual background medical costs. This incremental approach allows

for the inclusion of medical costs that are associated with treatment and side effects, and discussed in more

detail in Section B.

Chapter II.8 II.8-4 Cost of Bladder Cancer

Table II.8-1. Age-specific Incidence of Bladder Cancer

Age Group

Age-specific Rate of

Diagnosis Per

100,000

Percent of All

Bladder Cancer

Occurring in Age

Group

Cumulative Percent

of Bladder Cancer

0 - 14 0.0 0.0 0.0

15 - 34 0.5 0.8 0.8

35 - 39 2.0 0.8 1.6

40 - 44 4.0 1.5 3.1

45 - 49 9.0 2.9 6.0

50 - 54 18.1 4.6 10.6

55 - 59 32.2 6.7 17.3

60 - 64 51.9 10.0 27.3

65 - 69 84.4 16.1 43.4

70 - 74 110.7 18.5 61.9

75 - 79 130.2 16.4 78.3

80 - 84 148.8 12.4 90.7

85+ 138.2 9.3 100.0

Based on NCI, 1999

II.8.A.2. Concurrent Effects

As with all cancers, bladder cancer may spread to other organs. In

addition, treatment of cancer, which usually includes chemotherapy,

radiation, and surgery, has numerous adverse side effects and may, in itself,

lead to death. This is particularly true of the agents used to treat bladder

cancer (Abeloff et al., 1995). Radiation treatments of cancer have led to

increased risks of other types of cancer, sterility, etc. Surgery, especially

the removal of a bladder, may cause long-term changes in health status,

including reduced capacity or increased susceptibility to respiratory disease

that may lead to death. These effects are associated with additional

medical costs are considered in this chapter if they occur during the

treatment period.3
Chapter II.8 II.8-5 Cost of Bladder Cancer

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85+

Age

Probability

Figure II.8.1. Age Distribution of Bladder Cancer

Bladder cancer has multiple concurrent symptoms that require treatment in

addition to the treatments directed at the primary medical goal of cancer

eradication. Many of these additional symptoms are related to

chemotherapy. Effects observed include: hematuria (blood in urine) and

irritative bladder symptoms, bladder obstruction leading to hydronephrosis,

tumor infiltration of regional nerves or bone causing pain, and lymphedema

as a result of lymphatic obstruction due to lymph node metastasis (Bennett

and Plum, 1996; Abeloff et al., 1995), increased risk of epididymitis,

orchitis (male reproductive disorders), pneumonitis, hepatitis, and sepsis

(Abeloff et al., 1995).

There is a strong link between bladder cancer and smoking. Bladder

cancer patients are much more likely to have smoked than people who have

not been diagnosed with bladder cancer (causality is discussed below). 

Smoking is also associated with increased risks of many other diseases,

including other cancers. There is no indication, however, that bladder

cancer causes these other diseases. The simultaneous or sequential

occurrence of the diseases are likely due to their common causal link to

smoking.

The same pollutants that cause bladder cancer may cause other adverse

effects, especially of the urogenital system. These effects can incur added

medical costs not considered in this chapter. The risk assessment that

serves as the basis for a benefits evaluation should include all adverse

effects anticipated to result from exposure to the agent of interest.
Chapter II.8 II.8-6 Cost of Bladder Cancer

II.8.A.3. Causality & Special Susceptibilities

The causality and progression of this disease are not fully understood. It

has been hypothesized that bladder cancer may develop from a

preneoplastic and preinvasive localized condition to hyperplasia and then to

atypical hyperplasia and dysplasia. In some cases, the pathology

progresses further to neoplasms (Abeloff et al., 1995). As discussed

below, chemical irritants and other irritants are associated with bladder

cancer and may cause the observed cell proliferation and hyperplasia, as

well as the sometimes observed sequelae — bladder cancer. Experimental

evidence suggests that the DNA-damaging effects of carcinogens on the

urothelium causes cell proliferation. When the body is unable to repair

DNA adequately, progression to bladder cancer may occur. For more

detailed information on this topic see Abeloff et al. (1995).

Bladder cancer has been associated with environmental exposures for more

than 100 years. Exposure to aromatic amines and working in the dye

industry (especially with 2-naphthylamine) were known to cause high rates

of bladder cancer among workers. More recently, workers in the rubber,

electric, cable, paint, and textile industries had substantially higher

incidences of bladder cancer, with exposures to benzidine, auramine, and 4-

nitrophenol (Bennett and Plum, 1996), and arylamines from cigarettes and

other sources (Jones and Ross, 1999) were particularly noted. Arsenic is

also known to increase bladder cancer occurrence (ATSDR, 1998). It is

difficult to identify exposures that result in bladder cancer because the

latency period is between 15 and 50 years (Abeloff et al., 1995).

As noted above, cigarette smoking is also associated with a higher bladder

cancer risk and may account for one-half of all cases (Bennett and Plum,

1996; Abeloff et al., 1995). The prevalence of smoking and occupational

exposure among men may account for some or all of the increased

incidence seen in men versus women. The dramatic increases in bladder

cancer among women in recent years may be due to the relatively recent

entrance of women into the workforce, and their recent increase in tobacco

use. These factors would result in bladder cancer rates that are only

recently observed to increase, due to the long latency of most solid tumors

and the typically elderly age of diagnosis for bladder cancer. 

In other parts of the world, infection with Schistosoma haemotobium is

responsible for a large proportion of bladder cancer cases in less-developed

countries (e.g., as studied in Egypt (Abeloff et al., 1995; Bennett and Plum,

1996)). Pharmaceuticals, including cyclophosphamide used in treating

malignancies, and the analgesic phenacetin, are also associated with

increased bladder cancer risk (Bennett and Plum, 1996; Abeloff et al.,

1995).
Chapter II.8 II.8-7 Cost of Bladder Cancer

Although genetic abnormalities are associated with bladder cancer, it is not

clear wither these occurred as a result of the disease (or biomarker) or

preceded the disease. Chromosome 9 abnormalities, particularly

monosomy, occurs early in bladder cancer. 11p and 18p abnormalities are

found in more advanced tumors (Bennett and Plum, 1996). For a more

complete discussion of cellular-level changes and genetic markers for

bladder cancer, see Jones and Ross (1999) and Abeloff et al. (1995). 

Individuals with a family history of bladder cancer before the age of 45

have a risk that is approximately 50 percent greater than the general

population risk (Abeloff et al., 1995). Other genetic risks are suggested by

data regarding cigarette smokers. Some individuals who detoxify cigarette

toxins more slowly are theorized to have higher risks associated with

smoking (Abeloff et al., 1995).

Other factors that may increase the risk of bladder cancer are chronic

bladder irritation, bladder infections, and urinary nitrites (Abeloff et al.,

1995).

Table II.1-1 in Chapter II contains a list of many of the chemicals known to

cause or suspected of causing cancer (as reported in the EPA databases

IRIS, HEAST, and HSDB). Most chemicals in the table were carcinogenic

in animal studies. These studies do not provide organ-specific data because

it is not generally assumed that cancer induction will necessarily occur at

the same site in humans as in animals. Consequently, the chemicals listed in

Table II-1 may cause bladder cancer and/or other types of cancer. 

Evaluation of the likelihood of this occurrence would require additional

research (e.g., risk assessment).

Link to Table II.1-1

Bladder cancer is much more prevalent in the United States and in Spain

than in many other countries. Rates here are 25 to 30 cases per 100,000, in

contrast with a baseline rate of 2 per 100,000 in a typical low-rate area

(Bennett and Plum, 1996). Bladder cancer also has a positive association

with socioeconomic status (Jones and Ross, 1999; Abeloff et al., 1995),

which has not yet been explained.

NCI provides age-, sex-, and race-specific data regarding diagnosis of

bladder cancer from 1990 to 1994, which may be used to evaluate

susceptibilities among population subgroups. The data must be used with

care because diagnostic rates indicate occurrence only, and may or may not

indicate differences in susceptibility. See Chapter I.1 for a more detailed

discussion of susceptibilities. 

Link to Chapter I.1
Chapter II.8 II.8-8 Cost of Bladder Cancer

II.8.A.4. Treatments and Services

As noted above, bladder cancer is usually treated with surgery,

chemotherapy, and/or radiation, depending on the type of bladder cancer,

the stage of cancer at diagnosis, patient health, and other factors. The

treatment of bladder cancer can be defined more precisely by histologic

type and specific location of the cancer in the bladder. In this analysis,

which is concerned with the average cost for all bladder cancers, all

histologic types and sub-sites are considered together. 

Treatment is carried out in phases including initial diagnosis, initial

treatment, follow-up and maintenance treatment, and, for those who do not

survive, terminal treatment and palliative care. Although there are some

components of each treatment that are unique to each phase, most medical

activities and services may occur more than once over the course of the

disease from diagnosis to death or cure. For example, X-rays may be used

in diagnosis, to provide ongoing status updates, to assist in determining

initial and subsequent surgical and other treatment interventions, etc. 

Initial diagnostic activities may include an evaluation of signs and

symptoms, abdominal, pelvic, bone, and chest scans, intravenous

pyelogram, cystoscopy, urinary cytology, computed tomography (CT)

scans, magnetic resonance imagery (MRI), biopsies, and other procedures

(Bennett and Plum, 1996; Abeloff et al., 1995). Staging of the disease

occurs during this phase and is critical to determination of subsequent

medical actions. Most tumors are confined to the transitional cell layer and

these are generally treated only with surgery. The tumors often recur,

which requires frequent cystoscopy with subsequent removal of recurrent

tumors as necessary. Higher-grade tumors require chemotherapy or

immunotherapy. Invasive cancers with a higher metastatic potential often

require total removal of the bladder, and subsequent reconstruction of an

alternative urinary reservoir (Bennett and Plum, 1996)

Although there is an 80 to 90 percent survival rate among bladder cancer

patients during initial diagnosis and treatment, tumors recur in 30 to 80

percent of patients, and 30 percent progress to a higher stage or grade. 

Often chemotherapy is used to control or prevent this progression;

however, this entails the use of chemicals that are toxic to other organ

systems (Abeloff et al., 1995). Photodynamic therapy has also been used

recently with success, without the chemically-induced side effects (Abeloff

et al., 1995). 

The small percentage of patients who cannot be cured receive terminal

care, which may include a variety of medical services, long-term care in a

nursing facility, palliative care, family counseling, etc.
4

 This value is relevant for patients diagnosed at the age of 70 years (the average age of diagnosis

for bladder cancer) and is based on a follow-up period of 20 years. The method of calculating this value is

discussed below in Section II.8.A.5.2, and source values are listed in column (6) of Table II.8-3. 

Chapter II.8 II.8-9 Cost of Bladder Cancer

II.8.A.5. Prognosis

II.8.A.5.1 Background

The prognosis for bladder cancer is relatively good, compared to many

cancers. Approximately 26 percent of patients with bladder cancer die of

the disease.4 Mortality rates for bladder cancer patients have decreased

overall by 24 percent from 1973 to 1996. The most dramatic

improvements have been made among blacks under the age of 65 years,

with a 46.5 percent reduction in mortality among those diagnosed with the

disease (NCI, 1999). Improvements in survival are due to both better

diagnostic methods and improved treatments. 

The overall prognosis for bladder cancer patients is good, with an average

of only 19 percent of patients dying of the disease within five years. 

Among younger patients the survival rates are better, with those diagnosed

under the age of 45 having a 7.9 percent mortality rate over the first five

years post-diagnosis. Those with more limited tumors have a much better

prognosis than those with metastatic tumors (discussed below), with a

range of 6.9 percent mortality with localized tumors to 93.6 percent

mortality among those with distant tumors (based on 1989 to 1995 data)

(NCI, 1999).

Tumors that are restricted to a single site, or that occur in multiple sites

within the bladder, provide the best prognosis. Most bladder cancer cases

are superficial tumors of the transitional cell layer with a low potential for

metastatic spread. Those that invade multiple layers of the organ wall

and/or metastasize to other organs yield a poorer prognosis. Death occurs

primarily as a result of uncontrolled growth of metastatic tumors. 

A dynamic observed with bladder cancer, but not common to cancers, is a

long-term increase in mortality over 20+ years. Most cancers cause high

rates of mortality during the first few years, but are often considered

“cured” if the patient survives without recurrence of the cancer for five

years. Based on National Cancer Institute (NCI) statistics, bladder cancer

continued to cause increased mortality for at least 20 years (the maximum

length tracked) post-diagnosis. This trend is discussed in more detail

below.

II.8.A.5.2 Relative Survival Rates (RSRs)

The NCI Surveillance, Epidemiology, and End Results (SEER) data

reports were accessed online to obtain information regarding mortality and

survival probabilities and the duration after diagnosis until death (NCI,

1999). Basic survival statistics on bladder cancer are provided in this
Chapter II.8 II.8-10 Cost of Bladder Cancer

RSR '

observed survival rate among bladder cancer patients

survival rate among age& and sex&matched cohort in the general population

section because they relate to prognosis. Methods used to convert the NCI

statistics to survival probabilities are discussed briefly in this section and in

detail in Chapter II.2 on stomach cancer. 

Link to Chapter II.2

NCI provides the relative survival rate (RSR) for each year post-diagnosis. 

The RSR is the number of observed survivors among these patients,

divided by the number of “expected” survivors among persons with the

same age and gender in the general population (observed/expected). The

equation for this is:

The RSR takes into account that there are competing causes of death that

increase with age. The RSR for bladder cancer patients during the first year

post-diagnosis is 0.86 (NCI, 1999). This value indicates that a person with

bladder cancer would have, on average, a one-year survival probability that

is 86 percent of someone of the same age and gender in the general

population. The RSRs provided by NCI for each year post-diagnosis are

averages obtained from all ages at diagnosis. 

An evaluation of the RSRs for bladder cancer over the past 20 years

indicates that (1) survival has increased notably (up to ten percent) over the

20 years, and (2) mortality from bladder cancer, while at much lower rates

than for some other cancers, continues at non-negligible rates for at least

20 years post-diagnosis. This trend differs from other cancer evaluations

previously carried out for this handbook. Due to the long-term dynamic of

increasing mortality for bladder cancer, the medical and opportunity costs

incurred by bladder cancer patients were estimated for 20 years postdiagnosis (previous chapters considered ten years).

Because the RSRs for many years (e.g., 20 years) post-diagnosis

incorporate the survival probabilities of bladder cancer patients who were

diagnosed many years ago (e.g., in 1975), direct reliance on the RSRs

provided by NCI will result in downward-biased estimates of what RSRs

would be for patients who are currently being diagnosed with bladder

cancer. This bias occurs because the RSRs at each year post-diagnosis are

currently significantly higher than they were many years ago (i.e., the

survival for years one through five post-diagnosis in the late 1980s is

higher than for years one though five in the 1970s). 

To provide a more accurate estimate of what the RSRs (and the

corresponding survival and mortality probabilities) for bladder cancer

patients are likely to be for the next 20 years, we estimated RSRs for each
5

 All vital statistics data in this document applicable to the general population were obtained from

the National Center for Health Statistics (NCHS) Vital Statistics in the United States (NCHS, 1993).

Chapter II.8 II.8-11 Cost of Bladder Cancer

RSR RSR

RSR

RSR

future future

2 1

2

1994

1

= × 1994 .

year post-diagnosis using a two-step procedure. This procedure focuses

on using the most current data available for each year post-diagnosis. In

the first step, we assumed that the ratio of the RSR at n years postdiagnosis to the RSR at (n!1) years post-diagnosis in the most recent year

for which we have data is what that ratio will be in future years. For

example, the most recent year for which we have an RSR for one year

post-diagnosis for bladder cancer is 1995. The RSR in 1995 is 0.91, which

we assume will be the RSR for one year post-diagnosis in future years. 

The most recent year for which there is an RSR for two years postdiagnosis is 1994. We assume that:

RSR

RSR

RSR

RSR

future

future

2

1994

1

1994

2

1

=

so that 

Using the most recent RSR for one year post-diagnosis (0.91), and the

RSRs we have from 1994 for one year and two years post-diagnosis (0.911

and 0.865, respectively), the RSR for two years post-diagnosis is estimated

to be 0.91 × (0.865/0.911) = 0.8641. This estimate of the RSR for two

years post-diagnosis is then used to estimate the RSR for three years postdiagnosis, using the above formula. We continue this process until we have

generated RSRs for each of twenty years post-diagnosis. 

The RSRs, derived as described above, are only estimates of the underlying

population RSRs (i.e., the RSRs for the entire population of bladder cancer

patients in the United States). As such, they display some of the

“bumpiness” that data often contain. In step two, a plot of these estimated

RSRs against years post-diagnosis was generated. It shows that they

follow a general exponential decay trend. Rather than use these estimated

RSRs, regression was used to estimate the smooth trend described by the

estimates derived in step one. In particular, we estimated the model:

ln(RSR) = a + b × ln(years post-diagnosis) 

using the RSRs estimated in step one. The intercept (a) was estimated to

be -0.131866 and the slope (b) was estimated to be -0.0134114. The fit

was excellent, with an R2 of 0.952. Exponentiating the predicted natural

logarithms of RSR yielded the predicted RSRs shown in Table II.8-2.5
6

 This difference becomes clear in the extreme case in which the probability of dying of an illness is

extremely high. Suppose, for example, that the probability of dying of all causes except for illness X is

0.025 in the general population. Suppose that in a cohort of patients diagnosed with illness X, the

probability of dying from illness X in the first year post-diagnosis is 0.99. If the probability of dying of

other causes in this cohort were the same as in the general population (0.025), then the probability of

someone in the cohort dying would be greater than 1.0.

Chapter II.8 II.8-12 Cost of Bladder Cancer

Some bladder cancer patients will die of bladder cancer, but most die of 

other causes. The probability of a bladder cancer patient dying of causes

other than bladder cancer cannot be assumed to be the same as the

probability of someone in the general population dying of other causes,

particularly in the first few years post-diagnosis, when a bladder cancer

patient’s probability of dying of bladder cancer is not trivial.6 This

becomes clear in the extreme case in which the probability of dying of an

illness is extremely high. Suppose, for example, that the probability of

dying of all causes except for illness X is 0.025 in the general population. 

Suppose that in a cohort of patients diagnosed with illness X the

probability of dying from illness X in the first year post-diagnosis is 0.99. 

If dying of other causes in this cohort were the same as in the general

population (0.025), then their probability of dying would be greater than

1.0.
Chapter II.8 II.8-13 Cost of Bladder Cancer

Table II.8-2. Estimated RSRs* for Bladder Cancer for the First 

 20 Years Post Diagnosis

Years Post-Diagnosis (n)

Estimated RSR for n Years

Post-Diagnosis

1 0.86

2 0.85

3 0.84

4 0.83

5 0.82

6 0.81

7 0.80

8 0.79

9 0.78

10 0.77

11 0.76

12 0.75

13 0.74

14 0.73

15 0.72

16 0.71

17 0.70

18 0.69

19 0.68

20 0.67

*The estimated RSR for each year post-diagnosis is the result of a two

step procedure, using the set of RSRs reported by NCI (1999), as

described in the text above.

The probability of a bladder cancer patient dying of bladder cancer and the

probability of a bladder cancer patient dying of some cause other than

bladder cancer in the nth year post-diagnosis, given survival to the nth

year, were each derived from two known probabilities: 

1) the probability of a bladder cancer patient surviving through the

nth year post-diagnosis, given survival to the nth year; and 

(2) the probability of dying of causes other than bladder cancer in a

matched cohort in the general population. 

The derivation is explained in detail in the Appendix to Chapter II.2. 

Link to Chapter II.2, Appendix II.2-A

Because each of the known probabilities depends on the number of years

post-diagnosis and (minimally) on age at diagnosis, the derived
7

 Twenty years is period that captures most of the deaths due to bladder cancer among those

diagnosed with the disease. This period is a reasonable maximum duration of maintenance care and

treatment for those who do not die of bladder cancer.

Chapter II.8 II.8-14 Cost of Bladder Cancer

probabilities were calculated for each of the 20 years post-diagnosis and for

the average age at diagnosis (70 years).7 The following probabilities are

shown in Table II.8-3:

1) survival through the nth year, 

2) dying of bladder cancer during the nth year, and 

3) dying of some other cause during the nth year.

Probabilities of survival and dying of all causes among all members of the

general population aged 70 were obtained from the National Center for

Health Statistics (NCHS) Vital Statistics in the United States (NCHS,

1993). They are also shown in Table II.8-3. The values in this table are

used in Section II.8.B to calculate the expected medical costs of bladder

cancer patients. The probabilities in the general population of dying from

bladder cancer are 0.00020 in the 70-74 year age group, 0.00031 in the 75-

79 year age group, 0.00047 in the 80-84 year age group, and 0.00069 in

the 85+ age group. The probabilities in column (3) were derived by

subtracting these probabilities from the corresponding probabilities of dying

from any cause in the nth year, given survival to the nth year. The Chapter

II.2 Appendix contains a detailed explaination of the derivation of survival

and mortality probabilities.

Link to Chapter II.2, Appendix II.2-A

The mortality rate of 26 percent, cited in the introduction to this section,

was calculated for patients who are diagnosed at age 70 as the sum of the

probabilities of their dying of the disease in each year post-diagnosis. This

rate was calculated for 20 years post-diagnosis, using the data shown in

Table II.8-3. The probabilities of dying of bladder cancer during each year

post-diagnosis, shown in the column titled “probability of dying of bladder

cancer in the nth year post-diagnosis” were summed to obtain a value of 26

percent. 
Chapter II.8 II.8-15 Cost of Bladder Cancer

Table II.8-3. Survival and Mortality Probabilities for the Average Bladder Cancer Patienta

Years

postdiagnosis

(n)

A Cohort in the General

Population (Matched) A Cohort of Bladder Cancer Patients

Probability

of

surviving n

years

Probability of

dying in nth year of

causes other than

bladder cancer,

given survival to

the nth year

Relative

Survival

Rate

(RSR)

Probability

of surviving

through the

nth year

postdiagnosis

Probability of

dying of

bladder

cancer in the

nth year postdiagnosisb

Probability of

dying of other

causes in the

nth year postdiagnosis

0 1.000 --- --- 1.0 --- ---

1 .973 .027 0.86 .842 .134 .025

2 .945 .029 0.85 .806 .011 .024

3 .915 .031 0.84 .771 .011 .025

4 .884 .034 0.83 .735 .010 .026

5 .852 .037 0.82 .698 .010 .027

6 .817 .040 0.81 .661 .009 .028

7 .782 .043 0.80 .624 .009 .028

8 .745 .047 0.79 .586 .008 .029

9 .707 .051 0.78 .549 .008 .030

10 .667 .056 0.77 .511 .007 .030

11 .626 .061 0.76 .473 .007 .031

12 .584 .067 0.75 .436 .006 .031

13 .541 .073 0.74 .398 .006 .032

14 .497 .081 0.73 .361 .005 .032

15 .451 .090 0.72 .324 .005 .032

16 .410 .090 0.71 .290 .004 .029

17 .373 .090 0.70 .260 .004 .026

18 .339 .090 0.69 .234 .004 .023

19 .308 .090 0.68 .210 .003 .021

20 .280 .090 0.67 .188 .003 .019

a. The survival and mortality probabilities for bladder cancer patients presented here are derived from the RSRs

estimated from RSRs obtained from NCI and the survival probabilities for a matched cohort in the general

population. The average age of diagnosis of 70 years was used. See text for an explanation calculation

methods.

b. When the probalities in this column are summed, they yield the probability of dying of bladder cancer over 20

years post-diagnosis, which is equal to 26 percent.
Chapter II.8 II.8-16 Cost of Bladder Cancer

There is likely to be additional loss, although at a very low rate, beyond 20

years; however, data were not available on those values. Impacts beyond

20 years are unlikely to have a substantial impact on cost analyses because

there are many competing causes of death when a person reaches 90 years

of age.

The RSR can be used to approximate the probability of mortality at young

ages, when the background death rate is minimal. The bladder cancer

mortality rate is approximated by 1 ! RSR when background age-related

mortality from other causes is not considered. In the case of bladder

cancer, the RSR is 0.67 and 1 - RSR = 0.33. In reality, there is always a

background death rate in a population, and this rate increases with age. As

noted previously, most bladder cancer patients do not die of bladder

cancer. Only 18.8 percent of the population diagnosed with bladder cancer

survive to 20 years post-diagnosis, but most of these losses are due to

other causes of death than bladder cancer. The RSR, used with the

background mortality rates of the population at the average age at

diagnosis, provides clear information on the survival and mortality dynamic

of that specific population. If the cancer occurs at a younger age than

usual due to its genesis (e.g., chemical induction), however, then the

mortality statistics obtained through the method described above will

underestimate bladder cancer-related mortality. In these cases, the RSR

itself is a better approximation of survival (and derived mortality), allowing

estimation of mortality at young ages when background mortality is

negligible. 

Some environmentally-induced cancers, such as arsenic-induced skin

cancer, occur at much younger ages than those at which the cancers are

typically observed in the general population. Consequently, the use of the

inverse of survival, 1 ! RSR (e.g., 0.33 in the case of bladder cancer), as

an estimate of mortality may be very relevant for calculating benefits

associated with the avoidance of some environmentally-induced cancers. 

Due to the higher mortality estimates that this approach will always

generate, the benefits of avoiding the disease will be larger when the RSR

is used directly to estimate cancer mortality. When there is no evidence

that the disease will occur at an age that is younger than that of the general

population, the calculations that precede this — that link morbidity and

mortality to the average age at diagnosis — are used to estimate direct

medical costs.
8

 Studies were located that used more recent cost data than those used in this analysis. Due to

serious limitations (i.e., data were incomplete), the studies were not used. They are reported in the “Other

Studies” section at the end of Section II.8.B.

Chapter II.8 II.8-17 Cost of Bladder Cancer

II.8.B Costs of Treatments and Services

II.8.B.1. Methodology

II.8.B.1.1 Overview

There is no single typical case or treatment pattern for bladder cancer due

to individual differences in the stage of cancer at diagnosis, multiple

treatment options, patient health and age, and other factors; however,

average costs can be calculated. Treatment of bladder cancer may occur

over a brief or extended period of time, and costs may be limited or

substantial. As discussed in Section II.8.A, bladder cancer has a relatively

low mortality rate, with a relative survival rate of 0.67. The medical costs

of those who die of the disease are usually very different than for those

who survive (this is discussed in more detail in Chapter I.1). This chapter

therefore provides costs for the “average” bladder cancer patient, as well as

for survivors and nonsurvivors as separate patient groups. 

Link to Chapter I.1

II.8.B.1.2 Medical Cost Data

II.8.B.1.2.1 Sources

Medical cost data would ideally be obtained on current medical

expenditures. Although data files are maintained by public and private

sector sources, they are not generally available for public use. In addition,

to obtain reliable cost estimates it is necessary to evaluate very large

databases of charges from a variety of sources. This method was neither

practical nor cost-effective for the development of this chapter, given the

availability of summary data from other sources. A data search was

conducted to locate information in the medical economics literature

regarding medical costs associated with bladder cancer. In addition to a

literature search, most federal agencies dealing with cancer, disabilities,

medical costs and their management, and related issues were contacted for

information, and the various federal databases were discussed with senior

staff at these agencies. 

Very recent cost data were not located.8 However, current (1994) cancer

data were obtained regarding incidence and survival (as reported in Section

II.8.A, above), and were used with cost data from the 1980s described

below. The cost estimates presented in this section are based primarily on

the work of Baker et al. (1989) and Hartunian et al. (1981), respectively,

and on two sources of statistical data: the National Cancer Institute (1999)

and Vital Statistics of the United States, 1993 (NCHS, 1997). 
9

 See Baker et al. (1989 and 1991) for further details. Baker et al. (1991) contains additional

descriptive data regarding the database and methods used for the cost analysis; however, it does not contain

cost data for bladder cancer.

Chapter II.8 II.8-18 Cost of Bladder Cancer

Based on the 1997 review of the medical literature carried out for the

development of this chapter, there do not appear to be widely-adopted new

treatment methods for bladder cancer that alter either the medical costs or

the survival rates for most patients substantially. Consequently, the cost

estimates presented in this chapter may be considered appropriate under

most circumstances (e.g., regional costs may vary). 

II.8.B.1.2.2 Baker et al.’s Cost Estimation Method

Baker et al. (1989) used the Continuous Medicare History Sample File

(CMHSF) to estimate the per-patient average lifetime medical cost of

treating bladder cancer based on data files from 1974 to 1981. They chose

CMHSF because: 

1) it is a nationally representative sample of the Medicare

population (five percent), covering over 1.6 million patients; 

2) it is longitudinal, dating from 1974 to 1981; and 

3) it captures the majority of medical expenses for each beneficiary.

Five Medicare files are included in the CMHSF, which cover:

1) inpatient hospital stays, 

2) skilled nursing facility stays, 

3) home health agency charges, 

4) physicians’ services, and 

5) outpatient and other medical services.9 

Costs not included are outpatient prescription medications and nursing

home care below the skilled level. 

Because CMHSF provides no indication of initial diagnosis, Baker et al.

assumed that disease onset occurred when a diagnosis of bladder cancer

was listed on a hospitalization record following a minimum of one year

without a bladder cancer diagnosis. This assumption is reasonable due to

the high frequency of hospitalization associated with the disease (i.e.,

individuals diagnosed with bladder cancer would be hospitalized). Only

patients with an initial diagnosis during the years covered by the database

(1974-1981) were included. 
Chapter II.8 II.8-19 Cost of Bladder Cancer

Costs associated with bladder cancer were assigned to three postdiagnostic time periods:

• initial treatment, during the first three months following

diagnosis;

• maintenance care, between initial and terminal treatment; and 

• terminal treatment during the final six months prior to death.

As noted in Chapter I.1, the amount paid for service may differ from the

actual medical costs because many insurers and federal programs either

1) pay only a portion of total costs, or 2) pay more than actual costs to

underwrite the care providers’ losses due to underpayment from other

sources. 

Link to Chapter I.1

Baker et al. used provider charges, rather than Medicare reimbursements

(which represent only a portion of most total charges), thus providing a

more accurate cost estimate. To improve the accuracy of the cost

estimates, Baker et al. included cost data on coinsurance, deductibles, and

other cost components. They made four adjustments to the cost estimates

calculated from the CMHSF. First, charges were added for skilled nursing

facilities (SNFs) not covered by Medicare by multiplying the “length of

stay” at an SNF (computed from admission and discharge dates) by the

average daily SNF charge. Second, the annual Medicare Part B deductible

of $60 was added to the reimbursed charges in the database. Third, since

Medicare pays only 80 percent of physicians’ charges, Baker et al. scaled

these reimbursements to 100 percent of physicians’ charges to better reflect

social costs. Finally, they inflated all dollar values to 1984 dollars using the

Medical Care component of the Consumer Price Index. 

II.8.B.1.2.3 Cost Estimates by Treatment Period

Medical costs associated with the initial, maintenance, and terminal cancer

care treatment periods were itemized in Baker et al. (1989) and are shown

in Table II.8-4. The 1989 paper did not report incremental costs or the

costs of other medical services, which would be anticipated to occur while

the patient was receiving cancer treatment (i.e., co-morbidity/background

costs). In order to estimate the incremental costs, a co-morbidity cost of

$2,988 per year (1984 dollars) from Baker et al. (1991) was used in this

analysis. (This is equivalent to $6,394 in 1996 dollars using the CPI

multiplier of 2.14 for 1984 to 1996.) The co-morbidity cost was pro-rated

for this analysis using the specified durations for the initial (three-month)

and terminal (six-month) treatment periods. 

Table II.8-4 lists the incremental costs calculated for the three treatment

periods. Total costs are reported for the initial and terminal care periods. 

Annual costs for the maintenance period are shown and are further
Chapter II.8 II.8-20 Cost of Bladder Cancer

discussed in the “Lifetime Costs” section below. Using the Medical Care

component of the Consumer Price Index (CPI-U), all costs are inflated to

1996 dollars for purposes of this handbook. (The adjustment factor for

1984 to 1996 is 2.14; Bureau of Labor Statistics.) 

Table II.8-4. Average Per Patient Costs for the Three Periods of

Treatment for Bladder Cancer in 1996 dollars 

Costs adjusted for inflation using the Medical Care component of the

Consumer Price Index (CPI-U) 1996:1984 = 2.14 (Bureau of Labor)

Treatment Period

Incremental Cancer Treatment

Cost

Initial

(3 months)

$16,527

Maintenance (per year) $13,277

Terminal

(6 months)

$36,558

Based on Baker et al., 1989, with comorbidity charges from Baker et al., 1991. 

II.8.B.1.3 Calculation of Lifetime Cost Estimates for the

“Average” Bladder Cancer Patient

This section contains a discussion of the calculation of lifetime medical

costs for the “average” bladder cancer patient. The sections that follow

discuss methods and results of calculations for estimating costs for

survivors and nonsurvivors of bladder cancer separately. These separate

approaches were used to address specific requirements of different

activities that EPA carries out using direct medical cost data. Although

Baker et al. (1989) provide useful cost estimates for the three treatment

periods, they do not provide information on two critical aspects of medical

costs: 

1) costs for survivors versus nonsurvivors of bladder cancer. These

may differ substantially. For example, survivors would not have

terminal care costs and may receive maintenance services for an

extended time period.; and 

2) estimates of the duration of the maintenance periods. 

Data regarding age at diagnosis of bladder cancer were obtained from NCI

(1999). Survival and mortality probabilities for each year post-diagnosis

were derived from relative survival rates obtained from NCI (1999), as

discussed in Section II.8.A.5.2. 

Link to II.8.A.5.2

This information was used to address many time-related medical cost

issues. For some aspects of the analysis, however, detailed information
Chapter II.8 II.8-21 Cost of Bladder Cancer

was not available and average values have been used as a reasonable

approximation (e.g., a 20-year maintenance period was assumed for

survivors of bladder cancer). When average values or other assumptions

are used in this analysis, they are so noted. 

As previously noted, there are no substantial differences in survival related

to age at diagnosis, and NCI does not provide age-specific relative survival

rates for each year post-diagnosis. Consequently, it was assumed for this

analysis that the relative survival rates for bladder cancer were the same for

all ages. The survival and mortality probabilities for bladder cancer

patients, which are incorporated into calculations of expected medical costs

as discussed below, are based on this assumption.

The analysis assumes that death always occurs midyear. All bladder cancer

patients are therefore assumed to incur the costs of initial treatment during

the first three months of the illness. The costs incurred after that during the

first year depend on whether the patient:

1) survives through the year, 

2) dies of bladder cancer during the year, or 

3) dies of some other cause during the year. 

Patients who survive through the year incur the costs of initial treatment

($16,527.2) during the first three months, and then incur nine months’

worth of maintenance care costs (0.75 × $13,276.6 = $9,957.4) during the

remainder of the year. The total cost incurred during the first year by those

patients who survive the year is therefore $16,527.2 + $9,957.4 = $26,485. 

Bladder cancer patients who die of bladder cancer during the first year incur

the initial treatment cost and then incur terminal care costs for the remaining

three months of their lives (because those who die are assumed to die

midyear). Total costs during the first year post-diagnosis in this case are

therefore $16,527.2 + (0.5 × $36,557.6) = $34,806. 

Finally, the small percentage of bladder cancer patients who die of causes

other than bladder cancer during the first year post-diagnosis incur the

initial treatment costs and then incur three months’ worth of maintenance

care costs. Total first-year costs for these patients are therefore $16,527.2

+ 0.25 × $13,276.6 = $19,846. 
Chapter II.8 II.8-22 Cost of Bladder Cancer

The expected medical costs for bladder cancer patients during the first year

post-diagnosis, then, may be expressed as:

Expected First-Year Cost: initial treatment costs +

[maintenance care costs for nine months × probability of

survival through first year + terminal care costs for three

months × probability of dying of bladder cancer during first

year + maintenance care costs for three months ×

probability of dying of other causes during the first year]

Example: Expected first-year medical costs of a bladder cancer patient

diagnosed at age 70

As noted above, all bladder cancer patients incur an initial treatment cost of

$16,527. Those who survive through the year also incur maintenance care

costs for the remaining three quarters of the year. The total first-year costs

of those who survive the year are: 

Initial treatment: $16,527.2

Maintenance treatment: $9,957.4 (.75 × $13,276.6)

 

Total First-Year Cost $26,485

About nine percent of bladder cancer patients die of bladder cancer during

the first year. Those who do will incur the initial treatment costs plus half

of the terminal care costs. The total first-year costs of those who die of

bladder cancer during the year are:

Initial treatment: $16,527.2

Terminal care: $18,278.8 (.50 × $36,557.6)

_________________________________________________

Total First-Year Cost $34,806

Finally, a small percentage of patients will die of competing illnesses during

the first year. Because those who die of causes other than bladder cancer

are assumed to die at the midpoint of the year, costs during the first half of

the year are assumed to consist of the initial treatment costs for three

months, plus three months of maintenance care costs as follows:

Initial treatment: $16,527.2

Maintenance treatment: $3,319.1 (.25 × $13,276.6)

 

Total First-Year Cost $19,846

For each subsequent year, costs consist entirely of maintenance care costs

for those who survive the year. For those who do not survive the year,

costs depend on whether death was due to bladder cancer or other causes. 
10 Although this analysis focuses on costs incurred by a patient diagnosed with bladder cancer at

the average age of diagnosis (70 years), some environmentally-induced cancers are diagnosed at earlier

ages than those commonly reported for the cancers (e.g., arsenic-induced skin cancer). As noted in Section

II.8.A, this earlier diagnosis has an impact on the mortality dynamics and on the direct medical costs. The

uncertainty analysis contained in Section II.8.C includes an age-specific analysis of direct medical costs,

that demonstrates the differences that can result in earlier ages of onset than those used in the basic analysis

for this chapter.

Chapter II.8 II.8-23 Cost of Bladder Cancer

For those who die of bladder cancer during the nth year, costs incurred that

year consist of six months of terminal care costs, or $36,558. For those

who die of other causes during the nth year, there are six months of

maintenance care costs, or 0.5 × $13,276.6 = $6,638.

The expected first-year medical cost incurred by the “average” bladder

cancer patient diagnosed at age 70 is a weighted average of the costs of

those who survive the first year, those who die of bladder cancer during the

first year, and those who die of other causes during the first year, where the

weights are the probabilities of each of these occurrences.10 The weighted

average medical costs were calculated for 20 years post-diagnosis and

expected costs were summed over the 20 years. This timeframe was

assumed to be a reasonable period over which additional medical costs

associated with bladder cancer (i.e., maintenance care costs) would be

incurred by bladder cancer patients. 

Although the actual average period of maintenance care for bladder cancer

is not known, the resulting uncertainty about the expected maintenance

costs during a 20-year period is somewhat lessened by the fact that a large

percentage of bladder cancer patients diagnosed at age 70 die within the

20-year period (mostly of other causes), and would therefore not incur

maintenance costs for the full 20 years anyway. 

The expected medical costs for bladder cancer patients during the nth year

post-diagnosis, for n>1, then, may be expressed as: 

Expected nth-Year (n>1) Cost: [maintenance care cost for

one year × probability of survival through nth year +

terminal care cost for six months × probability of dying of

bladder cancer during the nth year + maintenance care cost

for six months × probability of dying of other causes during

the nth year]

Expected Lifetime Cost = Expected first-year cost + the sum

of the (discounted) expected subsequent-year costs 
11 Nonsurvivors include only those who die of bladder cancer and do not include those who die of

any other causes.

Chapter II.8 II.8-24 Cost of Bladder Cancer

$16,527 % ($13,277 × 0.75 × ps1) % ($13,277 × 0.25 × pm1

o

) % ($36,558 × 0.5 × pm1

bc)

%j

20

y'2

(ps

y

×

$13,277

(1 % r)

y&1

) % (pmy

o ×

$6,638

(1 % r)

y&1

) % (pmy

bc ×

$36,558

(1 % r)

(y&1)

)

The first year of treatment is calculated differently from other years

because the first three months of that year are spent in “initial” treatment

and the costs for that period of intensive medical care and surgery are

calculated separately.

The mathematical equation for the expected lifetime medical costs incurred

by the “average” bladder cancer patient over a 20-year period is:

Where:

y = the year post-diagnosis,

ps = the probability of surviving through the year,

pmbc= the probability of dying of bladder cancer during the year,

pmo = the probability of dying from other causes during the year, and

r = the discount rate.

The cost estimates for each year post-diagnosis and the estimate of

undiscounted expected total cost for a 20-year period are shown in Table

II.8-5 for the “average” bladder cancer patient diagnosed at age 70. The

survival and mortality probabilities necessary for the calculations of costs

are shown in Table II.8-3. 

Link to Table II.8-3

II.8.B.1.4 Calculation of Lifetime Cost Estimates Separately

for Bladder Cancer Survivors and Nonsurvivors

II.8.B.1.4.1 Survivors and Nonsurvivors

As noted above, there are differences in medical services provided to

bladder cancer patients who survive the disease (survivors) versus those

who die of the disease (nonsurvivors). Based on cost estimates by Baker et

al. (1989), terminal care is provided for approximately six months to

terminally ill cancer patients. The costs to nonsurvivors for this care

($36,558) is considerably higher than costs for survivors who receive

maintenance care for the same period of time ($6,638).11 

EPA may use the value of a statistical life (VSL) for nonsurvivors and thus

calculate separate costs for survivors and nonsurvivors. The method
Chapter II.8 II.8-25 Cost of Bladder Cancer

shown above to calculate costs for the “average” patient uses the

unconditional probabilities of survival and mortality listed in Table II.8-3. 

The method used to calculate costs for survivors and nonsurvivors

separately requires the probabilities that are conditional on being either a

survivor or nonsurvivor of bladder cancer.

Link to Table II.8-3

The conditional probability of a bladder cancer nonsurvivor dying in the nth

year is the number of nonsurviving bladder cancer patients who die of

bladder cancer during the nth year divided by the total number of bladder

cancer nonsurvivors. Likewise, the conditional probability of a bladder

cancer survivor dying in the nth year is the number of bladder cancer

survivors who die (of causes other than bladder cancer) during the nth year

divided by the total number of bladder cancer survivors. A detailed

explanation of the derivation of these values is provided in Chapter II.2. 

The conditional probabilities of survival and mortality for survivors and

nonsurvivors of bladder cancer are given in Table II.8-6.

Link to Chapter II.2

II.8.B.1.4.2 Calculation of Lifetime Cost Estimates for Bladder

Cancer Survivors

As shown in the example portion of Section II.8.B.1.3, cost estimates are

calculated by summing the costs of the different treatment phases over the

lifetime of the bladder cancer patient. 

Link to Section II.8.B.1.3
Chapter II.8 II.8-26 Cost of Bladder Cancer

Table II.8-5. Expected Costs of Medical Services (in 1996$) for Bladder Cancer Patients (Age of

Onset = 70)a

Medical Costs in the nth Year (undiscounted)

Years PostDiagnosis (n)

if survive

through the

nth year

if die of

bladder

cancer in

the nth year

if die of other

causes in the nth

year

Expected Medical

Costs for the nth Year

Post-Diagnosisc

 (Undiscounted)

1

b 26,485 34,806 19,846 27,432

2 13,277 36,558 6,638 11,276

3 13,277 36,558 6,638 10,790

4 13,277 36,558 6,638 10,299

5 13,277 36,558 6,638 9,802

6 13,277 36,558 6,638 9,301

7 13,277 36,558 6,638 8,794

8 13,277 36,558 6,638 8,283

9 13,277 36,558 6,638 7,769

10 13,277 36,558 6,638 7,254

11 13.277 36,558 6,638 6,740

12 13.277 36,558 6,638 6,224

13 13.277 36,558 6,638 5,708

14 13.277 36,558 6,638 5,195

15 13.277 36,558 6,638 4,685

16 13.277 36,558 6,638 4,205

17 13.277 36,558 6,638 3,772

18 13.277 36,558 6,638 3,384

19 13.277 36,558 6,638 3,035

20 13.277 36,558 6,638 2,723

Expected Total Cost Through the 20th Year Post-Diagnosis for a Bladder

Cancer Patient Diagnosed at Age 70 156,670

a. The probabilities used in this table are from Table II.8-3. The costs are from Table II.8-4.

Links to Tables II.8-3 and II.8-4

b. First-year costs include the charge for “initial” therapy ($16,527). The duration of maintenance care is adjusted

accordingly (see text for discussion).

c. Calculated using the probabilities in Table II.5-3 and the costs in Columns (2),(3), and (4) of this table.

Link to Table II.5-3
Chapter II.8 II.8-27 Cost of Bladder Cancer

Table II.8-6. Conditional Probabilities of Survival and Mortality for Survivors and Nonsurvivors

of Bladder Cancer (Age of Onset = 70)a

Years PostDiagnosis

 (n)

Bladder Cancer Survivors Bladder Cancer Nonsurvivors

Conditional probability of: Conditional probability of:

Surviving

through the nth

year

Dying of some

other cause

during the nth

year

Surviving

through the nth

year

Dying of bladder

cancer during

the nth year

1 .966 .034 .494 .506

2 .934 .033 .451 .043

3 .900 .034 .410 .041

4 .865 .035 .371 .039

5 .828 .036 .334 .037

6 .791 .037 .299 .035

7 .752 .039 .266 .033

8 .713 .040 .234 .031

9 .672 .041 .205 .030

10 .631 .041 .177 .028

11 .589 .042 .151 .026

12 .546 .043 .127 .024

13 .503 .043 .105 .022

14 .459 .044 .085 .020

15 .415 .044 .067 .018

16 .376 .039 .051 .016

17 .341 .035 .036 .015

18 .309 .032 .023 .013

19 .281 .028 .011 .012

20 .255 .025 .000 .011

a. As noted for Table II.8-3, the conditional survival and mortality probabilities for bladder cancer patients

presented here are derived from the RSRs estimated from RSRs obtained from NCI and the survival probabilities

for a matched cohort in the general population. See Section II.8.A.5.2 for an explanation of the estimation of

RSRs.

Link to Section II.8.A.5.2 

The expected medical costs for bladder cancer survivors during the first

year post-diagnosis may therefore be expressed as:

Expected First-Year Cost: initial treatment costs + [maintenance care

costs for nine months × probability of survival through first year +

maintenance care costs for three months × probability of dying of

other causes during the first year]
Chapter II.8 II.8-28 Cost of Bladder Cancer

$16,527 % pm1

s × 0.25 ($13,277) % ps1s × .75 × $13,277

% j

20

y ' 2

ps

y

s $13,277

(1 % r)

y&1

% pmy

s $6,638

(1 % r)

y&1

The expected medical costs for bladder cancer survivors during the nth

year post-diagnosis, for n>1, then, may be expressed as: 

Expected nth-Year (n>1) Cost: [maintenance care cost for

one year × probability of survival through nth year +

maintenance care cost for six months × probability of dying

of other causes during the nth year]

Expected Lifetime Cost = Expected first-year cost + the sum

of the (discounted) expected subsequent-year costs

Note that the probabilities used in these calculations are the conditional

probabilities given in Table II.8-6. They are conditional on the bladder

cancer patient not dying of bladder cancer. 

Using the initial, maintenance, and terminal care costs from Table II.8-6,

the mathematical equation for the lifetime costs incurred by bladder cancer

survivors is:

where: 

y = the year post-diagnosis;

pss = the conditional probability of survival for that year,

conditional on being a survivor of bladder cancer;

 pms = the conditional probability of mortality for that year,

conditional on being a survivor of bladder cancer; and

r = the discount rate.

The expected medical costs for bladder cancer survivors for each year postdiagnosis, as well as the expected total medical costs over 20 years postdiagnosis, are shown in Table II.8-7.
Chapter II.8 II.8-29 Cost of Bladder Cancer

Table II.8-7. Expected Undiscounted Costs of Medical Services (in 1996$) for

Survivors of Bladder Cancer (Age of Onset = 70)

Years PostDiagnosis

(n)

Medical Costs Through the 20th Year Post-diagnosisa

(undiscounted)

Medical Cost if

Survive Through

the nth Year

Medical Cost if Die of

other Causes in the

nth Year

Total Cost Based on

Weighted Averageb

1

c 26,485 19,846 26,262

2 13,277 6,638 12,613

3 13,277 6,638 12,172

4 13,277 6,638 11,713

5 13,277 6,638 11,238

6 13,277 6,638 10,748

7 13,277 6,638 10,243

8 13,277 6,638 9,724

9 13,277 6,638 9,193

10 13,277 6,638 8,649

11 13,277 6,638 8,096

12 13,277 6,638 7,535

13 13,277 6,638 6,965

14 13,277 6,638 6,389

15 13,277 6,638 5,808

16 13,277 6,638 5,255

17 13,277 6,638 4,759

18 13,277 6,638 4,315

19 13,277 6,638 3,916

20 13,277 6,638 3,559

Expected Total (Undiscounted) Cost Through the 20th Year

Post-Diagnosis:

179,153

a. Costs are based on data reported in Table II.8-4, adapted from Baker et al., 1989.

Probabilities of survival and mortality, taken from Table II.8-6, are conditional on surviving bladder

cancer.

b. Weighted average of the costs incurred by survivors who survive the year and the costs incurred

by survivors who die of other causes during the year. Weighting is based on the conditional

probabilities provided in Table II.8-6.

c. Costs during the first year include a charge for “initial” therapy ($16,527), and the duration of

maintenance or terminal care is adjusted accordingly. See text for discussion.

II.8.B.1.4.3 Calculation of Lifetime Cost Estimates for Bladder

Cancer Nonsurvivors

Nonsurvivors of bladder cancer will incur initial, maintenance, and terminal

costs. Their lifetime medical costs associated with the disease can be

calculated from the costs per treatment period shown in Table II.8-4 and

the conditional probabilities for nonsurvivors of bladder cancer shown in

Table II.8-6. 

Links to Tables II.8-4 and II.8-6
Chapter II.8 II.8-30 Cost of Bladder Cancer

As Table II.8-6 indicates, about 55 percent of bladder cancer nonsurvivors

die within one or two years of diagnosis. Of the remaining 45 percent of

nonsurvivors, death from bladder cancer may occur anywhere within the

remaining 18 years of the 20-year period considered in this analysis, with

the conditional probabilities of death ranging from four percent in the third

year post-diagnosis to about one percent in the twentieth year. As with

bladder cancer survivors, medical costs for nonsurvivors each year postdiagnosis were calculated as a weighted average of the costs incurred by

those who survive the year and those who die (of bladder cancer) during

the year. 

It was assumed that those who die during a year receive six months of care

(as was done for the survivors above). It was also assumed that terminal

care lasting six months would be provided to all nonsurvivors. Therefore,

unless death occurred during the first year, when initial care was assumed

to occur, the care costs assigned to the last year of life were terminal costs. 

If death occurred during the first year post-diagnosis, it was assumed that

initial care and three months (half of the total) of terminal care were

provided.

The general description of medical costs for nonsurvivors may be

expressed as:

Expected First-Year Cost: [initial costs + half the terminal

costs] × probability of mortality during the first year +

[initial costs + maintenance care costs for nine months] ×

probability of survival for first year 

Expected nth-Year (n>1) Cost: maintenance care cost for

one year × probability of survival through nth year +

terminal costs × probability of mortality in nth year

Expected Lifetime Cost = Expected first-year cost + the sum

of the (discounted) expected subsequent-year costs 

As with the cost calculations for bladder cancer survivors, the probabilities

used in these cost calculations are the conditional probabilities given in

Table II.8-6, in this case, conditional on dying of bladder cancer.

Link to Table II.8-6
Chapter II.8 II.8-31 Cost of Bladder Cancer

$16,527 % pm1

ns × 0.5 ($36,558) % ps1ns × .75 × $13,277

% j

20

y ' 2

ps

y

ns $13,277

(1 % r)

y&1

% pmy

ns $36,558

(1 % r)

y&1

Using the initial, maintenance, and terminal care costs from Table II.8-6,

the mathematical equation for the expected lifetime costs incurred by

nonsurvivors is: 

where: 

y = the year post-diagnosis;

psns = the conditional probability of survival for that year,

conditional on being a nonsurvivor of bladder cancer;

pmns = the conditional probability of mortality for that year,

conditional on being a nonsurvivor of bladder cancer; and

r = the discount rate.

The costs are summed over all years from diagnosis to death. Maintenance

care costs are not added in the last year of life because the patient is

assumed to receive terminal care during the six months assumed to

constitute this period. (The discounted results are shown in the “Results”

section that follows.) The approach is the same as that shown in the

example in Section II.8.B.1.3. When the costs for each year are summed

over a period of 20 years post-diagnosis, the total 20-year cost per

nonsurvivor is obtained. These costs are shown in Table II.8-8. 

Link to Section II.8.B.1.3

The results shown above can be used to calculate costs for an “average”

bladder cancer patient, from the costs calculated for survivors and

nonsurvivors. The expected medical costs of a bladder cancer patient can

be calculated as a weighted average of the expected costs of survivors and

nonsurvivors of bladder cancer. This approach, which was not used to

calculate costs for the “average” patient in this chapter, yields the same

results as the approach that was shown in Section II.8.B.1.3. In brief, the

approach used in this chapter for the average patient (in Section II.8.B.1.3)

uses cost data for all patients, weighted by their average utilization of

services. If the survivor and nonsurvivor data were used, which

incorporate utilization of services, the cost results obtained through

separate calculations for the two subgroups are simply re-aggregated based

on each group’s proportional contribution to the cost. A discussion of why

these two approaches yield the same results is provided in Chapter II.2

(Section II.2.B.2.3)

Link to Chapter II.2.B.2.3
Chapter II.8 II.8-32 Cost of Bladder Cancer

Table II.8-8. Expected Undiscounted Costs of Medical Services (in 1996$) for

Nonsurvivors of Bladder Cancer (Age of Onset = 70) 

Years PostDiag-nosis

(n)

Medical Costs Through the 20th Year Post-diagnosisa

(undiscounted)

Medical Cost if

Survive Through the

nth Year

Medical Cost if Die

in the nth Year

Total Cost Based

on Weighted

Averageb

1

c 26,485 34,806 30,699

2 13,277 36,558 7,543

3 13,277 36,558 6,936

4 13,277 36,558 6,352

5 13,277 36,558 5,793

6 13,277 36,558 5,264

7 13,277 36,558 4,750

8 13,277 36,558 4,261

9 13,277 36,558 3,797

10 13,277 36,558 3,359

11 13,277 36,558 2,955

12 13,277 36,558 2,564

13 13,277 36,558 2,200

14 13,277 36,558 1,862

15 13,277 36,558 1,551

16 13,277 36,558 1,274

17 13,277 36,558 1,016

18 13,277 36,558 784

19 13,277 36,558 577

20 13,277 36,558 390

Expected Total (Undiscounted) Cost Through the 20th Year PostDiagnosis:

93,927

a. Costs are based on data reported in Table II.8-4, adapted from Baker et al., 1989.

Probabilities of survival and mortality, taken from Table II.8-6, are conditional on dying of bladder

cancer within 10 years post-diagnosis.

Links to Tables II.8-4 and II.8-6

b. Weighted average of costs incurred by nonsurvivors who survive the year and those who die

during the year. Weighting is based on the conditional probabilities shown in Table II.8-6.

c. Costs during the first year include “Initial” therapy ($16,527) , and pro-rated maintenance or

terminal care. See text for discussion.

II.8.B.2. Results of Medical Cost Analysis

The per-patient lifetime direct medical costs calculated for the “average”

bladder cancer patient (as shown in Table II.8-5), bladder cancer survivors

(as shown in Table II.8-7) and bladder cancer nonsurvivors (as shown in

Table II.8-8) diagnosed at age 70 are listed in Table II.8-9. Undiscounted

costs and costs discounted at three, five, and seven percent back to year
12 As noted previously, costs will be higher if ages of diagnosis are earlier. The uncertainty

analysis in Section II.8.C contains additional cost estimates for earlier ages of diagnosis.

Chapter II.8 II.8-33 Cost of Bladder Cancer

one (time of diagnosis) are shown.12 Discounting was carried out for 20

years following diagnosis and comprises the assumed full duration of

maintenance care for survivors. 

Links to Tables II.8-5 and II.8-7

Table II.8-9. Incremental Per-capita Medical Costs for the Average Bladder Cancer Patient,

Survivors, and Nonsurvivors (Diagnosed at Age 70) Undiscounted and Discounted at 3, 5, and

7 Percent ($1996)

Patient Group

Discount Rate

Undiscounted 3 5 7

Survivors $179,153 $148,149 $132,653 $120,132

Nonsurvivors $93,927 $83,449 $77,983 $73,424

Average Patient $156,670 $131,081 $118,231 $107,811

See text for a definitions of patient groups.

The costs presented in this chapter were current in the year the chapter was written. They can be updated using

inflation factors accessible by clicking below.

Link to inflation factors

The results show substantially higher costs for survivors than nonsurvivors,

due primarily to their ongoing maintenance care. It is noted that although a

20-year maintenance period for bladder cancer survivors is assumed (with

adjustment for background mortality that reduces utilization), the actual

average period of maintenance is not known. Maintenance periods are

likely to vary considerably among individuals, depending on age, health

status, access to care, and other factors. Maintenance care costs comprise

the major cost element in determining the “average” patient costs, due to

the relatively low mortality attributable to bladder cancer. The uncertainty

surrounding the period of maintenance care for survivors could therefore

have an impact on the cost estimates for the “average” patient and for

survivors of bladder cancer. Because less than half of bladder cancer

patients diagnosed at age 70 survive beyond the first ten years postdiagnosis (most die of causes other than bladder cancer), the impact of

maintenance care costs on the costs of the “average” 70-year-old patient is

less than it would be if there were a lower overall mortality rate (i.e., if

diagnosis occurred at younger ages). 
Chapter II.8 II.8-34 Cost of Bladder Cancer

II.8.B.3. Other Studies 

A number of other studies were reviewed for this analysis. Most had

shortcomings with respect to the duration of the study (e.g., only one year

of medical cost data obtained) or the age of the data. A select group of

these are discussed below.

II.8.B.3.1 Hartunian et al.

Hartunian et al.’s (1981) method of estimating the costs of illness has been

discussed in Chapter I.1. The authors defined expected treatment on a

yearly basis, developed annual costs of the treatment, and combined the

cost data with survival data. Using this method, they estimated the costs

of cancer at eight sites, including cancer of the urinary system, which

includes bladder, kidney, and related structures.

Link to Chapter I.1

Hartunian et al. estimated the costs of inpatient stays using a 1976 study by

Scotto and Chazze of newly diagnosed cancer patients followed over a

two-year period to establish hospitalization and payment patterns. These

data were supplemented by questionnaire data. The Hartunian data are

quite old (over 20 years) and both survival and treatment methods have

changed since that time. Their estimated survival for bladder cancer was

0.15 percent, which is considerably lower than the current survival

statistics and impacts the percentage of patients who access care

components (reducing medical cost estimates through high death rates). 

Medical treatment has also changed considerably since their data were

obtained. In addition, they also limit their analysis to two years postdiagnosis, which is not sufficient due to both the prolonged period of

detailed follow up care that is required (note the 20 year post-diagnosis

time frame for increased mortality) and the frequency of relapse. 

II.8.B.3.2 Riley et al.

A study of Medicare payments from diagnosis to death in elderly cancer

patients was carried out by Riley et al. (1995). The cost estimates are

based on Medicare payments only, which do not include: most nursing

home care, home health care, pharmaceuticals unless supplied for

inpatients, out-of-pocket expenses, deductibles, charges in excess of

Medicare paid by other sources (e.g., coinsurance), and other related

medical services not covered by Medicare. 

Medicare patients younger than 65 were not included and the average age

at diagnosis of the bladder cancer cohort was 75.2 years, in contrast with

the 70 year national average. Riley et al. note that patients diagnosed at

younger ages have higher costs. In addition, those diagnosed at earlier

stages have a better prognosis but may have higher medical costs (due to

longer continuing care). 
Chapter II.8 II.8-35 Cost of Bladder Cancer

Medical costs are reported for all patients who were diagnosed with

bladder cancer, regardless of other diseases or their ultimate causes of

death. Due to the links among bladder cancer, smoking, and numerous

other diseases, this method is especially problematic because costs

associated with other illnesses may be commingled with the bladder cancer

costs. 

The background cost per year for medical services was estimated by Riley

et al. to be $2,250 ($3,154 in 1996 dollars), based on the experience of all

people over the age of 65 who received Medicare-compensated care. The

study excluded those costs that occur during the last year of a person’s life. 

Consequently, the estimated background value may underestimate

background costs, especially as age and associated mortality risks increase

over the age of 65. 

Riley et al. estimated that the total average Medicare payment from

diagnosis to death for persons diagnosed with bladder cancer was $57,629

in 1990 dollars, adjusted to $80,796 in 1996 dollars (CPI 1990:1996 =

1.402). This estimate is considerably lower than those obtained from

Baker et al. The difference is most likely due to the exclusion of many

costs not covered by Medicare, and the various other factors described

above that tend to reduce the cost estimate. Due to these limitations, the

Riley et al. study is not recommended for a benefits evaluation.

II.8.C. Uncertainties and Limitations

As noted periodically in the above discussion, there is uncertainty

surrounding various aspects of the analysis. Information concerning some

inputs to the analysis was limited. Although a complete uncertainty

analysis is beyond the scope of this work, the significant sources of

uncertainty are discussed. Limitations of the scope of the analysis are also

discussed.

II.8.C.1. Uncertainties Surrounding Key Inputs to the Analysis

II.8.C.1.1. Analysis of Medical Costs

The cost estimates based on Baker et al. (1989, 1991) have a number of

limitations, many of them noted by Baker et al. (1991), Mor et al. (1990),

and Mor (1993). Most of these limitations arise from the use of CMHSF. 

Medicare data have five limitations that decrease its value for calculating

the average lifetime direct medical costs of treating bladder cancer. First,

Medicare covers medical services only for most persons age 65 and over,

disabled persons entitled to Social Security cash benefits for at least 24

months, and most persons with end-stage renal disease. All patients not

covered by Medicare are excluded from the database, including all non-
13 This figure represents those enrolled in Medicare Part A; 95 percent of those enrolled in

Medicare Part A choose also to enroll in Medicare Part B.

Chapter II.8 II.8-36 Cost of Bladder Cancer

disabled women under 65, and women over 65 using private health

insurance (Baker et al., 1991). 

Given that diagnosis of bladder cancer occurs in almost half of all patients

before age 65, the CMHSF excludes a significant number of younger

patients. According to Mor et al., treatment for younger women for other

cancers tends to be more intensive (and therefore more costly per unit

time) than treatment for older women, though older women tend to have

longer hospital stays. This is likely to be the case for bladder cancer as

well, and may be supported by the improved cancer-specific five-year

survival observed among younger versus older patients. Because these

differences counteract each other, the omission of younger patients from

the Baker et al. analysis is not expected to affect the results substantially. 

In addition, the majority of senior citizens are enrolled in Medicare (Ibid);

differences in medical costs incurred by senior citizens not using Medicare

should have little effect on overall cost estimates.13

Medicare also does not cover self-administered drugs, intermediate nursing

care, long-term nursing care, and some expensive new treatments (such as

bone marrow transplants). For some patients, these costs may represent

significant percentages of total treatment costs. Most direct medical costs,

however, appear to be covered by the CMHSF database and are included in

Baker et al.’s analysis. In addition, Baker et al. made adjustments for some

cost elements not covered by Medicare (see Section II.8.B).

Another drawback is that Baker et al. were not able to identify bladder

cancer patients in CMHSF whose diagnosis and first course of therapy did

not involve hospitalization. In an analysis of Rhode Island non-bladder

cancer patients covered by Medicare, Mor et al. determined that a small

percentage of patients were initially diagnosed without hospitalization, and

had substantially lower initial and subsequent treatment costs (Mor et al.,

1990). This omission likely causes average treatment costs to be

overestimated, though by relatively little.

A fourth drawback is that Baker et al. (1989) provide no information

concerning the duration of the maintenance period for bladder cancer. The

analysis in this chapter considers a 20-year period. If the average duration

of maintenance care among patients of bladder cancer is shorter (longer)

than 20 years, the estimates of the costs incurred would be biased upward

(downward). This function is true for survivors as well as nonsurvivors of

bladder cancer. 
Chapter II.8 II.8-37 Cost of Bladder Cancer

A fifth drawback is that the data used by Baker are from the period 1974 to

1981, leading to uncertainty regarding changes in treatment methods and

costs.

Finally, the reliability of the data contained in the database used by Baker et

al. varies. An independent analysis of CMHSF performed in 1977 by the

Institute of Medicine of the National Academy of Sciences found that the

frequency of discrepancies in principal diagnoses varied among diseases

(Baker et al., 1991). It is unclear whether the presence of misnamed

diagnoses contained in CMHSF potentially increases or decreases the

resultant cost estimates.

Overall, despite the limitations described above, Baker’s analysis of the

CMHSF data represents the most nationally-representative, per-patient

lifetime estimate of the direct medical costs of treating bladder cancer to

date. Their cost estimates are based on sound criteria. Some of the data

limitations underestimate costs, and others overestimate costs; the sum of

the data limitations therefore decreases the magnitude of error. More of the

uncertainties in their analysis appear to underestimate costs, however; the

net result is a likely underestimation of actual direct medical costs.

Although there are some uncertainties associated with the estimation of the

survival and mortality probabilities used in the calculation of expected

medical costs (discussed below), these uncertainties are likely to be

relatively small. As noted in the text, NCI RSRs used to estimate survival

and mortality for this analysis are based on the survival experience of a

large group of bladder cancer patients considered in relation to the survival

experience of the general population.

An additional limitation of this analysis is that medical costs incurred as a

result of bladder cancer, but not considered by Baker et al., may arise as a

result of treatment for bladder cancer. Secondary cancers and other

adverse health effects may occur due to radiation, chemotherapy treatment,

and other therapies. These effects may occur substantially after bladder

cancer treatment has been completed and can incur added medical costs not

considered in this chapter. Many concurrent and related costs are included,

however, due to the methods used by Baker et al. The authors considered

all costs due to any medical services, minus the background costs of all

individuals who did not have cancer.

As with all chronic diseases, it is difficult to estimate the period following

diagnosis and initial treatment, during which additional medical monitoring

and follow-up care take place. Data have not yet been located regarding

the average duration of maintenance care for bladder cancer. For purposes

of this analysis, 20 years of follow-up care was assumed to be reasonable,

due to the severity of the disease and the consequences of bladder surgery.
Chapter II.8 II.8-38 Cost of Bladder Cancer

As noted above, there is a prolonged period during which mortality

continues to increase, indicating that morbidity must be monitored for

many years post-diagnosis. The estimated time required for maintenance

care may be revised in the future if data are located. 

There is additional uncertainty associated with the age of onset of the

disease and the resulting medical costs. If bladder cancer is induced at an

earlier than average age (70 years), as may be the case with arsenic-induced

bladder cancer if it follows the skin cancer pattern, the direct medical costs

will be greater, particularly the maintenance costs. Younger patients will

survive to require medical treatment and follow-up for a longer period (on

average) than those who are diagnosed at age 70, because they have fewer

competing causes of death. In addition, bladder cancer frequently recurs

and patients require careful monitoring; some require treatment for

recurrent cancer. The latter is more likely with young patients who may

survive for many decades after initial diagnosis.

II.8.C.2. Scope of the Analysis

The analysis in this chapter was confined to direct medical costs by the

patient. As noted in Chapter I.1, willingness-to-pay has many other cost

elements. 

Link to Chapter I.1

The analysis does not include time lost by the patient or their family and

friends who provide care. Also omitted from cost of illness estimates are

pain and suffering on the part of the patient or their family and friends,

changes in job status among previously employed patients, training for new

job skills due to physical limitations, or medical costs incurred after the 20-

year maintenance period. These cost elements may comprise a substantial

portion of the total cost of bladder cancer. 
Chapter III.1 III.1-1 Adverse Developmental Effects

CHAPTER III.1. INTRODUCTION TO THE COSTS OF DEVELOPMENTAL

ILLNESSES AND DISABILITIES

Clicking on the sections below will take you to the relevant text.

III.1.A Overview

III.1.A.1 Description

III.1.A.2 Overall Costs

III.1.B. Causes of Developmental Effects

III.1.B.1 Somatic Cell Damage

III.1.B.2 Heritable Cell Damage

III.I.B.3 Developmental Toxicity Studies

III.1.B.4 Genotoxicity

III.1.B.5 Categories of Causes of Developmental Damage

III.1.C. Valuation Issues

III.1.C.1 Short- Versus Long-term Effects

III.1.C.2 Occurrence of Illnesses

III.1.C.3 Multiple Effects

III.1.C.4 Prognosis

III.1.D. Environmental Agents Associated with Developmental Toxicity

III.1.D.1 Developmental Toxicity Agents

III.1.D.2 Genotoxic Agents
1

 These differences are described in a recent NAS report, developed by pediatricians,

epidemiologists, toxicologists, and environmental scientists.

Chapter III.1 III.1-2 Adverse Developmental Effects

CHAPTER III.1. INTRODUCTION TO THE COSTS OF DEVELOPMENTAL

ILLNESSES AND DISABILITIES

III.1.A Overview

This section of the handbook focuses on developmental illnesses and

disabilities that may be associated with exposure to environmental agents. 

Its chapters (III.2 through III.9) provide data on the direct medical costs of

individual effects or groups of similar types of developmental effects. As in

previous chapters, information is not included on all elements of 

willingness to pay (WTP) to avoid the illness. A summary of the cost

elements that comprise WTP is provided in Chapter I.1. Due to the

availability of data on some additional cost elements in the source used to

obtain direct medical costs, data are provided on the additional cost

elements at the end of some chapters in this section.. Some of elements

for which cost estimates are not available, such as the WTP to avoid pain

and suffering in children, are likely to be very substantial in the case of

adverse developmental effects. 

Link to Chapter I.1.

This chapter contains a description of some aspects of the environmental

causes of developmental toxicity, types of effects, and general issues

related to economic valuation of developmental effects, as well as a list of

agents associated with developmental toxicity and genotoxicity. 

III.1.A.1 Description

Developmental effects cover a wide spectrum of short- and long-term

illnesses, disabilities, and conditions. Pre- and postnatal exposure of

children carries risks that differ in many respects from those of adults due

to the unique physiological characteristics of developing individuals, their

food consumption patterns, other exposure characteristics, and other

factors (NAS, 1994).1 For example, children (especially infants) have a

much higher food intake than adults in relation to their body weight. They

may have much greater contact with soil, and their skin absorption differs

from adults.

Developmental illnesses and disabilities may be referred to in some EPA

sources as “adverse developmental effects,” and are defined in this

handbook as any adverse health effect resulting from exposure of the

mother or father pre-conception, of the mother during pregnancy, or of a
2

 Many of these are referred to as “birth defects” in the popular press, especially physical effects. 

They fall into the broad categories of structural abnormalities, functional deficiencies, and growth

alterations (Kimmel, 1993).

3

 Adverse developmental effects, which include all of the types of effects discussed above, are

referred to as “developmental effects” subsequently in this chapter, for brevity. The term implies adverse

effects, rather than simply any effect that deviates from the norm.

Chapter III.1 III.1-3 Adverse Developmental Effects

child to toxic substances. Adverse developmental health effects range from

physical deformities such as cleft palate, cleft lip, and shortened limbs, to

cognitive impairments such as mental retardation, hyperactivity, and

delayed cognitive development. Effects also include reduced birth weight,

growth retardation, adverse hormonal changes, and abnormalities in

physiology (e.g., liver and kidney function) and effects resulting from

genetic abnormalities (e.g., Down syndrome).2

There are hundreds of developmental effects listed under the general

category of congenital anomalies in the International Classification of

Diseases (ICD-9-CM).3 ICD-listed effects include structural abnormalities

that result from errors in embryogenesis or the fetal period (Bennett and

Plum, 1996) and are usually identifiable at, or shortly after, birth. 

Synonyms include congenital malformations, birth defects, or structural

anomalies (Bennett and Plum, 1996). Other developmental effects include

non-structural abnormalities such as physiological disturbances. Still other

effects may occur during childhood; for example, lead-induced brain

damage can occur up through late adolescence (discussed in Chapter III.9). 

Those developmental effects chosen for inclusion in this handbook include

illnesses and disabilities that could reasonably be associated with

environmental exposures to chemicals and that had sufficient medical cost

information to be of use in economic valuations. 

Major congenital anomalies, which comprise the majority of developmental

effects discussed in this handbook, are identified in two to three percent of

all newborn infants, independent of ethnic group or country of origin. 

Many anomalies are not detected at birth. During the first year of

observing the child, as developmental milestones are anticipated, the rate

of diagnosis doubles. By school age (five years) approximately five to

seven percent of children have been diagnosed with a major congenital

anomaly or learning disability (Bennett and Plum, 1996). (Learning

disabilities are not included in this edition of the handbook but may be

included in the future.) 

III.1.A.2 Overall Costs

The medical and related costs of developmental effects are substantial. 

Low birth weight (LBW), which is a relatively common occurrence in the
4

 Genotoxicity deals with the effects of chemicals on DNA and on mechanisms of inheritance in

cells and organisms, focusing on the process of mutagenesis (Hoffmann, 1991). 

Chapter III.1 III.1-4 Adverse Developmental Effects

United States, has been estimated to cost approximately 35 percent ($4

billion) of the $11 billion spent on health care for infants. Medical care

resulting from LBW may cost in excess of one million dollars for a single

child (Lewitt et al., 1995). Congenital anomalies, which are a subset of all

developmental effects, were estimated to cost $6.3 billion in 1980 in the

United States and represented 1.4 percent of the total cost of illness (Rice

et al., 1985). This estimate included direct medical costs and lost

productivity, but not special educational costs and developmental services. 

A similar type of evaluation in 1991 found the national cost of a single

effect, cerebral palsy, to be $1.2 billion. This estimate did not include longterm institutional care, which is often very costly (National Foundation for

Brain Research, 1992). 

Over one half of children evaluated in subspecialty medical clinics or

admitted to hospitals in North America are treated due to disorders arising

from congenital anomalies. Two thirds of deaths in pediatric hospitals are

also due to these anomalies. In addition, the rate of congenital anomalies

in early miscarriages is approximately ten times higher than that observed in

infants (Bennett and Plum, 1996). Serious developmental effects are likely

to be the cause of pregnancy loss in many cases. 

III.1.B Causes of Developmental Effects

The biology of developmental toxicity proceeds by two primary routes:

damage to heritable cell lines and damage to somatic cell lines. Heritable

cells carry the genetic materials from generation to generation (egg and

sperm) and damage typically involves alterations in chromosomes. 

Genotoxic chemicals cause mutations or death of heritable cell lines and the

mutations (genetic changes) may be perpetuated through generations.4

When cell death occurs, there is no perpetuation of cell lines, whether

mutated or not. Somatic cells (non-reproductive cells) may also be

damaged by genotoxins or other types of toxins. Somatic cell damage or

death affects those cells directly exposed or proceeding from the exposed

cells in the same individual (damage is not conveyed from one generation

to the next). This section is provided to explain the rationale for including

heritable and non-heritable birth defects in the COI handbook. It also

provides information on the biological mechanisms behind some birth

defects. 
Chapter III.1 III.1-5 Adverse Developmental Effects

III.1.B.1 Somatic Cell Damage

Chemicals may cause cellular toxicity, including toxicity to genetic

material. Somatic cell damage affects the exposed individual primarily by

altering cell structure or function. Exposure to chemicals that are

genotoxic or toxic to the cells in other ways during the prenatal period can

cause damage to somatic cell lines during development by altering or killing

cells. Exposure thus results in damage to cells, or in the absence of cells

that would arise from the damaged cell. Although redundancy occurs in

many developing systems and damage does not always lead to birth

defects, somatic cell damage from cellular toxicity may be responsible for

many of the birth defects discussed in this section. For example,

genotoxicity, and other types of cellular toxicity that prevent cell

replication, limit the production in the embryo of neurons in the central

nervous system (CNS). They also limit the development of limb buds that

eventually become limbs and digits, resulting in shortened or absent limbs

(discussed in Chapter III.4). Cleft lip or palate (discussed in Chapter III.3),

some heart anomalies (discussed in Chapter III.5), and spina bifida

(discussed in Chapter III.6) may also result from failure of early cells to

form and migrate properly. (There may also be a heritable component to

some occurrences of these effects that affects cell replication and

movement, as discussed in Section III.1.B.2 below.) 

Changes in somatic cells may also affect the offspring of an exposed

woman when the cellular damage alters her physiology or reproductive

system in such a way that it impacts her children (e.g., via maternal

toxicity). For example, a woman whose toxic exposure caused severe

kidney damage may not have the necessary capacity in her kidneys to

adequately process the substantial increase in fluid load that accompanies

pregnancy. Renal failure and the related toxicity to the mother will have a

serious and sometimes fatal impact on the child. Generally, when past

toxicity to the mother is the cause of an adverse developmental effect, it is

not reported in the toxicological literature. This omission occurs because

the studies are looking for toxicity in the offspring that is independent of

maternal toxicity, and is appropriate from a scientific perspective to

evaluate some aspects of developmental toxicity. Information is then

lacking, however, that may be appropriate for a benefits assessment on the

simultaneous occurrences of maternal and offspring toxicity.

III.1.B.2 Heritable Cell Damage

Heritable cells carry the genetic materials from generation to generation

(via egg and sperm) and damage typically involves alterations in

chromosomes in these cells. Changes in heritable cells may be perpetuated

through generations. The mutations include alterations in specific
Chapter III.1 III.1-6 Adverse Developmental Effects

chromosomes, as well as in the number of chromosomes (e.g., Down

syndrome occurs when three of chromosome number 21 are present rather

than the usual two chromosomes). 

The mutations may be observable in all persons with the chromosomal

alteration (dominant disorders), or may be expressed only when two

chromosomes (one from each parent) with the same alteration are present

(recessive disorders). Consequently, many mutations are not continuously

observable because they are recessive, but may appear when both parents

have the same recessive mutation (Hoffmann, 1991). Many important

areas of the chromosomes have substantial redundancy so that mutations in

small portions of the chromosome are compensated for by other portions

that carry out the same function and remain intact. 

Numerous repair mechanisms operate in cells so that exposure to

genotoxins does not necessarily result in permanent damage to cells

(Hoffmann, 1991). When a chemical is shown by studies to be genotoxic,

however, it has the potential to cause chromosome damage. The specific

site of chromosome damage cannot be predicted because chemicals alter

the basic structure or mechanisms related to DNA replication. 

Consequently, damage may occur at any site and the nature of any resulting

defect can vary accordingly. 

In 1984, the National Academy of Sciences estimated that about 0.3 to 0.4

percent of infants have syndromes associated with chromosomal

abnormalities (NAS, 1984). More recently these have been associated

with approximately seven to ten percent of stillbirths and infant deaths

(Bennett and Plum, 1996). As the human genome is mapped, understanding

and identification of genetic defects will increase. Some relatively common

effects that are based on genetic changes include Down syndrome

(discussed in Chapter III.8), Turner’s syndrome, and Klinefelter syndrome. 

Some genetic diseases that are recessive (e.g., cystic fibrosis, Tay-Sachs,

and phenylketonuria) are thought to occur primarily through inheritance

rather than new mutations (Hoffmann, 1991). 

III.I.B.3 Developmental Toxicity Studies

Most evidence of developmental toxicity is obtained from human

epidemiological studies or animal toxicity studies. The majority of data are

obtained from animal studies due to ethical issues and difficulties in

conducting large-scale controlled human studies. As discussed above,

many developmental effects are not observed until many years after birth;

consequently, birth defects are poorly tracked in the population with only

a small percentage reported formally (i.e., on birth certificates). Other

complicating factors include large variations in exposure, lifestyle, and

genetically-determined risks of birth defects within most populations.
Chapter III.1 III.1-7 Adverse Developmental Effects

Animal studies are often preferred due to the difficulty in conducting

human studies and for a variety of other reasons. These reasons include

cost, ethical considerations, and the level of control over exposure

concentrations and durations. Confounding study factors are limited in an

animal study and an evaluation of all observable structural and functional

effects is possible. There are many limitations to animal studies, including

considerable interspecies differences in neurological capabilities and

potential damage, and some physiological differences between study

mammals and humans.

Often the implications of effects observed in human and animal studies are

not clear from a health or economic perspective. For example, a recent

study by Kanitz et al. (1996) found that some water disinfection chemicals

were associated with reduced infant head size and body length in some

communities (characteristics easily extracted from birth certificates). 

These features usually suggest retarded development. Although giving

clear reason for concern, the immediate and long-term health effects of

these measures aren’t clear. Such external measures don’t provide specific

information on the more important internal effects on the brain or other

organ systems or on future development. Consequently, the data cannot be

easily used to establish the benefits of avoidance, even though most people

would agree that a considerable benefit is to be gained from avoiding the

observed effects. Some human studies (e.g., of mercury) provide more

straightforward indications of developmental toxicity. 

Animal studies of developmental toxicity have been carried out for many

environmental agents, and are required by the federal government for some

groups of chemicals (e.g., as part of the registration process for pesticides

and some pharmaceuticals). Although effects seen in humans may be

different than those seen in animal studies, it is assumed that developmental

effects in animals indicate the potential for developmental toxicity in

humans (EPA, 1991). Agents associated with developmental toxicity are

listed in Section III.1.D below.

III.1.B.4 Genotoxicity

Genotoxicity, as discussed above, may result in mutations or death of

somatic or heritable cell lines. Ethical considerations preclude the testing

of toxic agents on humans, but data on genotoxicity exist from studies of

occupationally-exposed workers. Incidental exposure to some chemicals

present in the workplace has been shown to cause chromosomal damage in

some workers. For example, exposure to vinyl chloride, styrene, benzene

and ethylene oxide have been positively associated with chromosomal

aberrations (Hoffmann, 1991). A high incidence of spontaneous abortions

was observed in nurses exposed to genotoxic cancer therapy drugs. 

 Even when these studies have been carried out, it is very difficult to
5

 The Environmental Mutagen Information Center in Oak Ridge, Tennessee, had data on 21,000

chemicals in their database in 1990 (Hoffmann, 1991).

Chapter III.1 III.1-8 Adverse Developmental Effects

establish unequivocally whether a chemical causes genotoxicity in humans

using epidemiological studies, due to a number of factors, including: 

• the inability to fully characterize all exposures that may contribute

to genotoxicity;

• the likelihood that severe damage will result in early miscarriage

and not be observable ;

• the largely random occurrence of many birth defects (e.g., Down

syndrome); and

• the separation in time between germ-cell mutations and effects in

subsequent generations (Hoffmann, 1991).

In addition, damage to cells, whether heritable or somatic, may be followed

by cell repair or death, which may not result in an adverse outcome. 

Multiple factors determine whether an adverse effect at the cellular level

will result in damage to a child.

Some studies in animals have been performed. The availability, however,

of relatively quick and inexpensive in vitro assays on human or other

mammalian cell cultures using somatic and reproductive cells, or on small

animals or microorganisms, make these the methods of choice for most

genotoxicity tests. In addition, researchers are beginning to study the

mutagenicity of environmental mixtures that occur in their natural setting. 

Hannigan et al. (1996) recently evaluated the mutagenicity of urban

particulate air pollution samples. This type of research has the potential to

provide very useful information regarding the mutagenic potential of

environmental pollutants. 

Thousands of chemicals have been evaluated using various in vitro tests of

genotoxicity to determine the potential for genotoxic effects.5 This

information has been commonly used as an indicator of a chemical’s

carcinogenic potential, because there is a link between genotoxicity and

cancer (Hoffmann, 1991). This information also has implications for a

chemical’s potential to cause developmental toxicity. Genotoxicity is not,

however, used at this time to establish a causal link between developmental

effects and exposure. Even when human data are available indicating that

an agent causes mutations, it is not possible to predict the type of

developmental effect that would arise from the mutation because damage

can occur at thousands of sites on the chromosomes.

Agents associated with genotoxicity are listed in Section III.1.D. below.
Chapter III.1 III.1-9 Adverse Developmental Effects

III.1.B.5 Categories of Causes of Developmental Damage

The contributions to congenital anomalies by various factors have been

estimated: 

congenital infection 2 - 3%

maternal diabetes 1.5%

other maternal illness <1.5%

chromosomal 6%

monogenic 7.5%

multifactorial 20%

maternal medication 1 - 2%

unknown >50%

 (Bennett and Plum, 1996)

As this list indicates, most congenital anomalies have no clear origin (more

than 50 percent). They may arise from a single factor or a specific

combination of factors. Interference with the normal progress of

development during a pregnancy may result from genotoxic effects, cellular

toxicity, or other factors. Adding to the complexity of evaluating

developmental toxicity is the fact that the nature of the developmental

effects often depend on the period of development during which exposure

occurred. 

III.1.C Valuation Issues

III.1.C.1 Short- Versus Long-term Effects

Developmental effects can be organized in many different ways, and are

typically approached by the medical community on an organ system basis

(e.g., neural damage, skeletal abnormalities) or by syndrome (e.g., Down). 

Approaching these effects from an economic perspective may require a

different approach that takes into account issues of cost, such as longversus short-term care. Economic evaluations differ substantially

depending on whether effects are time-limited or not. For example,

treatment and monitoring for elevated blood-lead levels is usually timelimited, while medical treatment and services for cerebral palsy require

long-term medical and other interventions. Most developmental effects

required long-term follow-up and care, often including a variety of medical

specialities, leading to relatively high lifetime care costs.

Federal and state agencies tend to group many of the effects that require

long-term care under the heading of “disabilities.” This term includes

physical and mental disabilities, which share the common requirement that

long-term care is required. Many of the disabilities are classified by the
Chapter III.1 III.1-10 Adverse Developmental Effects

Department of Health and Human Services and enable families to receive

special funding for medical care, maintenance, and other costs incurred by

the disabled child and adult. Funding is carried out through programs such

as Supplemental Security Income (SSI). The availability of federal

databases that track these types of disabilities and costs improves our

ability to estimate the treatment patterns and costs. 

Fewer data are available for disabilities not covered under federal

programs. Care may be received from a variety of specialists and is often

difficult to estimate, due to variations in the types of services that are

required. There is considerable variation in services and costs among

children with the same disabilities, due to differences in the severity of their

disabilities. An example of this can be observed among children with

Down syndrome, who may range from mildly affected by the chromosomal

abnormality to severely incapacitated. With the advent of managed care,

there has been an effort to evaluate the overall costs of caring for children

with disabilities that do not qualify for government supplements, so that

capitation costs can be estimated. This process is still in its infancy,

although some data are available that have been developed for this purpose.

III.1.C.2 Occurrence of Illnesses

Tracking of occurrence is poor because only a small percentage of

developmental effects is reported on birth certificates. Many effects are not

noted at birth and may be observable only after a child begins to develop

and is observed to miss critical developmental milestones. Severe birth

defects are more often reported because they are observed at birth and are

typically reported; however, many of these are very rare. (e.g., spina bifida,

Down Syndrome) (McManus et al., 1996 in Altman and Reinhardt, Eds.,

1996). Their rarity occurs in part because severe impairments often result

in miscarriage rather than a live birth. When the occurrence of a disease is

infrequent, it is particularly important to access data on large population

groups to obtain reasonable estimates of average costs. 

Recent work using a large set of California databases has been carried out

by Waitzman et al. (1996), used in Chapters III.3 through III.8 in this

section and described in Chapter III.3. In addition, the Agency for Toxic

Substances and Disease Reduction is funding studies in numerous states

that provide training for medical staff and follow-up evaluations for

children to better ascertain the actual rates of developmental effects. These

efforts are linked to studies of environmental pollutants and developmental

effects. A better understanding of the occurrence and causation of

developmental effects is expected to result from these studies.
Chapter III.1 III.1-11 Adverse Developmental Effects

III.1.C.3 Multiple Effects

A single chemical often induces an array of effects on different organ

systems. The occurrence of multiple effects has been reported in both the

human epidemiological and animal toxicological literature. Most animal

studies report multiple effects when developmental effects are observed. 

This observation is supported by the public health literature on children

with disabilities, which indicates that disabled children often have multiple

disabilities. For example, low birth weight is associated with physical and

cognitive disabilities, and with liver, kidney and brain damage (Hacket et

al., 1994; see also Chapter III.2). The multiple simultaneous occurrences

of effects are reported in the chapters within this section that discuss

specific developmental effects. When data were available, the chapters

provide information on the likelihood of co-occurrence of effects. The

information provided on the costs of developmental effects reflects these

complexities. The clustering of effects differs considerably among

individuals, however, and introduces uncertainty into the analysis.

The developmental effects of chemicals differ, depending on when

exposure occurs, because different components of organs are developing at

different stages during a pregnancy and postnatally. For example,

development within the CNS occurs over many years, with especially rapid

development during early life. Some milestones in the development of the

human nervous system are listed below:

 

Prenatal:

neural tube closes 22-26 days

 first neurons born 22-26 days 

 cortical neurons migrate 6 weeks

 mesencephelon expands considerably 9 weeks

 cerebellum is visible 12 weeks

 reflex actions are observable 3 months

 most major nerve tracks have been formed 6 - 9 months

Postnatal:

 cortical migration complete 5 months

 neuron proliferation complete 12 months

 myelin 50 percent complete 18 months

 visual system connections complete 3 - 4 years

 brain is mature in form 20 years

Cell proliferation and neural connections occur continuously during early

life, and interference in this process may lead to impaired or altered neural

functioning. The CNS is particularly susceptible because it produces many

cell types over an extended period and thus is subject to injury at more

stages than other organs. It also does not have the ability to replace

missing neurons when the developmental period for that neuron is past
Chapter III.1 III.1-12 Adverse Developmental Effects

(Rodier, 1994). Although the CNS is particularly vulnerable, all organ

systems go through many stages during the prenatal period and have

varying susceptibilities and manifestation of toxicity during early life. 

The effects discussed in this section often occur in multiples, and the costs

of concurrent effects are incorporated into the costs for some effects

(those discussed in Chapters III.2 through III.8). Generally, however,

medical costs are presented for each illness or disability separately (this is

discussed in more detail in Chapters III.2 and III.3). Based on the nature

of the economic analysis and the supporting scientific data for the

chemicals of concern, it may be appropriate to include an illness with its

related effects. Inclusion is a matter of judgement. For example, a large

percentage of children with Down syndrome have hearing loss and serious

visual problems. Inclusion of treatments would be logical, since these

conditions are so strongly associated with the syndrome. Alternatively,

children with many of the cardiac defects presented in Chapter III.5 often

have related cardiovascular problems. These problems are often treated

with the predominant effect presented in the chapters, and are part of the

costs of both immediate surgical intervention and follow-up care. 

Consequently, separate calculations of the benefits of avoiding these related

effects would not be necessary.

III.1.C.4 Prognosis

Developmental diseases and disabilities vary widely in their progression. 

Some types of anomalies have a relatively good prognosis (e.g., correction

of cleft lip and palate), with most patients achieving a normal quality of life. 

Others, such as Down syndrome patients, have lifelong costs associated

with their multiple symptoms and have a shortened lifespan. Some effects,

such as very low birth weight are usually fatal. Although generalizations

can be made regarding the “average” prognosis for specific effects, the

prognosis for survival and the length of time over which treatment is

required varies widely among individuals. Consequently, the cost estimates

presented in the chapters in this section use estimates of the average

treatment and survival rates to obtain representative estimates of the

medical costs.

III.1.D Environmental Agents Associated with Developmental Toxicity

This section contains lists of agents associated with developmental toxicity

and genotoxicity. As previous sections discussed, these data have many

limitations. Additional information on each chemical may be obtained from

the listed source and from a Medline or Toxnet search.
Chapter III.1 III.1-13 Adverse Developmental Effects

III.1.D.1 Developmental Toxicity Agents

Table III.1-2 lists many of the chemicals that have evidence of

developmental toxicity in animals or humans. Due to the orientation of this

handbook toward environmentally-induced illnesses, the discussion focuses

on induction by environmental agents. The information in this table was

obtained from journal articles, toxicology texts, and study reports

submitted to the government by pesticide registrants and other chemical

industry sources. The table does NOT provide an exhaustive list of

chemicals that cause developmental toxicity, but instead gives an indication

of the diversity of chemicals that have been associated with these effects. 

Information is provided below on genotoxins, which are potential causative

agents with a less established but no less important link to adverse

developmental effects. (Many chemicals have evidence of both

developmental toxicity and genotoxicity.)

TABLE III.1-1.

CHEMICALS ASSOCIATED WITH DEVELOPMENTAL EFFECTS1

DATA FROM HUMAN AND ANIMAL STUDIES ARE INCLUDED. 

CHEMICAL REFERENCE

*ACETONE 1

*ACROLEIN 3

*ACRYLIC ACID 7

*ACRYLONITRILE 1

*ALACHLOR 4

*ALDICARB 1

AMINOPTERIN 3

*AMITRAZ 1

*AMITROLE 3,5

ANTU 1

*AROCLOR 1016 (A PCB) 7

*ARSENIC COMPOUNDS 3

*ARSENIC 3

ASULAM 7

*ATRAZINE 9

AVERMECTIN B1 7

*BENOMYL 7,1

*BENZENE 5

*BENZO(A)PYRENE 14

BIORESMETHRIN 10

BISULFAN 14

BORIC ACID 3

BRADIFACOUM 3,4

BUSULFAN 3

BUTACHLOR 1

*CADMIUM 14

CAPROLACTAM 7

CAPTAFAL 6

*CAPTAN 7,1,2

*CARBARYL 1,2,5

*CARBOFURAN 1

*CARBON TETRACHLORIDE 5
TABLE III.1-1.

CHEMICALS ASSOCIATED WITH DEVELOPMENTAL EFFECTS1

DATA FROM HUMAN AND ANIMAL STUDIES ARE INCLUDED. 

CHEMICAL REFERENCE

Chapter III.1 III.1-14 Adverse Developmental Effects

*CARBON DISULFIDE 5,7

CARBOPHENOTHION 6

*CHLORDANE 12

CHLORDECONE 11

CHLORDIMEFORM 6

CHLORFENVINPHOS 6

CHLORMEQUAT 5

*CHLOROBENZILATE 7

*CHLOROBIPHENYLS (INCLUDES PCB’S) 3

*CHLOROFORM 5

CHLOROPHACINONE 1

CHLOROPHENOXY HERBICIDES 15

CHLOROPROPHAM 7

*CHLOROTHALONIL 4

CHLORPROPHAM 1

*CHROMIUM 17

*COPPER SULFATE 5

COUMACHLOR 1

COUMAFURYL 3,4

COUMATETRALYL 3,4

*CYANIDES 3

*CYCLOHEXANE 1

CYCLOHEXANONE 8

CYCLOHEXIMIDE 5

CYCLOPHOSPHAMIDE 14,3

*CYHALOTHRIN 7

*2,4-D 4,6

DALAPON 1

DECAMETHRIN 9

DEET (DIETHYLTOLUAMIDE) 9

DFP 2

DI(2-ETHYL HEXYL) ADIPATE 7

*DIBROMOCHLOROPROPANE 5

*DICAMBA 7

DICHLOBENIL 4

*O-DICHLOROBENZENE 1

*P-DICHLOROBENZENE 1

DICHLOROETHYL ETHER 1

1,3-DICHLOROROPENE (2,3 ON TRI) 1

*DICHLORVOS 1

DIETHYLSTILBESTROL (DES) 3,14

DIFENACOUM 3,4

*DIMETHOATE 5,6

DIMETHYL SULFOXIDE 3,5

DINOSEB 14,7

*DIOXANE 1

DIOXIN 2

DIPHACINONE 3,4

DIPHENYLHYDANTOIN 3

DIQUAT 4

DISULFOTON 6

*DIURON 5

ENDRIN 6
TABLE III.1-1.

CHEMICALS ASSOCIATED WITH DEVELOPMENTAL EFFECTS1

DATA FROM HUMAN AND ANIMAL STUDIES ARE INCLUDED. 

CHEMICAL REFERENCE

Chapter III.1 III.1-15 Adverse Developmental Effects

*EPICHLOROHYDRIN 5

EPN 6

*EPTC 7

ETHANOL 14

ETHYL CHLORIDE 7

*ETHYL BENZENE 7

ETHYLENE DIBROMIDE 5,6

*ETHYLENE DICHLORIDE 1

*ETHYLENE THIOUREA 14

*ETHYLENE OXIDE 5

ETHYLNITROSUREA 3

EUGENAL 1

*FENBUTATIN OXIDE 4,6

*FERBAM 5

*FLUOMETURON 1

FLURPRIMIDOL 7

FLUTOLANIL 7

*FOLPET 9,3,6

*FORMALDEHYDE 5

GLYCEROL FORMAL 5

GLYPHOSATE 7

HALOXYFOP METHYL 7

*HEXACHLOROBENZENE 5

*HEXACHLOROPHENE 5

*LEAD 14

*LINDANE 6

*LINURON 4,6

*LITHIUM (TRI LISTED AS LITHIUM CARBONATE) 3

*MALATHION 5

*MALEIC HYDRAZIDE 10

*MANEB 1

*MANGANESE 16

*MCPA (METHOXONE) 4,6

*MERCURY 7

METALDEHYDE 5

METHIDATHION 5

METHIMAZOLE 3

METHOMYL 1

*METHOXYCHLOR 5,7

*METHYL ETHYL KETONE (MEK) 7

METHYL BROMIDE 6

*METHYL METHACRYLATE 3,5

METHYLCHOLANTHRENE 14

METHYLENE CHLORIDE 5

METOLACHLOR 4,7

MEXACARBATE 1

MIREX 14

MNNG 3

*MOLINATE 9

*NABAM 5

*NAPHTHALENES 9

NAPROPAMIDE 7

*NICOTINES 8
TABLE III.1-1.

CHEMICALS ASSOCIATED WITH DEVELOPMENTAL EFFECTS1

DATA FROM HUMAN AND ANIMAL STUDIES ARE INCLUDED. 

CHEMICAL REFERENCE

Chapter III.1 III.1-16 Adverse Developmental Effects

*NITRATE 7

NITRITE 7

*NITROFEN 4

NITROGUANIDINE 7

*OXYFLUORFEN 1

*PARAQUAT 8

*PARATHION 5,2

*PCBS 2

PENTACHLORONITROBENZENE 10,9,6,5

*PENTACHLOROPHENOL 5

*PERCHLOROETHYLENE 5

*PERMETHRIN 6

PHENMEDIPHAM 1

*PHENOL 7,1

*O-PHENYLPHENOL 5

PHOSMET 6

*PICLORAM 5

PIDRIN 7

PINDONE 3,4

*PIPERONYL BUTOXIDE 5

PIRIMICARB 4,6

PIRIMIPHOS-ETHYL 6

*PIRIMIPHOS-METHYL 1

2-PIVALYL-1,3 INDANDIONE 3,4

*PROPACHLOR 1

*PROPARGITE 7,6

PROPHAM 1

*PROPOXUR 1,9

*PROPYLENE OXIDE 1

PROPYLENE DICHLORIDE 1

PYRAZON 5

*PYRIDINE 8

RADIONUCLIDES (ALPHA, BETA, & GAMMA EMITTERS) 3

*RESMETHRIN 7

RONNEL 5

ROTENONE 9,7

SODIUM CHLORATE 1

*STRYCHNINE 1

SULFUR DIOXIDE 5

2,4,5-T 4

TCDD 14

2,4,5-TP 6

*TETRACHLORVINPHOS 6

TETRACYCLINES 3

THERAM 2

*THIABENDAZOLE 5

*THIOPHANATE-METHYL 6 1

*THIRAM 5

*TOLUENE 5

*TOXAPHENE 6

*TRICHLORFON 6

*1,2,4-TRICHLOROBENZENE 7

*1,1,1-TRICHLOROETHANE 5
TABLE III.1-1.

CHEMICALS ASSOCIATED WITH DEVELOPMENTAL EFFECTS1

DATA FROM HUMAN AND ANIMAL STUDIES ARE INCLUDED. 

CHEMICAL REFERENCE

Chapter III.1 III.1-17 Adverse Developmental Effects

*TRICHLOROETHYLENE 5

TRIDIPHANE 7

*TRIFLURALIN 4,6

*TRIFORINE 4

TRIMETHADONE 3

*URETHANE 14

VALPROIC ACID 3

VERNAM 7

*WARFARIN 3,4

*WHITE PHOSPHORUS 7

*XYLENE 5

*ZINEB 3,6

ZIRAM 9.10

* = Listed in TRI. When “compounds” of a metal were listed on TRI, all compounds of that

metal in this table are considered to be TRI chemicals.

Footnotes:

1. This includes a wide range of effects including skeletal deformities (increased or reduced

number of digits or ribs, limb shortening or malformation, spina bifida, cleft lip or palate, etc),

neurological impairment (altered cognitive functioning, learning disorders including

retardation, palsy, inappropriate responses to stimuli, etc), and structural or functional changes

in organs (cardiomyopathy, renal agenesis, sterility, etc).

References

1. Cunningham and Hallenbeck (1985).

2. Stellman, J.M. (1983).

3. Doull et al. (1980).

4. U.S. EPA (1983a). 

5. U.S. Department of Health and Human Services, NIOSH (1983a). 

6. U.S. EPA (1983b).

7. IRIS, EPA online database.

8. Clayton and Clayton (1982). 

9. Hayes, W.H. (1982). 

10. Vettorazzi, G. (1979).

11. Council on Environmental Quality (1981). 

12. International Agency for Research on Cancer (1979). 

13. Chambers and Yarbrough (1982). 

14. Key et al. (1977). 

15. Garry et al. (1996).

16. Webster and Valois (1987). 

17. ATSDR (1993). 
6

 Results of genotoxic tests are often mixed because they evaluate different aspects of a chemical’s

ability to cause genetic damage and impair cell replication. 

Chapter III.1 III.1-18 Adverse Developmental Effects

III.1.D.2 Genotoxic Agents

Table III.1-2 lists agents for which there is evidence of genotoxicity. The

evidence varies for each agent and is based on a variety of in vitro and/or in

vivo analyses.6

TABLE III.1-2. CHEMICALS ASSOCIATED WITH GENOTOXIC EFFECTS 

DATA FROM HUMAN, ANIMAL, AND IN VITRO STUDIES ARE INCLUDED. 

CHEMICAL REFERENCES

*ACETONE 5

*ACROLEIN 4

*ACRYLIC ACID 7

*ACRYLONITRILE 5

*ALACHLOR 1

*ALDICARB 1

AMINOPTERIN 3

*AMITRAZ 6

*AMITROLE 5

ANTU 5

*AROCLOR 1016 (A PCB) 7

*ARSENIC COMPOUNDS 6

*ARSENIC 6

ASULAM 7

*ATRAZINE 9

AVERMECTIN B1 7

*BENOMYL 1,7

*BENZENE 5

*BENZO(A)PYRENE 14

BIORESMETHRIN 1

BISULFAN 14

BORIC ACID 5

BRADIFACOUM 1

BUSULFAN 3

BUTACHLOR 4

*CADMIUM 14

CAPROLACTAM 7

CAPTAFAL 6

*CAPTAN 7,6

*CARBARYL 6

*CARBOFURAN 6

*CARBON TETRACHLORIDE 1

*CARBON DISULFIDE 5

CARBOPHENOTHION 1

*CHLORDANE 12

CHLORDECONE 1

CHLORDIMEFORM 6

CHLORFENVINPHOS 6

CHLORMEQUAT 5

*CHLOROBENZILATE 7

*CHLOROBIPHENYLS (INCLUDES PCBS) 3
TABLE III.1-2. CHEMICALS ASSOCIATED WITH GENOTOXIC EFFECTS 

DATA FROM HUMAN, ANIMAL, AND IN VITRO STUDIES ARE INCLUDED. 

CHEMICAL REFERENCES

Chapter III.1 III.1-19 Adverse Developmental Effects

*CHLOROFORM 1

CHLOROPHACINONE 1

CHLOROPROPHAM 7

*CHLOROTHALONIL 1

CHLORPROPHONE 1

*CHROMIUM 16

*COPPER SULFATE 5

COUMACHLOR 1

COUMAFURYL 1

COUMATETRALYL 1

*CYANIDES 1

*CYCLOHEXANE 5

CYCLOHEXANONE 5

CYCLOHEXIMIDE 5

CYCLOPENTAPYRENE 2

CYCLOPHOSPHAMIDE 14

*CYHALOTHRIN 7

*2,4-D 6

DALAPON 5

DECAMETHRIN 1

DEET (DIETHYLTOLUAMIDE) 5

DI(2-ETHYL HEXYL) ADIPATE 7

*DIBROMOCHLOROPROPANE 5,6

*DICAMBA 7

DICHLOBENIL 1

*O-DICHLOROBENZENE 1

*P-DICHLOROBENZENE 5

DICHLOROETHYL ETHER 5

1,3-DICHLOROROPENE (2,3 ON TRI) 5

*DICHLORVOS 13

DIETHYLSTILBESTROL (DES) 3

DIFENACOUM 1

*DIMETHOATE 6

DIMETHYL SULFOXIDE 5

DINOSEB 14

*DIOXANE 5

DIPHACINONE 1

DIPHENYLHYDANTOIN 3

DIQUAT 5

DISULFOTON 1

*DIURON 5

ENDRIN 6

*EPICHLOROHYDRIN 5

EPN 1

EPTC 7

ETHANOL 14

*ETHYL BENZENE 

ETHYLENE DIBROMIDE 8,6

*ETHYLENE DICHLORIDE 5

*ETHYLENE THIOUREA 14

*ETHYLENE OXIDE 5

ETHYLNITROSUREA 3

EUGENAL 5

*FENBUTATIN OXIDE 1
TABLE III.1-2. CHEMICALS ASSOCIATED WITH GENOTOXIC EFFECTS 

DATA FROM HUMAN, ANIMAL, AND IN VITRO STUDIES ARE INCLUDED. 

CHEMICAL REFERENCES

Chapter III.1 III.1-20 Adverse Developmental Effects

*FERBAM 1

*FLUOMETURON 6

FLURPRIMIDOL 7

FLUTOLANIL 7

*FOLPET 8

*FORMALDEHYDE 5

GLYCEROL FORMAL 1

GLYPHOSATE 7

HALOXYFOP METHYL 7

*HEXACHLOROBENZENE 5

*HEXACHLOROPHENE 1

*LEAD 14

*LINDANE 1

*LINURON 5

*LITHIUM (TRI LISTED AS LITHIUM CARBONATE) 3

*MALATHION 1

*MALEIC HYDRAZIDE 5

*MANEB 6

*MCPA 1

*MERCURY 7

*MERCURY COMPOUNDS 15

METALDEHYDE 5

METHIDATHION 1

METHIMAZOLE 3

METHOMYL 6

*METHOXYCHLOR 5,7

*METHYL ETHYL KETONE (MEK) 7

METHYL BROMIDE 1

*METHYL METHACRYLATE 5

METHYLCHOLANTHRENE 14

METHYLENE CHLORIDE 5

METOLACHLOR 1,7

MEXACARBATE 1

MIREX 14

MNNG 3

*MOLINATE 1

*NABAM 5

*NAPHTHALENES 1

NAPROPAMIDE 7

*NICKEL 15

*NICOTINES 1

*NITRATE 7

NITRITE 7

*NITROFEN 4

NITROGUANIDINE 7

*OXYFLUORFEN 6

*PARAQUAT 5

*PARATHION 1

*PCBS

PENTACHLORONITROBENZENE 1

*PENTACHLOROPHENOL 1

*PERCHLOROETHYLENE 1

*PERMETHRIN 1

PHENMEDIPHAM 1
TABLE III.1-2. CHEMICALS ASSOCIATED WITH GENOTOXIC EFFECTS 

DATA FROM HUMAN, ANIMAL, AND IN VITRO STUDIES ARE INCLUDED. 

CHEMICAL REFERENCES

Chapter III.1 III.1-21 Adverse Developmental Effects

*PHENOL 1,7

*O-PHENYLPHENOL 5

PHOSMET 1

*PICLORAM 1

PIDRIN 7

PINDONE 1

*PIPERONYL BUTOXIDE 1

PIRIMICARB 1

PIRIMIPHOS-ETHYL 1

*PIRIMIPHOS-METHYL 6

2-PIVALYL-1,3 INDANDIONE 1

*PROPACHLOR 4

*PROPARGITE 7

PROPHAM 1

*PROPOXUR 1

*PROPYLENE OXIDE 5

PROPYLENE DICHLORIDE 5

PYRAZON 1

*PYRIDINE 5

RADIONUCLIDES (ALPHA, BETA, & GAMMA EMITTERS) 3

*RESMETHRIN 7

RONNEL 1

ROTENONE 1

SODIUM CHLORATE 5

*STRYCHNINE 5

SULFUR DIOXIDE 5

TCDD 14

2,4,5-T 1

2,4,5-TP 1

*TETRACHLORVINPHOS 1

TETRACYCLINES 3

*THIABENDAZOLE 5

*THIOPHANATE-METHYL 6 6

*THIRAM 1

*TOLUENE 5

*TOXAPHENE 6

*TRICHLORFON 13

*1,2,4-TRICHLOROBENZENE 7

*1,1,1-TRICHLOROETHANE 5

*TRICHLOROETHYLENE 5

TRIDIPHANE 7

*TRIFLURALIN 6

*TRIFORINE 1

TRIMETHADONE 3

*URETHANE 14

VALPROIC ACID 3

VERNAM 7

*WARFARIN 1

*WHITE PHOSPHORUS 3

*XYLENE 5

*ZINEB 5

ZIRAM 1
Chapter III.1 III.1-22 Adverse Developmental Effects

* = Listed in TRI. When “compounds” of a metal were listed on TRI, all compounds of that metal in this table are

considered to be TRI chemicals.

References

1. Cunningham and Hallenbeck (1985).

2. Archer and Livingston (1983).

3. Doull et al. (1980).

4. U.S. EPA 1983A). 

5. U.S. Department of Health and Human Services, NIOSH (1983).

6. U.S. EPA (1983B).

7. IRIS, EPA online database.

8. Clayton and Clayton (1982). 

9. Hayes (1982). 

10. Vettorazzi (1979). 

11. Council on Environmental Quality (1981).

12. International Agency for Research on Cancer (1979).

13. Chambers and Yarbrough (1982)

14. Key et al. (1977). 

15. Tice et al. (1996).

16. ATSDR (1993). 
Chapter III.2 III.2-1 Cost of Low Birth Weight

CHAPTER III.2. COST OF LOW BIRTH WEIGHT

Clicking on the sections below will take you to the relevant text.

III.2.A Background

III.2.A.1 Description

III.2.A.2 Concurrent Effects

III.2.A.3 Causality and Special Susceptibilities

III.2.A.4 Treatment and Services

III.2.A.5 Prognosis

III.2.B Costs of Medical Treatment and Other Services

III.2.B.1 Methodology

III.2.B.2 Results

III.2.B.3 Other Studies

III.2.B.4 Conclusions
Chapter III.2 III.2-2 Cost of Low Birth Weight

CHAPTER III.2. COST OF LOW BIRTH WEIGHT

III.2.A Background

This chapter contains a discussion of the methods used and the results of

estimating the direct medical costs incurred by individuals with low birth

weight (LBW). It does not include information on elements such as

indirect medical costs, pain and suffering, lost time of unpaid caregivers,

etc. The reader is referred to Chapter I.1 for a discussion of the cost

estimation methods and cost elements that are relevant to all benefits

estimates. Chapter III.1 contains information regarding the causes and

special characteristics of developmental illnesses and disabilities, as well as

environmental agents linked to these disorders.

Link to Chapters I.1 and III.1

Low birth weight is a serious medical condition that occurs in

approximately seven percent of all infants born in the United States (Oski,

1993). It is associated with multiple adverse effects in numerous organ

systems and carries a much higher risk of death than normal birth weight. 

Consequently, considerable medical resources are devoted to the treatment

of LBW infants and the medical expenditures on these infants is estimated

to be $5 billion per year (Lewit et al.,1995). This chapter contains a

detailed estimate of the medical and related costs associated with LBW for

children through age ten and limited additional information for older

individuals. Data regarding special education and aggregate costs are

included due to their availability, although they are not in the usual scope

of this handbook. The chapter also contains a brief discussion of the

medical science related to LBW.

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to inflation factors

III.2.A.1 Description

LBW babies are defined as having a weight less than 2,500 grams (5.5 lbs),

and very low birth weight infants weight is defined as a birth weight under

1,500 grams (3.3 lbs). “Low birth weight results when infants are born

prematurely or grew too slowly in utero, or a combination of the two”

(Paneth, 1995). These children may be 1) full-term infants with

intrauterine growth retardation (IUGR, see below); 2) born prematurely,
Chapter III.2 III.2-3 Cost of Low Birth Weight

with IUGR; or 3) appropriate for their gestational age, but with LBW due

to their prematurity. Regarding the full-term infants, IUGR is considered a

“final common pathway by which genetic and environmental influences

result in low birth weight for gestational age” infants (Oski, 1994). These

are infants that are born after a normal duration pregnancy, but have

retarded growth, and are born smaller and in a more immature condition

than normal infants. 

There are varying degrees of severity of LBW. Infants who are 1,501 to

2,500 grams are considered moderately low birth weight and comprise 82

percent of LBW infants. At 1,001 to 1,500 grams they are very low birth

weight infants; this occurs among 12 percent of LBW infants. Six percent

of LBW infants weigh 1,000 grams or less at birth are designated as

extremely low birth weight children (Oski, 1993). 

Regardless of the child’s status with respect to pregnancy duration, there

are serious consequences associated with low birth weight in many

children. More than three-quarters of all infant deaths have been attributed

to LBW (Paneth, 1995). When compared to normal-weight infants,

moderate, very low, and extremely low birth weight infants have a risk of

death that is 40 times, 200 times, and 600 times higher, respectively, than

the risk of death among normal-weight infants. Children who survive often

face multiple medical disorders arising from LBW (Oski, 1993). 

In LBW infants, the basic mechanisms for survival outside the womb are

often lacking. Premature LBW infants typically have very limited body fat

(energy stores), inability to maintain an acceptable body temperature, and

less available energy resources that are required for vital cellular processes,

including protein synthesis and other basic physiological processes. Organ

systems may be functionally immature, including the respiratory system. An

inability to maintain fluid balance leads to patent ductus arteriosus in 15 to

35 percent of very LBW and extremely LBW infants. This condition is

associated with myocardial stress, pulmonary congestion, progressive heart

failure, hepatic congestion, and a constellation of progressively serious

disorders. Intracranial hemorrhage occurs in 40 to 50 percent of LBW

infants and is a major cause of morbidity and mortality (Oski, 1993). 

LBW is associated with other developmental abnormalities including

delayed cognitive development and other central nervous system (CNS)

disabilities. For example, approximately 20 percent of infants born at

weights between 500 and 1500 grams have brain injury (Hack et al., 1994).

These acute problems often result in chronic medical conditions in the

LBW child. The disorders and diseases may occur in any organ system,

but are often seen in the gastrointestinal system (necrotizing enterocolitis),

respiratory system (bronchopulmonary dysplasia), the nervous system, and

the eyes (retinopathy of prematurity) (Oski, 1993).
Chapter III.2 III.2-4 Cost of Low Birth Weight

Many babies with birth weights as low as 750 grams (1 pound, 10 ounces)

are surviving due to technology available in neonatal intensive care units

(Hack et al., 1994). This technology is expensive. The medical costs

associated with LBW have been estimated to be $5.4 billion per year

(incremental direct costs among children ages birth to 15 years in 1988)

(Lewit, et al., 1995). This value does not include the costs of long term

care, special services, and special education, which are estimated to add an

additional $500 million per year. The medical expenditures for LBW

children is approximately one-tenth of the total expenditure for health care

for all children (Lewit et al., 1995).

III.2.A.2 Concurrent Effects

Concurrent effects are those that often occur with, but are not necessarily

caused by, the disease or disorder under discussion. LBW is a condition

that causes many adverse effects, and also occurs concurrently with certain

types of conditions and diseases. It is not always possible to determine

whether LBW was a causative agent for a specific medical condition, or

whether the disorders occurred independently, but in tandem, perhaps

arising from the same cause. Often the factors or agents responsible for

LBW are linked to concurrent disorders. 

LBW has been linked with most developmental defects. As noted above,

children with low birth weight are often afflicted with severe brain damage,

cerebral palsy, and disorders of multiple organs (e.g., lung and liver

disease, learning disabilities, asthma, and attention disorders). Children

may be born with low birth weight because of birth defects that cause

growth retardation. Alternatively, children may have a number of birth

defects because their birth weight and development are considerably

retarded. Finally, as noted above, the low weight at birth may be simply

concurrent with other birth defects, when the factors that lead to low birth

weight also cause other birth defects (Oski, 1993). 

 Although long-term disabilities and illnesses may be associated with LBW,

the medical costs associated with these effects are not discussed

individually in this chapter, but are included in the final cost estimates. 

The estimated costs in this handbook for LBW incorporate all costs of

medical treatment that exceeded those for a non-LBW child. 

Consequently, these incremental medical costs include the costs of treating

concurrent effects, are included in the final incremental cost estimate. 

Many of the long-terms effects are discussed in subsequent chapters (e.g.,

cerebral palsy) because these effects also occur independently of LBW. 

The occurrence and costs estimates presented in this chapter are based on

the incidence in the overall LBW population. If an agent is known to cause

LBW plus another disorder (e.g., cerebral palsy) at a higher rate than is

usually found in the LBW population as a result of environmental agents
Chapter III.2 III.2-5 Cost of Low Birth Weight

than is typically observed with LBW in the general population, it would be

necessary to add costs associated with the excess probability of the

disorder. By providing cost estimates of each effect separately in

subsequent chapters, the reader can use the information as required by their

risk data.

III.2.A.3 Causality and Special Susceptibilities

As described above, LBW may result from prematurity (a pregnancy of less

than 38 weeks with or without growth retardation) or from delayed growth

of an infant that is full-term (38+ weeks). 

III.2.A.3.1 Introduction

Prematurity may result from a variety of factors, including external factors,

maternal health, and the condition of the fetus. The causes in humans are

difficult to evaluate through the usual animal toxicology studies because

rodents are usually used in studies of reproductive outcomes. The rodent

gestation period is short, and there is a small window in time when

pregnancy could be observed to result in a live, but premature birth. More

often the studies yield results that include miscarriage, which is a delivery

prior to full-term that results in the death of the offspring. Numerous

chemicals are associated with miscarriage in toxicological studies of

pollutants. Many of these are listed in Table III.1-1 in Chapter III.1

Link to Table III.1-1

III.1.A.3.2 Data on Causality

Intrauterine growth retardation (IUGR) results in infants who have

retarded growth, and are born smaller and in a more immature condition

than normal infants. They are often LBW infants. Among chemicals that

cause reproductive disorders, it is very common to observe retarded

growth as one of the effects. Retarded growth is often coupled with other

effects, including structural abnormalities and functional anomalies. For

example, chromium, which has been the subject of multiple developmental

toxicity studies, is associated with delayed bone formation, decreased fetal

size, skeletal anomalies, increased resorptions (fetal death) and

postimplantation loss (embryonic loss). This cluster suggests a variety of

developmental impacts, including growth retardation. 

Many of the objective measures of developmental toxicity in animals are

highly specific (e.g., delayed bone ossification, decreased fetal weight);

however, when considered as an overall description of the condition of the

offspring, they are analogous to growth retardation in humans. 

Developmental toxicity studies in animals usually evaluate the offspring

very near the time of, but prior to, birth, and in the process they sacrifice

the animals (this is why studies report “fetal” rather than “offspring”

abnormalities). Consequently, animal studies provide limited predictive
Chapter III.2 III.2-6 Cost of Low Birth Weight

information regarding the postnatal disorders associated with low birth

weight in humans. Multigeneration studies and postnatal studies may be

carried out, but are more expensive and so are less frequently available.

There are a very limited number of studies evaluating low birth weight and

intrauterine growth retardation in humans in relation to environmental

exposure. It is both difficult and expensive to carry out well-controlled

human development studies. This is illustrated by a recent study by

Munger et al. (1997) that found an association between herbicidecontaminated drinking water supplied in the Midwestern United States and

intrauterine growth retardation. The presence of very commonly

encountered pesticides (e.g., atrazine, metolachlor, and cyanazine) were

linked to growth retardation after controlling for multiple potential

confounders (e.g., smoking, nutritional status, alcohol consumption). Low

birth weight was also marginally increased among the exposed population. 

As is the case for most environmental studies, exposures occurred

simultaneously to the mixture of chemicals, with varying concentrations

over time. Conclusions can be drawn regarding an association between the

cluster of chemical and growth retardation. However, the ability to

establish causality for specific chemicals in this study is questionable. 

III.1.A.3.3 Environmental Agents of Concern

Human data on environmental risk factors associated with LBW are very

limited, but dozens of chemicals have been demonstrated to cause LBW in

experimental animals, including many common pollutants. Table III.1-1 in

Chapter III.1 lists some of the chemicals associated with developmental

toxicity. Many of these are linked to growth retardation and/or

prematurity. Many chemicals have been shown to cause LBW in

experimental animals. Delayed development and reduced body weight are

relatively common observations in developmental toxicity studies on

chemical pollutants. 

Link to Chapter III.1, Table III.1-1

Some chemicals associated specifically with LBW are acrylic acid, aroclor

1016 (a PCB), chlorobenzilate, captan, benomyl, cylothrin, dimethyl

sulfoxide, dicamba, dinoseb, flutolanil, methyl ethyl ketone, metholchlor,

napropamide, nitroguanidine, phenol, propagite, resmethrin, rotenone,

vernam (IRIS), and chromium (ATSDR, 1993). LBW is also strongly

associated with pre-term delivery due to substance abuse, smoking,

diabetes, poor prenatal nutrition and care, and other causes. 

II.2.A.3.4 Susceptible Subpopulations

African-American infants are twice as likely as white infants to be born

with LBW and their risk is even greater for very LBW births. The causes

of this increased rate are not know. Although social and economic factor,

access to medical care, and other societal issues are considered to be
Chapter III.2 III.2-7 Cost of Low Birth Weight

responsible in part (Shiono and Behrman., 1995), very recent studies that

have controlled for these factors have found an increase in LBW among

African-American infants. It has been theorized that some groups may be

genetically at greater risk for LBW, suggesting a sensitive subpopulation

that may merit consideration in a benefits assessment. Additional support

for this argument can be obtained from the literature, which indicates that

the rates of LBW among other ethnic minorities in the United States (i.e.,

Hispanic, Native American, and Asian American) are similar to those of

the white population (Paneth, 1995). Consequently, biological and genetic

factors may be important considerations (Shiono and Behrman, 1995). In

an environmental risk benefit context, African Americans may be

considered to be at higher risk, and benefits of avoiding environmental

agents that pose risks of LBW should be considered accordingly. 

Additional research is required in this area to fully explore the risk factors

involved. 

III.2.A.4 Treatment and Services

Medical services in the neonatal period address the numerous acute medical

problems described above (see “Description”). They are designed to

eliminate the short-term crisis and mitigate long-term health problems. 

Extensive medical services are often required whether the LBW results

from a preterm delivery or a IUGR condition. Treatment often includes

monitoring in a neonatal intensive care unit; extensive testing to determine

the functional status of various organ systems; surfactant therapy to

preserve lung structure; specialized nutrition; fluid management; and

management of respiration, glucose levels, temperature, and other basic

physiological processes at a normal level to minimize damage (Oski, 1993).

Prenatal evaluations may provide information regarding intrauterine growth

retardation (IUGR), and medical intervention may begin considerably prior

to the birth of the child to address problems that have been diagnosed. The

costs of these types of services are not included in the estimates provided

below. They typically would be considered a part of prenatal costs and

would be attributed (in most accounting methods) to the mother, rather

than the child. Their lack of inclusion in this chapter generates a cost

estimate that underestimates true costs by the amount spent prenatally to

minimize exposure.

III.2.A.5 Prognosis

Although mortality among LBW infants declined rapidly into the 1970s, the

morbidity among the survivors has increased, due to the survival of much

smaller and more seriously ill infants. Table III.2-1 shows the morbidity

pattern for some major categories of illnesses arising from LBW in relation

to the size of the infant at birth. It demonstrates that there is an increasing

risk of morbidity and mortality associated with progressively smaller birth
Chapter III.2 III.2-8 Cost of Low Birth Weight

weight. The table includes selected outcomes for the most seriously

underweight infants, and does not include those in the moderate LBW

category, defined above as having a birth weight of 1,501 to 2,500 grams. 

Table III.2-1. Morbidity and Mortality Among Very Low Birth weight Infants.

Based on data from the National Institute of child Health and Human Development Neonatal

Network. Adapted from Oski, 1993 and originally based on Hack et al., 1991.

 

Effect

Weight at Birth ( in grams)

501-750 751-1000 1001-1250 1251-1500

morbidity among survivors (%) 56 39 25 15

 chronic lung disease (%) among survivors 26 14 7 3

 intracranial hemorrhage (%) among 

 survivors

26 17 13 6

 enterocolitis(%) among survivors 3 8 6 4

death (%) 66 34 13 7

Although survival among LBW has improved considerably in recent years,

those that survive often have long-term health and developmental problems

(Oski, 1993). The long-term prognosis for LBW children depends greatly

on the severity of their initial condition, as well as the medical services

provided shortly after birth. Researchers have found that “Infants with

IUGR secondary to environmental insult or decreased growth potential

generally have outcomes that are poor and reflect the underlying

neuropathology of conditions caused by the environmental or genetic

insult.” (Oski notes: “environmental” in this context refers to all factors

outside the mother and child). Infants with normal brain growth generally

have a more favorable prognosis. Most full-term IUGR infants have

normal intelligence, and even many preterm IUGR infants achieve normal

intelligence by school age (Oski, 1993). Conversely, children with LBW

are more likely than children with normal birth weight to have attention

disorders, developmental impairments, breathing problems (e.g., asthma),

and learning disabilities (Shiono and Behrman, 1995). All categories of

LBW children are more likely to be enrolled in special education classes

than normal birth weight children, and half of all children who were very

LBW are enrolled in special education classes (Hack et al., 1995).

III.2.B Costs of Medical Treatment and Other Services

The overall costs associated with LBW infants are very high and comprise

a substantial portion of all pediatric costs. While costs vary considerably

depending on the individual and the severity of their condition, the costs for

a single infant with LBW may exceed $1 million. The average cost for

initial hospitalization (only) for surviving infants weighing 500 to 600
Chapter III.2 III.2-9 Cost of Low Birth Weight

grams was $1 million per child (Pomerance et al., 1993). This weight

group is the most seriously affected, but their costs give some indication of

the potential magnitude of the medical costs. Most LBW infants require

some additional care, at an increase in cost over the usual pediatric care

expenditures. It has been estimated that of the $11 billion spent on health

care for infants, approximately 35 percent ($4 billion ) is spent on the

incremental costs of medical care for LBW infants (Lewit et al., 1995). 

There are two studies of the costs of LBW discussed in this section. The

Lewit et al. (1995) study, discussed in detail below, is more comprehensive

and is recommended for use in cost estimates. A study by McCormick et

al. (1991) is also briefly discussed, but is not recommended for use in

evaluating LBW costs due to its limitations.

III.2.B.1 Methodology

III.2.B.1.1 Data from Lewit et al. 

A recent comprehensive analysis of LBW was published in 1995 by Lewit

et al. They analyzed the incremental direct costs of low birth weight using

a prevalence approach. These costs, estimated for children aged 0 to 15, 

include expenditures for health care, child care, special education, and

grade repetition (considered to be related to special education). Each type

of cost is itemized, and although the handbook focuses on medical costs,

the costs of related professional services (e.g., special education) are

included in the material presented in this chapter. Child care, while a direct

cost, is not estimated in other chapters of this handbook and was not

included this chapter. (The study authors note that their comprehensive

approach offers an opportunity to evaluate the impact of LBW in a single

metric. Readers may wish to consult their work, depending on the goals of

their morbidity valuation.)

Lewit et al. (1995) used a number of sources for their study. Estimates for

LBW babies during the first year of life were obtained by combining data

from two other studies, as well as the data from the CIGNA Corporation’s

national employer-based business survey. The data were obtained from a

private source; the birth weight-specific cost ratios were therefore adjusted

to match the actual distribution of birth weights in the 1988 U.S. birth

cohort. The population-weighted relative cost ratios were applied to the

estimated national expenditures for infant health care in 1988 to determine

the allocation of expenditures between LBW and normal birth weight

infants. 

To estimate the incremental increase in costs for LBW children beyond the

first year of life, the 1988 Child Health Supplement of the National Health

Interview Survey and the 1991 National Household Education Survey were

used. The large number of children involved in the surveys allowed for

evaluation of age-specific resource utilization. Data regarding birth weight,
Chapter III.2 III.2-10 Cost of Low Birth Weight

hospitalization costs, and other relevant data were used. Multivariate

statistical analyses were conducted to control for the effects of potential

confounding variables, such as income and the mother’s educational level. 

Estimates of health care costs are also largely based on a previous study

that used the 1987 National Medical Expenditure Survey (USDHHS,

1988).

The incremental costs of special education and of repeating a grade were

estimated by Lewit et al. for children through the age of 15 years. 

Inclusion in special education classes and grade repetition both occur with

greater frequency among LBW children than among non-LBW children. 

Although they are not a part of medical costs, they are included as

supplemental information and may be considered to be a part of special

services related to a medical condition.

The Lewit et al. (1995) analysis of children’s medical costs after the first

year of life includes only the hospital and medical fees associated with

hospitalization. They evaluated the different hospitalization rates for LBW

and non-LBW children and used this ratio, with the average annual hospital

costs per child for all children, to estimate the incremental annual

hospitalization costs for LBW children. This approach will underestimate

total medical costs because it does not include office visits,

pharmaceuticals, therapy, and other medical services that are not a part of a

hospitalization incident. For example, annual medical costs for asthmatic

children may be high, even when they are not admitted to the hospital. 

(Chapter IV.2 contains a discussion of costs associated with asthma.) 

LBW children have an increased rate of asthma occurrence and would be

expected to have this type of non-hospitalization cost. This cost is not

included in the Lewit cost estimate because it is not a hospitalization cost. 

There are likely to be many other medical services required for LBW

children that do not require hospitalization; the costs of services were not

calculated by Lewit et al. 

Link to Chapter IV.2

This handbook addressed the lack of cost data for medical services

unrelated to an inpatient visit (hospital stay) for children over the age of

one by applying an inpatient/outpatient factor obtained from another study

to estimate the costs of outpatient services. A number of data sources

were considered for this factor, including data obtained from costs of

treating birth defects (Waitzman et al., 1996 data as discussed in Chapters

III.3 through III.8) and the Health Care Financing Administration (HCFA)

data. A prominent consideration in selecting the source of the factor was

the anticipated medical services required for LBW children after the age of

one year. It was assumed that much of the care would be for chronic

health problems and that surgical intervention would be minimal. These

assumptions would lead to an allocation of services more heavily weighted
Chapter III.2 III.2-11 Cost of Low Birth Weight

toward outpatient care than would be the case for treatment of diseases

that require substantial surgical intervention, such as treatment of many of

the birth defects discussed in Chapters III.1 through III.8 of this handbook.

Consequently, costs from those chapters were not considered optimal. 

Likewise, the HCFA data, which includes surgical and other acute care as a

major component, was not considered appropriate for establishing the ratio

for chronic care treatment of LBW children. 

Due to its focus on chronic care after initial diagnosis, cost data for the

treatment of asthma, discussed in Chapter IV.2 of this handbook, was

selected as having the most analogous type of care and cost requirement to

the chronic care provided for LBW children. The inpatient/outpatient cost

ratio can be calculated from the data provided in Chapter IV.2. The costs

for young children (ages 4 to 5) shown in Table IV.2-15 were used to

estimate the ratio. The sum of the office visit, drug therapy and emergency

room costs is $605.37 per year, and the hospitalization cost is $105.79 per

year. The outpatient/inpatient ratio was calculated to be 5.72. This value 

was used to estimate the outpatient costs for LBW children by multiplying

the inpatient costs times 5.72. This value is a source of considerable

uncertainty in the cost estimate. However, it was felt that it would be

better to provide an estimate than to omit the costs for outpatient care

altogether.

Link to Chapter IV.2, Table IV.2-15

Additional data will be sought on this issue and the value may be updated

in the future. Results obtained from application of this factor are shown in

the “Results” section below.

III.2.B.1.2 Supplementary Cost Estimates

Lewit et al. (1995) did not estimate incremental medical costs for ages 1 to

2 years and for children over 11 years of age. An estimate of the costs for

the missing years was made for this handbook, to provide a more

comprehensive estimate. Costs were estimated for the missing years as

follows: 

1 -2 years. To estimate costs for this age group, the two closest age

groups were considered as sources of information. It was assumed that the

medical and related costs of LBW are highest in infancy, and that these

costs should drop off quite quickly after the first year of life. 

Consequently, the incremental cost during the first year of life, of

approximately $25,000, was not considered an appropriate data source. 

The cost per year for three- to five-year-olds was assumed to be the most

representative of the one- to two-year age group, although some of the

substantial medical costs seen in infancy may persist into this age group for

those children most seriously affected (i.e., the very low birth weight

infants). Despite this drawback, the three- to five-year-olds’ cost per year
Chapter III.2 III.2-12 Cost of Low Birth Weight

was assumed to be the best option for the estimate and was used for ages

one and two. 

11 - 15 years. Although incremental educational costs were estimated for

this group by Lewit et al., the researchers did not estimate the costs for

medical services for this age group. The costs were extrapolated from the

costs per year for six- to ten-year-olds because it was assumed that the

medical costs would be very similar. LBW children often have health

problems (as noted in Section II.2.A, above) that are chronic and continue

through the life of the individual (Lewit et al., 1995). For example, Section

II.2.A noted that LBW children are more likely to have neurological

damage, asthma, and gastrointestinal disorders. These disorders are not

age-limited. Although many very serious acute health problems related to

LBW are addressed in the first year of life, those that persist into school

age are chronic health problems that are likely to recur over the lifetime of

the individual. Consequently, the increased costs seen during childhood in

the post-acute treatment period (e.g., ages five to ten years) are a

reasonable estimate of the costs that may be incurred later in childhood, as

well as in adulthood (see below).

15 - 75 years. LBW children have higher hospitalization rates and require

more medical services in both the preschool- and school-age years than

non-LBW children (Corman and Chaikind, 1993; Corman, 1994). Due to

the inability to track many children over the age of 15 years (as a result of 

their dropping out of school, etc.) and corresponding lack of good tracking

data, the analysis was not conducted on children over the age of 15 by

Lewit et al. Increased medical and related costs are likely to continue for

these individuals, due to persistent medical and, in some cases, social and

educational costs. To address this factor, an estimate was made of the

potential lifetime incremental medical costs of LBW, assuming that the

increased yearly costs seen in the six- to ten-year-old age cohort would be

representative of the costs over a lifetime. As noted above, in all cases the

cost data are for increased rates of hospitalization only and do not include

outpatient services, long-term care facilities, pharmaceuticals, etc. The

values are underestimates of the actual total incremental medical costs

associated with LBW.

III.2.B.2 Results

This section contains both comparative information regarding the costs for

LBW infants versus normal weight infants, and costs associated with LBW

over the childhood years. 

III.2.B.2.1 Aggregated First-Year Costs for All Infants

Table III.2-2 shows the total and incremental costs for LBW infants during

the first year of life, in contrast with normal birth weight infants. The LBW

costs, based on 1988 data from Lewit et al. (1995), are weighted averages
Chapter III.2 III.2-13 Cost of Low Birth Weight

based on the costs for all LBW categories and the proportion of infants in

those categories. The costs are updated using the Consumer Price Index

(CPI) for medical care from 1988 to 1996 dollars (1996:1988=1.6465). 

The total costs and costs for all births and normal weight infants are

provided for comparative purposes.

Table III.2-2. Comparative Medical Costs for LBW and Normal Birth Weight Infants During the

First Year of Life in 1996 Dollars.

Birth Weight Group

(in grams)

Number of

Births in

1988 in the

U.S.

Incremental

Cost per Child

in 1996 Dollars

(1st year)

Total Costs in

1996 Dollars

(billions)

Percentage

of Total

Health

Care Costs

for Infants

all births 3,871,000 3,128 12.2 100%

normal weight

(2,500+)

3,600,000 1,554 5.6 65%

LBWa

(<2500)

271,000 24697 6.6 35%

 extremely LBW (<1,000) or 

 having respiratory distress 

 syndrome

57,000 52,688 3.0 16%

 other LBW (1,000 -2500 

 without respiratory distress 

 syndrome)

214,000 16,465 3.6 19%

Source: Lewit et al., 1995 adjusted for inflation using CPI (1996:1988=1.6465)

a. Average for all LBW infants.

III.2.B.2.2 Annual Per Capita Costs for LBW Infants

Table III.2-3 shows the incremental direct costs per year estimated by

Lewit et al. (1995) for each age group for the average LBW infant. It also

shows outpatient cost estimates derived in this handbook from the ratio of

outpatient to inpatient costs (see methodology section for detail).

As noted above, Lewit et al. (1995) estimated health care costs for ages

through ten years only and did not estimate any costs for ages 1 and 2

years. As noted above, these gaps were addressed by using costs for the 3

to 5 year old age group as representative of the costs for ages 1 and 2

years. In addition, the medical costs for the 11 to 15 year olds and the 16

to 75 year olds were extrapolated from the costs per year for 6 to 10 year

olds. 
Chapter III.2 III.2-14 Cost of Low Birth Weight

Table III.2-3. Annual Incremental direct costs per LBW child (1996$)

Age Group Cost Type

Mean Cost

per Year per

LBW Child

Outpatient

Cost

Estimate

Based on

Ratio3

Infancy Health Care (all medical costs) $24,6971(not calculated

separately )

1 to 2 years Health Care (inpatient only) $4772 $2,728

3 to 5 years Health Care (inpatient only) $4771 $2,728

6 to 10 years Health Care (inpatient only) $7741 $4,427

6 to 15 years Special Education $2471 N/A

11 to 15 years Health Care (inpatient only) $7742 $4,427

11 to 15 years Grade Repetition $742 N/A

16 to 75 years Health Care (inpatient only) $7742 $4,427

1

 Costs from Lewit et al. (1995), adjusted for inflation, as shown in Table III.2-2. 

2

 Costs based on Lewit et al., estimated and modified as discussed in the Methods section of this chapter.

3

 Outpatient costs were estimated based on an outpatient/inpatient ratio derived from treatment of asthma

patients. See Methods section of text for discussion.

Lewit et al. estimated that there were approximately four million LBW

children from ages birth to 15 years in 1988 and that their total incremental

direct costs were $5.4 trillion in 1988 dollars. Using the Consumer Price

Index (CPI) for medical care from 1988 to 1996 dollars

(1996:1988=1.6465), the total cost in 1996 dollars (assuming a population

the same size as in 1988) is $8.91 billion.

III.2.B.2.3 Childhood Costs 

The direct medical costs for ages 0 to 15 years are shown in Table III.2-4 

at four discount rates (zero, three, five, and seven percent). These are

average values; as Table III.2-2 demonstrated, the costs are much higher

for some children, born with extreme low birth weight and/or respiratory

distress.

Link to Table III.2-2

The total estimated cost for special education, grade repetition, and

medical care (as itemized in Table III.2-3) for ages 0 to 15 years is $85,447

(undiscounted in 1996$).
Chapter III.2 III.2-15 Cost of Low Birth Weight

Table III.2-4: Discounted childhood medical care costs (Age 0-15) for Low Birth Weight in

1996$

0% 3% 5% 7%

Inpatient and Estimated

Outpatient Medical Care

$82,607 $69,765 $63,292 $58,052

III.2.B.2.4 Lifetime Costs

Medical and other costs for LBW individuals persist into adulthood. They

often have health problems (as noted in Section III.2.A, above) that are

chronic and continue through the life of the individual. To address this

factor, an estimate was made of the potential lifetime incremental medical

costs of LBW, as described in Section III.2.B.1, above. Table III.2-5

below provides an estimate of lifetime incremental medical costs that may

be incurred. 

In reality, it is most likely that those individuals most seriously affected by

LBW will have substantially increased medical costs that exceed the

estimate given below (e.g., those with serious brain damage, respiratory

insufficiency), and that many individuals with moderate LBW will have

minimal incremental costs associated with their birth condition. The values

below are an estimate of the likely average costs that may be incurred.

Link to Section III.2.B.1

The total estimated cost for special education, grade repetition, and

medical care (as itemized in Table III.2-3) is $436,514 for a full lifetime of

75 years (undiscounted in 1996$).

Table III.2-5: Discounted lifetime medical costs (Age 0-75) for Low Birth Weight in 1996$

0% 3% 5% 7%

Inpatient and Estimated Outpatient

Medical Care

$348,227 $148,406 $103,601 $80,578

III.2.B.2.5 Limitations 

The data provided in the Lewit et al. (1995) study have several limitations,

discussed briefly below, with regard to determining average costs.

The data used by Lewit et al. had very few observations of very low birth

weight children. The cost estimates may be underestimated because very

LBW children incur the highest costs. 

The authors noted that the costs may be underestimated due to limited

access to data on charges in the neonatal intensive care unit (NICU, where

the most significant charges are incurred) and on subsequent hospital stays.
Chapter III.2 III.2-16 Cost of Low Birth Weight

The data used by Lewit et al. were from one geographic area. There are

likely to be some regional differences in practices and costs. 

Some aspects of the cost estimate relied on parental surveys, which

introduce uncertainty. 

Data regarding some age groups are lacking. Best estimates of the costs

for age cohorts 11 to 15 years and 16 to 75 years were made based on 

reasonable use of the existing data. Actual cost data would be preferable. 

The lack of data for the one to two years age group is particularly

problematic. Because the one- and two-year-old child is still very close in

age to the birth experience and attendant medical problems, they are more

likely to require continuing medical and developmental services than they

would in at ages three to five. The three- to five-year age group was the

source of the cost data extrapolated to the one to two year age group. The

costs for the three- to five-year-olds are likely to underestimate the medical

costs for the 1 to 2 year age group, especially among the very low birth

weight children. 

Finally, the most serious limitation is the lack of data, aside from

hospitalization costs, on non-hospital costs after the first year of life. 

Hospitalization costs are clearly a significant factor in lifetime costs, but

they underestimate the total incremental medical costs by a factor that is

unknown. This uncertainty is offset partly by the comprehensive medical

costing that was carried out for the first year of life by Lewit et al. The

first year is the most expensive for LBW individuals, especially for those

with the most costly medical treatment. Accurate accounting during this

critical period provides a good basis for the overall cost estimate for LBW. 

The outpatient cost estimates based on the experience of asthmatics

provides a reasonable estimate of outpatient costs for LBW individuals

after the first year of life. The lack of comprehensive medical cost data for

latter years introduces additional uncertainty into the cost estimate and will

result in an underestimate of total costs. 

As with all cost estimates in this handbook, changes in technology create

uncertainty regarding the costs and practices that are currently relevant.

III.2.B.3 Other Studies

McCormick et al. (1991) provides another estimate of LBW costs, but only

for the first year of life. The researchers analyzed the costs incurred by

parents of Very low birth weight babies after the initial neonatal

hospitalization. Costs were obtained from a study of Very low birth weight

infants discharged from the Infant Intensive Care Unit of the Children’s

Hospital of Philadelphia from July 1983 to October 1984. The study

population consisted of 32 infants. Incremental costs were evaluated using
Chapter III.2 III.2-17 Cost of Low Birth Weight

control group of 34 infants born with normal birth weight. Costs were

estimated only for the first year of life and obtained solely for the one

hospital’s birth cohort.

The costs incurred by the family after leaving the NICU were recorded and

include hospital care, visits to doctors, diagnostic tests, prescription and

nonprescription medication, medical supplies and equipment, and special

infant formulas. Other costs reported by McCormack et al. are: hotel

charges associated with rehospitalization, renovations to the house, special

diets, travel to obtain health care, and the cost of in-home care or day care. 

While important , they are not discussed in this chapter, since they do not

fall within the scope of the handbook. 

Total per capita direct costs estimated by McCormick et al., over the first

year are presented in Table III.2-6. The estimates are updated from 1984

to 1996 dollars using the Consumer Price Index for medical costs

(1996:1984=2.14). The costs were calculated after subtracting the costs

for medical care for the control group (the non-LBW children) to obtain

incremental costs of LBW.

Table III.2-6: First year medical costs for LBW infants in 1996$ 

(McCormick et al., 1991)

Type of Costs Total Year

Hospital Care $15,705

Physician Visits $709

Other Direct Medical Expenditures $2,667

Total $19,145

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

below

Link to inflation factors

Additional studies conducted in the 1980s provide some information on

this topic (OTA, 1988; Boyle et al., 1983). These studies, however, have

several drawbacks. They do not provide complete cost estimates, use data

that are not well-suited to this analysis (either Canadian costs, or costs

primarily for moderate LBW rather than including very or extremely LBW

infants), and the ages of the studies are not optimal, due to rapidly

changing medical practices in this field. Additional studies are available on

specific population groups, but do not provide representative data on costs

(Hack et al., 1995).
Chapter III.2 III.2-18 Cost of Low Birth Weight

III.2.B.4 Conclusions

The Lewit et al. (1995) study is the most comprehensive and uses a number

of credible databases and assumptions to derive incremental cost estimates. 

In addition, costs were extrapolated for ages not covered by the Lewit et

al. study; these extrapolations were reasonable and provide an estimate of

average costs. The incremental costs for very LBW and extremely LBW

infants are likely to be much higher throughout their lifetime due to

persistent serious medical conditions. The McCormick et al. study looks

only at the first year of life, while the Lewit et al., (1995) study estimates

health care costs over the first ten years, and other costs up to age 15. 

Because of this restriction, cost estimates based on the Lewit et al. results

are recommended for use in LBW valuation. As discussed in the

“limitations” section above, the Lewit et al. data are likely to underestimate

the actual incremental medical costs for LBW.
Chapter III.3 III.3-1 Cost of Cleft Lip and Palate

CHAPTER III.3. COST OF CLEFT LIP AND PALATE

Clicking on the sections below will take you to the relevant text.

III.3.A Background

III.3.A.1 Description

III.3.A.2 Concurrent Effects

III.3.A.3 Causality

III.3.A.4 Treatment and Services

III.3.A.5 Prognosis

III.3.B Costs of Medical Treatment and Other Services

III.3.B.1 Methodology

III.3.B.2 Results
1

 “Costs” in this chapter refer to direct incremental per capita medical costs, unless otherwise

noted.

Chapter III.3 III.3-2 Cost of Cleft Lip and Palate

CHAPTER III.3. COST OF CLEFT LIP AND PALATE

III.3.A Background

This chapter contains a discussion of the methods used and the results of

estimating the direct medical costs incurred by individuals with cleft lip

and/or palate, and the results of the analysis.1 It does not include

information on elements such as indirect medical costs, pain and suffering,

lost time of unpaid caregivers, etc. The reader is referred to Chapter I.1

for a discussion of the cost estimation methods and cost elements that are

relevant to all benefits estimates. In addition, Chapter III.1 contains

information regarding the special characteristics of developmental defects,

and a list of chemicals that may cause developmental abnormalities. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and III.1

Link to inflation factors

III.3.A.1 Description

Cleft lip and palate occur when structures in the nose and mouth fail to

close during embryonic development. These birth defects appear as

openings or incomplete structures in the centerline of the face and mouth. 

They often occur concurrently (approximately 50 percent of the time), due

to the mechanism of damage that leads to these defects (Fraser, 1970). 

Cleft lip and palate may involve a small or large portion of the facial

structures associated with the nose and mouth. Without treatment, infants

may have problems sucking and swallowing and may aspirate food into

their lungs. Other problems arising from this deformity include delayed and

distorted speech, ear and sinus infections, reading disabilities, crossbite,

and problems with social interactions (Waitzman et al. 1996).

The incidence of cleft lip and palate varies across ethnic groups. Cleft lip,

with or without cleft palate occurs in approximately one in 1,000 births

among whites, 0.3 in 1,000 among blacks, 3.5 in 1,000 among Native

Americans, 1.7 in 1,000 among Chinese, and 2.5 in 1,000 among Japanese

(Oski, 1994). Although there are over 300 recognized cleft syndromes,

these represent a small percentage of the total cleft cases (Oski, 1994).
Chapter III.3 III.3-3 Cost of Cleft Lip and Palate

III.3.A.2 Concurrent Effects

More than 50 percent of infants born with cleft lip and/or palate have other

anomalies of the face, heart, and head (microcephaly). Cleft lip and/or

palate occur with slightly greater probability in individuals with Down

syndrome than in the general population (Waitzman et al. 1996). Middle

ear infections are a common occurrence in children with cleft palate (Oski,

1994).

III.3.A.3 Causality

Cleft lip and palate occur early in development, when the basic skeletal

structures are being formed. The latest time that this anomaly can be

induced is approximately 36 days post-conception (Bennett and Plum,

1996). Consequently, factors that cause this disorder must occur before

the pregnancy begins, or in its very early stages.

Both genetic and environmental factors may be responsible for cleft lip and

palate, inhibiting the normal flow of cells during development. A long list

of teratogenic substances can cause clefting in rodents, including

corticosteroids, folic acid inhibitors, Vitamin A, and phenytoin (Oski,

1994). 

Table III.1-1 in Chapter III.1 lists numerous chemicals associated with

developmental abnormalities in human and/or animal studies. Many of

these have identified structural and anatomical defects. Cleft lip and palate

fall into this category of defects. Little human data exist on developmental

effects of chemical exposures, as discussed in Chapter III.1, even though

birth defects are relatively common occurrences. 

Link to Table III.1-1 in Chapter III.1

Twin data suggest some genetic component to the occurrence of cleft lip

and palate; however, only 35 percent concordance in the occurrence of the

disorder is seen in identical twins. A simple genetic inheritance pattern is

therefore not responsible for the disorder in most cases (Oski, 1994), or all

identical twins (who have the same genetic composition) would have

identical patterns of occurrence (i.e., either both or neither would have the

anomalies). 

A recently completed study of the offspring of pesticide application

workers found that their incidence of skeletal anomalies (as well as

respiratory system, circulatory system, and urogenital anomalies) were

significantly greater than those of the general population in the same area

of the United States (Garry et al., 1996). Musculoskeletal anomalies

include any abnormality in the size, shape, or function of part of the

skeletal system, muscles, and related tissues (e.g., cartilage). They include
Chapter III.3 III.3-4 Cost of Cleft Lip and Palate

the absence or shortening of limbs (as discussed in Chapter III.4) and the

abnormal formation of part of the skeleton or related soft tissue and

cartilage, as is the case in cleft lip and palate. The chemicals evaluated in

the Garry et al. study that were associated with the birth defects were

trifluralin, triazine herbicides (including atrazine, a very common well

contaminant in agricultural areas), and chlorophenoxy herbicides (including

MCPA and 2,4-D, a pesticide with very high usage). There was also a

significant increase in birth defects among infants conceived in the spring

(i.e., during peak chlorophenoxy use) compared to infants conceived

during other periods of the year (Garry et al., 1996). 

As indicated in Chapter III.1, the timing of exposure is often a critical

determinant of whether and what type of effects will occur. Generally, the

earlier during a pregnancy that damage occurs, the more serious the effect

will be because all cells developing from the damaged cells may also be

damaged, and basic structures are being formed during the first trimester

(three months). Although Garry et al. do not provide detailed information

on the specific nature of the anomalies, this information can be obtained

from the authors of the study or from EPA (the work was funded by U.S.

EPA).

Link to Chapter III.1

III.3.A.4 Treatment and Services

Cleft lip and palate are typically corrected during infancy or early

childhood. They are usually treated surgically shortly after birth to close

the lip. Surgical correction of the palate typically occurs at 6 to 18 months. 

Remaining defects are corrected during adolescence. Speech and

orthodontic services are frequently required (Waitzman et al., 1996). A

medical team consisting of a maxilofacial surgeon, audiologist, speech

pathologist, prosthodontist, otolaryngologist, pediodontist, and geneticist

are often involved in the treatment of this disorder over an extended period

during childhood.

III.3.A.5 Prognosis

Long-term survival and quality of life after the first year of life are good, in

the absence of other medical problems. As noted under concurrent effects

above, other anomalies that frequently accompany cleft lip and palate may

shorten life and diminish abilities (Waitzman et al., 1996). The mortality

experience in California of individuals born with cleft lip and/or palate as

reported by Waitzman et al. is discussed in Section III.3.B.
Chapter III.3 III.3-5 Cost of Cleft Lip and Palate

III.3.B Costs of Medical Treatment and Other Services

Cleft lip and palate are typically corrected during infancy or early

childhood; consequently, their cost evaluation is simpler than many of the

other developmental effects discussed in this handbook. Cleft lip and

palate correction focuses on surgical and other medical care that occurs

over a relatively short time period. The medical procedures often fully

address the problem, and there are not medical costs occurring over the

lifespan of the individual, as there often are with effects such as spina bifida

and cerebral palsy (Waitzman et al., 1996). 

As noted above, cleft lip and palate are very often associated with other

birth defects. They also occur with slightly greater probability in

individuals with Down syndrome than in the general population. 

Consequently, it may be necessary to evaluate the costs of multiple effects

in addition to cleft lip and palate (Waitzman et al., 1996). The need for this

type of analysis is supported by the occurrence of multiple birth defects in

toxicological tests of environmental chemical exposures in animals. 

Multiple effects, which often occur from exposure to chemicals, would all

be considered in a comprehensive cost estimate.

III.3.B.1 Methodology

This chapter and chapters III.4 through III.8 in this section use cost of

illness estimates developed by primarily Waitzman et al. (1996). The

methodology and relevant considerations are discussed in detail in the

following sections. The results and elements related specifically to each

condition are then discussed in each individual chapter. 

To estimate the lifetime medical costs incurred by an individual with a birth

defect, Waitzman et al. estimated the average lifetime medical costs for an

individual with the birth defect. From this value, the authors subtracted the

average lifetime medical costs for an individual without the birth defect. 

This method has two important implications. First, unlike the costs

reported for many of the diseases in this handbook, cost estimates based on

Waitzman et al. include the costs of concurrent effects. These estimates

yield a more comprehensive assessment of total costs than would be

obtained if only individual effects were evaluated. This is of particular use

in valuing the avoidance of birth defects because they very frequently occur

in clusters within an individual. Second, the Waitzman et al. method

estimates the incremental costs for individuals with birth defects — that is,

the costs above and beyond the average costs that would be incurred by

individuals without the birth defect.

The Waitzman et al. cost estimates are well-researched and up-to-date.

These cost estimates are based on ongoing costs of birth defects in

California across many ages and the occurrence of birth defects in a large
Chapter III.3 III.3-6 Cost of Cleft Lip and Palate

cohort of children born in California in 1988. The state of California has

spent considerable resources to evaluate causes and occurrences of birth

defects and has an ongoing birth defects monitoring program. 

Consequently, the use of this state data provides excellent sources of

information on occurrences, costs, and related information. California’s

large size and diversity makes it a good heterogenous source of cost data.

Waitzman et al. used multiple databases, including the California Birth

Defects Monitoring Program incidence, birth, and death records, the

National Health Interview survey, The California Office of Statewide

Health Planning and Development hospital discharge data, MediCal claims

files, California Department of Development Services data, the National

Longitudinal Study of Special Education Students, California Special

Education Enrollment and Expenditure data, and the Survey of Income and

Program Participation. The variable-specific data sources and limitations

will be discussed in greater detail in Section III.3.B.1.6.

III.3.B.1.1 Direct and Indirect Costs

Cost of illness studies typically involve analysis of two types of costs:

direct and indirect. Direct costs are associated with resources used to

provide medical care to people with a particular illness. These costs

include medical costs such as inpatient and outpatient costs, and 

nonmedical costs, such as the cost of special education. Indirect costs, on

the other hand, are associated with resources lost to society as a result of

premature mortality and/or morbidity in patients. These costs are related

to activity limitations and include foregone earnings.

Waitzman et al. (1996) estimated three categories of costs: direct medical

costs, direct nonmedical costs, and indirect costs. Direct nonmedical and

indirect costs are reported at the end of this chapter without discussion for

the reader’s convenience. Direct medical costs, specifically inpatient care,

outpatient care, pharmaceuticals, laboratory tests, X-rays, appliances, and

long-term care are included in the direct medical cost estimates shown in

this chapter. For more information on methods used to derive these costs,

the reader may wish to consult Waitzman et al. (1996). 

III.3.B.1.2 Prevalence versus Incidence

Cost of illness studies usually employ either a prevalence or an incidence

approach. The prevalence of an illness at a given point in time is the

number of individuals who have the illness at that time. The prevalent

population is defined as a cross section of the population with the disease

of interest at a given time. This group may be subdivided into age-specific

prevalent populations. Incidence refers to the newly diagnosed cases of an

illness. The incidence of an illness in a given year, for example, is the

number of cases of the illness that were newly diagnosed in that year. 
Chapter III.3 III.3-7 Cost of Cleft Lip and Palate

Prevalence approaches are more useful for assessing treatment strategies. 

Incidence approaches, on the other hand, are more useful for assessing

prevention strategies, because preventing the occurrence of an illness

avoids the entire stream of costs that would have resulted from the illness

from its inception to the death of the individual. Part of the benefit of

preventing an illness is the benefit of avoiding the costs associated with the

illness, measured as the present discounted value of the stream of costs that

would be incurred over the entire course of the illness (Waitzman et al.,

1996).

Waitzman et al. use an incidence-based approach, but use both incidence

and prevalence numbers to arrive at the final incidence-based estimates. 

Cross-sectional cost data from the larger population group of all California

residents diagnosed with a condition (i.e., the prevalent population) were

divided by the total number of people in this group to obtain estimates of

the costs for the cohort of interest (i.e., those born in 1988). These costs

were adjusted based on the average cost for a healthy individual, in order

to obtain incremental costs (discussed below). The per-capita incremental

costs were then multiplied by estimates of the size of the 1988 cohort at

each age (i.e., the incident population) to obtain a total incidence-based,

age-specific cost estimate for the 1988 cohort. Finally, the total costs were

divided by the size of the cohort at birth with each defect to obtain the cost

per case. 

Table III.3-1 provides California prevalence data for a point in time (July 1,

1988) and California incidence data for infants born in 1988 for cleft lip

and palate, along with other commonly observed developmental defects. 

This table shows the differences between prevalence and incidence, as well

as the variation across defects in each. Although no exact relationship

between the prevalence of these conditions on July 1, 1988 and their

incidence during 1988 exists, the two are highly correlated. For example,

the two conditions with the highest incidences in 1988 (cleft lip or palate

and cerebral palsy) are also the two most prevalent conditions on July 1,

1988. The third most prevalent condition on July 1, Down syndrome, also

has the third greatest incidence during 1988. The least prevalent condition,

truncus arteriosis, has the lowest incidence. 
Chapter III.3 III.3-8 Cost of Cleft Lip and Palate

Table III.3-1: Prevalence and incidence of the most frequent birth defects in California:

1988*

Condition

Prevalence of the Birth

Defect on July 1, 1988**

Incidence of the Birth

Defect Among Infants Born

in California in 1988***

Spina bifida (Ch. III.6) 8,859 226

Truncus arteriosis (Ch. III.5) 1,591 56

Transposition (Ch. III.5) 7,469 263

Tetralogy of fallot (Ch. III.5) 5,336 187

Single ventricle (Ch. III.5) 1,932 68

Cleft lip or palate 24,956 944

Upper limb reduction (Ch.

III.4)

7,895 234

Lower limb reduction (Ch.

III.4)

3,856 114

Down syndrome (Ch. III.8) 14,095 558

Cerebral palsy (Ch. III.7) 28,745 656

* Numbers are from Tables 3-1 and 3-4 in Waitzman et al., 1996.

**The prevalence of a birth defect at a given time is the number of individuals (of all ages) who have the

birth defect at that time.

***The incidence of a birth defect in a given year is the number of infants born with the birth defect during

that year. For example, whereas there were 8,859 individuals (of all ages) in California on July 1, 1988

who had spina bifida, 226 babies were born with spina bifida in California during 1988. Those infants born

with spina bifida in California in 1988 on or before July 1 and still alive on July 1 would be counted among

the prevalent population on July 1, 1988. 

Waitzman et al. estimated the lifetime costs of birth defects in a cohort and

therefore used an incidence-based approach. Ideally, they would have

tracked the costs of the cohort members over time, until the death of the

last cohort member. Because the members of the cohort were born in

1988, however, this was not possible. Instead, estimates of the costs

incurred at each age were based on estimates of per capita costs in the

prevalent population of that age. The method is described more fully in

Section III.3.B.1.5.

III.3.B.1.3 Incremental Costs

Waitzman et al. emphasize that their cost estimates are “cost estimates for

individuals with birth defects rather than the costs of the birth defects per

se” (Waitzman et al., 1996). They are, moreover, estimates of incremental
2

 Waitzman et al. address this situation when they extrapolate the per-capita mean costs to the

total mean costs per disease. Rather than including a single person in the incidence totals for both Down

syndrome and cleft palate, for instance, they include a person with both defects in the incidence total of the

more costly defect. When the per-capita costs are multiplied by the total number of people with the defect,

each person is counted only once. The costs in this handbook focus on the per-capita costs only. 

Consequently, the adjustment described above is not applicable to the costs presented here. 

Chapter III.3 III.3-9 Cost of Cleft Lip and Palate

costs. Because medical costs are incurred by the population as a whole, the

costs incurred by an individual with a birth defect must be adjusted to

reflect these baseline costs. The per capita incremental cost of a birth

defect is the cost incurred above and beyond the cost incurred by an

“average child” without the birth defect. Waitzman et al. attempted to

isolate those costs specifically related to the condition of interest and

associated anomalies. In order to do this, the costs for each individual with

a particular effect (e.g., cleft lip) were tracked. Costs for the average nonaffected person were subtracted from those for the average person with the

effect. 

III.3.B.1.4 Costs of Concurrent Effects

Many of the defects discussed in the following chapters are associated with

other defects. By their nature, Waitzman et al.’s cost estimates include the

costs of concurrent effects. As noted above, Waitzman et al. estimated the

costs incurred by individuals with birth defects, including all medical costs

incurred, rather than the cost of the birth defect per se. For example, the

mean per-capita cost incurred by a person with Down Syndrome would

include the costs associated with other defects. This approach has

advantages and disadvantages (as discussed in detail by Waitzman et al.). 

If two defects are dependent, then it makes sense to include costs related to

both conditions; the benefits of preventing the first would be equal to the

costs of both, since prevention of one leads to prevention of the other. 

Alternatively, if two defects are independent of each other but show up in

the same person, this methodology would yield an overestimate of costs.2

Little is known about the pathogenesis of birth defects, and the assumption

is that most defects fall somewhere in between total dependence and

independence. Given the relative rarity of many severe birth defects, the

probability that they would occur in the same person, without any linkage

in causation, is very small. 

As Waitzman et al. note, the costs of associated anomalies are included as

part of the estimate of the costs incurred by an individual with a given birth

defect. For this reason, their cost estimates cannot be aggregated across

birth defects because of the possibility of double counting. 

Given the large size of the California databases used by Waitzman et al.,

the combination and frequency of concurrent effects in the authors’ sample

are likely to be representative of those in the larger United States

population, and therefore appropriate for a benefits assessment.
Chapter III.3 III.3-10 Cost of Cleft Lip and Palate

III.3.B.1.5 Analysis

The estimation of the average per capita lifetime cost associated with a

birth defect is based on the method of Waitzman et al. (1996). Waitzman

et al. estimate both the total lifetime cost for a cohort of individuals and the

average lifetime cost per case — i.e., for a single individual in the cohort. 

(The average cost per case is obtained by simply dividing the total cost for

the cohort by the original number of individuals in the cohort.) The

Waitzman et al. method is discussed briefly below. 

Waitzman et al. estimate the present discounted value of lifetime costs

associated with a birth defect for a cohort born with the defect in 1988 in

California. This value is the sum of costs over all years in which cohort

members are alive, with future costs discounted appropriately. The total

costs incurred during the first year after birth, denoted TC1, are the costs

incurred by all members of the cohort who survive to one year of age; these

costs are discounted back to the year of birth by dividing TC1 by the

discount factor for the first year, (1 + r), where r is the discount rate. The

total costs incurred during the second year after birth, denoted TC2, are

the costs incurred by all members of the cohort who survive to two years

of age; these costs are discounted back to the year of birth by dividing TC2

by the discount factor for the second year, (1 + r)2. In general, the costs

incurred during the ith year after birth, TCi, are the costs incurred by those

members of the cohort who survive to age i. These costs are discounted by

dividing by the discount factor for the ith year, (1 + r )i. 

The total cost of the birth defect, COBD, is the sum of these discounted

age-specific total costs:

COBD =3i TCi/(1+r)i .

As discussed in Section III.3.B.1.3, the total costs incurred at a given age

are incremental costs — that is, those costs above and beyond the costs

incurred by the average child of that age. 

Link to Section III.3.B.1.3

One way to estimate TCi, the total incremental costs during the ith year

after birth (i.e., at age i), might be to estimate the incremental costs

incurred by those members of the cohort who survive to age i. For a

cohort born in 1988, however, this calculation would be possible only

through age nine, because members of that cohort would reach that age in

the present year, 1997. Waitzman et al. instead base their estimates of total

incremental costs for a given age on costs in the prevalent population of

that age. For example, the average per capita total incremental cost among

15-year-olds is estimated from data on individuals with the birth defect

who are 15 years old (none of whom can be members of a cohort born in
3

 To estimate the number of cohort members surviving to a given age, Waitzman et al. multiplied

the number in the original cohort by an estimate of the probability of surviving to that age. The data

necessary to estimate survival numbers therefore include the data necessary to estimate survival

probabilities. 

Chapter III.3 III.3-11 Cost of Cleft Lip and Palate

1988). This method assumes that the real costs associated with the birth

defect for individuals of a given age will not change appreciably over time

— for example, that the real costs for a 15-year-old in the year 2003, when

the surviving members of the cohort born in 1988 are 15, will be the same

as the real costs for an individual who is 15 years old in the prevalent

population examined (e.g., in 1988). Waitzman et al. note that this

conclusion in turn rests on the assumption that future treatment patterns

will resemble current treatment patterns. An estimate of the per capita

cost based on the prevalent population of age i, PCPREVi, multiplied by an

estimate of the number of individuals in the 1988 cohort who are expected

to survive to age i, Si, yields an estimate of the total incremental costs of

those cohort members who survive to age i:

TCi = (Si ) × (PCPREVi ) . 

Waitzman et al. estimate per capita costs in the prevalent population of age

i, PCPREVi, in two different ways, depending on data availability. One

method is to simply divide the total costs in the prevalent population of age

i by the number of individuals in that population. If the necessary

information is not available for this method, an alternative method is used. 

Not all individuals with birth defects incur incremental costs at each age. 

The alternative method estimates the proportion of the prevalent

population at age i who do incur incremental costs, and multiplies that

proportion by the average per capita costs incurred by the individuals who

incur costs. This second method is used when estimates of the total or per

capita costs for the prevalent population of age i are not available, but

estimates of the average per capita cost for those incurring costs are

available. 

The focus in this handbook is on the expected lifetime incremental costs for

an individual with the birth defect — i.e., the average lifetime cost per case. 

As noted above, Waitzman et al. obtain this value by simply dividing the

total cost for the cohort by the original number of individuals in the cohort. 

This method is equivalent to following the calculation outlined above, with

one alteration: now, the probability of surviving to age i among those

individuals born with the birth defect, psi, is used, rather than Si, the

number surviving to age i.

3

 The expected per capita cost at age i, PCCi, of

an individual born with the birth defect would then be:

PCCi = (psi) × (PCPREVi) .
Chapter III.3 III.3-12 Cost of Cleft Lip and Palate

The present discounted value of expected per capita lifetime costs of the

birth defect, PCCOBD, is just the sum of these expected age-specific per

capita costs, appropriately discounted: 

PCCOBD =3i PCCi/(1+r)i .

III.3.B.1.6 Variable-Specific Data Sources

Table III.3.2 lists the data sources used for each variable necessary for the

calculations described above. It also briefly describes the limitations

associated with each of these sources, and the methodology used to derive

the data from the relevant sources.

Table III.3-2: Variable specific data sources and limitations

Variable Source Data Limitations

Number

surviving to a

given age, 

S = I×m

I (Incident Cases)

(not including Cerebral

Palsy)

CBDMP 1 1. Actual numbers were not collected for three

major counties, but were estimated for the study. 

These estimates could be biased.

2. Only live-born children are included.

3. Certain internal defects are not apparent

during the first year, and therefore prevalence

may be underestimated.

4. Does not account for birth defects treated

exclusively on an outpatient basis.

I (Cerebral Palsy) CA Cerebral Palsy

Project

1. Exceptionally stringent criteria for including

cases. May underestimate.

m (agespecific

survival

proportion)

Age 0-1 CBDMP linked with

death certificates

1. Assumes that mortality at time of database is

same at time of study — overestimates costs.

2. Assumes normal mortality beyond a specific

age — underestimates costs.

Quadrant IV

conditions

MEDLINE search for

each condition

Mortality Review of clinical lit,

panel of clinical

advisors

1. Assumption of normal mortality beyond a

specific age — may overestimate the number of

survivors.
Table III.3-2: Variable specific data sources and limitations

Variable Source Data Limitations

Chapter III.3 III.3-13 Cost of Cleft Lip and Palate

Size of the

prevalent

population

Age 0-1 CBDMP and incidence

estimate (see above)

1. Applied 1983-86 estimates to 1988 —

assumes that these numbers are similar.

2. Underestimates # of children who actually

used services, i.e, if a child died before the one

year cut-off date they would not be included, and

yet they may have received care.

3. Assumed first-year mortality was equal

among males and females.

4. Net migration not accounted for — may

underestimate prevalence if families migrate to

CA b/c of the availability of specialized care.

After age 1 NHIS 2 1. Assumes no net migration and no mortality

over time. These two may actually cancel each

other out.

2. Assumes that the prevalence of each defect

has been constant over time.

Total

incremental

costs in the

prevalent

population

(for each

age)

Inpatient/Outpatient OSHPD 3 (adjusted

using MediCal and

cost-to-charge ratios)

1. Cost-to-charge ratio may be too drastic.

Long-term (Down

syndrome and cerebral

palsy)

DDS file 4

Long-term (others) MediCal 1. Assumed that all costs were borne by

Medical.

2. Assumed that expenditures for such care

were at cost.

Other Shriners’ hospitals

(add’l data not

reported in OSHPD or

MediCal)

Incremental Costs NMCES 5 1. These data may include persons with defects

and therefore might be slightly overestimated,

making incremental costs slightly

underestimated.

PCAFF Developmental Costs DDS file 1. Unlikely that all underlying etiologies were

recorded — may have underestimated # of

people w/ birth defects receiving DDS services.

TC — special

education

fc — proportion of the

affected population

SRI 6 1. Assumed the national distribution applied to

CA.

p — proportion receiving

special ed

NHIS 1. May underestimate proportion receiving

special ed.

PCFC — per-capita

special education costs

CA State Department

of Education

CALPROP-the distribution

of students

CA Department of

Education

1

 California Birth Defects Monitoring Program

2

 National Health Interview Survey

3

 1988 California Office of Statewide Health Planning and Development hospital discharge file

4

 California Department of Developmental Services Masterfile, 1988-89

5

 National Medical Care Expenditure Survey, 1987

6

 National Longitudinal Transition Study of Special Education Students, 1990
Chapter III.3 III.3-14 Cost of Cleft Lip and Palate

III.3.B.2 Results

III.3.B.2.1 Annual Direct Medical Costs

Waitzman et al.’s (1996) estimates of the total lifetime medical costs of

cleft lip and palate are outlined in the following tables. They are updated

from 1988 to 1996 dollars based on the medical care cost component of

the Consumer Price Index (1996:1988=1.6465). Table III.3-3 shows

annual per capita medical costs incurred by individuals with cleft lip and

palate by age group. 

Table III.3-3: Annual Per-Capita Medical Costs of Cleft Lip and Palate by Age Group (1996$)

Condition Age 0-1 Age 2-4 Age 5-17 Age 18+

Cleft lip and palate $11,186 $2,025 $1,510 $1,421

III.3.B.2.2 Incremental Lifetime Direct Medical Costs

The medical cost of the average population was then subtracted from these

costs to obtain incremental costs. Waitzman et al. (1996) discounted these

costs using three different discount rates: two percent, five percent and ten

percent. Although these discount rates do not match the standard EPA

rates used in many other chapters in this handbook (zero percent, three

percent, five percent and seven percent), there is insufficient information

provided in Waitzman et al. (1996) to allow a conversion to discounted

costs using standard EPA discount rates. This problem exists in all

chapters based on the Waitzman et al. data (Chapters III.3 through III.8). 

The present discounted values of average per capita lifetime incremental

costs, using discount rates of two percent, five percent, and seven percent,

are listed in Table III.3-4 below. 

Table III.3-4: Per-Capita Incremental Medical Costs, Nonmedical Costs, and Total Costs of

Cleft Lip and Palate (1996$)

Cost Element 0% 2% 5% 10%

Direct Medical Costs $19,758 $18,111 $16,465

Direct Non-Medical Costs:

Developmental

Services

$688 $649 $589

Special Education $5,218 $3,866 $2,453

Total Direct Costs $25,664 $22,626 $19,507

The costs presented in this chapter were current in the year the chapter was written. They can be updated using

inflation factors accessible by clicking below.

Link to inflation factors
Chapter III.3 III.3-15 Cost of Cleft Lip and Palate

III.3.B.2.3 Other Costs

Categories of costs that are not usually included in this handbook were

available from Waitzman et al. and so are reported in Table III.3-4. For

information on their estimation methods see Waitzman et al. (1996). 

III.3.B.2.4 Limitations

Reliance on the Waitzman et al. (1996) study has a number of limitations. 

The first concerns the reliance solely on California data. Medical practices

and costs vary across the country, and an ideal data set would contain cost

information from a representative sample of the entire United States. As a

large state with varied areas (urban, rural, suburban, high, moderate, and

low income populations), California is likely to reflect some of the diversity

seen throughout the country. The California data are also especially

accurate because of the birth defects monitoring program that the state has

in place.

Another limitation involves the basis of the Waitzman et al. cost estimates. 

Waitzman et al. base their estimates of costs on actual costs incurred. To

the extent that services were not readily available to or obtained by parents

of children with birth defects in their sample, the Waitzman et al. estimates

may understate the costs necessary for children to receive the level of care

considered by doctors to be adequate. 

What is considered “adequate” may, of course, vary from one individual to

another (just as the willingness to pay to avoid the occurrence of a birth

defect may vary from one individual to another). An alternative approach

would be to delineate the collection of medical services and treatments that

constitute “proper care” for a given birth defect or illness, as defined by

consensus among doctors, and estimate the costs associated with that

“bundle” of services and treatments. This theoretical cost methodology has

the advantage of avoiding the possibility that the cost estimates may reflect

the unwillingness or inability of parents to pay for adequate medical care

rather than the cost of the care itself. These “ideal” costs are the costs of

the care that, according to doctors, should be received. They are thus

likely to be closer to the benefits to society of avoiding an illness. Actual

costs, on the other hand, reflect the care that actually is received, and are

therefore presumably a more accurate representation of what occurs. 

The degree to which actual costs understate “ideal” costs will depend on

the illness. Children with a life-threatening heart anomaly (See Chapter

III.5) will typically be diagnosed properly at birth and require treatment,

whereas children with Down syndrome may receive varying degrees of

services to address their needs, depending on parental and other social

factors and economic resources.
Chapter III.3 III.3-16 Cost of Cleft Lip and Palate

Waitzman et al. point out other limitations of their study, several of which

are likely to lead to underestimates of cost. For example, they

underestimate developmental services costs because the Department of

Developmental Services file included only public expenditures, not private,

out-of-pocket spending. In addition, the databases do not necessarily

include complete longitudinal profiles of costs for all individuals because it

was not always possible to link an individual’s files across the entire

lifespan. This omission would also result in underestimates of total lifetime

costs. Finally, costs could be either under- or overestimated due to

changes in technologies. Because the study attempts to estimate lifetime

costs, changes in medical care technologies or policies could be important. 

These changes could either increase or decrease costs. 

A final limitation warrants mention. Only select costs are presented in this

chapter. There are other important categories of costs that are not

included here. For example, a person born with a birth defect often has a

higher probability of early death (see Section III.3.A.5, above); the cost of

premature mortality is a real cost associated with many birth defects and

illnesses. Individuals with illnesses or birth defects often experience a

decrease in productivity, resulting in a loss to society of goods and

services. In addition, there are the indirect costs of the pain and suffering

of the individual and of family members, as well as the lost productivity of

family members. These costs can be considerable (e.g., the direct cost of

lost work time calculated for spina bifida by Waitzman et al. was $656,879

in 1996 dollars). These costs, while not presented for most illnesses in this

handbook, are valid components of the total economic costs associated

with the illnesses and birth defects discussed in this handbook.

Link to Section III.3.A.5
Chapter III.4 III.4-1 Cost of Limb Reductions

CHAPTER III.4. COST OF LIMB REDUCTIONS

Clicking on the sections below will take you to the relevant text.

III.4.A Background 

III.4.A.1 Description

III.4.A.2 Concurrent Effects

III.4.A.3 Causality

III.4.A.4 Treatment and Services

III.4.A.5 Prognosis

III.4.B Costs of Treatment and Services

III.4.B.1 Methodology

III.4.B.2 Results
1

 “Costs” in this chapter refer to direct incremental per capita medical costs, unless otherwise

noted.

Chapter III.4 III.4-2 Cost of Limb Reductions

CHAPTER III.4. COST OF LIMB REDUCTIONS

III.4.A Background

This chapter contains a discussion of the methods used and the results of

estimating the direct medical costs incurred by individuals with limb

reductions, and the results of the analysis.1 It does not include information

on elements such as indirect medical costs, pain and suffering, lost time of

unpaid caregivers, etc. The reader is referred to Chapter I.1 for a

discussion of the cost estimation methods and cost elements that are

relevant to all benefits estimates. In addition, Chapter III.1 contains

information regarding the special characteristics of developmental defects,

and a list of chemicals that may cause developmental abnormalities. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and III.1

Link to inflation factors

III.4.A.1 Description

Limb reductions are the partial (meromelia) or complete (amelia) absence

of arms or legs. They vary with respect to the bones, muscles, and other

structures affected.

III.4.A.2 Concurrent Effects

Children with limb reductions frequently have other birth defects. In 30 to

53 percent of affected children, other malformations are present, including

anomalies of the heart, kidney, anus, abdominal walls, esophagus,

vertebrae, and palate. Webbing between digits and spina bifida are also

associated with this defect (Waitzman et al., 1996). 

III.4.A.3 Causality

Table III.1-1 in Chapter III.1 lists numerous chemicals associated with

developmental abnormalities in human and/or animal studies. Many of

these chemicals have caused structural and anatomical defects. Limb

reductions fall into this category of defects. 

Link to Table III.1-1 in Chapter III.1
Chapter III.4 III.4-3 Cost of Limb Reductions

A recently completed study of the offspring of pesticide application

workers found that their incidence of skeletal anomalies, which includes

limb reductions, was significantly greater than that of the general

population in the same area of the United States (Garry et al., 1996). 

Respiratory system, circulatory system, and urogenital anomalies also

occurred at increased rates. Musculoskeletal anomalies include any

abnormality in the size, shape, or function of part of the skeletal system,

muscles, and related tissues (e.g., cartilage). They include the absence or

shortening of limbs (as discussed in this chapter) and the abnormal

formation of part of the skeleton or related soft tissue and cartilage, (as

discussed in Chapter III.3). The chemicals evaluated in the study that were

associated with the birth defects were trifluralin, triazine herbicides

(including atrazine, a very common well contaminant in agricultural areas),

and chlorophenoxy herbicides (including MCPA and 2,4-D, a pesticide

with very high usage). There was also a significant increase in birth

defects among infants conceived in the spring (i.e., during peak

chlorophenoxy use) compared to infants conceived during other periods of

the year (Garry et al., 1996). As indicated in the introductory

developmental effects chapter (III.1), the timing of exposure is often a

critical determinant of whether and what type of effects will occur.

Links to Chapters III.3 and III.1

Generally, the earlier during a pregnancy that damage occurs, the more

serious the effect will be, because all cells developing from the damaged

cells may also be damaged or eliminated, and basic structures are being

formed during the first trimester (three months). Although Garry et al.

(1996) does not provide detailed information on the nature of the skeletal

and other anomalies, information can be obtained from the author or from

EPA (which funded the work).

III.4.A.4 Treatment and Services

Individuals with limb reductions are treated using a variety of surgical

techniques, are fitted with prostheses, and usually require physical and/or

occupational therapy (Mason, 1991). Limb reductions may occur at any

point from the joint which attaches the limb to the body (i.e., shoulder or

hip) to the distal point of that limb, and may affect some or all of the bones,

muscles, cartilage, and other structures comprising the limbs. The

structures involved and the types of surgical approaches used are too

diverse and numerous to describe in this chapter. Depending on the nature

of the limb reduction, this type of birth defect may require multiple

complex surgical corrections. Following the initial surgical and related

treatments, prostheses are usually replaced each year up to five years. 

They are replaced biennially after that, up to twelve years, and every two to

five years after that (Waitzman et al., 1996). 
Chapter III.4 III.4-4 Cost of Limb Reductions

III.4.A.5 Prognosis

Twelve to twenty percent of infants with limb reductions die during

infancy, primarily due to other anomalies (as noted above) (FrosterIskenius and Baird, 1990). Individuals with limb reductions who have

received appropriate medical treatment usually have good functional

capabilities (in the absence of other unrelated serious medical problems),

although their physical actions may be slowed by their disabilities. There

are significant psychosocial implications of these permanent disabilities;

these may require medical or other treatment (Waitzman et al., 1996). 

III.4.B Costs of Treatment and Services

III.4.B.1 Methodology

Chapters III.3 through III.8 of this handbook use cost of illness estimates

developed primarily by Waitzman et al. (1996). Waitzman et al. used the

same methodology to estimate the costs incurred by individuals with limb

reductions as for all the birth defects for which they estimated costs. The

methodology and relevant considerations are detailed in Chapter III.3,

including discussions of direct and indirect costs, prevalence versus

incidence, incremental costs, and concurrent effects. The analytic method,

the sources of data, and the limitations of the Waitzman et al. method are

also discussed in Chapter III.3. The methodology is outlined briefly here.

Link to Chapter III.3.

To estimate the lifetime medical costs incurred by an individual with a birth

defect, Waitzman et al. estimated the average lifetime medical costs for an

individual with the birth defect. From this value, the authors subtracted the

average lifetime medical costs for an individual without the birth defect. 

This yielded the incremental costs associated with the birth defect. 

Because they estimated lifetime costs, they used an incidence-based

approach. Ideally, they would have tracked the costs of the cohort

members over time, until the death of the last cohort member. Because the

members of the cohort were born in 1988, however, this tracking was not

possible. Instead, estimates of the costs incurred at each age were based

on estimates of per capita costs in the prevalent population of that age (see

Chapter III.3, Section III.3.B.1.2).

Link to Chapter III.3, Section III.3.B.1.2

This method has two important implications. First, Waitzman et al.

estimated the costs incurred by individuals with birth defects, including all

medical costs incurred, rather than the cost of the birth defect per se. 
2

 Indirect costs are not generally discussed in this handbook and so are not included in this chapter. 

The reader may wish to consult Waitzman et al. (1996) for information on these costs.

Chapter III.4 III.4-5 Cost of Limb Reductions

These cost estimates therefore include the costs of concurrent effects

(unlike the costs reported for many of the diseases in this handbook). This

method yields a more comprehensive assessment of total costs than would

be obtained if only individual effects were evaluated. This method is of

particular use in valuing the avoidance of birth defects because they very

frequently occur in clusters within an individual. As Waitzman et al. note,

however, the costs of associated anomalies are included as part of the

estimate of the costs incurred by an individual with a given birth defect. 

These cost estimates therefore cannot be aggregated across birth defects

because of the possibility of double counting. 

Second, the Waitzman et al. method estimates the incremental costs for

individuals with birth defects — that is, the costs above and beyond the

average costs that would be incurred by individuals without the birth

defect.

Waitzman et al. (1996) estimated three categories of costs incurred by

individuals with limb reductions: direct medical costs, direct nonmedical

costs, and indirect costs.2 Direct medical costs, specifically inpatient care,

outpatient care, pharmaceuticals, laboratory tests, X-rays, appliances, and

long-term care are included in the cost estimates shown in this and other

chapters (Chapters III.3 through III.8) based on the work of Waitzman et

al. Nonmedical direct costs, specifically developmental services, and

special education are also included in this handbook.

The Waitzman estimates of the costs incurred by individuals with limb

reductions are based on the costs of this birth defect in California across

many ages, and its occurrence in a large cohort of children born in

California in 1988. California’s ongoing birth defects monitoring program

provides an excellent source of data. The California data sets were linked

with other national data sets so that Waitzman et al. could estimate the

incremental costs associated with limb reductions.

The method of calculating the expected lifetime incremental costs for an

individual with a birth defect — i.e., the average lifetime cost per case —

is the same for all the birth defects considered by Waitzman et al. The

expected per capita cost at age i, PCCi, for an individual born with the birth

defect is the probability of surviving to age i (among those individuals born

with the birth defect), psi, times the per capita cost among individuals who

do survive to age i (PCPREVi, measured in the prevalent population):

PCCi = (psi) × (PCPREVi) .
Chapter III.4 III.4-6 Cost of Limb Reductions

Waitzman et al. estimate per capita costs in the prevalent population of age

i, PCPREVi, in two different ways, depending on data availability (see 

Chapter III.3).

Link to Chapter III.3

The present discounted value of expected per capita lifetime costs of the

birth defect, PCCOBD, is just the sum of these expected age-specific per

capita costs, appropriately discounted (as explained more fully in Chapter

III.3): 

PCCOBD =3i PCCi/(1+r)i .

III.4.B.2 Results

Waitzman et al. (1996) estimate the medical costs of two different groups

of limb reductions: upper limb reductions and lower limb reductions. The

following tables outline the various costs associated with both types. They

are updated from 1988 to 1996 dollars based on the medical care cost

component of the Consumer Price Index (1996:1988=1.6465).

Table III.4-1 shows annual per capita medical costs incurred by individuals

with limb reductions by age group. Upper limb reductions tend to be

correctable at birth, and thus the costs decrease over time. The costs of

lower limb reductions, on the other hand, tend to increase with time

beyond the initial cash outlay, because lower limb reductions are less

correctable and require ongoing medical services.

Table III.4-1: Annual Per-Capita Medical Costs of Limb Reductions by Age Group (1996$)

Condition Age 0-1 Age 2-4 Age 5-17 Age 18+

Upper Limb Reduction $8,985 $659 $456 $280

Lower Limb Reduction $11,888 $1,215 $1,786 $3,492

The medical cost of the average population was then subtracted from these

costs to obtain incremental costs. Waitzman et al. (1996) discounted these

costs using three different discount rates: two percent, five percent, and ten

percent. Although these discount rates do not match the standard EPA

rates used in many other chapters in this handbook (zero percent, three

percent, five percent, and seven percent), there is insufficient information

provided in Waitzman et al. (1996) to allow a conversion to discounted

costs using standard EPA discount rates. This problem exists in all

chapters based on the Waitzman et al. data (i.e., Chapters III.3 through

III.8). 
Chapter III.4 III.4-7 Cost of Limb Reductions

The present discounted values of average per capita lifetime incremental

costs, using discount rates of two percent, five percent, and seven percent,

are listed in Table III.4-2 below. Direct medical costs and direct nonmedical costs are listed separately. The sum of per-capita direct medical

and nonmedical costs provides an estimate of the total per-capita costs

incurred by individuals with limb reductions. 

Table III.4-2: Per-Capita Net Medical Costs, Nonmedical Costs, and Total Costs of Limb

Reductions (1996$)

Cost Element 2% 5% 10%

Upper Limb Reduction

 Net medical costs $8,232 $8,232 $8,232

 Net nonmedical costs $28,372 $21,574 $14,342

 Total costs $36,604 $29,806 $22,574

Lower Limb Reduction

 Net medical costs $39,515 $26,343 $18,111

 Net nonmedical costs $28,332 $21,537 $14,311

 Total costs $67,847 $47,880 $32,422

The costs presented in this chapter were current in the year the chapter was written. They can be updated using

inflation factors accessible by clicking below.

Link to inflation factors

The costs associated with lower limb reductions are significantly higher

than those associated with upper limb reductions. This difference is due to

the weight bearing issues associated with lower limb reductions that require

more extensive surgical therapy. Because the legs are necessary for proper

balance, lower limb reductions often produce more complications, and thus

require more surgery than reductions in the arms.
Chapter III.5 III.5-1 Cost of Cardiac Abnormalities

CHAPTER III.5. COST OF CARDIAC ABNORMALITIES 

Clicking on the sections below will take you to the relevant text.

III.5.A Background 

III.5.A.1 Description

III.5.A.2 Causality

III.5.A.3 Truncus Arteriosus

III.5.A.4 Transposition of the Great Arteries

III.5.A.5 Double-outlet Right Ventricle

III.5.A.6 Single Ventricle

III.5.A.7 Tetrology of Fallot

III.5.B Costs of Treatment and Services

III.5.B.1 Methodology

III.5.B.2 Results

III.5.B.3 Other Studies

III.5.C Conclusions
1

 “Costs” in this chapter refers to direct incremental per capita medical costs, unless otherwise

noted.

2

 Certain forms of DORV are grouped together for the cost analysis because they resemble

transposition and actually fall under the same International Classification of Diseases ICD-9 codes.

Chapter III.5 III.5-2 Cost of Cardiac Abnormalities

CHAPTER III.5. COST OF CARDIAC ABNORMALITIES 

III.5.A Background

This chapter contains a discussion of the methods used and the results of

estimating the direct medical costs incurred by individuals with cardiac

abnormalities and the results of the analysis.1 It does not include

information on elements such as indirect medical costs, pain and suffering,

lost time of unpaid caregivers, etc. The reader is referred to Chapter I.1

for a discussion of the cost estimation methods and cost elements that are

relevant to all benefits estimates. In addition, Chapter III.1 contains

information regarding the special characteristics of developmental defects,

and a list of chemicals that may cause developmental abnormalities. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and III.1

Link to inflation factors

III.5.A.1 Description

A number of cardiac anomalies occur at birth or in early infancy, and are

quite varied. These are structural defects in the development of the heart,

arteries, and associated tissues. They arise when the function, movement

and relationships among cardiac cells fail to progress normally. Five

defects, all conotruncal heart anomalies, are discussed in this chapter. The

specific anomalies include: truncus arteriosus, transposition of the great

arteries, double-outlet right ventricle (DORV), single ventricle, and

tetralogy of Fallot. They were selected from among the cardiac

abnormalities for which cost data are available because they occur with

greater frequency than other defects and are not usually fatal when treated. 

Each anomaly is described below in turn in Section A, followed by the cost

data in Section B.2
Chapter III.5 III.5-3 Cost of Cardiac Abnormalities

III.5.A.2 Causality

Information on causality is discussed for each specific cardiac anomaly

described below. Many anomalies occur concurrently with other cardiac or

non-cardiac anomalies. Although there appears to be a genetic component

in some anomalies, none of the anomalies described below has a strong

clear hereditary pattern. The causation of the anomalies is therefore for the

most part unknown. These anomalies may be due to a variety of factors,

including maternal health, heredity, and environmental factors. 

A recently completed study of the offspring of pesticide application

workers found that their incidence of circulatory system anomalies was

significantly greater than that of the general population in the same area of

the United States (Garryet al., 1996). Respiratory system, musculoskeletal,

and urogenital anomalies also occurred at increased rates. The chemicals

evaluated in the study that were associated with the birth defects were

trifluralin, triazine herbicides (including atrazine, a very common well

contaminant in agricultural areas), and chlorophenoxy herbicides (including

MCPA and 2,4-D, a pesticide with very high usage). There was also a

significant increase in birth defects among infants conceived in the spring

(i.e., during peak chlorophenoxy use), compared to infants conceived

during other periods of the year (Garry et al., 1996). As indicated in the

introductory developmental effects chapter (III.1), the timing of exposure

is often a critical determinant of whether and what type of effects will

occur.

Generally, the earlier during a pregnancy that damage occurs, the more

serious the effect will be, because all cells developing from the damaged

cells may also be damaged or eliminated, and basic structures are being

formed during the first trimester (three months). Although Gerry et al.

(1996) do not provide detailed information on the nature of the circulatory

and other anomalies, information can be obtained from the author or from

EPA (which funded the work).

Table III.1-1 in Chapter III.1 lists numerous chemicals associated with

developmental abnormalities in human and/or animal studies. Many of

these studies have identified structural and anatomical defects. Cardiac

abnormalities fall into this category of defects. 

Link to Table III.1-1 in Chapter III.1
Chapter III.5 III.5-4 Cost of Cardiac Abnormalities

III.5.A.3 Truncus Arteriosus

III.5.A.3.1 Description

Truncus arteriosus occurs when abnormalities in major arteries and valves

lead to a mixing of oxygenated and de-oxygenated blood. This mixing

results in an insufficiently oxygenated supply of blood to tissues. This

disorder ultimately leads to congestive heart failure if uncorrected. In the

absence of surgery, 75 percent of children die within the first year, and the

survivors have severely limited abilities due to heart disease (Oldham et al.,

1972). Truncus arteriosus occurs in approximately two percent of children

with congenital heart defects (Oski, 1994).

III.5.A.3.2 Concurrent Effects

Children with this defect also frequently have underdevelopment of the

aortic arch, displacement or stenosis at the origin of the coronary arteries,

and absence of the main pulmonary artery supplying the lungs. This and

other cardiac anomalies occur with greater frequency among Down

syndrome children (statistics on occurrence were not available) (Waitzman

et al., 1996).

III.5.A.3.3 Treatment and Services

Although previously considered an inoperable defect, substantial

improvements in surgical and other treatments have been made in recent

years. The surgical methods and medical follow-up continue to be refined

(Oski, 1994). This defect is usually surgically treated at 6 to 12 weeks

through constructive surgery and insertion of valves. Follow-up surgical

repair or valve replacement is often required within the first five years after

surgery (15 to 50 percent). All valves are replaced at twelve years due to

growth. Follow-up surgery (i.e., dilations) is not uncommon (Waitzman et

al., 1996).

III.5.A.3.4 Prognosis

Based on a small sample (106 infants) there is a six percent mortality rate

prior to surgery and a ten percent mortality rate during the surgical period

(Ebert et al., 1984; Bove et al., 1989). Complications may result from

follow-up medical treatments (Waitzman et al., 1996).

III.5.A.4 Transposition of the Great Arteries

III.5.A.4.1 Description

Transposition of the great arteries occurs when the major arteries are

transposed, leading to insufficient oxygen flow to tissues and lungs. This

condition causes widespread cyanosis (Oski, 1994) and is fatal without

surgical intervention (Waitzman et al., 1996). Transposition of the great

arteries is a common cardiac abnormality, occurring in approximately five

percent of all patients with congenital heart disease (Oski, 1994).
Chapter III.5 III.5-5 Cost of Cardiac Abnormalities

III.5.A.4.2 Concurrent Effects

Various associated cardiac abnormalities involving multiple structures

within the heart complicate the treatment of this disorder (for a detailed

description see Oski, 1994). Ventricular septal defect also occurs in 20

percent of children with this anomaly (Kirklin, 1991). 

III.5.A.4.3 Treatment and Services

Surgery to correct this defect is performed shortly after birth. Ten percent

of affected individuals require additional surgery within one year

(Waitzman et al., 1996). As noted under concurrent effects above,

concurrent heart defects often occur, and the constellation of effects is

considered when determining the appropriate medical treatment.

III.5.A.4.4 Prognosis

During the immediate post-surgical period, the mortality rate is

approximately 14 to 22 percent, depending on the specific nature of the

defects and procedures used. Between 30 and 80 percent of children with

this defect who have received medical treatment develop cardiac

arrhythmias within ten years, again depending on the defects and surgical

approaches. Three to ten percent of these children require insertions of

pacemakers (Waitzman et al., 1996). 

Cardiac dysfunction occurs in approximately ten percent of children within

ten years. Arrhythmias and heart failure lead to death in approximately 11

percent of children between 30 days and 10 years after surgery (Morris and

Menashe, 1991). Depending on the type of procedures done to correct

this disorder, various medical problems may arise, some requiring surgery

at a later date. For a detailed description of the common long-term

sequelae, see Oski (1994).

III.5.A.5 Double-outlet Right Ventricle

III.5.A.5.1 Description

Double-outlet right ventricle refers to a diverse group of heart defects that

occur when both the aorta and pulmonary artery originate from the right

ventricle, and a septal defect is present (Oski, 1994). This condition leads

to insufficient blood flow to critical tissues, and may cause cyanosis,

exhaustion with exercise, heart failure, and pulmonary vascular disease

(Waitzman et al., 1996). This disorder occurs in approximately two

percent of congenital heart defects. Although sometimes associated with

trisomy-18 and material diabetes, most cases occur with no other

congenital anomalies (Oski, 1994). The symptoms of this anomaly vary

with the specific structural defects and may include cyanosis, congestive

heart failure, and related effects. 
Chapter III.5 III.5-6 Cost of Cardiac Abnormalities

III.5.A.5.2 Concurrent Effects

Complex lesions of the atrial or ventricular septum, valve defects,

mislocation of the heart, and ductus arteriosus have also been observed

with this defect (Waitzman et al., 1996).

III.5.A.5.3 Treatment and Services

Surgery is usually performed at 6 to 24 months. Arrhythmias in children

are common, even with surgery, and may require follow-up care

(Waitzman et al., 1996). 

III.5.A.5.4 Prognosis

Various mortality rates have been reported in the literature. A 15 percent

post-surgical mortality rate in infants was reported by Judson et al., (1983). 

Shen et al. (1990) reported that approximately 25 percent of children who

have received appropriate medical attention die during childhood, probably

due to arrhythmias. More recent reports indicate a much better prognosis

with a 90 to 95 percent post-surgical survival rate and excellent functional

status following surgery (Oski, 1994).

III.5.A.6 Single Ventricle

III.5.A.6.1 Description

Single ventricle occurs when one, rather than the usual two ventricles are

present. One may dominate (they are usually balanced) and the other may

be very small, or there may be only one present. In either case, there is one

that is primarily functional (Oski, 1994). This anomaly causes insufficient

blood flow to tissues and can lead to cyanosis, heart failure, and pulmonary

vascular disease. There is a 70 percent mortality rate in childhood in the

absence of surgery (Waitzman et al., 1996). This disorder is found in

approximately one percent of children with congenital anomalies. 

III.5.A.6.2 Concurrent Effects

Multiple concurrent cardiac defects occur with this anomaly. Twenty to 40

percent of children also have other non-cardiac problems, including

scoliosis and lack of a spleen (Waitzman et al., 1996). 

III.5.A.6.3 Treatment and Services

Correction of this defect commonly involves two surgical interventions,

one shortly after birth, and one at 18 to 36 months. Additional surgery is

required in 14 percent of children (Waitzman et al., 1996). 

III.5.A.6.4 Prognosis

With surgery, survival varies considerably. The mortality rate is 29 to 43

percent within ten years. Among survivors, ten percent have limited

activity and three percent were severely limited (Waitzman et al., 1996). 

Most patients exhibit exercise intolerance and cyanosis. Causes of death

include dysrhythmia, congestive heart failure, brain abscess, pancreatitis,
Chapter III.5 III.5-7 Cost of Cardiac Abnormalities

cerebral infarction, cerebral embolus, and hemorrhage, and pulmonary

embolus and valve occlusion (Oski, 1994). Due to the long-term medical

problems associated with this anomaly, research into improvements in

surgical and other medical treatments is being carried out. There is not a

single currently accepted treatment method at this time, and various

approaches are used. (Oski, 1994).

III.5.A.7 Tetrology of Fallot

III.5.A.7.1 Description

Tetrology of Fallot refers to a group of abnormalities of the heart that 

have the common characteristics of unrestrictive ventricular septal defects

and an obstruction of the right ventricular outflow (Oski, 1994). These

abnormalities also involve malpositioning of the aorta and thickening of the

right ventricular wall (Pinsky and Arciniegas, 1990). The severity varies

considerably from a heart murmur to life-threatening hypoxia. If it is not

detected during infancy it may lead to a misshapen (boot-shaped) heart

(Oski, 1994). This disorder occurs in approximately six percent of

children with congenital heart defects (Oski, 1994).

III.5.A.7.2 Concurrent Effects

Multiple additional cardiac defects are associated with this anomaly 

Waitzman et al., 1996). Non-cardiac abnormalities are associated with

this disorder in approximately 16 percent of cases, more so than with most

other cardiac defects. The children are also more likely to have concurrent

effects that are more serious than those found with other cardiac defects,

including cleft lip and palate, hypospadias (reproductive organ abnormality

in males), and skeletal malformations (Oski, 1994). 

III.5.A.7.3 Treatment and Services

When Tetralogy of Fallot is detected shortly after birth, surgery to correct

the defects usually occurs at three to twelve months of age. Depending on

the specific nature of the defects, surgery may also be required shortly after

birth. Five to fifteen percent of children require additional surgery within

thirteen years (Waitzman et al., 1996). Treatment of arrhythmias may be

required in some patients long after surgery, and bacterial endocarditis may

also occur and require treatment later in childhood or adulthood (Oski,

1994).

III.5.A.7.4 Prognosis

The rate of post-surgical mortality is three to eight percent in infants

(Touati et al., 1990; Walsh et al., 1988). At ten years the survival rate is

87 to 90 percent, and 85 percent survive into their twenties. The prognosis

for normal function and activity is good in surviving children (Waitzman et

al., 1996). As noted under the treatment section above, a number of

problems may be anticipated in the long-term follow-up of children with

this disorder (e.g., bacterial endocarditis, arrhythmias) and effects of
Chapter III.5 III.5-8 Cost of Cardiac Abnormalities

coronary artery disease at a more advance age may be more severe in

people with this disorder (Oski, 1994). 

III.5.B Costs of Treatment and Services

III.5.B.1 Methodology

Waitzman et al. (1996) provide an estimate of the direct medical and nonmedical costs of treating cardiac abnormalities, specifically for the five

types listed above. For the purpose of the cost analysis, transposition and

double-outlet right ventricle (DORV) were grouped together. Waitzman et

al. used the same methodology to estimate the costs incurred by individuals

with each type of cardiac abnormality as for all the birth defects for which

they estimated costs. The methodology and relevant considerations are

detailed in Chapter III.3, including discussions of direct and indirect costs,

prevalence versus incidence, incremental costs, and concurrent effects. 

The analytic method, the sources of data, and the limitations of the

Waitzman method are also discussed in Chapter III.3. The methodology is

outlined briefly here.

Link to Chapter III.3

To estimate the lifetime medical costs incurred by an individual with a birth

defect, Waitzman et al. estimated the average lifetime medical costs for an

individual with the birth defect. From this value, the authors subtracted the

average lifetime medical costs for an individual without the birth defect. 

Because they estimated lifetime costs, they used an incidence-based

approach. Ideally, they would have tracked the costs of the cohort

members over time, until the death of the last cohort member. Because the

members of the cohort were born in 1988, however, this tracking was not

possible. Instead, estimates of the costs incurred at each age were based

on estimates of per capita costs in the prevalent population of that age (see

Chapter III.3, Section III.3.B.1.2).

Link to Chapter III.3, Section III.3.B.1.2

This method has two important implications. First, Waitzman et al.

estimated the costs incurred by individuals with birth defects, including all

medical costs incurred, rather than the cost of the birth defect per se. 

These cost estimates therefore include the costs of concurrent effects

(unlike the costs reported for many of the diseases in this handbook). This

method yields a more comprehensive assessment of total costs than would

be obtained if only individual effects were evaluated. This method is of

particular use in valuing the avoidance of birth defects because they very

frequently occur in clusters within an individual. As Waitzman et al. note,

however, the costs of associated anomalies are included as part of the
3

 Indirect costs are not generally discussed in this handbook and so are not included in this chapter. 

The reader may wish to consult Waitzman et al. (1996) for information on these costs.

Chapter III.5 III.5-9 Cost of Cardiac Abnormalities

estimate of the costs incurred by an individual with a given birth defect. 

These cost estimates therefore cannot be aggregated across birth defects

because of the possibility of double counting. 

Second, the Waitzman et al. method estimates the incremental costs for

individuals with birth defects — that is, the costs above and beyond the

average costs that would be incurred by individuals without the birth

defect.

Waitzman et al. (1996) estimated three categories of costs incurred by

individuals with limb reductions: direct medical costs, direct nonmedical

costs, and indirect costs.3 Direct medical costs, specifically inpatient care,

outpatient care, pharmaceuticals, laboratory tests, X-rays, appliances, and

long-term care are included in the cost estimates shown in this and other

chapters (Chapters III.3 through III.8) based on the work of Waitzman et

al. Nonmedical direct costs, specifically developmental services, and

special education are also included in this handbook.

The Waitzman estimates of the costs incurred by individuals with limb

reductions are based on the costs of this birth defect in California across

many ages, and its occurrence in a large cohort of children born in

California in 1988. California’s ongoing birth defects monitoring program

provides an excellent source of data. The California data sets were linked

with other national data sets so that Waitzman et al. could estimate the

incremental costs associated with each type of cardiac abnormality.

The method of calculating the expected lifetime incremental costs for an

individual with a birth defect — i.e., the average lifetime cost per case —

is the same for all the birth defects considered by Waitzman et al. The

expected per capita cost at age i, PCCi, for an individual born with the birth

defect is the probability of surviving to age i (among those individuals born

with the birth defect), psi, times the per capita cost among individuals who

do survive to age i (PCPREVi, measured in the prevalent population):

PCCi = (psi) × (PCPREVi) .

Waitzman et al. estimate per capita costs in the prevalent population of age

i, PCPREVi, in two different ways, depending on data availability (see

Chapter III.3).

Link to Chapter III.3

The present discounted value of expected per capita lifetime costs of the

birth defect, PCCOBD, is just the sum of these expected age-specific per
Chapter III.5 III.5-10 Cost of Cardiac Abnormalities

capita costs, appropriately discounted (as explained more fully in Chapter

III.3): 

PCCOBD =3i PCCi/(1+r)i .

III.5.B.2 Results

Waitzman et al (1996) estimate the total lifetime medical costs of each of

the cardiac defects according to the methodology outlined above. As

outlined in Table III.3-1 in Chapter III.3, the prevalence on July 1, 1988

and the incidence in 1988 of cardiac abnormalities in the state of California

was as follows:truncus arteriosus: 1,591 and 56, respectively;

transposition/DORV: 7,469 and 263, respectively; tetralogy of Fallot:

5,336 and 187, respectively; and single ventricle: 1,932 and 68,

respectively. The occurrence data provide an indication of the relative rate

of yearly occurrence of the different anomalies discussed in this handbook. 

Table III.3-1 in Chapter III.3

Table III.5-1 shows the annual per capita medical costs incurred by

individuals with each type of cardiac anomaly by age group with costs

updated from 1988 to 1996 dollars based on the medical care cost

component of the Consumer Price Index (1996:1988=1.6465). 

Table III.5-1: Annual Per-Capita Medical Costs of Heart Defects Patients by Age Group (1996$)

Condition Age 0-1 Age 2-4 Age 5-17 Age 18+

Truncus arteriosus $162,463 $104,225 $7,197 $5,139

Transposition/DORV $56,296 $15,790 $3,071 $1,744

Tetralogy of Fallot $70,729 $18,952 $5,939 $1,251

Single ventricle $57,119 $15,727 $12,867 $10,071

The medical cost of the average population was then subtracted from these

costs to obtain incremental costs. Waitzman et al. (1996) discounted these

costs using three different discount rates: two percent, five percent, and ten

percent. Although these discount rates do not match the standard EPA

rates used in many other chapters in this handbook (zero percent, three

percent, five percent, and seven percent), there is insufficient information

provided in Waitzman et al. (1996) to allow a conversion to discounted

costs using standard EPA discount rates. This problem exists in all

chapters based on the Waitzman et al. data (i.e., Chapters III.3 through

III.8). 
Chapter III.5 III.5-11 Cost of Cardiac Abnormalities

The present discounted values of average per capita lifetime incremental

costs, using discount rates of two percent, five percent, and seven percent,

are listed in Table III.5-2 below. Direct medical costs and direct nonmedical costs are listed separately. The sum of per-capita direct medical

and nonmedical costs provides an estimate of the total per-capita costs

incurred by individuals with each type of cardiac abnormality. 

Children with some heart anomalies have a much lower probability of

survival (see the “prognosis” descriptions in part III.5.A, under the specific

descriptions above) than children with most cardiac or other anomalies

discussed in this section of the handbook. This report focuses on medical

costs, whereas other research often includes estimates of the value that a

person would pay to save his or her life, termed “value of life” estimates. 

In the case of heart anomalies, survivorship is an issue for some of these

children. The cost estimates presented here could therefore be dwarfed by

the additional value of life associated with each estimate. 
Chapter III.5 III.5-12 Cost of Cardiac Abnormalities

Table III.5-2: Per-Capita Net Medical Costs, Nonmedical Costs, and Total Costs of Heart

Defects (1996$)

Cost Element 2% 5% 10%

Truncus arteriosus

 Net medical costs $375,394 $344,111 $316,121

 Net nonmedical costs $2,918 $2,228 $1,492

 Total costs $378,312 $346,339 $317,613

Transposition/DORV

 Net medical costs $120,192 $113,606 $107,020

 Net nonmedical costs $4,562 $3,479 $2,323

 Total costs $124,754 $117,085 $109,343

Tetralogy of Fallot

 Net medical costs $194,283 $179,465 $161,354

 Net nonmedical costs $5,800 $4,422 $2,954

 Total costs $200,083 $183,887 $164,308

Single ventricle

 Net medical costs $227,212 $163,000 $123,485

 Net nonmedical costs $3,507 $2,674 $1,786

 Total costs $230,719 $165,674 $125,271

The costs presented in this chapter were current in the year the chapter was written. They can be updated using

inflation factors accessible by clicking below.

Link to inflation factors

III.5.B.3 Other Studies

Several other studies have been conducted on the costs of cardiac

abnormalities. In particular, two recent studies are especially useful for

comparison. The first, by Pearson et al. (1991), looks at hospital use and

inpatient charges for cardiac disease patients in the first year of life. The

second, by Silberbach et al. (1993), predicts the hospital charges for

congenital heart disease surgery. These two studies are easiest to compare

to Waitzman et al. because they examine similar types of direct medical

costs. Although these studies vary slightly in their methodologies, the

results tend to corroborate the Waitzman et al. results. No recent studies

examining the direct non-medical costs associated with cardiac

abnormalities were identified.
Chapter III.5 III.5-13 Cost of Cardiac Abnormalities

III.5.B.3.1 Pearson et al. (1991)

The Pearson et al. study analyzes the inpatient charges for infants with

cardiac disease in the first year of life. Infants admitted to The Johns

Hopkins Hospital Children’s Center in Maryland in 1988 were identified

for the study. Complete data for 93 of these infants were available. The

infants were subdivided into three groups: those with complex diseases,

those with extra-cardiac anomalies, and those with both. Hospital charges

were recorded, including all routine care charges, laboratory charges,

medical and surgical supplies, physical therapy, operating room time and

supplies, radiologic procedures, pharmacy supplies, and blood and blood

related products.

Pearson et al. estimated hospital charges per infant. These charges have

been adjusted to 1996 dollars using the Consumer Price Index for medical

care (1996:1988=1.6465) to facilitate comparison across studies. Average

hospital charges per infant were estimated at $60,506. The number is

larger for infants with complex cardiac diseases. 

Pearson et al.’s results are similar, in the first year of life, to those reported

by Waitzman et al., particularly for transposition/DORV, tetralogy of Fallot

and single ventricle (see Table III.5-1 for Waitzman et al.’s cost estimates). 

 Waitzman et al.’s higher cost estimate for truncus arteriosus may be

reflected in the upper range of costs that Pearson et al. estimated. They

identified a range of $1,651 to $770,177 per patient.

III.5.B.3.2 Silberbach et al. (1993)

The Silberbach et al. study is also useful for comparison because it looks at

the hospital charges for congenital heart disease surgery. Although the

study is not strictly limited to children, and is on a per-surgery basis, 49

percent of the surgeries examined occurred in children less than 12 months

old. The study is also useful because it breaks out costs according to ten

different types of congenital heart disease, facilitating direct comparison

with the Waitzman et al. study. The study was conducted between 1985

and 1989. A conservative adjustment to 1996 dollars assumes that all

reported costs in the Silberbach et al. study were in 1989 dollars

(Consumer Price Index for medical care (1996:1989=1.53)).

Silberbach et al. predicted the average hospital charge for a patient with

congenital heart disease at $41,699. More specifically, they estimated that

tetralogy of Fallot surgery costs $56,997 and surgery for

transposition/DORV of the great arteries costs $44,789. 

The Silberbach et al. study found similar costs to those reported in

Waitzman et al., particularly in their finding that surgery for

transposition/DORV is less expensive than for tetralogy of Fallot. The

Silberbach et al. estimates are a bit lower. This difference in relation to

Waitzman et al. and Pearson et al. is probably due to the limited nature of
Chapter III.5 III.5-14 Cost of Cardiac Abnormalities

the Silberbach et al. study; they calculate hospital charges for a specific

surgical procedure and do not include other costs that would be incurred

during the rest of the year. 

III.5.C Conclusions

Because the Waitzman et al. study provides cost estimates past the first

year of life, it is more appropriate for benefits evaluation than other studies

reviewed. The other studies, discussed above, generally support the

estimates provided by Waitzman et al. 
Chapter III.6 III.6-1 Cost of Spina Bifida

CHAPTER III.6. COST OF SPINA BIFIDA

Clicking on the sections below will take you to the relevant text.

III.6.A Background

III.6.A.1 Description

III.6.A.2 Concurrent Effects

III.6.A.3 Causality

III.6.A.4 Treatment and Services

III.6.A.5 Prognosis

III.6.B Costs of Treatment and Services

III.6.B.1 Methodology

III.6.B.2 Results

III.6.B.3 Other Studies

III.6.C Conclusions
1

 “Costs” in this chapter refer to direct incremental per capita medical costs, unless otherwise

noted.

Chapter III.6 III.6-2 Cost of Spina Bifida

CHAPTER III.6. COST OF SPINA BIFIDA

III.6.A Background

This chapter contains a discussion of the methods used and the results of

estimating the direct medical costs incurred by individuals with spina bifida 

and the results of the analysis.1 It does not include information on elements

such as indirect medical costs, pain and suffering, lost time of unpaid

caregivers, etc. The reader is referred to Chapter I.1 for a discussion of the

cost estimation methods and cost elements that are relevant to all benefits

estimates. In addition, Chapter III.1 contains information regarding the

special characteristics of developmental defects, and a list of chemicals that

may cause developmental abnormalities. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and III.1

Link to inflation factors

III.6.A.1 Description

Spina bifida occurs when the neural tube, from which the brain and spinal

cord develop (central nervous system), fails to close properly. Depending

on where closure fails to occur, portions of the brain, spinal cord, and

nerves connected to them will not function properly. If failure to close

occurs on the lower portion of the spinal cord, then the bowel, bladder or

sexual organs will be affected. Failure at mid-level may cause paralysis or

malfunction of the arms and legs. Anomalies at higher levels may affect the

brain. In most spina bifida cases, the normal flow of cerebrospinal fluid is

also blocked (Arnold-Chiari malformation), which would result in

hydrocephalus unless treated (Waitzman et al., 1996).

Some common disabilities and medical problems associated with spina

bifida are: 

• sight problems, including atrophy of the optic nerve in 17 percent

of children and strabismus in 42 percent of children (Gaston, 1985);

• dysfunction in the arms in 45 percent of children (Turner, 1986); 
Chapter III.6 III.6-3 Cost of Spina Bifida

• epilepsy in 20 to 30 percent of children (Bartoshesky et al., 1985);

and

• bladder dysfunction in most children (McLone, 1983).

III.6.A.2 Concurrent Effects

Approximately six percent of children with this anomaly have

malformations outside the central nervous system. These commonly affect

the diaphragm, esophagus, and kidneys. Cleft lip and palate are also

associated with spina bifida (Waitzman et al., 1996). Additional

malformations outside of the central nervous system include:

• pressure sores and skin problems in 70 percent of adolescents and

young adults (Blum et al., 1992);

• curvature of the spine in 15 percent of children (Samuelsson and

Eklof, 1988); and

• weight substantially over the norm in 30 to 50 percent of children

(Thomas et al., 1987).

III.6.A.3 Causality

Spina bifida is associated with prenatal exposure to sulfonamides and

antihistamines, maternal folate deficiency, and maternal diabetes. 

Chemicals that interfere with the development of the neural crest and fold

during embryogenesis may cause spina bifida (Waitzman et al., 1996). 

Table III.1-1 in Chapter III.1 lists numerous chemicals associated with

developmental abnormalities in human and/or animal studies. 

Link to Chapter III.1, Table III.1-1 

III.6.A.4 Treatment and Services

Treatment may begin before birth if diagnosis occurs during pregnancy. 

Lab tests are now available that provide an indication of whether spina

bifida is likely. Ultrasound may be used to confirm the test results. 

Cesarean delivery may be used to prevent damage to the infant. The spinal

canal defect is usually closed surgically shortly after birth. Approximately

90 percent of infants receive a ventriculaoperitoneal shunt to carry fluid

from the head to the abdominal cavity (to prevent the occurrence of

hydrocephalus noted above) (Waitzman et al., 1996). 

Concurrent disorders are treated as needed, including dialysis or kidney

transplant for patients with severe kidney disease, and surgery to fuse the

vertebrae for patients with scoliosis (Waitzman, et al., 1996).
Chapter III.6 III.6-4 Cost of Spina Bifida

III.6.A.5 Prognosis

Spina bifida usually results in permanent disabilities of some type; these

may be severe (e.g., paralysis). Social isolation is common, and

employment prospects for adults are reduced. Even with appropriate

medical treatment, children with spina bifida have a shortened lifespan. 

Ongoing medical treatment may be required, including replacement of

shunts and treatment of kidney and urinary problems (Waitzman et al.,

1996).

III.6.B Costs of Treatment and Services

III.6.B.1 Methodology

Chapters III.3 through III.8 of this handbook use cost of illness estimates

developed primarily by Waitzman et al. (1996). Waitzman et al. used the

same methodology to estimate the costs incurred by individuals with spina

bifida as for all the birth defects for which they estimated costs. The

methodology and relevant considerations are detailed in Chapter III.3,

including discussions of direct and indirect costs, prevalence versus

incidence, incremental costs, and concurrent effects. The analytic method,

the sources of data, and the limitations of the Waitzman method are also

discussed in Chapter III.3. The methodology is outlined briefly here.

Link to Chapter III.3

To estimate the lifetime medical costs incurred by an individual with a birth

defect, Waitzman et al. estimated the average lifetime medical costs for an

individual with the birth defect. From this value, the authors subtracted the

average lifetime medical costs for an individual without the birth defect. 

Because they estimated lifetime costs, they used an incidence-based

approach. Ideally, they would have tracked the costs of the cohort

members over time, until the death of the last cohort member. Because the

members of the cohort were born in 1988, however, this tracking was not

possible. Instead, estimates of the costs incurred at each age were based

on estimates of per capita costs in the prevalent population of that age (see

Chapter III.3, Section III.3.B.1.2).

Link to Chapter III.3, Section III.3.B.1.2

This method has two important implications. First, Waitzman et al.

estimated the costs incurred by individuals with birth defects, including all

medical costs incurred, rather than the cost of the birth defect per se. 

These cost estimates therefore include the costs of concurrent effects

(unlike the costs reported for many of the diseases in this handbook). This
2

 Indirect costs are not generally discussed in this handbook and so are not included in this chapter. 

The reader may wish to consult Waitzman et al. (1996) for information on these costs.

Chapter III.6 III.6-5 Cost of Spina Bifida

method yields a more comprehensive assessment of total costs than would

be obtained if only individual effects were evaluated. This method is of

particular use in valuing the avoidance of birth defects because they very

frequently occur in clusters within an individual. As Waitzman et al. note,

however, the costs of associated anomalies are included as part of the

estimate of the costs incurred by an individual with a given birth defect. 

These cost estimates therefore cannot be aggregated across birth defects

because of the possibility of double counting. 

Second, the Waitzman et al. method estimates the incremental costs for

individuals with birth defects — that is, the costs above and beyond the

average costs that would be incurred by individuals without the birth

defect.

Waitzman et al. (1996) estimated three categories of costs incurred by

individuals with limb reductions: direct medical costs, direct nonmedical

costs, and indirect costs.2 Direct medical costs, specifically inpatient care,

outpatient care, pharmaceuticals, laboratory tests, X-rays, appliances, and

long-term care are included in the cost estimates shown in this and other

chapters (Chapters III.3 through III.8) based on the work of Waitzman et

al. Nonmedical direct costs, specifically developmental services, and

special education are also included in this handbook.

The Waitzman estimates of the costs incurred by individuals with limb

reductions are based on the costs of this birth defect in California across

many ages, and its occurrence in a large cohort of children born in

California in 1988. California’s ongoing birth defects monitoring program

provides an excellent source of data. The California data sets were linked

with other national data sets so that Waitzman et al. could estimate the

incremental costs associated with spina bifida.

The method of calculating the expected lifetime incremental costs for an

individual with a birth defect — i.e., the average lifetime cost per case —

is the same for all the birth defects considered by Waitzman et al. The

expected per capita cost at age i, PCCi, for an individual born with the birth

defect is the probability of surviving to age i (among those individuals born

with the birth defect), psi, times the per capita cost among individuals who

do survive to age i (PCPREVi, measured in the prevalent population):

PCCi = (psi) × (PCPREVi) .

Waitzman et al. estimate per capita costs in the prevalent population of age

i, PCPREVi, in two different ways, depending on data availability (see

Chapter III.3).
Chapter III.6 III.6-6 Cost of Spina Bifida

Link to Chapter III.3

The present discounted value of expected per capita lifetime costs of the

birth defect, PCCOBD, is just the sum of these expected age-specific per

capita costs, appropriately discounted (as explained more fully in Chapter

III.3): 

PCCOBD =3i PCCi/(1+r)i .

III.6.B.2 Results

Waitzman et al (1996) estimate the total lifetime medical costs incurred by

individuals with spina bifida according to the methodology outlined above.

The following tables outline the various costs, updated from 1988 to 1996

dollars based on the medical care cost component of the Consumer Price

Index (1996:1988=1.6465). Table III.6-1 shows the annual per capita

medical costs incurred by individuals with spina bifida by age group.

Table III.6-1: Annual Per-Capita Medical Costs of Spina Bifida by Age Group (1996$)

Condition Age 0-1 Age 2-4 Age 5-17 Age 18+

Spina Bifida $34,013 $14,924 $13,208 $4,194

The medical cost of the average population was then subtracted from these

costs to obtain incremental costs. Waitzman et al. (1996) discounted these

costs using three different discount rates: two percent, five percent, and ten

percent. Although these discount rates do not match the standard EPA

rates used in many other chapters in this handbook (zero percent, three

percent, five percent, and seven percent), there is insufficient information

provided in Waitzman et al. (1996) to allow a conversion to discounted

costs using standard EPA discount rates. This problem exists in all

chapters based on the Waitzman et al. data (i.e., Chapters III.3 through

III.8). 

The present discounted values of average per capita lifetime incremental

costs, using discount rates of two percent, five percent, and seven percent,

are listed in Table III.6-2 below. Direct medical costs and direct nonmedical costs, including developmental services costs and special education

costs, are listed separately. The sum of per-capita direct medical and

nonmedical costs provides an estimate of the total per-capita costs incurred

by individuals with spina bifida. 
Chapter III.6 III.6-7 Cost of Spina Bifida

Table III.6-2: Per-Capita Net Medical Costs, Nonmedical Costs, and Total Costs of Spina Bifida

(1996$)

Cost Element 2% 5% 10%

Net direct medical costs $210,747 $163,000 $123,485

Net direct nonmedical costs

 Developmental Costs $2,694 $1,635 $1,004

 Special Education Costs $50,719 $38,298 $25,155

Total Costs $264,160 $202,933 $149,644

The costs presented in this chapter were current in the year the chapter was written. They can be updated using

inflation factors accessible by clicking below.

Link to inflation factors

III.6.B.3 Other Studies

Waitzman et al. present a study by Lipscomb (1986) that used an incidence

approach to estimate the total lifetime costs per individual of spina bifida

based on data gathered from individual reviews of clinical records in North

Carolina in 1985. Waitzman et al. adjust the Lipscomb estimates to

account for differences in medical care prices. They deflate their California

estimates by the difference in the Employee Compensation Index between

California and the nation. To account for differences in the base year they

adjusted the North Carolina estimates to 1988 dollars. While there is some

variability in the cost distribution across age groups, the total cost

estimates are strikingly similar; Waitzman et al. estimated total lifetime

costs per individual of $36,529 and Lipscomb estimated total costs of

$34,949 in the U.S. in 1988.

III.6.C Conclusions

The results based on the Waitzman et al (1996) work are recommended for

use in benefits valuation. The Lipscomb work uses a smaller database and

older data. The similarity of the two independently researched results lends

credibility to the cost estimates.
Chapter III.7 III.7-1 Cost of Cerebral Palsy

CHAPTER III.7. COST OF CEREBRAL PALSY

Clicking on the sections below will take you to the relevant text.

III.7.A Background

III.7.A.1 Description

III.7.A.2 Concurrent Effects

III.7.A.3 Causality

III.7.A.4 Treatment and Services

III.7.A.5 Prognosis

III.7.B Costs of Treatment and Services

III.7.B.1 Methodology

III.7.B.2 Results

III.7.B.3 Other Studies

III.7.C Conclusions
1

 “Costs” in this chapter refer to direct incremental per capita medical costs, unless otherwise

noted.

2

 Cerebral palsy is often used synonymously with static encephalopathy (Oski, 1994).

Chapter III.7 III.7-2 Cost of Cerebral Palsy

CHAPTER III.7. COST OF CEREBRAL PALSY

III.7.A Background

This chapter contains a discussion of the methods used and the results of

estimating the direct medical costs incurred by individuals with cerebral

palsy and the results of the analysis.1 It does not include information on

elements such as indirect medical costs, pain and suffering, lost time of

unpaid caregivers, etc. The reader is referred to Chapter I.1 for a

discussion of the cost estimation methods and cost elements that are

relevant to all benefits estimates. In addition, Chapter III.1 contains

information regarding the special characteristics of developmental defects,

and a list of chemicals that may cause developmental abnormalities. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and III.1

Link to inflation factors

III.7.A.1 Description

Cerebral palsy is a motor disorder appearing in early childhood that is

caused by brain damage (Waitzman et al., 1996).2 It is the most common

movement disorder of childhood and affects approximately one to six

children per 1,000 births. The estimate varies considerably because mild

cases may not be determined in early childhood, and all cases may be

obscured by other developmental disabilities, such as seizures and mental

retardation. The most severe cases may result in rapid death and not be

detected. When estimates of the incidence of cerebral palsy are based on

evaluations in the neonatal period, the occurrence will be underestimated. 

It is very difficult to identify cerebral palsy during this period by clinical

methods, due to the relative immaturity of the nervous system of newborn

infants (Oski, 1994).

Both muscle tone and the control of movement are affected in cerebral

palsy (Oski, 1994), which leads to a complex array of movement, posture,

and communication problems. Various types of cerebral palsy include

athetoid (15 percent of cases), spastic (70 percent), and ataxic (5 percent). 

Approximately 15 percent of cases are mixed (Wollack et al., 1991). 
Chapter III.7 III.7-3 Cost of Cerebral Palsy

Cerebral palsy may affect one or more limbs. Athetoid cerebral palsy

patients exhibit uncoordinated and uncontrolled movements. Spastic

cerebral palsy patients exhibit exaggerated reflexes, increased muscle tone,

weakness, and joint contractures (spasms). Ataxic cerebral palsy patients

often have difficulty performing repetitive movements and have a widebased gait (Waitzman et al., 1996). 

Individuals affected with this disorder are among the most handicapped in

our society. Although the incidence declined in the 1960s due to better

pre- and perinatal care, the incidence has increased in recent years due to

the improvement in survival among low birth weight infants. Cerebral palsy

usually originates in the pre- or perinatal period; however, it can be

brought on in childhood by infection, trauma, and other causes (Oski,

1994).

III.7.A.2 Concurrent Effects

Approximately 21 percent of children with cerebral palsy have

malformations unrelated to cerebral palsy; however, no specific occurrence

patterns have been reported for major malformations. Occurrences of hip

dislocation, curvature of the spine, and poorly developed dental enamel

have been frequently reported (Waitzman et al., 1996). About 50 percent

of children with cerebral palsy also have strabismus. Depending on the

nature of the cerebral palsy, children may have severe retardation, frequent

seizures, and blindness, or have a normal intellect with minimal non-motor

effects (Oski, 1994).

Other central nervous system (CNS) disorders are common in children with

cerebral palsy. Epilepsy occurs in 22 to 50 percent of children with

cerebral palsy, increasing with the number of limbs affected. 

Approximately 25 percent of the children have severe or profound mental

retardation, with the degree of retardation generally related to the severity

of cerebral palsy. Most children with all limbs affected are severely

retarded. Other CNS disorders include severe hearing and visual

impairments and speech disorders (Waitzman et al., 1996).

III.7.A.3 Causality

Risk factors for cerebral palsy include the presence of other malformations,

maternal retardation, premature separation, low weight of the placenta,

breech birth, and low birth weight (Waitzman et al., 1996), although these

were more prominent causes in the past, when management of pregnancy

and delivery were less refined. Today most cerebral palsy occurs without
Chapter III.7 III.7-4 Cost of Cerebral Palsy

identifiable risk factors (Oski, 1994). Table III.1-1 in Chapter III.1 lists

numerous chemicals associated with developmental abnormalities in human

and/or animal studies. 

Link to Chapter III.1, Table III.1-1

III.7.A.4 Treatment and Services

Treatment of cerebral palsy focuses on improving the quality of life and

function of the individual. There is no “cure”. Surgery on muscles, limbs,

and associated sites may be used to restore balance. Brain surgery may be

used to reduce spasticity, but may have undesirable consequences. 

Appliances may include provision of wheelchairs, walkers, casts, or splints. 

In some cases, medication is used (Waitzman et al., 1996). 

Treatment objectives change as the individual ages (Oski, 1994). In early

childhood, improving communication abilities is often the focus because

these abilities are more closely related than motor function to long-term

outcome. In some cases, when speech is not possible, other supportive

materials are provided to facilitate communication. Other areas of

significant effort are development of the ability to perform basic daily living

activities and improving motor skills (Oski, 1994). Treatment of cerebral

palsy is rapidly changing and many options are usually offered, often

involving multiple medical and educational specialists. Treatment plans are

often complex and may require extensive non-medical care, including

considerable assistance in day-to-day living activities. These are not a part

of the direct medical costs, but they may contribute substantially to the

overall costs associated with this disorder.

III.7.A.5 Prognosis

Among those with average or above intelligence (IQ > 80), the limitations

are not generally severe. Approximately 39 percent are able to function

independently as adults, and 48 percent are partially dependent. Of those

with lower intelligence, only 1 percent are independent and 17 percent are

partially dependent (Cohen and Kohn, 1979). The balance of both the

average and below-average intelligence groups are totally dependent. 

Other issues related to this disorder are low self-esteem and difficulty with

sexual relationships. Among those with severe retardation (IQ < 50) there

is a mortality rate of 28 percent during the first 20 years of life. This is

compared to 2 percent among those with higher IQs (Hutton et al., 1994).
Chapter III.7 III.7-5 Cost of Cerebral Palsy

III.7.B Costs of Treatment and Services

III.7.B.1 Methodology

Chapters III.3 through III.8 of this handbook use cost of illness estimates

developed primarily by Waitzman et al. (1996). Waitzman et al. used the

same methodology to estimate the costs incurred by individuals with

cerebral palsy as for all the birth defects for which they estimated costs. 

The methodology and relevant considerations are detailed in Chapter III.3,

including discussions of direct and indirect costs, prevalence versus

incidence, incremental costs, and concurrent effects. The analytic method,

the sources of data, and the limitations of the Waitzman et al. method are

also discussed in Chapter III.3. The methodology is outlined briefly here.

Link to Chapter III.3

To estimate the lifetime medical costs incurred by an individual with a birth

defect, Waitzman et al. estimated the average lifetime medical costs for an

individual with the birth defect. From this value, the authors subtracted the

average lifetime medical costs for an individual without the birth defect. 

Because they estimated lifetime costs, they used an incidence-based

approach. Ideally, they would have tracked the costs of the cohort

members over time, until the death of the last cohort member. Because the

members of the cohort were born in 1988, however, this tracking was not

possible. Instead, estimates of the costs incurred at each age were based

on estimates of per capita costs in the prevalent population of that age (see

Chapter III.3, Section III.3.B.1.2).

Link to Chapter III.3, Section III.3.B.1.2

This method has two important implications. First, Waitzman et al.

estimated the costs incurred by individuals with birth defects, including all

medical costs incurred, rather than the cost of the birth defect per se. 

These cost estimates therefore include the costs of concurrent effects

(unlike the costs reported for many of the diseases in this handbook). This

method yields a more comprehensive assessment of total costs than would

be obtained if only individual effects were evaluated. This method is of

particular use in valuing the avoidance of birth defects because they very

frequently occur in clusters within an individual. As Waitzman et al. note,

however, the costs of associated anomalies are included as part of the

estimate of the costs incurred by an individual with a given birth defect. 

These cost estimates therefore cannot be aggregated across birth defects

because of the possibility of double counting. 
3

 Indirect costs are not generally discussed in this handbook and so are not included in this chapter. 

The reader may wish to consult Waitzman et al. (1996) for information on these costs.

Chapter III.7 III.7-6 Cost of Cerebral Palsy

Second, the Waitzman et al. method estimates the incremental costs for

individuals with birth defects — that is, the costs above and beyond the

average costs that would be incurred by individuals without the birth

defect.

Waitzman et al. (1996) estimated three categories of costs incurred by

individuals with limb reductions: direct medical costs, direct nonmedical

costs, and indirect costs.3 Direct medical costs, specifically inpatient care,

outpatient care, pharmaceuticals, laboratory tests, X-rays, appliances, and

long-term care are included in the cost estimates shown in this and other

chapters (Chapters III.3 through III.8) based on the work of Waitzman et

al. Nonmedical direct costs, specifically developmental services, and

special education are also included in this handbook.

The Waitzman estimates of the costs incurred by individuals with limb

reductions are based on the costs of this birth defect in California across

many ages, and its occurrence in a large cohort of children born in

California in 1988. California’s ongoing birth defects monitoring program

provides an excellent source of data. The California data sets were linked

with other national data sets so that Waitzman et al. could estimate the

incremental costs associated with cerebral palsy.

The method of calculating the expected lifetime incremental costs for an

individual with a birth defect — i.e., the average lifetime cost per case —

is the same for all the birth defects considered by Waitzman et al. The

expected per capita cost at age i, PCCi, for an individual born with the birth

defect is the probability of surviving to age i (among those individuals born

with the birth defect), psi, times the per capita cost among individuals who

do survive to age i (PCPREVi, measured in the prevalent population):

PCCi = (psi) × (PCPREVi) .

Waitzman et al. estimate per capita costs in the prevalent population of age

i, PCPREVi, in two different ways, depending on data availability (see

Chapter III.3).

Link to Chapter III.3

The present discounted value of expected per capita lifetime costs of the

birth defect, PCCOBD, is just the sum of these expected age-specific per

capita costs, appropriately discounted (as explained more fully in Chapter

III.3): 

PCCOBD =3i PCCi/(1+r)i .
Chapter III.7 III.7-7 Cost of Cerebral Palsy

III.7.B.2 Results

Waitzman et al.’s (1996) estimates of the total lifetime medical costs of

cerebral palsy are outlined in the following tables. Estimates are updated

from 1988 to 1996 dollars based on the medical care cost component of

the Consumer Price Index (1996:1988=1.6465). Table III.7-1 shows the

annual per capita medical costs incurred by individuals with cerebral palsy

by age group.

Table III.7-1: Annual Per-Capita Medical Costs of Cerebral Palsy by Age Group (1996$)

Condition Age 0-1 Age 2-4 Age 5-17 Age 18+

Cerebral Palsy $16,236 $9,848 $11,451 $19,349

The medical cost of the average population was then subtracted from these

costs to obtain incremental costs. Waitzman et al. (1996) discounted these

costs using three different discount rates: two percent, five percent, and ten

percent. Although these discount rates do not match the standard EPA

rates used in many other chapters in this handbook (zero percent, three

percent, five percent, and seven percent), there is insufficient information

provided in Waitzman et al. (1996) to allow a conversion to discounted

costs using standard EPA discount rates. This problem exists in all

chapters based on the Waitzman et al. data (i.e., Chapters III.3 through

III.8). 

The present discounted values of average per capita lifetime incremental

costs, using discount rates of two percent, five percent, and seven percent,

are listed in Table III.7-2 below. Direct medical costs and direct nonmedical costs are listed separately. The sum of per-capita direct medical

and nonmedical costs provides an estimate of the total per-capita costs

incurred by individuals with cerebral palsy.
Chapter III.7 III.7-8 Cost of Cerebral Palsy

Table III.7-2: Per-Capita Net Medical Costs, Nonmedical Costs, and Total Costs of Cerebral

Palsy (1996$)

Cost Element 2% 5% 10%

Net direct medical costs $461,010 $233,798 $116,899

Net direct nonmedical costs

 Developmental Services $145,106 $68,979 $30,853

 Special Education $94,454 $71,771 $47,634

Total Costs $700,570 $374,548 $195,386

The costs presented in this chapter were current in the year the chapter was written. They can be updated using

inflation factors accessible by clicking below.

Link to inflation factors

III.7.B.3 Other Studies

Waitzman et al. (1996) present a study conducted in 1991 by The National

Foundation for Brain Research (NFBR), using a prevalence approach, on

the cost of cerebral palsy. Rather than using the primary diagnosis,

however, to construct costs (as in Rice et al., discussed in Chapter III.3),

cost estimates were made for cerebral palsy appearing as the first through

fifth diagnosis for inpatient stays, and the first through third diagnosis for

physician visits. The NFBR also estimated indirect family costs based on

family income reported in the 1989 National Health Interview Survey. 

Waitzman et al. compare their estimate for direct medical costs of $172

million, adjusted to the nation and 1991 dollars, to the NFBR estimate for

inpatient stays of $318 million. They identify two reasons for the

difference in these two estimates. First, an incidence approach, such as the

approach used by Waitzman et al., uses discounting, whereas a prevalence

approach, such as that used by NFBR, does not. For example, Waitzman

et al. calculate that the 1991 estimate of $172 million discounted at five

percent would increase by over $100 million to $282 million if a two

percent discount rate was used instead. Second, Waitzman et al. estimate

incremental costs by subtracting the average costs of an individual without

cerebral palsy, whereas the NFBR study does not subtract average costs. 

Waitzman et al. show that had they not subtracted the average costs, their

estimate for cerebral palsy in 1991 at a five percent discount rate would be

$330 million, an estimate much closer to the one produced by the NFBR

study.

Link to Chapter III.3
Chapter III.7 III.7-9 Cost of Cerebral Palsy

III.7.C Conclusions

The cost estimates based on the research by Waitzman et al. (1996) are

recommended for use in benefits valuation. The NFBR study does not

include many relevant medical costs (including all non-hospital costs). 

They also do not use an incremental approach. Consequently, the NFBR

cost estimates are not as closely matched to the direct medical costs which

are reported in this handbook as the Waitzman et al. results. 
Chapter III.8 III.8-1 Cost of Down Syndrome

CHAPTER III.8. COST OF DOWN SYNDROME

Clicking on the sections below will take you to the relevant text.

III.8.A Background

III.8.A.1 Description

III.8.A.2 Concurrent Effects

III.8.A.3 Causality

III.8.A.4 Treatment and Services

III.8.A.5 Prognosis

III.8.B Costs of Treatment and Services

III.8.B.1 Methodology

III.8.B.2 Results
1

 “Costs” in this chapter refer to direct incremental per capita medical costs, unless otherwise

noted.

Chapter III.8 III.8-2 Cost of Down Syndrome

CHAPTER III.8. COST OF DOWN SYNDROME

III.8.A Background

This chapter contains a discussion of the methods used and the results of

estimating the direct medical costs incurred by individuals with Down

Syndrome and the results of the analysis.1 It does not include information

on elements such as indirect medical costs, pain and suffering, lost time of

unpaid caregivers, etc. The reader is referred to Chapter I.1 for a

discussion of the cost estimation methods and cost elements that are

relevant to all benefits estimates. In addition, Chapter III.1 contains

information regarding the special characteristics of developmental defects,

and a list of chemicals that may cause developmental abnormalities. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and III.1

Link to inflation factors

III.8.A.1 Description

Down syndrome occurs as a result of having three, rather than two, copies

of chromosome 21 (hence the name “trisomy 21”). Mental retardation and

a group of physical characteristics are commonly associated with Down

syndrome. In addition, a number of serious defects in critical organs (e.g.,

heart, digestive system) are also commonly found in people with Down

syndrome. The syndrome involves clusters of external physical anomalies,

learning disabilities, and organ system anomalies. Physical anomalies and

their prevalence (given in parenthesis) among Down syndrome children are:

unusually small head (50 percent), excess skin folds on eyelids (50-70

percent), speckled irises in eyes (30-80 percent), narrow and short palate

(60-90 percent), protruding tongue (40-60 percent), broad hands (70

percent), and other relatively minor changes in physical appearance. Down

syndrome children usually have a flattened nose bridge, additional skin on

the back of the neck, small or anomalous ears, abnormally formed fingers,

and “simian” hand creases (Pueschel and Rynders, 1982).

The severity of mental retardation associated with this disorder varies

considerably. Between 3 and 12 percent of Down syndrome children are

profoundly retarded. Many of these individuals are unable to walk, talk, or

eat without assistance. Approximately 25 percent are severely retarded, 55
Chapter III.8 III.8-3 Cost of Down Syndrome

percent are moderately retarded, and 14 percent are mildly retarded. 

Seizures occur in five to nine percent of children, increasing with age. In

adulthood, memory loss and reduced cognitive abilities are usually evident

after age 45 in people with Down syndrome. Pathology studies have found

structural changes in the brain similar to those found in Alzheimers disease

patients (Waitzman et al., 1996). 

Children with Down syndrome often have very early onset Alzheimer-type

changes in cognitive ability. These changes may affect their functional

abilities, and are observed when comparing the abilities of Down syndrome

children with other children over the range of school ages. By young

adulthood, the IQ scores of Down syndrome children have progressed from

the range of low-mild to high-moderate retardation seen in early school

years to a range that includes severe retardation (Oski, 1994). 

Down syndrome is the most common chromosomal disorder observed in

the newborn period and accounts for approximately one third of all

chromosomal abnormalities. Overall, chromosomal abnormalities occur in

approximately 1 in 200 live births and account for a sizable fraction of the

malformations and neonatal deaths that occur. The frequency of Down

syndrome is estimated to range from one in 700 to one in 1,000 (Oski,

1994). With the availability of prenatal testing, not all Down syndrome

fetuses are brought to term. Although the total medical costs of Down

syndrome and its incidence (which is measured in terms of live births) are

thereby reduced, the individual and societal costs may be very substantial. 

III.8.A.2 Concurrent Effects

Associated organ system anomalies include congenital heart disease,

duodenal atresia or stenosis, cleft lip or palate, fused digits,

tracheoesophageal fistula, imperforate anus, failure of the testicles to

descend, and incomplete development of neck vertebrae. Of these, the

most common and serious are heart defects, which occur in approximately

29 percent of children with Down syndrome. Approximately 50 percent of

adolescents and adults have mitral valve prolapse in the absence of

symptoms of heart disease. The children usually also have poor muscle

tone, increased joint flexibility, instability between the first two neck

vertebrae, and an abnormally developed pelvis. Their musculoskeletal

abnormalities often lead to degenerative changes in the joints. Thyroid

function is often decreased (Waitzman et al., 1996).

Hearing loss affects approximately 60 percent of Down syndrome children,

and 15 to 26 percent have moderate to profound hearing loss. Cataracts

affect approximately 12 to 20 percent of children; strabismus affects 20 to

45 percent. Severe nearsightedness and deformity of the cornea are also

common (Waitzman et al., 1996).
Chapter III.8 III.8-4 Cost of Down Syndrome

Down syndrome children have an increased risk of skin and lung infections,

acute leukemia, and an impaired immune system function (Waitzman et al.,

1996), and increased rates of testicular cancer and retinoblastoma (a

childhood cancer) (Oski, 1994). 

III.8.A.3 Causality

Down syndrome occurs when the egg or sperm receives an extra copy of

chromosome 21. This condition is hereditary in some cases and is also

associated with maternal age. Chemicals that cause chromosomal

abnormalities, especially interference with normal chromosomal replication

and disjunction, may cause this type of genetic abnormality (Waitzman et

al., 1996). Table III.1-2 in Chapter III.1 lists chemicals associated with

genotoxic effects. A review of material in the references listed in Chapter

III.1 will provide information regarding those chemicals that have been

shown to cause non-disjunction, and other genotoxic effects that may

specifically cause an abnormal number of chromosomes. 

Link to Chapter III.1, Table III.1-2

III.8.A.4 Treatment and Services

A variety of medical treatments and special services are required for Down

syndrome patients. These vary widely, depending on the specific cluster of

abnormalities occurring in an individual. The numerous structural

abnormalities may require immediate attention in the postnatal period, or

be corrected later in childhood if they are not immediately life-threatening. 

Some structural problems related to bone structure, muscles, and joints

may require specialized equipment and physical therapy. Hearing problems

and recurrent ear infections are often treated with pressure-equalization

tubes and antibiotics. Due to the retardation associated with this

syndrome, special education services are usually required. Many Down

syndrome patients require lifelong services in the form of specialized

housing and medical care. 

III.8.A.5 Prognosis

Down syndrome involves a cluster of effects. While some effects, such as

facial appearance, do not change over time, others become more severe

over time. For example, a deterioration in memory and other cognitive

functions is seen in most Down syndrome patients over the age of 45

(Waitzman et al., 1996). Laxity in the ligaments often leads to degenerative

changes in the joints, especially in the knees and spine (Semine et al., 1978;

Mendez et al., 1988). The prevalence of seizures, which occur in

approximately five to nine percent of Down syndrome patients (Waitzman

et al, 1996), increases with age (McVicker et al., 1994). In addition to
Chapter III.8 III.8-5 Cost of Down Syndrome

increased morbidity over time, the lifespan of Down syndrome patients is

likely to be shortened, due to the multitude of serious effects associated

with this disease.

III.8.B Costs of Treatment and Services

III.8.B.1 Methodology

Waitzman et al. (1996) provide an estimate of the direct medical and nonmedical costs of treating Down syndrome. They used the same

methodology to estimate the costs incurred by individuals with Down

syndrome as for all the birth defects for which they estimated costs. The

methodology and relevant considerations are detailed in Chapter III.3,

including discussions of direct and indirect costs, prevalence versus

incidence, incremental costs, and concurrent effects. The analytic method,

the sources of data and the limitations of the Waitzman method are also

discussed in Chapter III.3. The methodology is outlined briefly here.

Link to Chapter III.3

To estimate the lifetime medical costs incurred by an individual with a birth

defect, Waitzman et al. estimated the average lifetime medical costs for an

individual with the birth defect. From this value, the authors subtracted the

average lifetime medical costs for an individual without the birth defect. 

Because they estimated lifetime costs, they used an incidence-based

approach. Ideally, they would have tracked the costs of the cohort

members over time, until the death of the last cohort member. Because the

members of the cohort were born in 1988, however, this tracking was not

possible. Instead, estimates of the costs incurred at each age were based

on estimates of per capita costs in the prevalent population of that age (see

Chapter III.3, Section III.3.B.1.2).

Link to Chapter III.3, Section III.3.B.1.2

This method has two important implications. First, Waitzman et al.

estimated the costs incurred by individuals with birth defects, including all

medical costs incurred, rather than the cost of the birth defect per se. 

These cost estimates therefore include the costs of concurrent effects

(unlike the costs reported for many of the diseases in this handbook). This

method yields a more comprehensive assessment of total costs than would

be obtained if only individual effects were evaluated. This method is of

particular use in valuing the avoidance of birth defects because they very

frequently occur in clusters within an individual. As Waitzman et al. note,

however, the costs of associated anomalies are included as part of the

estimate of the costs incurred by an individual with a given birth defect. 

These cost estimates therefore cannot be aggregated across birth defects

because of the possibility of double counting. 
2

 Indirect costs are not generally discussed in this handbook and so are not included in this chapter. 

The reader may wish to consult Waitzman et al. (1996) for information on these costs.

Chapter III.8 III.8-6 Cost of Down Syndrome

Second, the Waitzman et al. method estimates the incremental costs for

individuals with birth defects — that is, the costs above and beyond the

average costs that would be incurred by individuals without the birth

defect.

Waitzman et al. (1996) estimated three categories of costs incurred by

individuals with Down syndrome: direct medical costs, direct nonmedical

costs, and indirect costs.2 Direct medical costs, specifically inpatient care,

outpatient care, pharmaceuticals, laboratory tests, X-rays, appliances, and

long-term care are included in the cost estimates shown in this and other

chapters (Chapters III.3 through III.8) based on the work of Waitzman et

al. Nonmedical direct costs, specifically developmental services, and

special education are also included in this handbook.

The Waitzman estimates of the costs incurred by individuals with Down

syndrome are based on the costs of this birth defect in California across

many ages, and its occurrence in a large cohort of children born in

California in 1988. California’s ongoing birth defects monitoring program

provides an excellent source of data. The California data sets were linked

with other national data sets so that Waitzman et al. could estimate the

incremental costs associated with Down syndrome.

The method of calculating the expected lifetime incremental costs for an

individual with a birth defect — i.e., the average lifetime cost per case —

is the same for all the birth defects considered by Waitzman et al. The

expected per capita cost at age i, PCCi, for an individual born with the birth

defect is the probability of surviving to age i (among those individuals born

with the birth defect), psi, times the per capita cost among individuals who

do survive to age i (PCPREVi, measured in the prevalent population):

PCCi = (psi) × (PCPREVi) .

Waitzman et al. estimate per capita costs in the prevalent population of age

i, PCPREVi, in two different ways, depending on data availability (see

Chapter III.3).

Link to Chapter III.3
Chapter III.8 III.8-7 Cost of Down Syndrome

The present discounted value of expected per capita lifetime costs of the

birth defect, PCCOBD, is just the sum of these expected age-specific per

capita costs, appropriately discounted (as explained more fully in Chapter

III.3): 

PCCOBD =3i PCCi/(1+r)i .

III.8.B.2 Results

Waitzman et al. (1996) estimate the total lifetime medical costs of Down

syndrome as outlined in the following tables, updated from 1988 to 1996

dollars based on the medical care cost component of the Consumer Price

Index (1996:1988=1.6465). Table III.8-1 shows the annual per capita

medical costs associated with Down syndrome by age group. 

Table III.8-1: Annual Per-Capita Medical Costs of Down syndrome by Age Group (1996$)

Condition Age 0-1 Age 2-4 Age 5-17 Age 18+

Down syndrome $27,265 $5,577 $2,231 $7,529

The medical cost of the average population was then subtracted from these

costs to obtain incremental costs. Waitzman et al. (1996) discounted these

costs using three different discount rates: two percent, five percent, and ten

percent. Although these discount rates do not match the standard EPA

rates used in many other chapters in this handbook (zero percent, three

percent, five percent, and seven percent), there is insufficient information

provided in Waitzman et al. (1996) to allow a conversion to discounted

costs using standard EPA discount rates. This problem exists in all

chapters based on the Waitzman et al. data (i.e., Chapters III.3 through

III.8). 

The present discounted values of average per capita lifetime incremental

costs, using discount rates of two percent, five percent, and seven percent,

are listed in Table III.8-2 below. Direct medical costs and direct nonmedical costs, including developmental services costs and special education

costs, are listed separately. The sum of per-capita direct medical and

nonmedical costs provides an estimate of the total per-capita costs incurred

by individuals with Down syndrome. 
Chapter III.8 III.8-8 Cost of Down Syndrome

Table III.8-2: Per-Capita Net Medical Costs, Nonmedical Costs, and Total Costs of Down

syndrome (1996$)

Condition 2% 5% 10%

Net direct medical costs $141,596 $90,556 $64,212

Net direct nonmedical costs

 Developmental services $67,645 $35,439 $19,089

 Special education $144,138 $109,622 $72,854

Total Costs $353,379 $235,617 $156,155

The costs presented in this chapter were current in the year the chapter was written. They can be updated using

inflation factors accessible by clicking below.

Link to inflation factors
III.9 III.9-1 Cost of Reducing High Blood-Lead Levels

CHAPTER III.9 COST OF REDUCING HIGH BLOOD LEAD LEVELS IN 

CHILDREN

Clicking on the sections below will take you to the relevant text.

III.9.A Background

III.9.A.1 Description

III.9.A.2 Concurrent Effects

III.9.A.3 Causality and Special Susceptibilities

III.9.A.4 Treatments and Services

III.9.A.5 Prognosis

III.9.B Costs of Treatments and Services

III.9.B.1 Methodology

III.9.B.2 Treatment Profile and Costs by Risk Level

III.9.B.3 Average Treatment Costs

III.9.B.4 Survival

III.9.B.5 Present Value Costs

III.9.B.6 Limitations
1

 This analysis used data provided in EPA, 1985 and 1987, which contain a cost-benefit analysis of

reducing lead in gasoline.

III.9 III.9-2 Cost of Reducing High Blood-Lead Levels

CHAPTER III.9 COST OF REDUCING HIGH BLOOD LEAD LEVELS IN 

CHILDREN

III.9.A Background

This analysis focuses solely on the medical costs associated with efforts to

reduce blood lead (PbB) levels in children under the age of six. Information

is provided regarding treatment, source reduction and education prescribed

in response to elevated PbB levels. The chapter does not include medical

costs of treating health effects that result from lead exposure. Cost

estimates may be developed for lead-induced effects in the future

(concurrent effects are discussed in more detail below). The chapter also

does not include information on elements such as indirect medical costs,

pain and suffering, lost time of unpaid caregivers, etc. The reader is

referred to Chapter I.1 for a discussion of the cost estimation methods and

cost elements that are relevant to all benefits estimates. In addition,

Chapter III.1 contains information regarding the special characteristics of

developmental defects, and a list of chemicals that may cause

developmental abnormalities. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and III.1

Link to inflation factors

III.9.A.1 Description

Elevated PbB levels in young children occur when children are exposed to

lead via any media (i.e., air, water, food, soil). Elevated PbB in children is

a considerable public health concern, due to the potential adverse effects of

lead on multiple organ systems and the particular susceptibility of young

children to many of these effects, including neurological damage. Lead is

toxic to the kidneys and is associated with low birth weight, male sterility,

cancer, and a wide array of neurological disorders. Elevated PbB may lead

to neurological impairment, behavioral abnormalities, and damage to the

cardiovascular, kidney, liver, gastrointestinal, blood-forming, reproductive,

and endocrine systems. Lead is also a suspected carcinogen and mutagen

(EPA, 1987), and impairs the immune system, causing increased

susceptibility to infectious agents (ATSDR, 1997).1
III.9 III.9-3 Cost of Reducing High Blood-Lead Levels

Children are particular susceptibility to neurological impairment. Lead

damages the developing neurons in the brain by damaging the protective

coating of myelin on nerve cells; it is suspected of causing irreversible

limitations in brain function. A relationship between a decrease in

cognitive functioning (as measured by IQ tests) and lead exposure in young

children has been reported in numerous studies. 

Elevated PbB levels are used to evaluate the level of risk and determine

treatment. The Centers for Disease Control (CDC) have developed a

classification system for risks to children, based on their PbB levels and a

related measure of lead exposure, erythrocyte protoporphyrin (EP). Their

classification system was modified in EPA (1987) and is shown in Table

III.9-1. This system is used in Section B to determine treatment costs.

Table III.9-1

Condensed Version of CDC Risk Classification Table

Blood Lead

Level

(μg/dl)

Erythrocyte Protoporphyrin Level

(EP)

(μg/dl)

0-32 33-53 >53

0-20 I Ia Ia

21-40 Ib II III

>40 * III IV

* = not generally observed

Source: U.S. EPA (1987)

III.9.A.2 Concurrent Effects

As noted above, lead exposure may lead to a variety of adverse health

effects. The occurrence of effects will depend on the levels of PbB (as

reflective of exposure throughout the body), the health status of the

individual (e.g., poor nutritional status is especially problematic), and

individual factors. Most children in the U.S. today do not experience

severe adverse health effects that are measurable. Damage to the nervous

system is very difficult to quantify, especially in young children. Aside

from IQ loss, this damage not usually identified except in severe lead

poisoning cases. Severe lead poisoning may lead to coma and death. The

form of lead is important; and organic lead, such as tetraethyl lead (TEL),

has caused deaths in children.
III.9 III.9-4 Cost of Reducing High Blood-Lead Levels

III.9.A.3 Causality and Special Susceptibilities

Children absorb considerably more lead than adults when ingesting the

same contaminated media. Adults absorb five to ten percent of dietary lead

and retain little of it; young children absorb 40 to 50 percent of dietary lead

and retain 20 to 25 percent of it (Oski et al., 1994). Demographic and

cultural factors affecting nutrition and dietary patterns may be considered

when evaluating risks and costs. As noted above, the occurrence of

adverse effects depends, in part, on the health status of the individual and

individual factors. Both the uptake of lead into the body (which impacts the

PbB levels) and the severity of health impacts may be exacerbated by

various factors including poor health and nutritional status. Elevated EP

(an indicator of lead poisoning) is often associated with iron deficiency

(EPA, 1987). Diets high in fat and low in calcium, magnesium, iron, zinc,

and copper increase the absorption of lead (Oski et al., 1994). Lead is

stored in the body primarily in bone and may be released, causing toxicity,

over many decades.

III.9.A.4 Treatments and Services

The treatments and services provided for children with elevated PbB

depend on their risk classification, as shown in Table III.9-1. Detailed

treatment descriptions are provided in Section B of this chapter along with 

cost data, and so are not presented here.

Link to Table III.9-1

III.9.A.5 Prognosis

Elevated PbB levels can always be brought down over time. The prognosis

for health effects related to the elevated levels is more serious. The

prognosis for full and unimpaired recovery depends on the degree of lead

poisoning that occurred (e.g., the risk classification), the amount of time

during which the PbB levels were elevated, the age of the child, general

health and nutrition status, the degree of intervention (including special

education strategies provided), and individual factors. It is not possible to

predict the outcomes for individual children, due to the variety of factors

which impact the final outcome. High risk children (as determined by the

CDC classification system) are generally more likely to experience

permanent damage than children with moderate or low risk levels. 

PbB levels greater than 10 to 15 ug/dL sustained during early childhood

carry a substantial risk for long-lasting but subtle injury to the nervous

system, even if no clinical symptoms are detected. Attention deficits and

reading disabilities have been observed in cohorts of young children with

elevated PbB levels. In adults with elevated PbB as children, increased
III.9 III.9-5 Cost of Reducing High Blood-Lead Levels

rates of dropping out and having long-term reading disabilities have been

observed. When levels are very high and encephalopathy has resulted,

serious sequelae may occur in later years that include seizure disorders,

mental disorders, and (in some rare cases) blindness and hemiparesis. In

some cases, residential care is required (Oski et al., 1994).

III.9.B Costs of Treatments and Services

III.9.B.1 Methodology

To estimate the average costs of testing and treating children with high

PbB levels, this analysis relies heavily on methodologies developed for the

benefit-cost analysis of reducing lead in gasoline (U.S. EPA, 1985) and

later applied by the EPA’s Office of Air Quality Planning and Standards

(U.S. EPA, 1987).

The average direct cost per child with high PbB levels was calculated in

four steps: 

• a typical treatment profile was developed for each risk level, 

• the costs of relevant treatments were determined,

• the costs of treatments were combined with the treatment profiles 

to produce an estimate of the average cost per child, and 

• the costs were reduced to reflect the fact that only a portion of 

children with high PbB levels will be screened.

III.9.B.2 Treatment Profile and Costs by Risk Level

The costs of relevant treatment elements (e.g., chelation therapy,

neuropsychological evaluation, family education) were estimated by U.S.

EPA (1985) and adjusted in U.S. EPA (1987). These costs are based on

the CDC’s (1978) recommended clinical management program and are

linked to the risk level by determining PbB and EP levels (See Table

III.9-1). 

Link to Table III.9-1

The treatment profile is developed at the age at which the child is first

screened. This analysis considers the cost of follow-up through age five

regardless of the age of the child at the initial screening. Consequently, the

actual costs for children initially screened at older ages may differ from

those estimated in this chapter. They may be greater or lesser, depending

on the medical consequences of later screening. In addition, treatment is
III.9 III.9-6 Cost of Reducing High Blood-Lead Levels

still likely to take place when screening occurs later in childhood, so overall

costs may not be reduced regardless of the screening results. It was

assumed that the distribution of the ages of children screened is uniform

over the ages one through five. The cost of follow-up tests are adjusted

accordingly. 

Regardless of the age of initial screening, follow-up testing of children is

assumed to continue through age five. A child initially screened at age one

will therefore have follow-up tests for five years (ages one to five,

including the initial screening year), while a child initially screened at age

five will have follow-up tests only in the year of screening. The cost

estimates presented below, given in 1996$, are averages for all screened

children in the risk group regardless of the age at which they were initially

screened.

Risk Level I. Children in this risk group are considered to be at low risk. 

Because screening is concentrated on children in areas with high-risk

factors, follow-up treatment and family education are recommended. The

estimate of the average (undiscounted) cost per child at this risk is $522.

Risk Level Ia. Children in this risk group do not have elevated PbB levels. 

They do have elevated EP levels, which may be indicative of iron

deficiency or other medical problems. In addition to initial testing, all

children at this risk level are tested for iron deficiency, at a cost of $39. The

cost of medication for anemia is estimated as $127. With a mean

population PbB of 20, 23.8 percent of those classified in risk level Ia will

receive the medication, resulting in an average cost of $29 per child. The

percentage of the children testing positive for anemia will vary with the

mean population PbB concentration; a higher mean population would

increase the percentage of children testing positive, and would therefore

increase the average treatment costs per child. Health education, stressing

nutritional needs, is assumed to be provided to 50 percent of the families

with children in this risk group. The average (undiscounted) costs per

screened child at this risk level is $692. 

Risk Level Ib. In addition to the initial screening, children in risk category

Ib receive periodic follow-up tests and limited family education. Table

III.9-2. shows an estimated average (undiscounted) cost for this risk group

of $623.

Risk Level II. As can be seen from Table III.9-2, children at moderate

risk receive no chelation therapy. Also, no neuropsychological evaluation

is performed and family education is limited. The major cost for this group

comes from follow-up tests. The estimated average (undiscounted) cost

for screened children in risk level II is $1,205.
III.9 III.9-7 Cost of Reducing High Blood-Lead Levels

Risk Level III. The treatment for children in risk level III is similar to

treatment for children in risk level IV. For risk level III, however, a

CaNa2-EDTA provocation test is included. This test is used to evaluate the

responsiveness of the child to chelation therapy. Also, the costs of

chelation treatment fall sharply compared with children in risk level IV, due

to the decreased percentage of children estimated to need this therapy. 

Only 0.43 percent of risk level III children are assumed to require this

therapy, as compared with 37 percent of children in risk level IV. The cost

of follow-up tests also decreases, since the frequency of follow-up tests is

higher for children who have received chelation therapy than for children

who have not. The estimated average (undiscounted) cost for screened

children who are in risk level III is $2,632. 

Risk Level IV. As can be seen from the table, the major cost element for 

children in the urgent risk group is chelation therapy. The probability of

requiring chelation therapy increases with PbB concentrations. EPA

(1987) estimated that 37 percent of the children in this risk group would

require chelation therapy, based on a mean population PbB level of 20

μg/dl. Note that the cost of treatment for children in this risk group

depends on this assumption regarding mean population PbB levels. A

higher mean population PbB level would result in a greater percentage of

children in this risk group requiring chelation therapy. Cost estimates for

this risk group would therefore increase. 

EPA reports that in some cases, an initial chelation therapy may be

followed by a rebound in PbB levels as the body attempts to equilibrate

between lead in soft tissue and lead in blood. A second and sometimes a

third chelation treatment is therefore necessary. Fifty percent of children

who receive one chelation treatment are assumed to require a second

treatment. Fifty percent of children requiring a second chelation treatment

are assumed to require a third. The total average (undiscounted) cost of

treating a child in risk level IV is estimated to be $5,200.

Typical treatment for children in each risk level is shown in Table III.9-2,

along with the associated average costs per screened child in each risk

level.
III.9 III.9-8 Cost of Reducing High Blood-Lead Levels

 Table III.9-2

 Average Direct Cost of Treatment per Screened Child

Year Treatment

Cost Per Child (1996 $)

Level IV Level III Level II Level Ib Level Ia Level I

 Year of

 screening

Chelation, inpatient 1,486 13 0 0 0 0

2nd chelation, inpatient 743 5 0 0 0 0

3rd chelation, inpatient 372 3 0 0 0 0

Initial lab test 61 61 61 61 61 61

CaNa2 provocation test 0 221 221 0 0 0

Iron deficiency test 0 0 0 0 39 0

Medication for anemia 0 0 0 0 29 0

Follow-up tests 570 481 481 120 120 120

Neuropsychological

evaluation

1,204 1,204 0 0 0 0

Family education 401 401 200 200 200 101

Total 4,837 2,390 964 382 450 281

 2nd year Follow-up tests 145 97 97 97 97 97

 3rd year Follow-up tests 108 72 72 72 72 72

 4th year Follow-up tests 72 48 48 48 48 48

 5th year Follow-up tests 36 25 25 25 25 25

 TOTAL 5,200 2,632 1,205 623 692 522

 Totals may not add due to rounding.

 Sources: U.S. EPA, 1987, Bureau of Labor Statistics.

III.9.B.3 Average Treatment Costs

To determine the average costs per child it was first necessary to estimate

what percent of children in each risk category are screened. The percent of

children who are placed in each risk category based on the screening results

were then estimated. The risk level was used to determine the percent of

patients receiving each type of treatment.

For children in risk levels III and IV, it was assumed that the lead exposure

would result in behavioral symptoms; therefore, all children in these risk

levels would be screened. The average cost per screened child in risk

levels III and IV was assumed to equal the average cost per child in these

risk groups.

Children in the lower risk categories may not develop obvious symptoms

and may not receive treatment. U.S. EPA (1987) has estimated that 20

percent of children are screened for blood lead levels in any one year. A

probability analysis could be performed to estimate the likelihood of a child

being treated between disease onset and the age of six. Costs could then

be adjusted based on the predicted average years past onset that screening

occurs, but the level of detail of the information available on frequency of

screening does not warrant this detailed analysis. As a simple and

approximate method of accounting for the fact that not all children with

high PbB levels are screened, the treatment costs for children in risk

categories II, I, IA, and IB are multiplied by 0.2. The estimated costs for

each risk level are shown in Table III.9-3. 
2

 Screening may not be coincident with onset of high PbB levels; no information was located

regarding a typical time period between onset of high PbB levels and screening. If such information was

available, then the costs of the disorder could be discounted over this lag period.

III.9 III.9-9 Cost of Reducing High Blood-Lead Levels

 Table III.9-3

 Average Direct Costs per Child With High Blood Lead Levels--All Risk Groupsa (1996 $)

Risk Level

Per Child

Cost per Disease Year (1996 $) Total Cost

1 2 3 4 5 (1996 $)

IV 4,837 145 108 72 36 5,200

III 2,390 97 72 48 25 2,632

IIb 193 19 14 10 5 241

Ibb 77 19 14 10 5 125

Iab 90 19 14 10 5 138

I

b 56 19 14 10 5 105

 a Assuming uniform distribution of the tested children over ages 1 through 5.

 b As explained in the text, cost estimates for these risk categories have been multiplied by 0.20 to reflect the

percentage of children expected to be screened. If it is assumed that all children who need services will receive

them, then the values reported in Table III.9-3 for Levels I and II should be used.

 Source: U.S. EPA, 1987.

III.9.B.4 Survival

No data linking survival rates to elevated blood lead levels were found. 

This analysis assumes, therefore, that survival rates match typical survival

rates in the entire U.S. population. The calculated survival rates for disease

years one through five for children ages one to five, however, are 100

percent, as reported in Vital Statistics of the United States (U.S.

Department of Health and Human Services, 1985). Survival rates therefore

have no impact on the cost estimates. 

III.9.B.5 Present Value Costs

Table III.9-4 shows the discounted direct cost estimates in Table III.9-3. 

Estimates of the present value costs per child with high PbB levels are

shown in Table III.9-4, using discount rates of zero, three, five, and seven

percent. Using a five percent discount rate, estimates of the net present

value of medical costs per child with high blood levels are $5,162 for risk

level IV, $2,610 for risk level III, $237 for risk level II, $120 for risk level

Ib, $134 for risk level Ia, and $101 for risk level I. The discount rates have

only a minor impact on the present value cost estimates, due to the fact that

the majority of costs are incurred in the year of screening and are therefore

unaffected by the discount rates.2
III.9 III.9-10 Cost of Reducing High Blood-Lead Levels

 Table III.9-4

Discounted Average Direct Costs per Child Age One to Five Years with 

 High Blood Lead Levels (1996 $)

Risk Level Discounted Per Patient Costs (Discount Rate %) 

0 3 5 7

IV 5200 5185 5162 5135

III 2632 2623 2610 2591

II 241 240 237 234

Ib 125 123 120 117

Ia 138 137 134 132

I 105 104 101 97

 Sources: U.S. EPA, 1987, Bureau of Labor Statistics.

The costs presented in this chapter were current in the year the chapter was written. They can be updated using

inflation factors accessible by clicking below.

Link to inflation factors

Lead exposure analyses can produce estimates of the distribution of PbB

levels and EP levels among the population, and therefore the distribution of

the population among the risk levels shown in Table III.9-1. This

distribution can be compared to levels of PbB and EP in the population

under various regulatory options to estimate the change in the number of

individuals in each of the risk categories. By multiplying the change in the

number of individuals in each risk category by the costs of screening and

treating an individual in that risk category and summing over all risk

categories, the benefits of the regulations may be calculated. 

Link to Table III.9-1

III.9.B.6 Limitations

There are numerous limitations to the cost estimates provided in this

chapter. Foremost is the restriction of the information to those costs

associated directly with the reduction of lead levels in blood. As discussed

in Section III.9.A, numerous serious concurrent effects occur as a result of

elevated blood lead levels. These effects are the reason that time and

money are spent to reduce blood lead level in children. The costs of their

treatment may be substantial. Some children may not experience

measurable (or any) consequences of elevated blood lead levels,

particularly if the elevations are very small, the children are healthy, and

they have a good nutritional status.

Another major limitation is the assumption that only 20 percent of children

are tested, valued when the chapter was originally written in 1993. There

has since been an increased awareness of the risks associated with lead

poisoning in children and a concurrent increase in the testing of young
III.9 III.9-11 Cost of Reducing High Blood-Lead Levels

children, which will lead to an increase in both testing and treatment costs. 

The costs presented in this chapter are therefore an underestimate of actual

costs.

Another limitation is the lack of data regarding the age at which testing is

performed. As stated in the text, testing may not be done at the age of one

year. If it is done later, the costs of treatment may be greater or less than

those estimated here. Costs would be lower if only minimal treatment were

required because they would extend over a shorter period. If a delay in

testing led to higher levels requiring more complex treatment and longterm impairment, then the costs could be much higher.

Finally, the cost estimates in this chapter are based largely on a

methodology and data that were collected in the 1980s. These data may be

outdated if new protocols are in place, and the costs may therefore differ

from those presented here.
IV.1 IV.1-1 Cost of Respiratory Illness and Symptoms

CHAPTER IV.1 INTRODUCTION TO THE COST OF RESPIRATORY

ILLNESS AND SYMPTOMS

Clicking on the sections below will take you to the relevant text.

IV.1.1 Overview

IV.1.2 Illness Definition and Duration
1

“Cost” refers to direct medical costs unless otherwise noted.

IV.1 IV.1-2 Cost of Respiratory Illness and Symptoms

CHAPTER IV.1 INTRODUCTION TO THE COST OF RESPIRATORY

ILLNESS AND SYMPTOMS

IV.1.1 Overview

Section IV of the Cost of Illness Handbook provides direct medical cost

estimates for respiratory illness and symptoms, excluding cancers of the

respiratory system. Cancers are discussed in Section II, and at the time of

this writing includes one respiratory illness, lung cancer. 

This introductory chapter contains a brief summary of respiratory illness

definitions and duration that are relevant to estimating the costs of

respiratory illness and symptoms (referred to subsequently as “illness” for

simplicity).1 The illnesses included in this section are those that were being

evaluated by EPA in a manner that required cost estimates (e.g., for policy

evaluations, benefits assessments, comparative illness reduction strategies). 

Although the specific applications of the cost data vary, basic cost

information is provided for each illness. There is considerable variation in

both the level of detail that was required for the illness in this section and

the type of information that was available for the illness.

IV.1.2 Illness Definition and Duration

Respiratory illnesses involve the upper or lower respiratory system, which

usually includes the nose, tonsils, throat, mouth, trachea (wind pipe), and

all the structures of the lungs (bronchi, alveoli, etc.). Respiratory illnesses

also are usually defined to include ear infections, sinusitis, and related

illnesses (Oski et al., 1994). Often the illnesses involve multiple parts of

the respiratory system.

A characteristic of the respiratory illnesses that are discussed in this section

is that they are commonly treated by primary care physicians. This is in

contrast to the illnesses discussed in Sections II and III, which were more

likely to be treated by a physician or team of physicians with

subspecializations, such as oncology and pediatric surgery, neonatal

pediatrics, etc. The illnesses in this section may be very serious and even

life-threatening. They usually are not, however, and are often treated with

medications and minimally invasive procedures. Most illnesses of this type

can be treated on an outpatient basis, rather than requiring hospitalization. 

Consequently, the costs of the illnesses, which are estimates of the average

costs, are generally much lower, on an annual basis, than costs for illnesses

that require more intensive treatment. 
IV.1 IV.1-3 Cost of Respiratory Illness and Symptoms

All direct medical costs presented in the Handbook are estimates of the

“average” cost for patients, so that the extremely high and low cost

treatments that may be required in a small number of cases have been

averaged into the overall distribution of care costs to yield an average cost. 

For most illnesses, the circumstances that would lead to unusually high or

low costs are noted in the individual illness chapters.

This section includes cost estimates for both acute and chronic illnesses. 

An acute illness generally has a rapid onset (hours or days) and is

sufficiently intense to cause someone to seek medical treatment. A chronic

illness, such as asthma, is also assumed to require medical attention, but

may continue over months and years, with a requirement for continuous or

intermittent medical supervision and care. Symptoms are observed

pathological responses in the body that may be associated with numerous

causes, including illnesses or other stimuli (e.g., a cough in response to

smoke).
Chapter IV.2 IV.2-1 Cost of Asthma

CHAPTER IV.2: COST OF ASTHMA

Clicking on the sections below will take you to the relevant text.

IV.2.A Background

IV.2.A.1 Description

IV.2.A.2 Concurrent Effects

IV.2.A.3 Causality and Special Susceptibilities

IV.2.A.4 Treatment and Services

IV.2.A.5 Prognosis

IV.2.B Costs of Treatment and Services

IV.2.B.1 Methodology Summary

IV.2.B.2 Diagnosis

IV.2.B.3 Long-term Management

IV.2.B.4 Acute Care

IV.2.B.5 Annual Cost of Treatment and Services

IV.2.B.6 Summary of Lifetime Costs

IV.2.C Sensitivity Analysis

IV.2.D Uncertainty Analysis

Appendix IV.2-A Chemicals Associated with Asthma

Appendix IV.2-B Drug Therapies Recommended by NHLBI
Chapter IV.2 IV.2-2 Cost of Asthma

CHAPTER IV.2: COST OF ASTHMA

IV.2.A. BACKGROUND

This chapter contains a discussion of the lifetime incremental direct medical

costs incurred by asthma patients, and methods used to estimate those

costs. Asthma is of particular concern to EPA because there are many

pollutants that may cause or exacerbate this disease. Regulation of primary

and toxic air pollutants may result in a reduced number of cases of chronic

airway diseases, including asthma. Programs to reduce indoor air

pollutants, such as environmental tobacco smoke (ETS), are also crucial in

reducing the impacts of this disease. The benefits of such activities can be

estimated in part, by evaluating the direct medical costs avoided. A full

measure of the costs of asthma would also include direct non-medical costs

and indirect costs. This chapter does not include information on elements

of willingness-to-pay (WTP), such as indirect medical costs, pain and

suffering, lost time of unpaid caregivers, lost productivity of patients, etc. 

The direct medical costs presented in this chapter may be useful in

providing a lower-bound measure of WTP. The reader is referred to

Chapter I.1 for a discussion of direct cost estimation methods and cost

elements that are relevant to all benefits estimates. In addition, Chapter

IV.1 contains general information regarding respiratory illnesses.

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and IV.1

Link to inflation factors

This chapter uses the Guidelines for Diagnosis and Management of Asthma

developed by the National Heart, Lung, and Blood Institute (NHLBI,

1997), which provide disease definition and clinical practice guidelines. 

The guidelines were developed by clinicians and researchers and provide

information on current approaches to treating asthma. Current Medicare

reimbursements and journal articles were used to obtain cost estimates. 

The medical and economics literature was consulted to obtain supporting

information. A cost estimate was developed for the average patient and an

upper bound value was estimated based on patients with moderate or

severe asthma who had a high use rate of acute care services.

IV.2.A.1 Description

IV.2.A.1.1 Definition

Asthma is a chronic inflammatory disorder of the airways, designated as

ICD9-CM-493 in the International Classification of Diseases (ICD-9). 
Chapter IV.2 IV.2-3 Cost of Asthma

Airway inflammation contributes to airway hyperresponsiveness, airflow

limitation, respiratory symptoms, and the chronic nature of the disease. 

Airflow limitation and the narrowing of airways can be manifested as acute

bronchoconstriction, airway edema, mucus plug formation, and remodeling

of the airway walls. In susceptible individuals, this inflammation causes

recurrent episodes of wheezing, breathlessness, chest tightness, and

coughing. Asthma patients are usually categorized as having mild

persistent, mild intermittent, moderate persistent, or severe persistent

asthma, based on symptoms and the results of diagnostic tests. Their care

depends, to some extent, on this categorization (NHLBI, 1997). 

Asthma episodes (also referred to as exacerbations or acute symptoms) are

periods when bronchial constriction restricts airflow and causes the

symptoms described above. The episodes can be triggered by allergens,

irritants such as cigarette smoke, odors, pollution, sulfite preservatives,

weather changes, and emotions. Prolonged severe attacks may be

precipitated by common colds (e.g., influenza, rhinovirus). Some drugs

cause short severe attacks (e.g., aspirin, nonsteroidal anti-inflammatory

drugs). Responses are typically triggered within a few hours and may

persist as a hypersensitive response to stimuli for two to three weeks

(Eggleston, 1994).

In recent years the importance of inflammation in asthma has been further

substantiated by research. When inflammation occurs, it is usually

associated with airflow obstruction that is often reversible spontaneously or

with treatment. The inflammation also causes an increase in the existing

bronchial hyperresponsiveness to the triggers listed above. At the

physiological level, asthma results from complex interactions among

inflammatory cells, mediators, and other cells and tissues in the airways

(NHLBI, 1997).

Although asthma may affect individuals throughout their life, the disease

has certain age-specific characteristics and differential diagnosis issues. 

These issues need to be considered in the etiology and treatment of asthma

(NHLBI, 1997). This chapter focuses on asthma that is diagnosed in

childhood because that is the most common period of diagnosis, and much

of the care provided for asthmatics is provided during childhood. In

addition, the Agency has a particular interest in costs associated with

childhood asthma. Most of the information provided is relevant to patients

of any age, however, and information is provided to allow the reader to

calculate costs associated with asthma onset at any age.

Asthma is a leading cause of morbidity among children and is the most

commonly cited reason for school absenteeism, accounting for one-third of

all school days lost. It is the most common cause for hospitalization of

children. The median age of onset of asthma is four years; however, more

than 20 percent of children who are diagnosed with asthma develop

symptoms during the first year of life (Eggleston, 1994). 
1

 Prevalence is a measure of how many people have a disease, rather than how many were newly diagnosed

in a particular year. 

2

 The prevalence of a chronic disease is often determined through patient surveys.

3

 It is useful to consider both values because neither value alone can fully express trends and potential

impacts. Rates provide information on changes, standardized to a specific size population. Absolute

values reflect a combination of changes in the rate, along with changes in the underlying population size. 

For example, a rate could stay the same, but if the population increased by 20 percent, then the absolute

number of cases would need to increase by 20 percent to maintain the same rate.

Chapter IV.2 IV.2-4 Cost of Asthma

IV.2.A.1.2 Sources of Health Statistics Data 

Although asthma is one of the most common chronic diseases in the U.S.

and has increased in importance over the past 20 years, surveillance of

asthma trends was very limited until recently. CDC provided summary

data in 1998 for the overall period 1960 to 1995 that described some of the

trends in asthma occurrence (CDC, 1998a). These data include asthma

prevalence(for the years 1980-1994).1 They also include asthma office

visits (1975-1995), emergency room visits (1992-1995), hospitalizations

(1979-1984), and deaths (1960-1995). The CDC report noted that the

overall trend has been toward an increase in asthma prevalence and asthma

deaths, with substantial differences in death rates within a single geographic

region. Asthma hospitalizations have increased in some areas and

decreased in others. Surveillance data are not available at the state or local

levels, with the exception of asthma mortality (CDC, 1998a). 

 

The National Center for Health Statistics (NCHS) collected much of the

basic information on which the 1998 CDC surveillance summary was based

(CDC, 1998a). They used the National Health Interview Survey which

provides data on prevalence supplied by patients.2 They also used the

National Ambulatory Medical Care Survey which provides physician office

visit data; the National Hospital Ambulatory Medical Care Survey, which

provides emergency room visit data; and the National Hospital Discharge

Survey, which provides data on in-hospital stays. Mortality data were also

collected from each state (CDC, 1998a). Information is expressed both as

the absolute value (e.g., number of cases) and the rate in the population

(e.g., 2 per 10,000 people).3 Age groupings used in the CDC surveillance

summary are 0 to 4, 5 to 14, 15 to 34, 35 to 64, and >64 years (CDC,

1998a).

Mortality data from CDC (1998a) were limited, so additional information

was also obtained from NCHS’s FASTATS (CDC, 1999a). Multiple areas

within this large database were used; they can be accessed through the

website listed in the References section.
Chapter IV.2 IV.2-5 Cost of Asthma

CDC also published a forecast estimate of self-reported asthma prevalence

for the U.S. in 1998 (CDC, 1998b). This estimate was developed using

1995 survey data, 1998 census data, and linear extrapolations of regionspecific increases in asthma prevalence over previous years (CDC, 1998b).

Another report by CDC contains an evaluation of the number and rate of

ambulatory care visits for various diagnostic categories for the period 1993

to 1995 for children under 15 years of age (CDC, 1998c). The National

Hospital Ambulatory Medical Care Survey provided hospital outpatient

data used in this analysis. There are age restrictions in the data (only ages

0 to 14 are covered); however, other data sources were not located for

hospital outpatient visits. The survey data are therefore used both as the

source of the rate for those patients aged 0 to 14, and to estimate the visits

for patients 15 years and older.

Data from the various government statistical summaries are provided

below. In addition, some statistics are calculated using existing data. Most

calculated statistics are for 1994 because this is the most current year for

which prevalence data are available. Prevalence is important because it is a

commonly used denominator in calculating statistics in this analysis, such as

the rates of various services per asthmatic. 

An important consideration when reviewing the asthma statistics is the way

the rates are presented. Data on rates are provided in the CDC reports

using the entire general population in the group of interest as a

denominator (e.g., all people, all people aged zero to four, all blacks, etc). 

This division gives a somewhat distorted sense of the utilization of services

by asthmatics because both the prevalence of asthma in the population and

the size of the overall population have increased. The rate of service use

could therefore appear to increase in the general population, while it

actually decreased among asthma patients. Consequently, many statistics

are presented using two types of rates for this discussion: 

• rate per number in the population — denominator is total number

of people in group of interest (e.g., children aged zero to four), and

• rate per number of asthmatics — denominator is number of

asthmatics in the group of interest.

The rates are important because they are used to estimate the proportion of

asthmatics using various services in the cost section of this chapter, which

follows. Because the rates are not generally provided in the CDC reports,

most rates per asthmatic were calculated for this analysis using the CDC

statistics.
4

 All rates are expressed in terms of the entire population rather than just asthma patients, unless otherwise

stated. For example, 10 per 1,000 indicates 10 cases among all the population, of whom some are asthma

patients. This standard is used for all rates expressed in this section, unless otherwise noted.

5

 NCHS does not provide much detail on the age group of most interest to this analysis in their summary

statistics (they group all those under the age of 45 together for many statistics). Consequently, the data are

reported for this group, although those under 18 are of most interest. 

Chapter IV.2 IV.2-6 Cost of Asthma

IV.2.A.1.3 Prevalence of Asthma 

The self-reported prevalence of asthma increased 75 percent from 1980 to

1994 to 13.7 million people during the period from 1993 to 1994, and the

trend was observed among all races, sexes, and age groups (CDC, 1998a). 

Estimates of asthma prevalence in 1998 by CDC, based on population

trends and the pattern of increasing incidence, yielded a CDC-estimated

total of 17,229,000 asthmatics of all ages in the U.S. (CDC, 1998b). This

section focuses on the actual reported values (CDC, 1998a), rather than on

the estimated prevalence (CDC, 1998b).

The increase in asthma prevalence was the greatest for children aged 0 to 4

(160 percent) with a rate increase during the period 1980 to 1994 from

22.2 per 1,000 (2.2 percent) to 57.8 per 1,000 (5.8 percent).4 The current

rate indicates that more than 1 in every 20 very young children have

asthma, with approximately 1.3 million children in this age group having

asthma during the most recent survey period (1993-4), in contrast with

360,000 in 1980 (CDC, 1998a). As noted above, the average age of

diagnosis is four years, so half of all children will be diagnosed with asthma

after the age of four. There was a 74 percent increase in prevalence in the

age group 5 to 14 from 1980 to 1994. By the age of 18, the prevalence is

7.5 percent. This is in contrasts to the general population (all ages), with a

prevalence of 5.7 percent. The prevalence rates are near or below 5

percent among age groups over 18 (CDC, 1998b). Among adults 35 years

and older, the asthma rate was 44.6 per 1,000 (4.5 percent) in 1993-4. 

Asthma prevalence is 14 percent higher among blacks than whites, with

rates of 57.8 versus 50.8 per 1,000 (5.8 versus 5.1 percent) during the

most recent survey period (CDC, 1998a). 

Asthma is most commonly diagnosed in children by the age of five and in

adults in their thirties, although onset of symptoms can occur at any age. 

About ten percent of patients are first diagnosed with asthma after age 64

(AAFA, 1999).

Family income is related to asthma incidence, with those under the age of

45 having a prevalence of eight percent when family incomes were less

 than $10,000 compared to six percent for those with incomes greater than

 $35,000 (CDC, 1999a).5
Chapter IV.2 IV.2-7 Cost of Asthma

Many studies have reported an association between urban residence and

asthma. The NCHS aggregate statistics (not provided by individual age

group) support this association, with a rate of 5.8 percent in metropolitan

statistical areas compared with 5.1 percent in non-metropolitan areas. The

rate is slightly higher in central city areas compared to non-central city

areas within a metropolitan area (CDC, 1999a). Some areas have reported

much higher rates, including Chicago, Bronx, and an area in Louisiana

(CDC, 1998b).

There is substantial variation in asthma rates among states, although data

are limited. In three states where surveys of adults were recently carried

out, self-reported medically diagnosed active asthma in the previous year

occurred in 6.6 percent and 7.4 percent of the population in Oregon in the

years 1995 and 1996 respectively. Of those, 9 percent received emergency

care for asthma in the preceding year. In New Hampshire, 11 percent of

respondents reported having medically-diagnosed active asthma, and 19.9

percent of males and 44.6 percent of females had used medication

(CDC,1998a). In Washington state, 10.8 percent of adults reported having

asthma at some point in their life and 12.8 percent of children had asthma. 

Family incomes below $20,000 per year were associated with an

approximately two-fold increase in asthma prevalence among children

(MMWR, 1999). More state data will be available in the future, allowing

national patterns to be evaluated.

IV.2.A.1.4 Office Visits 

Use of office visits has increased in approximate correspondence to the

prevalence of asthma. From 1975 to 1995, the estimated annual number of

office visits for asthma increased from 4.6 to 10.4 million. The lowest rate

of office visits was among people aged 15 to 34 years. The annual rate of

office visits for asthma during the period 1993 to 1995 was 39.6 for whites

and 43.8 for blacks per 1,000. The rate was higher for pediatric cases:

50.3 for ages 0 to 4 and 51.5 for ages 5 to 14 (CDC, 1998a).

The rates of office visits among asthmatics was calculated for this analysis

using the prevalence statistics and the number of office visits reported by

CDC (1998a). In 1994 there were 1,024,000 office visits for asthma

among children aged 0 to 4 and a population of 1,300,000 children aged 0

to 4 with asthma. These statistics yield a rate of 780 per 1,000 asthmatic

children for age 0 to 4, yielding an average annual office visit rate of 0.78

per patient. Using the same calculation for the age group 5 to 14, the rate

was 720 per 1,000, yielding an annual average visit rate of 0.72 per patient.

As with all services discussed in this section (e.g., hospitalization,

emergency room use), it was not possible to determine what percentage of

patients had more than one office visit more in a year, nor the distribution

of visits among patients. However, it was possible to estimate the average

number of visits per patient (CDC,1998a). For costing purposes, the rates
Chapter IV.2 IV.2-8 Cost of Asthma

make it possible to calculate an average cost per patient, even though some

patients will have much higher or lower costs, depending on actual

utilization of medical services.

IV.2.A.1.5 Hospital Outpatient Visits

There is a trend toward increasing provision of outpatient services by

hospitals. These may function as clinics, or be more similar in practice to a

group medical practice within a hospital. These outpatient visits provide

the same kind of care that is provided in a physician’s office; it is therefore

anticipated that the costs will be the same (discussed in Section IV.2.B,

below). It is important to determine the number of these visits that occur

annually, to estimate the total number of medical visits and to determine

the number of visits per year by a patient.

The CDC report “Ambulatory Health Care Visits by Children: Principal

Diagnosis and Place of Visit” provides information on the number of

children and rate per 100 children for ambulatory visits to physicians’

offices, hospital outpatient departments, and emergency rooms (CDC,

1998c). Other sources of information for physicians’ visits and emergency

room visits are preferable for most statistics because they cover all ages,

while this report covers patients only up to age 14. This report is useful,

however, for evaluating patient utilization of hospital outpatient services,

which the other sources do not describe. 

CDC (1998c) reports an outpatient visit rate of 0.8 per 100 children aged 0

to 14 per year, during the 1993 to 1995 period, with 469,000 visits per

year. Dividing the number of visits by the total number of asthmatic

children in this age group of 4,090,000 children yields an average annual

visit rate of 0.115 per asthmatic child. To evaluate the use of outpatient

hospital care among those over 14 years of age, it was assumed that the

relationship between this type of care and physician’s office visits would be

the same across ages. The ratio of hospital outpatient visits to office visits

among children aged 5 to 14 is 0.115/0.72 = 0.159. The rate of office

visits among all asthmatics in 1994 was estimated to be 0.607 per year

(including adults and children). By applying the outpatient/office visit

ratio determined for children (0.159) to the office visit rate for all ages

(0.607), the rate of outpatient use per patient can be estimated as: 0.159 ×

0.607 = 0.10. 

IV.2.A.1.6 Combined Medical Visit Rate

When the hospital outpatient visit rate is added to the office visit rate, the

total annual physician visits per patient can be estimated. As described

above, the per patient rate of office visits among all asthmatics in 1994 was

estimated to be 0.607 per year and the rate of outpatient use was estimated

to be 0.10. Summing these two values yields an overall patient visit rate of

0.707 for the average patient. In subsequent discussions, the outpatient

and physicians’ office visits are discussed together as physician’s office
6

 Use is defined by CDC as admission for asthma listed as first diagnosis. 

Chapter IV.2 IV.2-9 Cost of Asthma

visits, due to their similarity and to the fact that a physician is usually seen

in either location.

An estimate of the medical visit rate for children can also be calculated. 

CDC (1998c) reports a physician visit rate of 5.3 per 100 children (similar

to that reported in CDC 1998a), with 3,029,000 visits per year. 

Combining the hospital outpatient visits with the office visits yields

3,498,000 visits per year. This total yields an overall rate of 0.855 per

patient aged 0 to 14 (2,498,0000/4,090,000). An annual visit rate can be

calculated for the two childhood age divisions. For zero- to four-year-olds,

the office visit rate listed above was 0.78 per patient. Adding the rate of

0.115 from above yields 0.895 per year. For five- to fourteen-year-olds,

the office visit rate of 0.72 per patient was combined with the rate of 0.115

to obtain a rate of 83.5 per patient (taken directly from or calculated from

statistics provided in CDC, 1998a).

IV.2.A.1.7 Emergency Room Use 

Only recent data (1992-1995) are available on emergency room use, so

longitudinal trend analysis is limited.6 In 1994 the overall rate was 6.3 per

1,000 and 0.117 per asthmatic. There was not a statistically significant

change in use over the four-year period among all patients (CDC, 1998a),

but the rate of use by black asthmatics increased by 50.1 percent. Among

white asthmatics the increase was 4.1 percent (calculated from statistics

provided in CDC, 1998a and CDC, 1998c). Blacks had consistently higher

rates of use than whites with a rate in 1995 (the most recent year with data)

of 22.9 per 1,000 (population) versus 4.9 in whites. In 1994, the likelihood

of an asthma patient visiting an emergency room was 0.337 for blacks and

0.087 for whites (taken directly from or calculated from statistics provided

in CDC, 1998a).

Rates were higher for younger than for older patients. In 1994, the rate for

children aged 0 to 4 was 14.5 per 1,000 people. For ages 5 to 14 the rate

was 8.0 per 1,000 people. Rates of emergency room use in 1994 among

asthmatic children were 239 per 1,000 (23.9 percent) for ages 0 to 4, and

112 per 1,000 (11.2 percent) for ages 5 to 14. Rates per 1,000 in the

general population were very similar among the age groups within the span

from 15 to 64 (approximately 7 per 1,000) and much lower for the elderly

(65+ years) at 3.0 per 1,000. Rates among asthmatics in those age groups

were lower than the rates for children (taken directly from or calculated

from statistics provided in CDC, 1998a).

As discussed above under office visits, it was not possible to determine

what percentage of patients used an emergency room more than once in a

given year, so the values provided are an average across all patients. As
7

 There is no way to determine which patients were hospitalized more than once in a given year, but these

overlaps are not expected to occur more frequently in 1994 than in 1980. Due to this uncertainty, the

percents provided are approximate values.

Chapter IV.2 IV.2-10 Cost of Asthma

discussed in Section IV.2.B below, some patients have a much higher rate

of emergency room use and hospitalization than the average patient.

IV.2.A.1.8 Hospitalization

Asthma is the ninth leading cause of hospitalization nationally (CDC,

1998b). Although the number of hospitalizations has increased

substantially during the period 1980 to 1994 from 386,000 to 466,000, the

rate of hospitalizations has not changed significantly (17.6 to 18.1 per

10,000 people). When the increase in asthma prevalence is considered, the

hospitalization rate among asthma patients has actually decreased over the

years considered. The hospitalization rate among asthmatics in 1994 was

0.034 per patient (calculated from data on prevalence and hospitalization

provided in CDC, 1998a) 

There have been dramatic shifts in hospitalization usage by whites and

blacks during the period of study (1980 to 1994). While overall

hospitalization rates for asthma patients have decreased by approximately

25 percent during that period, hospitalization among blacks has increased

by 37 percent from 26.0 to 35.5 per 10,000. During the most recent

observation period (1994) blacks had a hospitalization rate that was more

than three times greater than whites, even though blacks have only a 14

percent greater prevalence of the disease (see prevalence discussion above)

(CDC,1998a). 

Hospitalization of patients of different ages has also changed during the

observation period. Hospitalization of patients aged 35 and older has

declined, but the number (not rate) of hospitalizations of very young

children has increased dramatically. Among zero- to four-year-olds there

has been a 45 percent increase in the hospitalization rate, from 34.3 to 49,7

per 10,000. This rate should be compared with an overall rate increase in

the prevalence of asthma among this age group (discussed above) of 160

percent, which is substantially greater than the rate of hospitalization. (The

total number of children in this age group with the disease in 1980 was

360,000 versus 1,280,000 in 1994). Using these numbers with the number

of hospitalizations in 1980 (56,000) and 1994 (97,000), the hospitalization

rates were estimated. In 1980, the rate of hospitalization among young

asthma patients was approximately 16 percent, and in 1994 it was

approximately 8 percent.7 The hospitalization rate among asthma patients

in this age group is therefore approximately one-half of what it was in 1980

(taken directly from or calculated from statistics provided in CDC, 1998a).

There has been a very modest increase among older children and young

adults in the hospitalization rate per 10,000 people. For ages 5 to 14, the
Chapter IV.2 IV.2-11 Cost of Asthma

increase has been from 15.9 to 18.0 per 10,000; for the age group 15 to 34,

the increase has been from 8.7 to 10.0 per 10,000 (taken directly from or

calculated from statistics provided in CDC, 1998a). As with very young

children discussed above, the overall asthma hospitalization rate among

asthma patients in this age group has declined substantially. 

Evaluating the reasons behind trends observed in hospitalization of asthma

patients is difficult because many factors impact hospitalization, including:

• changes in the health status of patients (e.g., severity of the

disease, management of the disease), 

• changes in guidelines for admission to hospitals due to

managed care, 

• cost containment efforts or other considerations, 

• a shift to emergency room use without admission rather

than admitting patients, 

• patient preferences, 

• more self-administered therapy, or 

• other factors. 

The reduction in hospitalizations should not be interpreted as an

improvement in the health status of patients, without additional information

on the causes of the decreases in admissions. 

There are regional differences in hospitalization; however, these are not

discussed in this analysis. The differences may be reviewed in the summary

provided by CDC (CDC,1998a)

IV.2.A.1.9 Mortality

Mortality from asthma is relatively rare and directly impacts the medical

costs only by reducing the medical costs for those patients who die. 

Mortality is a sentinel event, however, as infant mortality is, in expressing

the overall health or sickness of a population or population subgroup. 

Mortality is usually preceded by considerable medical treatment for illness

(although not in every case for asthma). As such, it is useful to evaluate

the patterns of mortality to gain some insight into medical care. Because

mortality has little direct effect on the cost of medical care for asthma,

limited data are provided below. 

The CDC has provided a summary of mortality numbers and rates, by fiveyear increments over the past two decades (CDC, 1998a). They note that

changes in the ICD codes and diagnosis during that period complicate the

analysis of trends (CDC,1998a). Asthma-related deaths vary considerably

by age group, with 85 percent of deaths occurring among people over 34

years of age. This rate may be due to the overlap of asthma with chronic
Chapter IV.2 IV.2-12 Cost of Asthma

obstructive pulmonary disease (COPD), which usually occurs in older

individuals. Decreases in airway function, which is reversible in asthma, is

not reversible with COPD (CDC,1998a). 

During the 1993 to 1995 observation period, the annual death rate from

asthma was 17.9 per 1,000,000 population (CDC, 1999b). Using the total

asthma population of 13,690,000, and 5,429 deaths (both from 1994), the

death rate among asthmatics was 397 per 1,000,000 (an annual probability

of dying of 0.0004). Among whites the mortality rate was 15.1 per

1,000,000 general population; among blacks the rate was 38.5 per

1,000,000 general population (CDC, 1999b). In light of the fact that the

prevalence rate of asthma among blacks and whites is very similar (50.8

versus 57.8 per 1,000 general population, respectively (CDC, 1998a)), the

difference in death rates is striking. 

In addition to the source used above, CDC also provides a more detailed

age-, race-, and sex-specific summary of mortality related to asthma, as

well as other diseases (CDC, 1999b). These data can be used to determine

the age- and race-specific mortality rates. There is no rate listed (numbers

are too small to estimate reliably) for the first year of life. For ages 1 to 4

and 5 to 9, the rate is 0.2 per 100,000 general population. For ages 10 to

14 and 15 to 19, the rate is 0.4 per 100,000. The rate very gradually

increases as age increases for subsequent ages (taken directly from or

calculated from statistics provided in CDC, 1998a). 

There are clear racial differences in deaths due to asthma among children. 

Among blacks, the numbers are too small to estimate reliably under age

five. From that age forward, the rates are substantially higher than for

whites. The black/white ratio for children is as follows: 

Age Black Rate/White Rate

5 to 9 0.8 per thousand / too small to estimate 

10 to 14 1.2 / 0.2 = 6-fold difference

15 to 19 1.0 / 0.3 = >3-fold difference

The differences in mortality persist through adulthood. The overall

mortality rate due to asthma is 3.86 × 10 (-4) among whites and 6.31 × 10

(-4) among blacks with asthma. 

A number of studies have evaluated differences in medical care,

hospitalization, emergency room use, and mortality between blacks and

whites. A discussion of the hypotheses offered for these differences is

beyond the scope of this chapter, which is focused on direct medical costs. 

One frequently offered observation is that better patient outreach and

education reduces severe episodes and resulting emergency room visits and
Chapter IV.2 IV.2-13 Cost of Asthma

hospitalizations by improving control of the disease. This improvement is

likely to have an impact on mortality. (A subset of these patients is

discussed below as “high-use” patients).

IV.2.A.1.10 Summary of Asthma Statistics

Table IV.2-1 contains information on prevalence and some aspects of

medical care for asthma. Most notable statistics in the table were discussed

in preceding sections. Statistics that are used later in cost calculations are

bolded with an * at the beginning of the entry.
Chapter IV.2 IV.2-14 Cost of Asthma

Table IV.2-1: Asthma Statistics: Data on overall population statistics, age, and racial

characteristics a, b, c, d 

Characteristic Statistic Source

Prevalence

number 1994 13,700,000 CDC, 1998a

number forecast 1998 17,200,000 CDC, 1998b

number of blacks 1994 1,880,000 CDC, 1998a

number of whites, 1994 10,700,000 CDC, 1998a

overall rate per 1,000 57 (5.7%) CDC, 1998a

overall rate under 18 years per 1,000 75 (7.5%) CDC, 1998a

number of children aged 0 to 4 in 1980 360,000 CDC, 1998a

number of children aged 0 to 4 in 1994 1,300,000 CDC, 1998a

rate for ages 0 to 4 per 1,000 in 1980 22.2 (2.2%) CDC, 1998a

rate for ages 0 to 4 per 1,000 in 1994 57.8 (5.8%) CDC, 1998a

increase in prevalence rate in children 0 to 4

from 1980 to 1994

160% Calculated from statistics

provided in CDC, 1998a

number of children aged 5 to 14 in 1980 1,520,000 CDC, 1998a

number of children aged 5 to 14 in 1994 2,790,000 CDC, 1998a

increase in prevalence rate in children 5 to 14

from 1980 to 1994

74% Calculated from statistics

provided in CDC, 1998a

Office Visits e

rate 1994 all ages per 1,000 34.1 CDC, 1998a

rate 1994 per asthmatic patient 0.607 Calculated from statistics

provided in CDC, 1998a

rate 1994 ages 0 to 4 per 1,000 50.3 CDC, 1998a

rate 1994 per asthmatic patient 0.78 Calculated from statistics

provided in CDC, 1998a

rate 1994 ages 5 to 14 per 1,000 51.5 CDC, 1998a

rate 1994 ages 5 to 14 per asthmatic patient 0.72 Calculated from statistics

provided in CDC, 1998a

rate 1994 among blacks per 1,000 43.8 CDC, 1998a

rate 1994 among whites per 1,000 39.6 CDC, 1998a
Table IV.2-1: Asthma Statistics: Data on overall population statistics, age, and racial

characteristics a, b, c, d 

Characteristic Statistic Source

Chapter IV.2 IV.2-15 Cost of Asthma

Outpatient Hospital Visits

rate 1994 among children aged 0 to 14 per 100

children

0.8 CDC, 1998c

rate 1994 among children aged 0 -14 per

asthmatic child

0.115 Calculated from data provided in

CDC, 1998c and 1998a

rate 1994 extrapolated to patients over age 14

(see text for method)

0.10 Calculated from data provided in

CDC, 1998c and 1998a

Combined Office/Outpatient Visits

rate 1994 for children 0 to 4 per asthmatic

patient

0.855 Calculated from data provided

in CDC, 1998c and 1998a

*rate 1994 extrapolated to all asthmatics

expressed per asthmatic patient (see text

for method)

0.707 Calculated from data provided

in CDC, 1998c and 1998a

Emergency Room (ER) Visits (no historical data were available) f

rate 1994 all ages per 1,000 6.3 CDC, 1998a

*rate 1994 of ER visits per asthmatic 0.117 Calculated from data provided

in CDC, 1998c and 1998a

rate 1994 ages 0 to 4 per 1,000 14.5 CDC, 1998a

rate 1994 ages 5 to 14 per 1,000 8.0 CDC, 1998a

rate 1994 among blacks per 1,000 19.1 CDC, 1998a

rate 1994 among whites per 1,000 4.6 CDC, 1998a

rate of admissions among black asthmatics

1994 (635,000 admissions per 1,880,000

cases)

0.337 Calculated from statistics

provided in CDC, 1998a

rate of admissions among white asthmatics

1994 (927,000 admissions per 10,700,000

cases)

0.087 Calculated from statistics

provided in CDC, 1998a

increase in rate among blacks during period

1992 to 1995 (4 years) per 1,000 general

population (228.9 in 1995/151.9 in 1992) h

50.1% Calculated from statistics

provided in CDC, 1998a

increase in rate among whites during period

1992 to 1995 (4 years) per 1,000 general

population (48.8 in 1995 versus 46.8 in 1992)

4.2% Calculated from statistics

provided in CDC, 1998a

Hospitalization (described as number of discharges) g

number 1980 386,000 CDC, 1998a

number 1994 466,000 CDC, 1998a
Table IV.2-1: Asthma Statistics: Data on overall population statistics, age, and racial

characteristics a, b, c, d 

Characteristic Statistic Source

Chapter IV.2 IV.2-16 Cost of Asthma

rate per 1,000 in 1980 1.76 CDC, 1998a

rate per 1,000 in 1994 1.81 CDC, 1998a

*rate of hospitalization among asthmatics

all ages in 1994

3.4% Calculated from statistics

provided in CDC, 1998a

change in rate per asthma patient for all

patients

-25% Calculated from statistics

provided in CDC, 1998a

rate of hospitalization among asthmatic

children aged 0 to 4 in 1980

16% Calculated from statistics

provided in CDC, 1998a

rate of hospitalization among asthmatic

children aged 0 to 4 in 1994

8% Calculated from statistics

provided in CDC, 1998a

change in rate among asthmatic children aged

0 to 4 from 1980 to 1994

-50% Calculated from statistics

provided in CDC, 1998a

change in rate per 10,000 for children aged 0 to

4 from 1980 to 1994

+45% Calculated from statistics

provided in CDC, 1998a

change in rate per 1,000 for blacks from 1980

to 1994

+37% Calculated from statistics

provided in CDC, 1998a

Mortality

rate 1994 per 1,000 general population 0.0179 CDC, 1999b

rate 1994 among asthmatics per patient 0.0004 Calculated from data provided in

CDC, 1998a

rate 1994 among whites per 1000 0.0151 CDC, 1999b

rate 1994 among blacks per 1,000 0.0385 CDC, 1999b

rate 1994 among asthmatic blacks per patient 6.31 × 10 (-4) Calculated from data provided in

CDC, 1998a and 1999b

rate 1994 among asthmatic whites per patient 3.86 × 10 (-4) Calculated from data provided in

CDC, 1998a and 1999b
Table IV.2-1: Asthma Statistics: Data on overall population statistics, age, and racial

characteristics a, b, c, d 

Characteristic Statistic Source

Chapter IV.2 IV.2-17 Cost of Asthma

a. All numbers and rates are annual. See text for additional detail.

b. All rates are per person in the general population unless otherwise noted. When rates are expressed per

asthmatic, the number of asthmatics is the 1993-4 value, unless otherwise noted.

c. The study period 1993-1994 is listed as 1994, while the study period 1979-1980 is listed as 1980.

d. Age- and race-related statistics are presented only when there are differences across the ages or races. If

the values are very similar (e.g., as with overall prevalence of the disease among whites and blacks), no data

are listed. Data are not provided on the racial designation “other,” which comprises a very small portion of

asthmatic patients and represents a diverse group of individuals who are categorized as neither black or white

(e.g., Hispanic, Native American, Asian).

e. It was not possible to determine the percentage of patients with more than one office visit per year. The

statistics presented do not indicate the total number of persons treated, but rather the number of visits that

occurred.

f. It was not possible to determine the percentage of patients with more than one visit to the ER. The statistics

presented do not indicate the total number of persons treated, but rather the number of visits that occurred.

g. It is important to note the differences in rates when expressed per population versus per asthmatic patient. 

The overall number of asthmatic patients has increased substantially, as well as the rate of asthma in the

population. Increases in use of services (e.g., office visits, ER visits, hospitalizations) must therefore be

considered in light of the number of asthmatics, rather than just the overall population.

h. The percentage change is calculated as: { (y2 - y1)/y1} × 100, where y1 = the number in earlier years and y2

= the number in the most current year considered.

* Statistics that are bolded (but not italicized) with an * are used in calculating costs later in this chapter.
Chapter IV.2 IV.2-18 Cost of Asthma

IV.2.A.1.11 Variations in the Management and Use of Medical

Services Among Asthmatic Patients.

Variations in disease management and the use of medical services occur on

the basis of individual patient characteristics, including the severity of the

disease. Considerable variation also results from the degree to which a

patient has, and follows, an adequate asthma management plan. Under

optimal circumstances, most patients would have a long-term asthma

management plan that managed the symptoms of asthma sufficiently well

that they did not have asthma episodes requiring medical intervention in

emergency rooms or as inpatients in hospitals. Theoretically, the

management plan would control inflammation sufficiently well with longacting therapies so that short-acting therapies in response to airway

restrictions were not routinely required. NHLBI has issued guidelines

designed to address this issue. In practice, many patients either do not

receive drug plans, or do not follow drug plans that manage asthma at this

level of control. 

Considerable evidence supports the contention that many, if not most,

patients do not receive or follow treatment plans that are consistent with

NHLBI guidelines, although the degree of compliance varies. Recent

studies suggest that many patients who are seen in emergency rooms report

not having treatment plans or not taking anti-inflammatory medication on a

regular (proactive) basis. It has also been estimated that over one half of

all people who use inhalers do not use them properly (AAFA, 1999).

It has been suggested, anecdotally, that it will take some time for NHLBI

guidelines to become familiar and comfortable to most primary care

physicians. In addition, there is not consensus among all physicians that

they should prescribe according to NHLBI guidelines. Another factor is

constraints on medical providers' time for patient education (due to cost

containment or other reasons). This factor may be an important

contributor to the seemingly high percentage of patients who do not use

drug therapies that are optimal. Patients may also resist or not remember

treatment plans. Regardless of the reasons behind the noncompliance with

NHLBI guidelines, the fact of its occurrence is a reality. This

noncompliance poses problems in evaluating both treatment of and costs

for asthma. 

One approach to this problem is to evaluate the studies that have been done

on patients before and after training in optimal asthma management. Such

an evaluation can provide information that can be used to estimate

variations in management and services that occur and their costs. Studies

of educational interventions have focused mainly on populations that have

had a high level of acute care (e.g., emergency room use or hospitalization)

in the recent past. Although these populations are not representative of the

cross-section of asthma patients, the studies provide insight into both 1) the
Chapter IV.2 IV.2-19 Cost of Asthma

high level of costs incurred by some patients, and 2) the savings in medical

services and costs that may be gained through patient compliance with

asthma management plans. 

It has been estimated that the costs of hospitalizations and emergency room

(ER) visits for asthma together comprise about 73 percent of the total

direct expenditures on asthma for children (age 17 and under) in the United

States (Weiss et al., 1992). It is also generally believed that most

hospitalizations and ER visits for asthma could be avoided by following an

asthma management protocol, such as NHLBI guidelines (see, for example,

Weiss et al., 1992; Coventry et al., 1996; and Higgins et al., 1998). 

Although there are no national statistics on the costs of asthma for those

asthmatics who do not follow such guidelines, several studies of the cost

savings resulting from asthma management education programs support the

hypothesis that the asthma-related medical costs for those asthmatics who

do not follow an asthma management protocol are likely to be substantially

greater than the costs for those who do follow such a protocol – largely

due to increased utilization of hospitals and emergency rooms, which are

relatively more costly than physician and pharmaceutical services. 

Several prospective studies have compared utilization and the

corresponding costs of medical services by asthma patients for a period of

time (usually a year) before an intervention program to those for the same

period of time after the program. These studies focused on patients who

had used acute care services (e.g., hospitalizations or emergency room

visits) recently, and most evaluated patients who had a relatively high rate

of utilization and a moderate or severe form of asthma. These studies

therefore do not represent the experiences of the average patient. The

data from these studies can be used to evaluate the costs of patient services

before and after intervention for patients with a high use of services at the

outset. By multiplying the average cost of utilization (e.g., for

hospitalization) by the number of occurrences of utilization, before and

after an intervention, and for each type of medical service considered, the

average per-patient cost before the intervention can be compared to the

average per-patient cost after the intervention. Each study thus affords an

estimate of the extent to which complying with an asthma management

protocol may reduce asthma-related medical costs — or, conversely, the

extent to which failure to comply may increase these costs for some

patients. 

There are several factors, including the exact nature of the intervention, the

utilization categories considered, and the severity of asthma in the study

subjects, that would likely affect the ratio of before-intervention costs to

after-intervention costs; these factors vary from study to study. Moreover,

because these studies (some of which are pilot studies) were often based on

relatively small samples and may not necessarily be representative of the

population of asthmatic children as a whole, their results should not be
Chapter IV.2 IV.2-20 Cost of Asthma

taken as definitive. They do, however, afford a rough idea of the

magnitude and range of the extent to which the asthma-related costs of the

“noncompliant” population of asthmatic children may exceed those of the

“compliant” population of asthmatic children. The results of these studies

are summarized in Table IV.2-2. 

Table IV.2-2: Summary of Asthma Intervention Studies

Higgins et al.,

1998

Westley et al.,

1997

Greineder et

al., 1995

Gaioni et al.,

1996

Utilization categories included in study:

Hospitalization x x x x

ER visits x x x x

Office (clinic) visits x x

Chest radiographs x

Inhaled anti-inflammatory

drugs

x

Beta-2 agonists x

Considered children

separately?

yes yes yes no

Number of subjects

(children)

61 43 53 207

Were the estimated savings

net of the costs of the

intervention?

no no yes yes

Ratio of before-intervention

to after-intervention costs 7.62 3.60 3.84 2.01

These studies suggest that the asthma-related medical costs of children in

the “noncompliant” population could be from twice to over seven times the

costs of children in the “compliant” population. As noted above, however,

several factors are likely to affect these ratios. First, the intervention

programs differed from one study to another. Second, some studies took

into account the cost of the intervention program itself, and considered the

savings net of those costs, while other studies did not. Third, these studies

generally selected asthmatics whose asthma was more severe than average,

focusing primarily on patients with considerable hospitalizations and

emergency room use prior to the study. Both their “before intervention”

and “after intervention” acute care use rates are much higher than the

national average. This frequency suggests that they would be categorized

as patients with moderate or severe asthma. Fourth, these patients may

have had much poorer compliance with management plans (or a lack of a

plan) than other patients, leading to their very high acute care use rate at

the outset of study participation. 
Chapter IV.2 IV.2-21 Cost of Asthma

The results of these studies shed light on the cost impacts that the

variations in treatment may have. No single study fully illustrates national

patterns of treatment, but the information in these and other studies is used

later in this analysis as the basis for estimating medical costs for some

patients. Additional detail is provided on the studies in Section IV.2.B.

IV.2.A.2. Concurrent Effects

Asthma usually occurs concurrently with allergies (as described above),

although this is not always the case with adult-onset asthma. In the elderly

it is often associated with other respiratory diseases such as chronic

obstructive pulmonary disease (COPD). It has also been linked to other

upper and lower respiratory tract diseases (e.g., sinusitis, rhinitis). It is not

clear in most cases whether one disease triggered another.

As with most pharmaceuticals, those that are used to treat asthma have

adverse side effects. Long-term use of corticosterioids have been

associated with growth retardation in children and other serious health

effects. There are also potential health risks listed for most other drugs

used to control asthma. It is beyond the scope of this analysis to evaluate

the health risks and potential direct medical costs of these secondary

illnesses. These illnesses, however, are likely to occur in some patients and

lead to an underestimate of medical costs when not considered.

Asthma may exacerbate cardiac and other problems. Asthma often leads to

restricted activities in patients and a sedentary lifestyle that has been

associated with numerous health problems. Asthma is a leading cause of

activity restriction in children (NCHS web site, 1999). Perhaps most

significantly, asthma during childhood has been associated with permanent

structural changes in the lungs that are associated with adult respiratory

diseases. This is one reason for the current focus in medical services on

reducing episodes of asthma and the severity of the disease. Quantitative

data were not obtained on the concurrent effects that result from the

adverse physiological impacts of asthma. Due to the lack of information on

these impacts, however, the cost estimates provided in this chapter, which

focus solely on costs associated directly with asthma treatment, will

underestimate total medical costs.

IV.2.A.3 Causality and Special Susceptibilities

Asthma usually begins in childhood and is often associated with atopy —

the genetic susceptibility to produce IgE (an immune response) in response

to exposure to common environmental allergens. Atopy occurs in 30 to 50

percent of the asthmatic population, and occurs in the absence of asthma in

some individuals. It is the strongest predisposing factor for the
8

 The medical literature on asthma usually refers to external agents that can trigger asthma as

“environmental factors,” although they do not necessary mean “environmental” in the sense in which it is

used in this Handbook. The environmental factors referred to in the literature include any aspects of the

environment that are external to the body and include, but are not limited to, environmental pollutants.

9

 Maternal versus paternal smoking is a stronger risk factor for childhood asthma, and more women smoke

now than in the first half of the century. 

Chapter IV.2 IV.2-22 Cost of Asthma

development of asthma. In young children who wheeze in response to viral

infections, the presence of allergy in the child or their family is very

strongly associated with asthma throughout childhood (NHLBI, 1997).

Other risk factors are neonatal lung disease, especially in infants with

reduced lung volumes, and respiratory infections. Respiratory syncytial

virus (RSV) has been particularly highlighted in association with asthma. 

Approximately half of all children with RSV bronchiolitis develop chronic

asthma (Eggleston, 1994).

In adults asthma occurs both with and without IgE responsiveness. 

Without it, asthma is often associated with sinusitis, nasal polyps, and

sensitivity to aspirin. Although the genesis may differ, the inflammatory

process is similar to that seen in atopic asthma. Workplace exposures to

some materials can also cause clinical signs of asthma, which may persist

after the workplace exposure has ceased (NHLBI, 1997). Because asthma

is often associated with atopy in response to exposure to common

environmental allergens (NHLBI, 1997), these allergens are important

asthma triggers. In adults asthma occurs both with and without IgE

responsiveness and has been linked to numerous environmental agents.8

Numerous studies have identified air pollutants (e.g., particulate matter and

ozone) as contributors to asthma (EPA, 1996). Hospitalizations for asthma

have been shown to increase during air pollution episodes. Passive

cigarette smoke (ETS) is also a strong instigator of asthma, with multiple

studies showing associations between parental smoking and childhood

asthma. EPA has provided a detailed summary of literature related to ETS

through 1992 (EPA, 1992).

There has been an increase, as shown in the statistics presented earlier, in

the incidence of asthma, asthma hospitalizations, and asthma deaths in

recent decades. The specific causes of this increase are not known,

although it has been hypothesized that air pollution and smoking in the

home may be contributing factors.9

Appendix IV.2-A contains a list of many of the chemicals known or

suspected of causing asthma that have been reported in the EPA Hazardous

Substances Data Base (HSDB). High quality human dose-response studies

are uncommon because non-pharmaceutical chemicals are rarely tested on
Chapter IV.2 IV.2-23 Cost of Asthma

humans, which limits the information that can be obtained directly from

human studies. Animal studies provide an additional source of information

for links between a pollutant and disease. Potential causality of asthma as

indicated by the HSDB toxicity excerpts was the only requirement for

including a chemical in this table. 

Regarding special susceptibility, it is difficult to determine whether an

increase in the occurrence of a disease within a population group is due to

genetic susceptibilities of the group, or a common characteristic that is

unrelated to their genetic predispositions. That is the case with asthma,

which affects a disproportionate number of socioeconomically

disadvantaged minority children who often live in urban areas. It is likely

that a combination of factors are at work in this case, including nutritional

status, the presence of numerous pollutants in the environment, the greater

likelihood that someone in the home smokes, less prenatal care, and other

factors. 

In addition to a greater likelihood of the occurrence of asthma, there is a

greater likelihood that the same populations will be hospitalized for asthma,

and that they will die of the disease (as shown in Table IV.2-1). Both of

these endpoints indicate a much more severe case of asthma than what is

routinely observed and can be treated through periodic office visits and

self-medication with physician-prescribed treatments. At present there are

clearly higher risks of the disease associated with the characteristics

described above. These have environmental justice implications for

benefits evaluations that focus on asthma.

Although socioeconomic and geographic factors may be the primary

factors in the observed differences in asthma rates in the national

population, genetic differences may also play an important role. This has

recently been found to the case with some types of cardiovascular disease;

African-Americans appear to have higher risks in some studies even when

socioeconomic and other factors are carefully controlled. The rapid

increase in asthma incidence and serious consequences has made careful

evaluation of the risk factors for this disease difficult, and it has yet to be

determined whether there are large differences within the U.S. population

in the inherent (genetic) susceptibility to the disease (NHLBI, 1997).

IV.2.A.4 Treatment and Services

This chapter provides cost estimates that are based on a description of

specific treatments and services provided to asthma patients. It is unlike

chapters that use cost estimates obtained from journal articles or other

sources. Because the cost estimates are generated for each specific service,

very detailed treatment information is provided along with the costs of each
10 Self-administered includes administration by a parent or non-medical care provider.

Chapter IV.2 IV.2-24 Cost of Asthma

service. Consequently, treatment is more appropriately discussed in

Section IV.2.B on cost. This section provides only a brief description of

asthma treatment and services.

Treatment of asthma involves three phases: 1) initial diagnosis of the

disease with efforts directed at immediate stabilization of the patient, 2)

ongoing care to minimize episodes and maximize the quality of life of the

patient, and 3) acute care for treatment of asthma episodes.

Depending on the severity of the asthma episode at initial diagnosis, a

variety of treatment strategies are employed and may be provided on either

an inpatient or outpatient basis. Follow-up care and long-term

management of the disease involves multiple strategies. A major goal of

asthma treatment is to enable patients to control their symptoms through

the use of medications that they self-administer, and to control their

exposure to situations that trigger their asthma episodes. This patientcentered focus requires determining the best long-term disease

management approach and considerable training by medical personnel to

achieve the objective of enabling the patient to live a life as free from

asthma symptoms as possible (NHLBI, 1997). 

Most asthma is managed through the use of drugs and avoidance of asthma

triggers (e.g., allergens, irritants, behavior such as exercise in cold

environments). When management is not adequate, asthma episodes occur

that require more aggressive care, either provided at home or by a medical

professional. These two scenarios, long-term management and acute

episodic treatment, are reflected in the drug therapies offered to patients. 

Two major types of drugs are used to address these two circumstances: 1)

long-term control agents: anti-inflammatory drugs that are selfadministered;10 and 2) acute control agents: bronchodilators that relieve

acute symptoms (also self-administered, except in crisis). The drug

therapies comprise the majority of costs in well-managed long-term asthma

care. When long-term management is inadequate, as it often is for some

groups of patients, episodes occur that require the use of acute control

agents (and in some cases hospitalization, emergency room use, and

mortality). 

As the above paragraph indicates, this disease is largely a manageable

disease for most patients. In practice, there are large differences in how

well the disease is managed due to differences in treatment by medical care

providers and the patient. As a result of this variation, the cost section of

this chapter (Section IV.2.B) contains a discussion and cost evaluations

based on differences in the use of medications and resulting medical

services.
Chapter IV.2 IV.2-25 Cost of Asthma

IV.2.A.5 Prognosis

Asthma is a chronic disease that is commonly observed in childhood, but it

may be diagnosed or persistent at any age. Approximately 60 percent of

asthmatic children undergo remission in young adult life, but 50 percent of

those (30 percent of the original population) become symptomatic again as

young adults. Among those who are asymptomatic as adults, some studies

have shown that they retain airway hyperresponsiveness. Based on the

above statistic, it is assumed in this analysis that 30 percent of asthmatic

children will become permanently asymptomatic at age 18 and incur no

additional medical costs for asthma treatment. Tests of airway

hyperactivity show that the airways have not returned to normal among

asymptomatic young adults who were previous asthma patients. As a

general rule, children whose asthma is resolved are those with:

• less severe intermittent asthma;

• few positive skin tests to inhalant allergens;

• no persistent wheezing or rhonchi; or

• no heavy exposure to pollution, allergens, or cigarette

smoke (Eggleston, 1994).

The assumption that 30 percent of children will undergo remission is based

on observations made in the past. It is not known if the remission rate at

this time is the same as it was when the 30 percent statistic was observed. 

It is also not known which percentage of asthmatics in any severity

category (discussed below), will undergo remission. In this analysis it was

assumed that the severity mix among asthmatics who became

asymptomatic was the same as the mix in the original asthma population. 

This assumption introduces uncertainty to this cost analysis.

Although many children see a gradual lessening of symptoms as they

progress toward adulthood, this is not universally the case. In some cases,

the disease becomes more severe and in rare cases is fatal. As discussed

under Concurrent Effects above, damage that is done to lung tissue and

structure during asthma episodes may lead to adverse long-term or

permanent changes in the lung. Current treatment strategies are designed

to minimize the inflammatory processes that occur during an asthma

episode, in part to avoid long-term damage to the respiratory system

(NHLBI, 1997).

The long-term disease course and effects of asthma differ among

individuals. In some patients fibrosis of the subbasement membranes in the

respiratory system may occur, and this may contribute to persistent

abnormalities in lung function in these individuals (NHLBI, 1997). Due to

concerns regarding the irreversible damage that can occur, effort is being
11 The value of a statistical life (VSL) can be computed for those patients who die of the disease when

asthma avoidance is being considered in a benefits analysis.

Chapter IV.2 IV.2-26 Cost of Asthma

focused on early diagnosis, limiting the severity of the disease, and drug

therapy that minimizes the inflammation causing structural changes in the

respiratory system (NHLBI, 1997).

When considering the prognosis for asthma patients, it is necessary to take

into account both the recurrence of asthma episodes and the effects that

treatment of asthma may have on overall health. Inflammation is an early

and persistent component of asthma and therapy to suppress it is long term. 

Greater asthma control achieved with high doses of inhaled corticosteroids

causes less airway inflammation. The drug therapies used to control

asthma episodes are not without side effects, as discussed previously. 

There are a variety of products on the market and each has specific

advantages and disadvantages. There is some evidence that some of the

most effective asthma treatments also lead to growth retardation in

children. Consequently, the prognosis for this disease must take into

account both the long-term nature of asthma in many individuals and

potential damage to the patient that results from control of asthma

symptoms. Quantitative data on long-term prognosis is not available for

newly-diagnosed patients because many new drugs have been introduced

recently.

Urban residence and poverty are major risk factors for asthma morbidity

and mortality. There are areas of increased mortality in cities, especially

among people in lower socioeconomic groups (Eggleston, 1994). 

Mortality due to asthma is a rare event. The mortality rate for asthmatics is

0.0004 (see Table IV.2-1 above).11 Some population subgroups have much

higher rates than average (for example, teenagers in lower socioeconomic

groups). Increased mortality among young and otherwise healthy patients

has been associated with an inability to understand or comply with the

sometimes demanding drug and activity regimens required to control

asthma episodes. They may also be less likely or able to obtain timely

health care for acute episodes.

Link to Table IV.2-1

As discussed in the section IV.2.A.4 above, there are differences in how

individual patients manage their disease. These differences can lead to

major differences in the prognosis among patients. Self- or parental

management of the disease is much more important for asthma than for

most diseases discussed in the Handbook. This distinction places a large

burden on the medical community regarding outreach, education, patient

tracking, and follow-up care. Ultimately, the prognosis for asthma patients

depends largely on their ability and interest in managing their disease
Chapter IV.2 IV.2-27 Cost of Asthma

through complying with treatment plans. Asthma deaths have occurred

among patients with mild, moderate, and severe asthma, and so are not

strictly related to the severity of the disease. Both hospitalizations and

mortality are strongly related to the degree of control of inflammation and

a timely response to acute asthma episodes. Patient (or caregiver)

education, access to medical care, and appropriate use of drug therapies

are very strong determinants in the overall prognosis for asthma patients.

Link to Section IV.2.A.4 

IV.2.B. Costs of Treatment and Services

This section contains a description of the methodology used to estimate

cost, followed by a description of the services provided for the three main

components of care: diagnosis, long-term management and acute care

management, and a presentation of the costs of these services. Costs are

presented on an annual and lifetime basis for both the average and high

services use patient.

IV.2.B.1. Methodology Summary

Estimates of the direct costs of asthma are constructed using national data

on asthma medical services, utilization, reimbursement by Medicare, and

national recommendations and private sector costs regarding drug therapy. 

The probabilities of patients utilizing various services are multiplied by the

cost per service. The methodology by which estimates of the lifetime

incremental costs are developed proceeds in four steps:

1) Develop treatment descriptions and probabilities,

2) Estimate the cost of each treatment component,

3) Estimate the annual costs of treatment, and

4) Sum costs over the lifetime of an average patient and apply 

discount rates.

After initial diagnosis, asthma management can be considered as two

separate activities: long-term management and management of acute

episodes. Long-term management includes the establishment of an

appropriate treatment program, education for the patient and for family

members to allow them to manage the disease, and office visits to evaluate

the patient’s ongoing health and use of medications. It also includes the

drug therapy that is used to manage the disease. Acute episode

management focuses on reducing symptoms of an acute asthma attack and

preventing further damage to the patient’s health. This section is organized

according to the treatment components listed above, with diagnosis

described first, followed by long-term management and then acute episode

management. 
12 A panel of three physicians (two pulmonologists and an internist) was convened in 1991 to determine a

standard treatment protocol and the percentage of patients receiving various types of treatments. The

purpose of the panel was to supply information that was used to develop the first asthma COI chapter in

1991. These physicians, all from New England, did not represent a cross-section of primary care

physicians who treat most asthma cases. Aware of these limitations, they reviewed Medicare treatment

records and other materials and attempted to provided useful information on overall treatment patterns. 

The information they provided has been largely superseded by NHLBI guidelines and other information. 

13 All referrals to asthma management acknowledge that this process involves both the medical community

and the patient, due to the importance of self-medication and other activities in asthma treatment.

Chapter IV.2 IV.2-28 Cost of Asthma

IV.2.B.1.1 Treatments and Services Evaluated 

The first step in estimating the cost of the disease is to model the typical

course of the disease and the corresponding treatment. Three main sources

were used to construct disease course and treatment profiles for asthma in

this chapter: NHLBI Guidelines (NHLBI, 1997 — primary source), data

from the literature, and, to a limited degree, data from a physician panel

convened in 1991.12 

Asthma treatments and costs have three main components: 

1) diagnosis,

2) long-term management, and

3) acute episode management. 

Diagnosis is required for all patients, and the types of diagnostic tests and

evaluations conducted are assumed to be the same for all patients (although

differences may exist among care providers). Long-term management

consists of office or outpatient visits and self-administered drug therapy. 

Acute care results from immediate health emergencies that require

emergency room use and/or hospitalization. These components of health

care are first described (in Sections IV.B.2, 3, and 4) and then the costs of

the services are presented and discussed (in Section IV.B.5). 

IV.2.B.1.2 Evaluation of Differences in Asthma 

Management 13

IV.2.B.1.2.1 Overview of Issues

As discussed in Section IV.2.A.1.11 above, under optimal circumstances

all patients would have a long-term asthma management plan that managed

the symptoms of asthma sufficiently well that they did not have asthma

episodes requiring medical intervention. In practice, many patients either

do not receive drug plans, or do not follow drug plans that manage asthma

at this level of control. The lack of adequate medication often leads to

higher costs for office visits and acute care (emergency room use and

hospitalization).

Link to Section IV.2.A.1.11 
14 Mild asthma is estimated to comprise 70 percent of all asthma cases, as discussed below.

Chapter IV.2 IV.2-29 Cost of Asthma

As discussed in Section IV.2.A.1.11 above, some patients use services at a

much higher rate than the average patient, suggesting that substantial

differences exist in the utilization of medical services and the resulting costs

among asthma patients. In addition to obtaining a cost estimate for the

“average” patient, it would be useful to obtain cost estimate for patients

with two different patient profiles: one in compliance with treatment plans

(such as those specified by NHLBI guidelines), and one that does not have

well-managed asthma and has health problems related to the management

plan. There are limited data on the variations in treatment that preclude

providing highly reliable national estimates for these two patient groups,

but there are some studies of high-use patients (as discussed in Section

IV.2.A.1.11). These studies were used to describe a hypothetical patient

who is not following an optimal treatment plan and incurs the associated

higher medical costs. 

IV.2.B.1.2.2 Patient Types Evaluated in this Cost Analysis

Descriptions of treatments and costs are provided for two types of patients:

1) the average patient: a profile was developed using national statistics

on office and outpatient visits, emergency room use, and

hospitalization, as described in Section IV.2.A, Table IV.2-1. No

data are available on drug therapy use, so NHLBI guidelines are

assumed to be relevant. Issues related to drug therapy are

discussed below.

Link to Table IV.2-1

2) the high-use patient: a profile was developed using studies of

patients who have difficulty managing their asthma with a larger

number of acute episodes than average. The estimate of their

hospital and emergency room use is based on studies that evaluated

the experiences of patients before they had training on how to

follow their management plans. These patients tend to have

moderate or severe asthma. Their costs provide a type of

reasonable upper bound on costs.

Ideally, data would be available on patients with mild asthma who are in

compliance with treatment plans and have a resulting low utilization of

acute care services. These data, which could provide a lower-bound cost

estimate, are not available. The studies that evaluated “before” and “after”

intervention included mainly patients who had serious acute care problems

and were not likely to include mild asthma cases.14 Consequently, although
Chapter IV.2 IV.2-30 Cost of Asthma

data are available on the impact of intervention on high-use patients, there

are no data on a cross section of asthma patients. 

As discussed above, asthma treatments and costs have three main

components (diagnosis, long-term management, and acute episode

management). Diagnostic methods and costs are likely to be similar

regardless of the subsequent decisions of patients or their physicians. 

Long-term management and acute episode services will vary, depending on

the factors discussed above. Although the number of hospitalizations and

emergency room visits are assumed to vary for the two patient types, the

level of services provided during hospitalization and emergency room visits

are not assumed to differ. (There is no basis on which to assume that the

services would differ.)

IV.2.B.1.2.3 Quantitative Data on Treatment and Services for

Two Patient Types

The Average Patient. National statistics listed in Section IV.2.A Table

IV.2-1 on treatment and services were used (office/outpatient visits,

emergency room use, and hospitalization).

Link to Table IV.2-1

The High-use Patient. Table IV.2-3 lists the frequency of use of various

services before and after the intervention of an asthma management

program. The “before” statistics have been used to develop a hypothetical

“high-use” patient profile, to provide an indication of the high costs that

can be associated with asthma in the absence of adequate disease

management. (The data in this table expand on information provided in

Table IV.2-2.) The “after” data are used in the sensitivity analysis

presented in Section IV.2.C.

Although studies indicate that inadequate disease management is a

relatively common problem, data were not located that adequately describe

the percentage of asthma patients with this problem or its extent. 

Consequently, this analysis does not assign the “high-use” costs to a

specific proportion of asthma patients. It is likely that these patients’ use

of acute care services comprises a substantial portion of the overall national

acute care services use reflected in the “average” patient costs referred to

above. 
Chapter IV.2 IV.2-31 Cost of Asthma

Table IV.2-3: Acute Care Utilization Rates for “High-use” Asthmatics Before and After Participation in an Asthma Management Program

Study

Utilization Rate Per “High-use” Asthmatic per Year

Hospitalization Emergency Room Visits Office (Clinic) Visits

Before

Intervention

After

Intervention Ratio

Before

Intervention

After

Intervention Ratio

Before

Intervention

After

Intervention Ratio

Higgins et al.,

1998 0.149 0.070 2.13 0.498 0.316 1.58 2.587 3.724 0.70

Westley et al.,

1997 0.530 0.190 2.79 3.670 1.350 2.72 4.395 2.442 1.80

Greineder et al.,

1995 0.660 0.094 7.00 1.358 0.283 4.80 — —

Gaioni et al.,

1996 0.758 0.169 4.49 1.126 0.304 3.70 — —

Mayo et al., 1990

1.560 0.480 3.25 — — — — —

Average Across

Studies:

0.732 0.201 3.93 1.663 0.563 3.20 3.491 3.083 1.25

Average

Asthmatic (for

Comparison)

0.034 0.117 0.707
15 There may be mortality due to therapy or other aspects of asthma that are not well-described at this

time. In the absence of information to the contrary, it was reasonable to assume a normal lifespan for

asthmatics.

Chapter IV.2 IV.2-32 Cost of Asthma

IV.2.B.1.3 Duration of Treatment and Services

Although patients can be diagnosed with asthma at any point in their lives,

most people are diagnosed as children. As noted earlier, the average age of

diagnosis is four years (Eggleston, 1994) and that is the age that is used as

the average onset of the disease for this analysis.. As noted above, asthma

patients are assumed to live a normal lifespan due to the minimal mortality

due to asthma. An average life expectancy of 75 years was assumed for

purposes of estimating care duration and cost.15 This lifespan is

recommended in EPA’s Exposure Factors Handbook for general use (EPA,

1997), which yields an overall lifespan with asthma of 72 years (from age 4

through age 75). There is an assumption that 30 percent of patients with

mild asthma become asymptomatic and no longer require treatment at age

18. (See discussion in Section IV.2.A.5.). 

Link to Section IV.2.A.5

Life expectancy increases as individuals survive through each year of their

life, so that by the average age of diagnosis (four years) life expectancy is

longer than 75 years for the average person in the United States. This

figure is balanced by the likelihood that people with chronic illnesses, such

as asthma, have a decreased life expectancy due to asthma and related

illnesses or the side-effects of treatment. The average duration of

treatment is uncertain for asthmatics, and the actual duration and

associated costs may be greater or lesser than the value estimated in this

analysis.

IV.2.B.2 Diagnosis

IV.2.B.2.1 Medical Evaluation During Diagnosis

The diagnosis of asthma usually occurs in response to the observation of

symptoms that prompt a visit to a physician's office or emergency room

(ER). It may also occur when a routine physical is scheduled, especially in

the case of children. Treatment in an ER does not imply a severe medical

condition; rather, it indicates an acute problem and may be the medical

location of choice for some patients who do not have a regular physician,

or when an asthma episode occurs outside of usual office hours. NHLBI

does not distinguish among diagnoses in different settings when describing

the diagnostic protocol (NHLBI, 1997).

Medical evaluation needed to diagnose asthma is not complex in most

cases. Asthma is indicated by an appropriate array of symptoms, an acute
Chapter IV.2 IV.2-33 Cost of Asthma

reaction to asthma-related stimuli, and quick relief by appropriate therapy. 

Other supporting evidence may include family history, an elevated IgE

level, and eosinophilia (Eggleston, 1994). 

When considering a diagnosis of asthma, NHLBI recommends the

following:

• careful history-taking (specific questions can be viewed at

the NHLBI web site),

• physical examination, and

• spirometry to evaluate air flow.

Beyond the above activities, NHLBI discusses some specific procedures

that may be dictated by the patient’s characteristics and history, but that are

not required for most patients. These may include:

• additional pulmonary function tests (lung volume,

inspiratory and expiratory flow loops, diffusion capacity test

(primarily in older patients));

• diurnal variation in PEF over one to two weeks;

• bronchoprovocation with methacholine, histamine, or

exercise;

• chest X-ray;

• allergy testing;

• screening for nasal polyps and sinus disease;

• evaluation of gastrointestinal reflux;

• evaluation of biomarkers of inflammation (in development);

and

• other tests to rule various diseases suggested by patient

symptoms.

Many of the above additional evaluations have specific and narrow

indicators for their use and are not needed for most patients. It is not

possible to determine the percentage of patients that are evaluated for each

of the above. Some of the evaluations would be done during a second

diagnostic visit to a specialist (e.g., allergy testing) or may be

characteristics observed by the patient and reported back to the physician

(e.g., diurnal variation in PEF over one to two weeks). Second diagnostic

visits are considered below. The other evaluations listed above are beyond

the scope of this analysis, but their inclusion would increase costs. Thus,

their exclusion leads to an underestimate of costs.

Diagnosis of asthma is difficult in young children. They are often

diagnosed as having bronchitis, bronchiolitis, or pneumonia. In infants

there are two patterns of wheezing (a critical observation in asthma),

allergic and nonallergic. As children develop, the nonallergic infants no

longer wheeze during colds and other minor illnesses because their airways
16 The NHLBI does not recommend different evaluations during diagnosis based on severity (severity

category is determined during diagnosis, not at the onset of the process). 

Chapter IV.2 IV.2-34 Cost of Asthma

enlarge. Allergic children continue to have episodes when their airways

constrict and may be diagnosed with asthma (AAFA, 1999). 

Diagnoses of asthma are not frequently made in children under the age of

one year. When wheezing and related symptoms occur prior to that age,

they are generally diagnosed as bronchiolitis or other diseases that cause

wheezing, with the understanding that they may later be diagnosed as

asthma. The symptoms that occur prior to one year may be “asthma” in

the pragmatic, if not clinically defined, sense of the term. When asthma is

diagnosed in much older children, it may be because their symptom onset

occurs later or because there is a delay in diagnosis beyond the onset of

symptoms, which can lead to more severe forms of asthma when diagnosis

occurs. Numerous studies have suggested that an underdiagnosis of

asthma is a public health problem.

IV.2.B.2.2 Services Provided During the Diagnostic Visit

Based on NHLBI guidelines and the 1991 panel recommendations,

components of the diagnostic visit (that are costed individually for

Medicare reimbursement) are listed in Table IV.2-4. As discussed

previously, services will vary depending on patient characteristics, the

physician’s practice methods, and other factors.16 X-rays were included in

this list because they appear as a possible procedure in NHLBI guidelines

and were listed by the 1991 physician panel as a diagnostic procedure.

Table IV.2-4: Diagnostic Procedures

Chest X-Ray, Two Views

Blood Gases: pH, pO2, pCO2

Automated Hemogram

Breathing Capacity Test

Office Visit, Level 5, New Patient

Drawing Blood for Specimen

Diagnosis may occur at a physician’s office, in a hospital outpatient clinic,

or in an emergency room. It is assumed in this analysis that an outpatient

clinic would provide essentially the same services for the same cost as a

physician’s office. When diagnosis occurs in an emergency room, it may be

that the patient is experiencing symptoms that require immediate attention

or that medical care is unavailable via other means (e.g., they do not have a

personal physician. Due to the potentially more serious nature of their

symptoms, there may be additional services provided. These services may

include: a complete blood count (CBC), theophylline administered
Chapter IV.2 IV.2-35 Cost of Asthma

intravenously, nebulizer therapy, or other services that are medically

required (as described by the 1991 physician panel). These added services

will lead to increased costs not considered in this analysis. (A description

of services and the costs for an emergency room visit are described below.)

Emergency room staff often do not have information available on the

medical history of a patient, so may treat each patient entering the

emergency room with asthma as a new diagnosis (Physician panel, 1991). 

That was the assumption made when developing the description of services

and costs for the emergency room services discussed below. This

description and the associated costs may be relevant for both initial

diagnosis in an emergency room and visits to the emergency room that

occur after diagnosis. Whether this is the case will depend on the specific

hospital’s practices, and whether the patient was referred to the emergency

room by a physician who provided the patient’s medical history to the

hospital. 

IV.2.B.2.3 Asthma Severity Level

When diagnosed with asthma, the severity of the patient’s disease is

evaluated and a severity category is assigned. These categories are

subsequently used to develop an asthma management plan for the patient. 

The National Heart, Lung, and Blood Institute (1997) has developed a

classification scheme for asthma by severity of disease. Patients are

diagnosed at their initial visit (or a subsequent visit to a specialist) with

either mild intermittent, mild persistent, moderate persistent, or severe

persistent asthma based on this classification scheme. Treatment plans and

costs vary depending on the severity of the asthma. The classification

scheme, shown in Table IV.2-5, shows symptoms and lung function

measures that are used to categorize asthma (NHLBI, 1997). 

Recent information was not located in the literature regarding the

distribution of patients into the various categories listed above. Estimates 

are available from the 1991 physician panel: approximately 70 percent of

asthmatics have mild asthma, 25 percent have moderate asthma, and 5

percent have severe asthma. In their 1997 publication, NHLBI separated

mild asthma into two components, intermittent and persistent (NHLBI,

1997). For purposes of this analysis, it is assumed that half of those with

mild asthma are in each diagnostic category. 

It is also assumed that the 1991 panel’s estimate of the percentage of

patients in each category is currently accurate. Due to increases in the

occurrence and acute services use by asthmatics in recent years, it is

possible that more patients are now in the moderate and severe asthma

categories than in the past. Uncertainty exists regarding this distribution

because data on the current severity distribution are not available. This

uncertainty does not impact service utilization, which is not based on

severity in this analysis (it is based on national statistics and the results of
Chapter IV.2 IV.2-36 Cost of Asthma

studies of service utilization). Severity categories are used, however, to

estimate drug therapy use and cost. Consequently, if the severity

distribution among asthma patients is currently more severe than it was in

1991, the costs of drug therapy will be underestimated. As better

information becomes available and/or practices change, the percentages can

be modified to reflect current knowledge.

In this analysis, patients were assumed to retain the severity level that they

were originally diagnosed up to age 18. Beyond that age it was assumed

that 30 percent become symptom-free (Eggleston, 1994; see discussion in

Section IV.2.A.5). The remaining 70 percent continue to require

treatment at the severity level at which they were originally diagnosed. As

with the severity distribution, the percentage of patients becoming

symptom-free may differ from estimates made in the past.

Link to Section IV.2.A.5
Chapter IV.2 IV.2-37 Cost of Asthma

Table IV.2-5: Classification of Asthma Severity

Clinical Features Before Treatment*

Symptoms**

Nighttime

Symptoms Lung Function

STEP 4

Severe

Persistent

• Continual symptoms

• Limited physical activity

• Frequent exacerbations

Frequent • FEV1 or PEF # 60%

predicted

• PEF variability > 30%

STEP 3

Moderate

Persistent

• Daily symptoms

• Daily use of inhaled shortacting beta2

-agonist

• Exacerbations affect activity

• Exacerbations $ 2 times a

week; may last days 

> 1 time a week • FEV1 or PEF > 60%-<80%

predicted

• PEF variability > 30%

STEP 2

Mild

Persistent

• Symptoms > 2 times a week

but < 1 time a day

• Exacerbations may affect

activity

> 2 times a

month

• FEV1 or PEF $ 80%

predicted

• PEF variability 20-30%

STEP 1

Mild

Intermittent

• Symptoms # 2 times a week

• Asymptomatic and normal

PEF between exacerbations

• Exacerbations brief (from a

few hours to a few days);

intensity may vary

# 2 times a

month

• FEV1 or PEF $ 80%

predicted

• PEF variability < 20%

* The presence of one of the features of severity is sufficient to place a patient in that category. An individual

should be assigned to the most severe grade in which any feature occurs. The characteristics noted in this

figure are general and may overlap because asthma is highly variable. Furthermore, an individual’s

classification may change over time.

** Patients at any level of severity can have mild, moderate, or severe exacerbations. Some patients with

intermittent asthma experience severe and life-threatening exacerbations separated by long periods of

normal lung function and no symptoms.

IV.2.B.2.4 Drug Therapy During Diagnosis

A patient is initially diagnosed with asthma may receive two types of drug

therapies that are consistent with the two aspects of managing asthma: 

1) Long-term care. The patient will receive a management plan that

includes long-term drug therapy for control of their disease. If this

management plan adequately controls symptoms, the patient will be

maintained on that plan, with subsequent review to determine if dosages

can be “stepped down” and still maintain control over the disease. 

2) Episodic care. A patient diagnosed in response to an asthma episode

will receive drugs during the visit to address current symptoms. These will

be short-acting drugs that are used in response to asthma episodes rather

than for long-term disease management. 
Chapter IV.2 IV.2-38 Cost of Asthma

In both cases, the drug regimens do not differ from those that would be

used under similar circumstances after initial diagnosis. Consequently, they

are discussed below under the two relevant headings: Long-term

Management and Management of Acute Episodes. The specific

therapeutic drugs that are recommended for use when asthma is initially

diagnosed vary, depending on the disease symptoms, patient

characteristics, and the physician’s prescribing habits. There are two main

groups of drugs used to treat asthma, one for long-term management of the

disease and one for quick relief of symptoms. 

In the cost section below, drug costs are assumed to begin when the

diagnosis is made at age four. The drugs prescribed or given in the

physician’s office at diagnosis will be the same as those used during the

subsequent long-term management and quick-relief management. 

Consequently, the specific drugs are discussed below under those two

headings. Separate drug costs are not assigned to the diagnostic process

because they are the same as those itemized under the Drug Therapies

section below.

IV.2.B.2.5 Referral to Specialists During Diagnosis

Most people with asthma are diagnosed by and receive care from a primary

care physician. NHLBI does not suggest that diagnostic procedures vary

depending on the severity category in which the patient may be ultimately

diagnosed. Consequently, it is assumed that all patients will undergo

similar diagnostic procedures, although NHLBI recommends referral to

specialists in asthma treatment (e.g., a pulmonologist) under specific

circumstances. The conditions leading to referal are related to ongoing

care and meeting treatment goals unrelated to the initial diagnosis;

consequently, they are not discussed in this section. Some criteria are

relevant at diagnosis, and one (criterion 5) is related to the severity

category of the patient. The criteria are:

1) signs and symptoms are atypical or there are problems in

differential diagnosis;

2) other conditions complicate asthma or its diagnosis;

3) additional diagnostic testing is indicated (e.g., allergy

testing, complete pulmonary function studies, rhinoscopy,

provocative challenge, bronchoscopy);

4) patient is being considered for immunotherapy;

5) patient has severe persistent asthma (Step 4, as shown in

Table IV.2-5), or is under age three and has moderate or

severe persistent asthma (Step 3 or 4) and in some cases

mild persistent asthma (Step 2); and
Chapter IV.2 IV.2-39 Cost of Asthma

6) patient has significant psychiatric, psychosocial, or family

problems that interfere with asthma therapy. (NHLBI,

1997, refer to this source for additional detail)

Link to Table IV.2-5

Referral to a specialist occurs when a patient’s asthma or some other health

characteristic is complex and requires more sophisticated investigation

and/or treatment. This analysis does not attempt to speculate on what

specialized treatment would be provided because the reasons for referral

and the resulting treatments vary widely. The analysis assumes that the

cost of treatment by a specialist would be the same as the cost of the initial

office visit for diagnosis. This is a conservative assumption, because it is

likely that the treatment would be at least as complex (and costly) as the

initial office visit for diagnosis. 

It is not known what percentage of patients may experience any of the

above, but an estimate can be made for criterion 5. As discussed

previously, the 1991 physician panel provided an estimate of the

percentage of individuals who fall into each severity category. Using this

information, the percentage of patients who would be referred to a

specialist based on criterion 5 can be estimated. It was estimated in 1991

that 70 percent of asthmatics have mild asthma (35 percent persistent, 35

percent intermittent), 25 percent moderate, and 5 percent severe asthma. 

Using this information with criterion 5, an estimate of the number of

patients who will see a specialist following their initial visit with a primary

care physician was made as follows: 

For severe asthma: the 5 percent of patients with severe asthma will all be

assumed to consult a specialist. 

For moderate asthma: the criterion is age-related. There is not a

distribution of ages of diagnosis available; however, if four years is the

median age of diagnosis (50 percent above and 50 percent below), then it

will be assumed that half of all patients were diagnosed at age three or

younger. Thus, one half of the 25 percent of patients with moderate

asthma, or 12.5 percent of all asthma patients, will be assumed to consult

with a specialist.

For mild asthma: there is not quantitative guidance provided for those with

mild asthma. Based on the numerous criteria for referral to specialists, the

substantial number of very young children who have asthma (and are more

difficult to evaluate and treat) and the statement that some cases of mild

persistent asthma will require referral to a specialist, it was assumed that

one half of those with mild asthma, or 35 percent of all asthma patients,

will consult a specialist. Aggregating the three categories above, the total

percentage of patients who are assume to consult with a specialist
17 Consultation with one pediatrician who treats many asthma cases suggests that considerable time is

required for adequate patient education. He routinely spent one hour or more explaining the disease and

training the patient, which was followed by later consultations with nurse practitioners. It was felt that this

time investment was necessary to ensure that patients understood their treatment plans, how to avoid

asthma triggers, how to use inhalers and peak flow meters, and other aspects of their disease.

Chapter IV.2 IV.2-40 Cost of Asthma

following initial consultation with a primary care physician is 52.5

percent.

It was assumed that patients meeting this criterion would meet with a

specialist after the first diagnostic visit, for additional diagnosis and

planning evaluations. As noted above, the specific additional evaluations

that are performed in this visit will vary depending on the reason for

referral and patient characteristics. Consequently, the specific activities

cannot be estimated. It is reasonable to assume that they will be at least as

complex (and as costly) as those provided by the primary care physician in

the first diagnostic visit.

IV.2.B.2.6 Level of Visit and Number of Visits for Diagnosis

To estimate the costs of office visits, it is necessary to specify the level of

visit (1 to 5), which is determined by the length of the visit. Visits for

asthma include a number of activities related to the initial diagnosis,

including the determination of the appropriate treatment plan through tests,

history taking, physical exam and evaluation, explanation of the disease and

management plan to the patient (or parent), and patient education

regarding drugs and equipment. A second visit follows shortly after

diagnosis to determine if the treatment plan is managing the disease

adequately; additional patient education may also be provided. 

NHLBI has emphasized the importance of education and the management

of asthma by the patient and physician as key elements of care. Emphasis is

also placed on quality of life issues, which is closely tied to adequate

disease management (NHLBI, 1997). These foci require considerable time

be spent by medical staff on training and education of patients. This is

particularly true due to the daily need for self-medication for many

asthmatics and the use of inhalers and peak flow meters. The result of all

this is a requirement that more time be spent during office visits than is

spent for many other chronic diseases.17 Due to the time requirements, this

analysis assumes that a single maximum duration (level 5) office visit would

be used for the initial diagnostic consultation. 
18 It has been observed that many patients need to be checked for use of their asthma therapy equipment. 

At one children's asthma camp, it was observed that as few as ten percent of patients appeared to be using

their inhalers correctly (Aligne, 1999).

Chapter IV.2 IV.2-41 Cost of Asthma

NHLBI guidelines indicate that the first diagnostic visit is followed shortly

by another visit to determine if the management plan is adequate for the

patient, and to make any necessary adjustments. Additional patient

education may also be provided.18 This analysis assumes that a second visit

will follow the first within a short time frame as part of the diagnostic

process. Within the set of those patients who require adjustment of their

treatment plans at this visit, there may be a subset that require another visit

to determine if the modified plan was optimal. The percentage of patients

requiring this third visit is not known. Consequently, this visit and any

subsequent planning visits related to initial diagnosis are not included. The

assumption that only two visits are required will cause an underestimate of

medical cost in this analysis. 

IV.2.B.3 Long-term Management

Long-term management of asthma involves ongoing use of medications and

asthma trigger avoidance by patients. It also requires periodic assessments

and monitoring by medical care providers. For purposes of cost evaluation

the focus of this discussion is on: 

1) the office visits or hospital outpatient visits that occur, and 

2) the drug therapy regimen that is prescribed for the patient.

No skilled nursing or therapeutic services are typically provided to

asthmatics in their homes, so costs for such services are not included in this

analysis. It is assumed that severe asthmatics will use a nebulizer with

compressor in the home on an ongoing basis. This cost (which is minimal)

is listed with drug therapy, since it is self-administered and is more closely

related to drug therapy than to medical services.

As discussed above, the frequency and complexity of long-term care

depends substantially on the patient receiving an adequate treatment plan,

understanding it, and complying with it (particularly self-administered drug

regimens). Consequently, an estimate of the patient’s use of treatment and

services and their cost is provided for an average patient, as well as for

high-use patients. When a patient is managing their exposures to asthma

triggers adequately and self-administers drugs that prevent asthmatic crises,

the course of their therapy and resulting costs for many patients may be

fairly predictable. When management is inadequate, there will be asthma

episodes requiring different self-administered drugs, more office and

emergency room visits, and potential hospitalization (discussed in the

following section). In either case, there will be office visits and selfmedication. 
Chapter IV.2 IV.2-42 Cost of Asthma

IV.2.B.3.1 Long-term Management for the Average Patient

IV.2.B.3.1.1 Office Visits

The number of office visits an average asthma patient makes per year was

estimated using CDC data reported in Section IV.2.A to be 0.707 (see

Table IV.2-1). The services provided during office visits are shown in

Table IV.2-4 (based on information from the 1991 physician panel and a

review of information in NHLBI guidelines). The categories of services

shown in the table below are those specified for Medicare reimbursement

and do not provide detailed descriptions of services. For example, the

activities of the physician (e.g., history taking, discussion of symptoms,

education of the patient, etc.) are not specifically listed in the table, but are

assumed to fall under the category of “office visit.”

Link to Table IV.2-1

Link to Table IV.2-4

Table IV.2-6: Asthma: Description of Follow-Up Care by

Severity Level

Chest X-Ray, Two Views

Assay for Theophylline

Breathing Capacity Test

Office Visit, Level 5, Established Patient

Drawing Blood for Specimen

For some patients who have difficulty managing their asthma through

treatment plans, NHLBI recommends additional evaluations and activities

that are similar to those listed under Section IV.A.2.5, above(e.g., allergy

testing, immunotherapy). These additional steps will result in additional

costs that are not considered in this analysis, due to a lack of detailed

information on their use, and will cause an underestimate of total costs.

Link to Section IV.A.2.5

IV.2.B.3.1.2 Drug Therapies

As noted above, no data are available on the actual practices of asthmatics

regarding drug use. Consequently, NHLBI guidelines were used as an

estimate of drug use and costs. Aside from drugs administered during

acute episodes in a medical care setting, most asthma drugs are selfadministered, following directions provided by a physician. NHLBI

recommends that most patients be treated with self-administered long-term

asthma medications to reduce inflammation. All patients but those with
Chapter IV.2 IV.2-43 Cost of Asthma

mild intermittent asthma (approximately 35 percent of patients) are

encouraged to have daily anti-inflammatory medication. NHLBI also

recommends the self-administration of “quick-relief” medications to deal

with asthma episodes. The type of drugs, their quantity, and their

frequency of use depends on the severity of the asthma and specific

characteristics of the patient. Pharmaceutical usage is discussed by level of

asthma severity in this analysis because it is not possible to determine the

distribution of specific patient characteristics. Both the costs of various

drug alternatives, and drug costs for different management plans, will vary. 

Although NHLBI drug therapy guidelines were used in this analysis to

estimate drug costs, the distribution of drugs between long-term

management and quick relief medications may differ among patients. 

Among patients whose asthma is not well managed, there may be a greater

use of quick-relief medications for acute episodes and less use of drugs

used for long-term management among many patients. Study data

(discussed below) suggest that many patients do not manage their disease

in a manner that provides long-term low-level care, but rather use

medication when they experience symptoms. As described in Section

IV.2.A, a lack of disease management causes asthma attacks. 

Consequently, those who don’t use preventive long-term care drugs are

likely to need a greater amount of short-term relief medications. Given this

trade-off, the drug costs are not expected to differ substantially among

patients in the average versus high-use categories considered in this

analysis (although hospitalization and emergency room use are, as

discussed below).

The NHLBI recommends the therapies shown in Table IV.2-5 for initial

management planning for children age five and under, and those shown in

Table IV.2-6 for patients older than five years of age. 
Chapter IV.2 IV.2-44 Cost of Asthma

Table IV.2-7: Stepwise Approach for Managing Asthma in Infants 

and Children under 6 Years of Age

Adapted from NHLBI, 1997. Sections dealing with education and cautions are not included. 

Long-term Control Quick Relief*

STEP 4

Severe Persistent

Daily medications:

• Daily anti-inflammatory medicine

— High-dose inhaled corticosteroid with

spacer/holding chamber and face mask

— If needed, add systemic corticosteroids 2

mg/kg/day and reduce to lowest daily or

alternate-day dose that stabilizes symptoms

beclomethasone dipropionate

• Bronchodilator as needed

for symptoms (see step 1)

up to 3 times a day

albuterol

.

STEP 3

Moderate

Persistent

Daily medication:

• Daily anti-inflammatory medication. Either:

— Medium-dose inhaled corticosteroid with

pacer/holding chamber and face mask

OR, once control is established:

— Medium-dose inhaled corticosteroid and

medocromil

OR

— Medium-dose inhaled corticosteroid and long

acting bronchodilator (theophylline)

beclomethasone dipropionate

• Bronchodilator as needed for

symptoms (see step 1) up to

3 times a day

albuterol

STEP 2

Mild Persistent

Daily medication:

Daily anti-inflammatory medication. Either:

— Cromolyn (nebulizer is preferred; or MDI) or

nedocromil (MDI only)

— Infants and young children usually begin with

a trial of cromolyn or nedocromil

OR

— Low-dose inhaled corticosteroid with

spacer/holding chamber and face mask

cromolyn

• Bronchodilator as needed for

symptoms

albuterol.

STEP 1

Mild Intermittent

• No daily medication needed. • Bronchodilator as needed for

symptoms < 2x / week

Inhaled short-acting beta2-

agonist by nebulizer or face

mask and spacer/holding

chamber

albuterol

Step down

Review treatment every 1 to 6 months; a gradual stepwise reduction in

treatment may be possible.

Step up

If control is not maintained,

consider step up. First, review

patient medication technique,

adherence, and environmental

control (avoidance of allergens or

other factors that contribute to

asthma severity).
Table IV.2-7: Stepwise Approach for Managing Asthma in Infants 

and Children under 6 Years of Age

Adapted from NHLBI, 1997. Sections dealing with education and cautions are not included. 

Long-term Control Quick Relief*

Chapter IV.2 IV.2-45 Cost of Asthma

NOTE:

• The stepwise approach presents general guidelines to assist clinical decision making; it is not intended to be a

specific prescription. Asthma is highly variable; clinicians should tailor specific medication plans to the needs

and circumstances of individual patients.

• Gain control as quickly as possible; then decrease treatment to the least medication necessary to maintain

control. Gaining control may be accomplished by either starting treatment at the step most appropriate to the

initial severity of the condition or starting at a higher level of therapy (e.g., a course of systemic corticosteroids

or higher dose of inhaled corticosteroids).

• A rescue course of systemic corticosteroids may be needed at any time and at any step.

• Some patients with intermittent asthma experience severe and life-threatening exacerbations separated by long

periods of normal lung function and no symptoms. This may be especially common with exacerbations

provoked by respiratory infections. A short course of systemic corticosteroids is recommended.

• At each step, patients should control their environment to avoid or control factors that make their asthma worse

(e.g., allergens, irritants); this requires specific diagnosis and education.

• Referral to an asthma specialist for consultation or co-management is recommended if there are difficulties

achieving or maintaining control of asthma or if the patient requires step 4 care. Referral may be considered if

the patient requires step 3 care.

* In all quick relief cases, the “intensity of treatment depends on severity of exacerbation” (NHLBI, 1997).
Chapter IV.2 IV.2-46 Cost of Asthma

Table IV.2-8: Stepwise Approach for Managing Asthma in Adults and Children Older than 5 Years of Age: Treatment

Adapted from NHLBI, 1997. Sections dealing with cautions are not included. 

Long-term Control Quick Relief Education

STEP 4

Severe Persistent

Daily medications:

• Anti-inflammatory: inhaled

corticosteroid (high dose)

AND

• Long acting bronchodilator: either long

acting inhaled beta2 -agonist,

sustained-release theophylline, or long

acting beta2 -agonist tablets

AND

• Corticosteroid tablets or syrup long

term (make repeat attempts to reduce

systemic steroids and maintain control

with high dose inhaled steroids)

beclomethasone dipropionate

• Short-acting bronchodilator: inhaled

beta2 -agonists as needed for

symptoms.

albuterol

.

Steps 2 and 3 actions plus:

• Refer to individual

education/counseling

STEP 3

Moderate

Persistent

Daily medication:

• Either 

Anti-inflammatory: inhaled

corticosteroid (medium dose)

OR

Inhaled corticosteroid

(low-medium dose) and add a long

acting bronchodilator, especially for

nighttime symptoms; either long

acting inhaled beta2 -agonist,

sustained-release theophylline, or

long acting beta2 -agonist tablets.

beclomethasone dipropionate

• Short-acting bronchodilator: inhaled

beta2 -agonists as needed for

symptoms.

albuterol

Step 1 actions plus:

• Teach self-monitoring

• Refer to group education if available

• Review and update self-management

plan
Table IV.2-8: Stepwise Approach for Managing Asthma in Adults and Children Older than 5 Years of Age: Treatment

Adapted from NHLBI, 1997. Sections dealing with cautions are not included. 

Long-term Control Quick Relief Education

Chapter IV.2 IV.2-47 Cost of Asthma

STEP 2

Mild Persistent

One daily medication:

• Anti-inflammatory: either inhaled

corticosteroid (low doses) or cromolyn

or nedocromil (children usually begin

with a trial of cromolyn or nedocromil).

• Sustained-release theophylline to

serum concentration of 5-15 mcg/mL is

an alternative, but not preferred,

therapy. Zafirlukast or zileuton may

also be considered for patients $12

years of age, although their position in

therapy is not fully established.

cromolyn

• Short-acting bronchodilator: inhaled

beta2 -agonists as needed for

symptoms.

albuterol.

Step 1 actions plus:

• Teach self-monitoring

• Refer to group education if available

• Review and update self-management

plan

STEP 1

Mild Intermittent

• No daily medication needed. • Short-acting bronchodilator: inhaled

beta2 -agonists as needed for

symptoms.

albuterol

• Teach basic facts about asthma

• Teach inhaler/spacer/holding chamber

technique

• Discuss roles of medications

• Develop self-management plan

• Develop action plan for when and how

to take rescue actions, especially for

patients with a history of severe

exacerbations

• Discuss appropriate environmental

control measures to avoid exposure to

known allergens and irritants

Step down

Review treatment every 1 to 6 months; a gradual stepwise

reduction in treatment may be possible.

Step up

If control is not maintained, consider step up. First, review patient medication

technique, adherence, and environmental control (avoidance of allergens or other

factors that contribute to asthma severity).
Table IV.2-8: Stepwise Approach for Managing Asthma in Adults and Children Older than 5 Years of Age: Treatment

Adapted from NHLBI, 1997. Sections dealing with cautions are not included. 

Long-term Control Quick Relief Education

Chapter IV.2 IV.2-48 Cost of Asthma

NOTE:

• The stepwise approach presents general guidelines to assist clinical decision making; it is not intended to be a specific prescription. Asthma is highly

variable; clinicians should tailor specific medication plans to the needs and circumstances of individual patients.

• Gain control as quickly as possible; then decrease treatment to the least medication necessary to maintain control. Gaining control may be accomplished by

either starting treatment at the step most appropriate to the initial severity of the condition, or starting at a higher level of therapy (e.g., a course of systemic

corticosteroids or higher dose of inhaled corticosteroids).

• A rescue course of systemic corticosteroids may be needed at any time and at any step.

• Some patients with intermittent asthma experience severe and life-threatening exacerbations separated by long periods of normal lung function and no

symptoms. This may be especially common with exacerbations provoked by respiratory infections. A short course of systemic corticosteroids is

recommended.

• At each step, patients should control their environment to avoid or control factors that make their asthma worse (e.g., allergens, irritants); this requires

specific diagnosis and education.

• Referral to an asthma specialist for consultation or co-management is recommended if there are difficulties achieving or maintaining control of asthma or if

the patient requires step 4 care. Referral may be considered if the patient requires step 3 care.
19 Refer to NHLBI for additional information on these medications and recommendations.

Chapter IV.2 IV.2-49 Cost of Asthma

 The tables list drug options for each severity category. Data were not

available on which drugs, of the many options, were actually used by a

specific percentage of patients. Consequently, drugs were selected for

purposes of cost estimation in this analysis because they were referred to or

recommended frequently in the literature reviewed for this work. The

selected drugs are listed in italics following each recommendation in the

tables. Specific drug options in each drug category (e.g., beta2- agonists)

are shown in Appendix IV.2-B with recommended doses for different ages

and weights.

Some drugs are specified as “if needed” by NHLBI. Because they are not

prescribed for all patients and information is lacking on the percentage of

patients receiving these discretionary drugs, it was assumed that they were

not prescribed for the average patient and they are not listed in the tables.19

This is a cost-conservative assumption.

IV.2.B.3.2 Long-term Management for the High-use Patient

Patients who are not in compliance with NHLBI guidelines or other

management plans are likely to spend less effort and money “managing”

their disease through long-term drug therapy, and have a higher frequency

of emergency room visits, hospitalizations, and sick visits to doctors’

offices or clinics. Although actual practices are not well documented nor

known at the national level, a number of studies have been carried out to

evaluate specific intervention programs for “high-use” patients. These

studies indicate that the frequency of visits to emergency rooms, hospitals,

and doctors’ offices or clinics to treat acute episodes can be substantially

greater than for the average asthmatic. Some of these study results were

summarized in Tables IV.2-2 and IV.2-3. 

Link to Tables IV.2-2 

Link to Table IV.2-3 

IV.2.B.3.2.1 Office Visits

Two of the studies listed in Table IV.2-3 above (Higgins et al., 1998; and

Westley et al., 1997) examined the rate of office visits among “high-use”

patients before and after an intervention program. These studies suggest

that the frequency of visits to doctors’ offices or clinics among these “highuse” patients may be substantially greater than the frequency for the

average asthmatic. The average frequency of visits (averaged over the two

studies) was almost five times the frequency for the average asthmatic

(3.491 per year versus 0.707 per year). Based on this information, the

hypothetical high-use patient is estimated to visit a physician’s office (or

outpatient clinic) 3.491 times per year. Although these visits are listed

under “long-term management” they are likely to be used mainly to address

short-term medical needs rather than for checkups, planning, or education,
Chapter IV.2 IV.2-50 Cost of Asthma

due to the nature of the asthma management approach taken by these

patients and their caregivers. The proportion of each type of office visit is

not known. 

IV.2.B.3.2.2 Drug Therapies

As discussed above, NHLBI guidelines regarding drug therapy are used for

estimating treatment and costs for all asthma patients. Section

IV.2.B.3.1.2 above provides details on drug therapy, and additional detail

is provided in Appendix IV.2-B. Patients who are not in compliance with

NHLBI guidelines are expected to use medication when they experience

symptoms rather than use long-term management. Those who do not use

long-term care drugs are likely to need a greater amount of short-term

relief medications. There is not sufficient information in the literature to

quantitatively determine the trade-offs in drugs used or costs incurred. 

Given the lack of data and the likelihood that underuse of preventive

medication will result in greater use of short-acting medications, this

analysis assumes that drug costs do not differ substantially among patients

with different management strategies (although office visits, hospitalization,

and emergency room use differ, as discussed below). 

Link to Section IV.2.B.3.1.2 

IV.2.B.4 Acute Care

IV.2.B.4.1 Acute Care for the Average Patient

IV.2.B.4.1.1 Emergency Room Visits

As discussed above, emergency room visits result when asthma episodes

cannot be managed by the patient or family members sufficiently well to

provide relief to the patient. The patient may be experiencing a lifethreatening episode, or a relatively mild episode on arrival to the

emergency room. Care will therefore vary widely. As discussed in Section

IV.2.A, the likelihood of an asthma patient vising an emergency room is

0.117 annually. The procedures anticipated to occur, based on the 1991

physicians panel and NHLBI guidelines, are shown in Table IV.2-9. The

emergency room services are not assume to be related to severity category

because mild or severe exacerbations can occur among asthma patients in

any severity category (NHLBI, 1997). 
Chapter IV.2 IV.2-51 Cost of Asthma

Table IV.2-9: Services provided in Hospitals

to Asthma Patients

Chest X-Ray, 2 Views

Assay for Theophylline

Blood Gases: pH, pO2, pCO2

Automated Hemogram

IV Infusion Therapy, 1 Hour

Breathing Capacity Test

Airway Inhalation Treatment

ER Visit, Level 5

Drawing Blood for Specimen

IV.2.B.4.1.2 Hospitalization

Hospitalization occurs when the patient requires care beyond what can be

provided in the emergency room — either specific therapies or observation

and care that requires a longer period to provide. As discussed in Section

IV.2.A, the likelihood of an average asthma patient being hospitalized is

0.034 annually. Hospital cost reimbursements are specified by Medicare,

based on the patient’s diagnosis in a diagnostically related group (DRG). 

This system is used widely by many medical cost reimbursement systems. 

Due to the use of this system, it is not necessary to list specific services

provided in the hospital to estimate the costs of hospitalization, and they

are not described in this analysis.

IV.2.B.4.2 Acute Care for High-use Patients

Failure to properly manage relatively severe asthma results in a much

greater occurrence of acute episodes and greater utilization of more

expensive acute care facilities. Utilization rates of acute care facilities (i.e.,

emergency rooms and hospitals) among “high-use” asthmatics can be many

times the rates among the general population of asthmatics. Using the

average of the “before intervention” rates in the studies listed in Table

IV.2-3, the average rate of hospitalization in this group was estimated to be

over 20 times the average rate among all asthmatics (0.732 per patient per

year versus 0.034 per patient per year). The average rate of emergency

room visits was estimated to be 1.663 per patient per year, over ten times

the rate in the general population of asthmatics of 0.117. These higher

values are used in the cost analysis below to estimate the annual and

lifetime costs for the hypothetical high-use patient.

Link to Table IV.2-3
Chapter IV.2 IV.2-52 Cost of Asthma

IV.2.B.5 Annual Cost of Treatment and Services

IV.2.B.5.1 Overview

The goal of this analysis is to determine the lifetime incremental direct

medical cost of asthma. This section aggregates the annual costs for the

following:

• office visits,

• drug therapy,

• emergency room care, and

• hospitalization.

The cost of diagnosis is also described, although that is incurred only once,

rather than annually. 

The medical costs are estimated for the average patient and for

hypothetical high-use patients. Most costs for treatments and services

were estimated using the Medicare reimbursements system. This system

provides support for care for the elderly and the disabled. Consequently,

recipients span all ages. There are specific reimbursements for many

services for children (ages 0 to 17), which are used in this analysis. 

Medicare reimbursements charges generally fall between Medicaid

reimbursement and self-pay or private insurance reimbursement. The use

of Medicare data has both advantages and disadvantages, discussed in

Chapter I.1.

Link to Chapter I.1 

Although the arguments for and against using Medicare data to estimate

costs are complex, these data are used in this case primarily because they

are national cost data that have been judged, for this application, to be a

reasonable proxy for the direct medical costs of services for asthma. 

Medicare payments are thought to be reasonably representative of the

national costs of medical care because the Medicare program is the largest

national payer for health care services. The Health Care Financing

Administration (HCFA), which administers the Medicare program, has

conducted a considerable amount of research into the actual resource costs

of providing medical services, and has used this research in establishing

Medicare payment rates. Moreover, Medicare payment methodologies and

payment rates are often used by private payers and state Medicaid

programs as a starting point in establishing their own methodologies and

rates, and Medicare payment rates usually fall somewhere between

Medicaid payment rates and private payer payment rates. Finally, data

regarding Medicare payment rates are readily available from HCFA.
20 The services identified in the tables represent one possible treatment profile. Actual practice patterns

are variable across physicians, across specialties, and even across geographic areas. The cost estimates

provided in the following tables should therefore be regarded with an understanding of this limitation.

Chapter IV.2 IV.2-53 Cost of Asthma

The services described for diagnosis, long-term management and

management of acute episodes were mapped to actual CPT/HCPCS codes,

which are used by the Medicare program to identify and pay for physician

services and outpatient services.20 Hospital costs are based on the

admitting diagnosis and any subsequent diagnoses. 

IV.2.B.5.2 Costs of Diagnosis

The cost of diagnosis is assumed to be the same for all patients and to

occur only once during a lifetime. It was assumed that diagnosis occurred

in a physician’s office for this analysis. Diagnosis can also occur in an

emergency room, which may lead to higher costs. Those costs would be

best represented by the emergency room costs discussed in the next

section. As discussed above, emergency room care usually does not rely

on previous medical diagnosis and care; the patient goes through essentially

the same procedures as diagnosis of a new case of asthma. 

Medicare payment for most services provided in a physician’s office is

determined under the Medicare physician fee schedule. One exception to

the Medicare physician fee schedule is made for clinical laboratory services,

for which payments are determined under a separate fee schedule. Both

the Medicare physician fee schedule and the Medicare clinical laboratory

fee schedule used for the purposes of this analysis are effective for

Calendar Year 1999. The treatments and services discussed above are

included in Table IV.2-10 below, with relevant codes to link to Medicare’s

reimbursement system.
Chapter IV.2 IV.2-54 Cost of Asthma

Table IV.2-10: Costs of Diagnosis

CPT Code CPT Description Source 1999 RVUs

1999

Physician

Conversion

Factor

 1999 

Medicare

Payment

71020 Chest X-Ray, Two Views Physician Fee 1.00 $34.73 $34.73

82803 Blood Gases: pH, pO2, Clinical Lab Fee $26.74

85025 Automated Hemogram Clinical Lab Fee $10.74

94010 Breathing Capacity Test Physician Fee 0.88 $34.73 $30.56

99205 Office Visit, Level 5, New Physician Fee 4.00 $34.73 $138.93

G0001 Drawing Blood for Carrier Manual $3.00

Total $244.70

Under the Medicare physician fee schedule, the payment for a given service

is determined using relative value units (RVUs), geographic practice cost

indices (GPCIs), and a conversion factor (CF). RVUs measure the relative

time, effort, and expense that physicians incur when providing services. 

The Resource Based Relative Value Scale (RBRVS) used by HCFA for the

Medicare program expresses the RVUs for all services on a single scale. 

Under the RBRVS, there are separate RVUs for physician work (PW),

practice expense (PE), and malpractice expense (ME). GPCIs are used to

adjust RVUs for regional cost variations. There are separate GPCIs for

physician work, practice expense, and malpractice expense RVUs. Finally,

a CF quantifies the dollar value of one relative value unit and converts the

RVUs associated with each service into a fee amount. Hence, the general

formula for determining payment under the Medicare physician fee

schedule for a given service is expressed as follows:

Allowed Charge = [(RVUPW ×GPCIPW) + (RVUPE × GPCIPE) + (RVUME × GPCIME)] × CF

As shown in Table IV.2-10, the 1999 Medicare payment for CPT codes

99203, 99204, 99205, 71020, and 94010 are determined under the

Medicare physician fee schedule. CPT codes 99203, 99204, and 99205

describe office visits of increasing complexity for new patients; CPT code

71020 describes a two view chest X-ray; and CPT code 94010 describes

spirometry, a breathing capacity test. National cost estimates were

developed in this analysis; the GPCIs were not used to adjust the RVUs for

these services. The 1999 Medicare payment for CPT codes 82803 (arterial

blood gases) and 85025 (an automated complete blood count) are

determined under the Medicare clinical laboratory fee schedule. Again,

national cost estimates were developed, so the national limits under the

Medicare clinical laboratory fee schedule were used in Table IV.2-10. 
Chapter IV.2 IV.2-55 Cost of Asthma

Finally, there is a nominal payment for HCPCS code G0001, routine

venipuncture. The total Medicare payment for a patient diagnosed in the

physician’s office with asthma is $244.70 for the initial visit. 

As discussed above, there is a second visit to confirm that the management

plan is working properly. This visit is assumed to involve the same

diagnostic procedures. Like the initial visit it involves time to discuss

issues with the patient and do additional training. Consequently, the cost

of this second visit is assumed to be the same as for the first visit. The total

cost of diagnosis for patients who do not see a specialist is estimated as the

cost of two visits, which equals $489.40.

As discussed in Section IV.2.B.2.5, 52.5 percent of all patients are

assumed to be referred to a specialist during the initial diagnostic process. 

This referral will add a single additional office visit to the cost above for

52.5 percent of patients. This yields a total cost of:

$244.70 × 2 + .525 ( $244.70) = $617.87

The average total cost for diagnosis is estimated to be $617.87

Link to Section IV.2.B.2.5

There are likely to be drugs provided by the physician at the time of

diagnosis. Those costs are incorporated into the drug therapy costs

discussed below under long-term management.

V.2.B.5.3 Cost for the Average Patient

IV.2.B.5.3.1 Office Visits

Table IV.2-11 provides the 1999 Medicare payment for follow-up care

provided in a physician’s office for patients with mild asthma, moderate

asthma, and severe asthma. As discussed earlier, the Medicare payment for

services provided in a physician’s office is determined by the Medicare

physician fee schedule and the Medicare clinical laboratory fee schedule.

As shown in Table IV.2-11, the 1999 Medicare payment for CPT codes

99215, 71020, and 94010 are determined under the Medicare physician fee

schedule. CPT code 99215 describes an office visit of level 5 for

established patients; CPT code 71020 describes a two-view chest X-ray;

and CPT code 94010 describes spirometry, a breathing capacity test. The

1999 Medicare payment for CPT code 80198 (assay for theophylline) is

determined under the Medicare clinical laboratory fee schedule. The

national limit under the Medicare clinical laboratory fee schedule was used

in Table IV.2-11. Finally, there is a nominal payment for HCPCS code

G0001, routine venipuncture. 
21 Specific drug options in each drug category (e.g., beta-2 agonists) are shown in Appendix IV.2-B with

recommended doses for different ages and weights. 

Chapter IV.2 IV.2-56 Cost of Asthma

Table IV.2-11: Asthma: Cost of Office Visit

CPT

Code CPT Description Source

1999

Medicare

RVUs

1999

Medicare

Conversion

Factor

1999

Medicare

Payment

71020 Chest X-Ray, Two Views Physician Fee 1.00 $34.74 $34.74

80198 Assay for Theophylline Clinical Lab Fee

Schedule

$19.56

94010 Breathing Capacity Test Physician Fee 0.88 $34.73 $30.56

99215 Office Visit, Level 5,

Established Patient

Physician Fee

Schedule

2.82 $34.73 $97.94

G0001 Drawing Blood for Specimen $3.00

$185.80

The total Medicare payment for follow-up care provided in a physician’s

office to a patient with asthma is estimated to be $185.80. Using the

average patient rate of 0.707 visits per year, the average annual cost of

office visits per patient is estimated to be $131.36.

IV.B.5.3.2 Cost of Drug Therapy

As discussed previously, the NHLBI recommends specific drug therapies

for children five years and younger and for those older than five, for each

severity category. These therapies were listed in Tables IV.2-5 and IV.2-6

in Section IV.2.B.3 above. As discussed in that section, data were not

available on which drugs were actually used by a specific percentage of

patients, so drugs were selected from the numerous options that were

referred to or recommended frequently in the literature reviewed for this

work. The selected drugs are listed in italics following each

recommendation in the above-cited tables.21 

Link to Table IV.2-5 

Link to Table IV.2-6

The selected drugs are listed in Table IV.2-12 with the dose and frequency

of use. Their use is then converted to units (e.g., one inhaler) and the unit

cost is listed, followed by the annual cost. The final column contains the

weighted cost calculated as the percentage of patients in the severity

category (listed in column 1) times the annual cost. 

Drug costs were taken from the 1998 Red Book, a reference book used by

the pharmacies to obtain prices (Red Book, 1998). The relationship

between pharmaceutical average wholesale prices (AWP) cited in the Red
Chapter IV.2 IV.2-57 Cost of Asthma

Book and the average retail price has fluctuated dramatically over the last

few years. Historically, retail prices were based on a percentage markup

over wholesale prices. In some cases, however, the Red Book AWP

actually exceeds retail rates. A quick review of prices charged by national

pharmacy chains for the most common asthma medications indicated that

Red Book prices are very close to those charged by the chains. There are

numerous companies marketing the most common drugs, and their prices

vary somewhat. 

For this analysis, an average cost was estimated by reviewing the spectrum

of costs listed in the Red Book . When the HCFA price was provided and

it was lower than the average price (e.g., in the case of albuterol tablets)

that price was used. (The HFCA price is the maximum price limit

determined for payment by the federal government.) When prices were

provided for various sizes of packaging, the largest size, which was

invariably the least expensive, was used to estimate costs. These prices

are likely to vary over time as new products are introduced and market

forces continue to play a role in pricing. 

Drug therapy costs differ for the youngest patients (ages four and five), and

older patients, as shown in the table above. The drug costs per year for

each age are used in the lifetime cost analysis, based on the costs incurred

at each specific age. 

Additional information, not used in the lifetime cost analysis on the average

annual cost across all ages, is provided here. The average cost per patient

was calculated as a weighted average cost per year. If diagnosis occurs at

age four (the average age of diagnosis) and the patient has asthma

throughout his or her life (through age 75), then the full lifespan of the

disease is 72 years. Two of those years are at the lower cost for drug

therapy of $471.40, and 70 are at the higher cost of $615.14. The average

annual cost per patient is calculated as:

[2 × $471.40 + 70 × $615.14] / 72 = $611.15
Chapter IV.2 IV.2-58 Cost of Asthma

Table IV.2-12: Drug Costs for Asthma Therapy: Long-term and Acute Management

(Adapted from NHLBI, 1997. Additional detail provided in Tables IV.2-5 and 6 above.)

Severity

(% in

Category) Drugs Dose Frequency Units per Year

Cost per

Unit in $

Annual

Cost in $

Proportional Annual

Cost

(cost * % in category)

Children age 5 and under

1 (35%) albuterol 2 puffs 2 × /week 1 inhaler 25 25 8.75

2 (35%) albuterol 2 puffs 2 × /week 1 inhaler 25 25 8.75

cromolyn 2 puffs 1 × /day 3.7 inhalers 70 259 90.65

3 (25%) albuterol 2 puffs 3 s /day 10.95 inhalers 25 274 68.50

beclomethasone

dipropionate

8 - 16 puffs (assume 12) over the day 21.9 inhalers 40 876 219.00

4 (5%) albuterol 2 puffs 3 × /day 10.95 inhalers 25 274 13.70

beclomethasone

dipropionate

> 16 puffs (assume 17) over the day 31.03 inhalers 40 1241 62.05

Total Annual Average Cost : $471.40 

Children Over age 5 and Adults

1 (35%) albuterol 2 puffs 2 × /week 1 inhaler 25 25 8.75

2 (35%) albuterol 2 puffs 2 × / week 1 inhaler 25 25 8.75

cromolyn 2 puffs 1 × /day 3.7 inhalers 70 259 90.65

3(25%) albuterol 2 puffs 3 × /day 10.95 inhalers 25 274 68.50

beclomethasone

dipropionate

12 - 20 puffs (assume 16) over the day 29.2 inhalers 40 1168 292.00

4(5%) albuterol 2 puffs 3 × /day 10.95 inhalers 25 274 13.70

beclomethasone

dipropionate

>20 (assume 21) over the day 38.33 inhalers 40 1533 76.66

methyl

prednisolone

24 mg/day = 6 tablets over the day 2190 tablets .50 1095 54.75

albuterol 4 mg tablets 2 × /day 730 tablets .0378 28 1.38

Total Average Annual Cost: $615.14

Cost for both age groups, assuming age of diagnosis of four years (at beginning of year) and death at age 75.
Chapter IV.2 IV.2-59

In addition to the cost of drugs discussed above, patients with severe

asthma are urged to have a nebulizer at home as part of their asthma

therapy. A nebulizer costs approximately $80.00, and comes with a

five-year warranty, yielding an annual cost of approximately $16.00. This

cost is assumed to be applicable only to the five percent of patients who are

estimated to have severe asthma. The average cost per patient is therefore

estimated to be 16 × 0.05 = $0.80. This cost is added to the annual drug

cost listed in Table 2-12, yielding a total annual average cost of $472.20

for children under 5 years of age and $615.94 for children five and over

and for adults.

Using the assumptions and sources above, the estimated drug therapy

cost for the average asthma patient is $611.95.

When lifetime costs are calculated, the stream of costs incurred each year is

summed. The costs for ages four and five 4 and 5 are added to the costs

for ages 6 through 75, yielding the same average annual cost. This analysis

also provides discounted costs (at three, five, and seven percent). When

costs are discounted, the average annual cost will differ slightly because the

discounting applied to later years yields much lower costs than those

incurred in the current or proximal years.

IV.2.B.5.3.3 Costs of Emergency Room Care for the Average

Patient 

Currently, Medicare payment for outpatient hospital services is determined

under multiple methodologies. For example, payment for ambulatory

surgical services is determined on the basis of a blend of aggregate hospital

outpatient costs and the ambulatory surgical center (ASC) payment

methodology, while payment for diagnostic radiology services is

determined on the basis of a blend of aggregate hospital outpatient costs

and the Medicare physician fee schedule. Medicare payments for most

outpatient hospital services are based in part on aggregate hospital

outpatient costs; payment rates for individual outpatient services do not

exist.

Beginning in 2000, however, Medicare payment for most outpatient

hospital services will be determined using a prospective payment system

(PPS) based on Ambulatory Payment Classification (APC) groups. A

proposed rule for this system was published in the September 8, 1998

Federal Register and revised in the June 30, 1999 Federal Register. We

used these proposed payment rates to develop the cost estimates provided

in Table IV.2-8 because the proposed Medicare hospital outpatient PPS

assigns payment rates to individual outpatient services. Once again,

however, clinical laboratory services will be exempt from the proposed

PPS and will continue to be paid under the Medicare clinical laboratory fee

schedule. It also should be noted that the proposed PPS applies only to the
Chapter IV.2 IV.2-60

facility fee paid to a hospital. Professional services provided by physicians

will therefore continue to be paid under the Medicare physician fee

schedule.

Link to Table IV.2-8

Under the proposed PPS, each service provided in a hospital outpatient

department will be assigned to an APC. An APC represents a group of

services with similar resource requirements and clinical characteristics. The

payment for the service will be determined as the product of the relative

weight for the APC group to which the service is assigned and a CF. The

labor-related portion of the CF will be adjusted by the Medicare wage

index for inpatient hospital services based on the metropolitan statistical

area in which the hospital is located. We did not adjust the national

standardized operating amounts because we are developing national cost

estimates. Although the proposed PPS will become effective sometime in

2000, the proposed CF published in the Federal Register is expressed in

1999 dollars.

Table IV.2-13 provides the 1999 Medicare payment for treating patients

with asthma in a hospital emergency room. As shown in Table IV.2-5, the

1999 Medicare payment for CPT codes 99283, 99284, 99285, 90780,

94640, and 71020-TC are determined under the Medicare hospital

outpatient PPS. CPT codes 99283, 99284, and 99285 describe emergency

department visits of increasing complexity, CPT code 90780 describes one

hour of IV infusion therapy, CPT code 94640 describes nebulizer therapy,

and CPT code 71020-TC describes the technical component of a two-view

chest X-ray. The 1999 Medicare payment for the physician’s interpretation

of the X-ray (71020-26) is determined under the Medicare physician fee

schedule, and the 1999 Medicare payment for CPT codes 80198 (assay for

theophylline), 82803 (arterial blood gases), and 85025 (automated

complete blood differential) are determined under the Medicare clinical

laboratory fee schedule. Finally, there is no payment for HCPCS code

G0001 in a hospital setting. The total Medicare payment for a patient

diagnosed in a hospital emergency room with asthma is $442.84. The

average patient uses an emergency room 0.117 times per year. This yields

an average annual cost of $51.81 per patient for emergency room visits.

Link to Table IV.2-5
Chapter IV.2 IV.2-61 Cost of Asthma

Table IV.2-13: Cost of Emergency Room Care

Procedure CPT Code

CPT

Description Status Source APC

APC

Description

Proposed

APC Relative

Weight

Proposed

APC

Conversion

Factor 1999 RVUs

1999

Physician

Conversion

Factor

1999

Medicare

Payment

Chest

Radiological

Examination

71020-PC Chest X-Ray, 2

Views,

Professional

Physician Fee

Schedule

0.33 $34.73 $11.00

Routine

Venipuncture

71020-TC Chest X-Ray, 2

Views,

Technical

X Hospital

Outpatient

PPS

700Plain Film 0.80 $51.42 $41.00

Blood Gas

Oximetry

80198 Assay for

Theophylline

A Clinical Lab

Fee Schedule

$19.56

Blood

Theophylline

82803 Blood Gases:

pH, pO2,

pCO2

A Clinical Lab

Fee Schedule

$26.74

Spirometry 85025 Automated

Hemogram

A Clinical Lab

Fee Schedule

$10.74

Complete

Blood Count

90780 IV Infusion

Therapy, 1

Hour

X Hospital

Outpatient

PPS

906Infusion

Therapy

Except Chemo

1.93 $51.42 $99.00

Emergency

Room Charge

94010 Breathing

Capacity Test

X Hospital

Outpatient

PPS

971Level I

Pulmonary

Tests

0.98 $51.42 $50.00

Theophylline IV 94640 Airway

Inhalation

Treatment

S Hospital

Outpatient

PPS

976Pulmonary

Therapy

0.44 $51.42 $23.00

Nebulizer

Therapy

99285 ER Visit, Level

5

V Hospital

Outpatient

PPS

95533High Level ER

Visits/Respirat

ory

3.13 $51.42 $161.00

Physician

Charge

G0001 Drawing Blood

for Specimen

A Not Paid in

Hospital

$0.00

Total $442.84
Chapter IV.2 IV.2-62 Cost of Asthma

IV.2.B.5.3.4 Cost of Inpatient Hospital Care for the Average

Patient

Hospitalization costs are determined by the specific diagnosis that is

provided for the patient. The standard form of these diagnoses is the

International Classification of Disease codes: ICD-9. Medicare payment

for inpatient hospital services is determined under the Medicare hospital

inpatient prospective payment system. Under this system, reimbursement is

based on the principal and secondary ICD-9-CM diagnosis and procedure

codes, and the age and sex of the patient.

1999 Medicare payment reimbursement values are provided for hospital

patients with the following principal ICD-9-CM diagnoses:

493.00—Extrinsic Asthma Without Status Asthmaticus

493.01—Extrinsic Asthma With Status Asthmaticus

493.10—Intrinsic Asthma Without Status Asthmaticus

493.11—Intrinsic Asthma With Status Asthmaticus

493.90—Unspecified Asthma Without Status Asthmaticus

493.91—Unspecified Asthma With Status Asthmaticus

There are three DRGs for patients diagnosed with asthma:

DRG 96—Bronchitis & Asthma Age > 17 With Complications

DRG 97—Bronchitis & Asthma Age > 17 Without Complications

DRG 98—Bronchitis & Asthma Age 0-17

Information was not available on the percentage of patients admitted with

asthma complications that are directly related to asthma. Those that are

unrelated would not have costs attributable to asthma. For this analysis, it

is assumed that “asthma without complications” as listed above is relevant (

DRG 96). Costs for DRG 97 are provided to demonstrate the cost range

that may occur with complications. For children (ages 0 to 17) the

Medicare reimbursement system does not make a distinction between

patients with and without complications. 

As shown above, the reimbursements also differ for children (ages 0 to 17)

and adults. The distribution of hospitalizations between children and adults

was estimated using the data from CDC (1998a) regarding the number of

hospitalizations for different age groups for the years 1993-1994. The

percentage of hospital visits made by children (through age 17)

was 37.71 percent (rounded to 38 percent), with the balance of admissions

for adults (62 percent).

Generally, payment is determined as the product of the relative weight for

the DRG to which the patient is assigned and a national standardized

operating and capital amount. There are separate national standardized

operating amounts for large urban areas and other areas. The labor-related

portion of the national standardized operating amount is usually adjusted
Chapter IV.2 IV.2-63 Cost of Asthma

by the Medicare wage index for inpatient hospital services, based on the

MSA in which the hospital is located. We did not adjust the national

standardized operating amounts because we are developing national cost

estimates. Medicare does not provide a single national value, but instead

provides two values, one for urban areas (metropolitan statistical areas)

and one for non-urban areas. Although information is not available on the

distribution of asthma hospitalizations geographically, the problem of

asthma hospitalizations in urban areas is well-recognized. The values for

urban hospitals are therefore used in this analysis. 

Table IV.2-14 lists the 1999 Medicare payment for a patient assigned to

DRGs 96, 97, or 98 as $3,531.13, $2,648.68, or $3,111.38, respectively, in

large urban areas; and $3,338.59, $2,504.26, or $2,941.73, respectively, in

other areas. Using the urban area values, an age-weighted cost based on

the percentage distribution discussed above can be calculated:

38% × $3111,38 + 62% × $2648.68 = $2824.50.

The average hospitalization cost is estimated to be $2,824.50. This cost is

combined with the average rate of hospitalizations for asthma patients of

0.034 per year to yield an estimated annual hospitalization cost of $99.43

per patient.
Chapter IV.2 IV.2-64 Cost of Asthma

Table IV.2-14: Asthma: Cost of Inpatient Hospital Care

DRG DRG Description

ICD-9 Diagnosis

Codes

DRG

Relative

Weight

National

Standardized

Operating

Amount for

Large Urban

Areas

National

Standardized

Capital

Amount

DRG

Payment for

Operating

and Capital

for Large

Urban Areas

National

Standardized

Operating

Amount for

Other Areas

National

Standardized

Capital

Amount

DRG

Payment for

Operating

and Capital

for Other

Areas

96

Bronchitis & Asthma Age

> 17 With Complications

493.00, 493.01,

493.10, 493.11,

493.90, 493.91 0.7891 $4,096.83 $378.05 $3,531.13 $3,852.83 $378.05 $3,338.59

97

Bronchitis & Asthma Age

> 17 Without

Complications

493.00, 493.01,

493.10, 493.11,

493.90, 493.91 0.5919 $4,096.83 $378.05 $2,648.68 $3,852.83 $378.05 $2,504.26

98

Bronchitis & Asthma Age

0-17

493.00, 493.01,

493.10, 493.11,

493.90, 493.91 0.6953 $4,096.83 $378.05 $3,111.38 $3,852.83 $378.05 $2,941.73
Chapter IV.2 IV.2-65 Cost of Asthma

IV.2.B.5.3.5 Annual Costs for the Average Patient

The total annual medical costs for the average asthma patient sum the costs

of office visits, drug therapy, emergency room use, and hospitalizations. 

These costs, as discussed in the text above, are summarized in Table IV.2-

15. The are derived by multiplying the cost of each service times the rate

of utilization per patient in a given year. Note that the costs for drug

therapy and hospitalization change during childhood; the differing costs are

presented at the end of the table.

IV.2-15: Summary of Average Annual Costs for the

Average Patient (undiscounted)

Treatment and Service Cost (1999$)*

Office Visits 131.36

Drug Therapy**: 

ages 4 and 5

ages 6 to 75

472.20

615.94

Emergency Room Use: 51.81

Hospitalization:

 ages 4 to 17

 ages 18 to 75

105.79

90.06

Total:

ages 4 to 5

ages 6 to 17 

ages 18 to 75

761.16

904.90

889.17

* The costs are as listed in previous tables The costs for all services

are in 1999 dollars, based on Medicare reimbursement amounts. The

drug costs are taken from the 1998 Red Book (Red Book, 1998) and

were not adjusted because the CPI for this year is not yet available. 

**Includes an average annual $0.80 for use of a nebulizer.

IV.2.B.5.4 Costs for the High-use Patient

The cost categories for the high-use patient are the same as those for the

average patient: office visits, drug therapy, emergency room use, and

hospitalizations. As discussed above, the annual cost of drug therapy for

high-use patients is assumed to be the same as for the average patient, even

though the actual use of specific drugs (long-term versus short-acting) is

expected to differ. The cost of nebulizers are higher, on average, than for

average patients, because the proportion of severe asthmatics in the highuse group is higher than among all asthmatics (1 in 6 versus 1 in 20). The

annual average cost of a nebulizer, used only by severe asthmatics, is

greater than for the average asthmatic ($2.66 per year, averaged over all

high-use asthmatics, versus $0.80 per year averaged over all asthmatics),

yielding an annual estimated drug cost of $474.06 for children ages four

and five and $617.80 for those over age five.
Chapter IV.2 IV.2-66 Cost of Asthma

The costs per service in the other categories (e.g., emergency room visit)

are assumed to be the same for the average patient and for the high-use

patient. The frequency of utilization of each type of service is different, as

discussed above and as shown in Table IV.2-3. The costs of a

hospitalization are calculated for two separate age categories (ages 0-17,

and ages over 17), as are the costs of drug therapy (ages 4 and 5, and ages

over 5). As discussed above, the annual cost in each category is derived

by multiplying the cost of each service by the rate of utilization of the

service (i.e., the average number of times the service is used per year per

high-use patient). The utilization rates used in these calculations are given

in Table IV.2-3. The total annual costs for the high-use patient are shown

in Table IV.2-16.

Link to Table IV.2-3.

Table IV.2-16: Total Annual Costs for the High-use Asthma

Patient

Treatment and Service Cost (in 1999$)

Office Visits 648.66

Drug Therapy*

ages 4 to 5

ages 6 to 75

474.06

617.80

Emergency Room Use 736.45

Hospitalization

ages 4 to 17

ages 18 to 75

2,276.18

1,937.69

Total

ages 4 -5 

ages 6 to 17

ages 18 to 75

4,135.35

4,279.09

3,940.60

*Includes an annual average $2.66 for use of a nebulizer.

The costs for each age group among high-use patients are more than five

times the corresponding costs for the average patients described in the

previous section. This difference reflects the much higher use of expensive

services, such as emergency rooms and hospitals, and the increased number

of office visits.

IV.2.B.6. Summary of Lifetime Costs

Lifetime costs are those direct medical costs incurred by the patient from

the average age of diagnosis of the disease (four years in this case) to the

average age of death of 75 years. The medical costs relevant to each age

were summed over the ages 4 to 75 to calculate the estimated lifetime

direct medical costs. 
22 While the impact of mortality and an associated reduction in medical costs is small on an individual

basis, there are a substantial number of deaths when the rate is considered in light of the entire asthmatic

population. Consequently, it would be useful to consider the VSL with the mortality statistics if benefits

evaluations were being carried out. 

Chapter IV.2 IV.2-67 Cost of Asthma

As discussed in the prognosis section (Section IV.2.A.5), approximately 30

percent of asthma patients become asymptomatic as they move into

adulthood. For this analysis it is assumed that these patients will not incur

costs beyond their seventeenth year, although in practice there is a range of

ages entering adulthood when people become asymptomatic. The

remaining 70 percent of asthma patients are assumed to have the disease

throughout their life. It is not assumed that high-use patients will go into

asthma remission because : 1) they are based on a higher risk group

(moderate and severe asthmatics), and 2) their disease has not been

carefully managed (by definition) and their increased use of acute services

indicates a higher number of asthma episodes. As discussed in Section

IV.2.A, the repeated episodes that occur when asthma is not carefully

managed are likely to lead to permanent adverse structural changes in the

respiratory system, which is likely to cause this group to have a higher

requirement for ongoing medical care.

Link to Section IV.2.A.5

The death rate among asthma patients in 1994 was 0.0004 per patient. 

Mortality from asthma occurs primarily among the elderly. The impact of

deaths on costs is not considered in this analysis due to the very small

percentage of patients who die of this disease, the advanced age at which

people typically die of asthma (and therefore the very small reduction in

cost associated with death), and the impact that discounting has in

minimizing costs attributable many decades in the future.22 Unfortunately,

there are also deaths that occur among children and young adults. A

precise age distribution is not available for asthma-associated deaths, and

asthma mortality was not evaluated in this analysis due to its rarity.

Table IV.2-17 shows the lifetime costs estimated to occur for asthmatic

patients both as an undiscounted cost and at discount rates of three, five,

and seven percent. 

Table IV.2-17: Lifetime Direct Medical Costs for Asthma (in 1999$)

Patient Category Undiscounted 3% 5% 7%

Average patient $49,099 $22,447 $15.974 $12.242

High-use Patients $220,026 $101,459 $72,342 $56,411
23 Numerous parameters that could be evaluated in a sensitivity analysis are presented in the Uncertainty

Analysis section that follows (IV.2.D). Feedback is sought from reviewers on which specific parameters

would be of interest. The calculation of costs is carried out through spreadsheets that can be modified

easily for most parameters to evaluate sensitivity to altering assumptions and other inputs.

Chapter IV.2 IV.2-68 Cost of Asthma

The undiscounted costs for the average patient are approximately $50,000

over the average lifespan. For the hypothetical high-use patient, the

lifetime costs are approximately $220,000.

Data reviewed for this analysis suggest that high-use patients are likely to

be people in lower socioeconomic groups, in urban areas, and often

minorities. The need for acute care and the medical costs borne by these

people is considerably higher than for the average asthmatic. Conversely,

improvements in their disease management and reductions in the

occurrence or severity of disease will result in substantial reductions in

costs, as well a concurrent reduction in pain and suffering, disability, and

lost school time. The sensitivity analysis that follows is an evaluation of

the potential impacts on costs of interventions designed to improve asthma

management. 

IV.2.C. Sensitivity Analysis

Many aspects of this cost analysis for asthma could be considered in a

sensitivity analysis. A single aspect has been selected for evaluation at this

time (additional evaluations may be done at a future date).23 As discussed

previously, there are substantial costs associated with acute care required

by patients who are not able to follow an optimal management plan for the

disease. This difficulty in following an optimal plan may be due to the

medical care provided, access to care, patient understanding, or other

factors. Studies of service utilization among high-use patients cited in the

preceding sections evaluated the impact of education and guidance

designed to improve asthma management by patients. These interventions

had a substantial impact on service utilization (as shown in Table IV.2-3

above). This sensitivity analysis considers the medical costs incurred by

those patients after intervention. This analysis provides an alternative cost

estimate for moderate and severely affected patients, as well as

demonstrating the potential efficacy of programs that assist asthma patients

in managing their disease.

Link to Table IV.2-3

The data from Table IV.2-3 were used as a source of utilizations rates,

taking the average values across studies from the “after intervention”

columns for office visits, emergency room visits, and hospitalizations. It

was assumed that drug therapy costs would not change (although the use

of specific drugs is likely to change). 
Chapter IV.2 IV.2-69 Cost of Asthma

Table V.2-18: Total Annual Costs for the High-use Asthma

Patient After Intervention

Treatment and Service Cost (1999$)

Office Visits 572.81

Drug Therapy*

ages 4 to 5

ages 6 to 75

474.06

617.80

Emergency Room Use 249.47

Hospitalization

ages 4 to 17

ages 18 to 75

624.41

531.55

Total

ages 4 -5 

ages 6 to 17

ages 18 to 75

$1,920.75

$2,064.48

$1,971.63

*Includes an annual average $2.66 for use of a nebulizer

Using the same approach as described above, the costs over the lifespan

were summed to obtain an estimated total lifetime medical cost. The

undiscounted value is $109,281. The various discounted costs are shown

in Table IV.2-19 below.

Table IV.2-19: Lifetime Direct Medical Costs for Asthma Among High-use Patients After

Intervention (in 1999$)

Patient Category Undiscounted 3% 5% 7%

High-use Patients After

Intervention

$109,281 $50,041 $35,569 $27,678

As a comparison of Tables IV.2-18 and IV.2-19 shows, there is a

substantial decrease in costs resulting from interventions that reduce the

use of acute care medical services. There is an approximately $110,000

savings in lifetime medical costs using undiscounted medical cost estimates. 

Even using highly discounted values (at 7%) the savings is approximately

$30,000. 

Additional information on the specific methods used to improve patients’

asthma management can be obtained from the five papers cited in Table

IV.2-3.

Link to Table IV.2-3
Chapter IV.2 IV.2-70 Cost of Asthma

IV.2.D Uncertainty Analysis

There are numerous sources of uncertainty in this cost analysis. They are

discussed throughout the text as assumptions and inputs from various data

sources (e.g., CDC reports). Because these are discussed in detail in the

text, a detailed discussion of the sources of uncertainty is not duplicated in

this section. The sources of uncertainty are summarized in Table IV.2.20. 

The table lists the nature of the uncertainty, the likely impact of the

uncertainty on costs (leading to an over- or underestimate), and the

location in the text where the issue was first discussed. In most cases, it is

unknown whether the impact leads to an overestimate or underestimate of

costs.

Table IV.2-20 Sources of Uncertainty in the Cost Estimates

Source of Uncertainty Expected Impact Location in Chapter

Prevalence and service use statistics from CDC

— extrapolated from surveys

Unknown IV.2.A.1.2

Use of services by high-use patients — based on

five studies

Unknown IV.2.A.1.11

Concurrent Effects Caused by Asthma — not

quantitatively considered in cost analysis

Underestimate Costs IV.2.A.2

Remission rate — may differ at this time. Unknown IV.2.A.5

Specific services provided to patients during

diagnosis, office visits, emergency room use,

and hospitalization — estimated from general

statements in NHLBI and recommendations of

1991 panel 

Unknown IV.2.B.1.2.2

Assumed lifespan of 75 years — based on

Exposure Factors Handbook and an assumption

of minimal asthma mortality

Unknown IV.2.B.2.3

Estimated age of diagnosis of four years Unknown IV.2.A.1.2

Infrequent diagnosis of asthma in children

younger than one year of age — may impact

estimated age of diagnosis

Underestimate IV.2.B.2.1

Diagnostic tests that may be carried out but are

not included in cost estimates

Underestimate IV.2.B.2.2

Distribution of current asthma severity level in

the population — based on 1991 panel

recommendations

Underestimate IV.2.B.2.3

Assumption that average and high-use patients’

drug costs are represented by the profile of drug

use recommended by NHLBI and the specific

drugs selected for cost estimation

Unknown IV.2.B.2.4
Table IV.2-20 Sources of Uncertainty in the Cost Estimates

Source of Uncertainty Expected Impact Location in Chapter

Chapter IV.2 IV.2-71 Cost of Asthma

Assumption that a specific percentage of patients

are referred to a specialist and that they will see

the specialist only once

Underestimate IV.2.B.2.5

Assumption that costs associated with a visit to a

specialist will be the same as an office visit, as

specified

Underestimate IV.2.B.2.5

Assumptions that a level 5 office visits is most

relevant for diagnosis and follow-up care

Overestimate IV.2.B.2.6

Assumption that the Medicare reimbursement

system accurately represents average costs

Unknown IV.2.B.5.2

Assumption that the severity of asthma over the

lifespan doesn’t change, except among 30% who

become symptom-free.

Unknown IV.2.B.

Assumptions regarding the proportion of high-use

patients who have severe versus moderate

asthma — used to estimate drug therapy costs

and visits to specialists

Unknown IV.2.B.5.3.2 — drug

therapy

IV.2.B.2.5 — referral to

specialist

Of the sources listed above, some may have a larger impact than others if

they deviate substantially from the actual experience of the national

population of asthmatics. These generally include those assumptions or

parameters that impact the costs across the board for most services of

patients. They include the assumption that Medicare costs are relevant, the

profile of services described for patients (including diagnostic tests), and

the rate of office visits, emergency room visits, and hospitalizations per

asthmatic. 

The uncertainties described above have either an unknown impact, or, in

most cases, tend to underestimate costs (or have an unknown impact). 

Consequently, this cost estimate should be considered a lower-bound

estimate of costs for the average patient.
Appendix IV.2-A IV.2-A-1 Chemicals Associated with Asthma

APPENDIX IV.2-A. CHEMICALS ASSOCIATED WITH ASTHMA

The toxic chemicals listed in this appendix are a sample of the potential

environmental hazards associated with this diseases (the chemicals with

asterisks are subject to reporting requirements under the Toxics Release

Inventory, Section 313 of the Emergency Planning and Community Rightto-Know Act). Although the tables contain many chemicals associated

with the disease, the list is incomplete for two reasons:

1. It does not include toxicological data from sources other

than HSDB through 1996. The toxicological literature

currently available is vast, and a thorough review was

beyond the scope of this analysis. 

2. The human health effects of many environmental hazards

are unknown, especially at concentrations found in the

environment. 

For these reasons, Table IV.2.A-1 should not be used as a definitive source

of information on the links between chemical hazards and asthma. Rather,

further research should be done by analysts using this handbook to identify

the dose-response relationships between the chemical hazards of concern

and the diseases.

Table IV.2.A-1: Chemicals Associated with Asthma in the Hazardous

Substances Data Bank (HSDB) Human Toxicity Excerpts

(metal compounds are assumed to have characteristics of parent element)

CAS

Number

HSDB

Entry

Revision

Chemical name

811-97-2 2/1/96 1,1,1,2-TETRAFLUOROETHANE

1717-00-6 2/1/96 1,1-DICHLORO-1-FLUOROETHANE*

124-73-2 6/27/96 1,2-DIBROMOTETRAFLUOROETHANE*

76-14-2 6/7/96 1,2-DICHLORO-1,1,2,2-TETRAFLUOROETHANE*

1649-08-7 2/1/96 1,2-DICHLORO-1,1-DIFLUOROETHANE*

624-72-6 2/1/96 1,2-DIFLUOROETHANE

106-50-3 6/24/96 1,4-BENZENEDIAMINE

16245-77-5 1/31/96 1,4-BENZENEDIAMINE SULFATE

762-49-2 2/1/96 1-BROMO-2-FLUOROETHANE

75-68-3 1/26/96 1-CHLORO-1,1-DIFLUOROETHANE*

762-50-5 2/1/96 1-CHLORO-2-FLUOROETHANE

306-83-2 6/7/96 2,2-DICHLORO-1,1,1-TRIFLUOROETHANE*

137-09-7 1/28/96 2,4-DIAMINOPHENOL DIHYDROCHLORIDE

584-84-9 6/11/96 2,4-TOLUENE DIISOCYANATE*

823-40-5 1/27/96 2,6-DIAMINOTOLUENE*

95-55-6 1/27/96 2-AMINOPHENOL
Table IV.2.A-1: Chemicals Associated with Asthma in the Hazardous

Substances Data Bank (HSDB) Human Toxicity Excerpts

(metal compounds are assumed to have characteristics of parent element)

CAS

Number

HSDB

Entry

Revision

Chemical name

Appendix IV.2-A IV.2-A-2 Chemicals Associated with Asthma

151-67-7 5/17/96 2-BROMO-2-CHLORO-1,1,1-TRIFLUOROETHANE

2837-89-0 6/7/96 2-CHLORO-1,1,1,2-TETRAFLUOROETHANE*

496-72-0 1/31/96 3,4-DIAMINOTOLUENE

591-27-5 1/24/96 3-AMINOPHENOL

9000-01-5 1/23/96 ACACIA

37517-30-9 2/1/96 ACEBUTOLOL

315-30-0 6/6/96 ALLOPURINOL

10043-67-1 6/21/96 ALUM, POTASSIUM

7429-90-5 6/21/96 ALUMINUM*

7784-25-0 6/21/96 ALUMINUM AMMONIUM SULFATE

7727-15-3 6/21/96 ALUMINUM BROMIDE

1344-01-0 5/14/96 ALUMINUM CALCIUM SODIUM SILICATE

7446-70-0 3/21/96 ALUMINUM CHLORIDE

7784-18-1 6/21/96 ALUMINUM FLUORIDE

21645-51-2 6/6/96 ALUMINUM HYDROXIDE

13473-90-0 6/21/96 ALUMINUM NITRATE

1344-28-1 6/21/96 ALUMINUM OXIDE*

20859-73-8 3/21/96 ALUMINUM PHOSPHIDE*

15096-52-3 6/24/96 ALUMINUM SODIUM FLUORIDE

10102-71-3 6/21/96 ALUMINUM SODIUM SULFATE

10043-01-3 6/21/96 ALUMINUM SULFATE

1951-25-3 5/14/96 AMIODARONE

16919-58-7 5/10/96 AMMONIUM CHLOROPLATINATE

26787-78-0 7/11/96 AMOXICILLIN

69-53-4 7/11/96 AMPICILLIN

77-02-1 1/26/96 APROBARBITAL

68844-77-9 2/1/96 ASTEMIZOLE

1302-78-9 7/11/96 BENTONITE

65-85-0 3/21/96 BENZOIC ACID

353-59-3 4/18/96 BROMOCHLORODIFLUOROMETHANE*

75-63-8 6/11/96 BROMOTRIFLUOROMETHANE*

125-40-6 6/6/96 BUTABARBITAL

2611-82-7 5/14/96 C..I ACID RED 18

4697-36-3 7/11/96 CARBENICILLIN

25953-19-9 7/11/96 CEFAZOLIN

15686-71-2 7/11/96 CEPHALEXIN

76-15-3 7/22/96 CHLOROPENTAFLUOROETHANE

63938-10-3 8/14/95 CHLOROTETRAFLUOROETHANE*

7738-94-5 6/18/96 CHROMIC ACID

10101-53-8 6/18/96 CHROMIC SULFATE

1308-31-2 6/3/96 CHROMITE

25402-06-6 5/14/96 CINERIN I

121-20-0 5/14/96 CINERIN II
Table IV.2.A-1: Chemicals Associated with Asthma in the Hazardous

Substances Data Bank (HSDB) Human Toxicity Excerpts

(metal compounds are assumed to have characteristics of parent element)

CAS

Number

HSDB

Entry

Revision

Chemical name

Appendix IV.2-A IV.2-A-3 Chemicals Associated with Asthma

15663-27-1 5/13/96 CIS-DIAMINEDICHLOROPLATINUM

61-72-3 7/11/96 CLOXACILLIN

7440-48-4 6/21/96 COBALT*

13426-91-0 5/3/96 CUPRIETHYLENEDIAMINE

973-21-7 1/21/96 DESSIN

334-88-3 6/24/96 DIAZOMETHANE*

90454-18-5 6/7/96 DICHLORO-1,1,2-TRIFLUOROETHANE*

75-71-8 5/9/96 DICHLORODIFLUOROMETHANE*

34077-87-7 6/7/96 DICHLOROTRIFLUOROETHANE*

3116-76-5 7/11/96 DICLOXACILLIN

2425-06-1 4/23/96 DIFOLATAN

75847-73-3 5/14/96 ENALAPRIL

51-79-6 5/11/96 ETHYL CARBAMATE

107-15-3 5/14/96 ETHYLENEDIAMINE

69409-94-5 5/14/96 FLUVALINATE*

50-00-0 7/11/96 FORMALDEHYDE*

111-30-8 7/11/96 GLUTARALDEHYDE

5051-62-7 2/1/96 GUANABENZ

354-23-4 6/7/96 HCFC-123a *

812-04-4 6/7/96 HCFC-123b*

354-25-6 6/7/96 HCFC-124a*

9005-49-6 5/11/96 HEPARIN

757-58-4 1/19/96 HEXAETHYLTETRAPHOSPHATE

822-06-0 5/17/96 HEXAMETHYLENE DIISOCYANATE*

53-86-1 1/26/96 INDOMETHACIN

4098-71-9 6/3/96 ISOPHORONE DIISOCYANATE*

16853-85-3 5/10/96 LITHIUM ALUMINUM HYDRIDE

108-31-6 6/3/96 MALEIC ANHYDRIDE*

1344-43-0 7/11/96 MANGANOUS OXIDE

61-68-7 1/26/96 MEFENAMIC ACID

100-97-0 1/19/96 METHENAMINE

61-32-5 7/11/96 METHICILLIN

 101-68-8 6/24/96 METHYLENEBIS(4-PHENYLISOCYANATE)*

142-47-2 5/10/96 MONOSODIUM GLUTAMATE

57-27-2 7/11/96 MORPHINE

147-52-4 7/11/96 NAFCILLIN

9006-04-6 2/1/96 NATURAL RUBBER

7440-02-0 6/21/96 NICKEL*

373-02-4 6/21/96 NICKEL ACETATE*

15699-18-0 6/21/96 NICKEL AMMONIUM SULFATE*

3333-67-3 6/21/96 NICKEL CARBONATE*

7718-54-9 6/21/96 NICKEL CHLORIDE*

557-19-7 6/21/96 NICKEL CYANIDE*
Table IV.2.A-1: Chemicals Associated with Asthma in the Hazardous

Substances Data Bank (HSDB) Human Toxicity Excerpts

(metal compounds are assumed to have characteristics of parent element)

CAS

Number

HSDB

Entry

Revision

Chemical name

Appendix IV.2-A IV.2-A-4 Chemicals Associated with Asthma

15843-02-4 6/21/96 NICKEL FORMATE*

12054-48-7 6/21/96 NICKEL HYDROXIDE*

13138-45-9 6/21/96 NICKEL NITRATE*

7786-81-4 6/21/96 NICKEL SULFATE*

10102-44-0 7/11/96 NITROGEN DIOXIDE*

95-54-5 6/6/96 O-PHENYLENEDIAMINE

20816-12-0 6/6/96 OSMIUM TETROXIDE*

79-57-2 1/26/96 OXYTETRACYCLINE

101-54-2 1/23/96 P-AMINODIPHENYLAMINE

51-78-5 1/23/96 P-AMINOPHENOL HYDROCHLORIDE

61-33-6 7/11/96 PENICILLIN G

87-08-1 7/11/96 PENICILLIN V

132-98-9 7/11/96 PENICILLIN VK

354-33-6 2/1/96 PENTAFLUOROETHANE

53910-25-1 2/1/96 PENTOSTATIN

132-93-4 7/11/96 PHENETHICILLIN POTASSIUM

50-33-9 1/26/96 PHENYLBUTAZONE

85-44-9 6/24/96 PHTHALIC ANHYDRIDE*

110-85-0 1/21/96 PIPERAZINE

142-64-3 6/6/96 PIPERAZINE HYDROCHLORIDE

51-03-6 6/6/96 PIPERONYL BUTOXIDE*

10025-65-7 5/14/96 PLATINOUS CHLORIDE

7440-06-4 6/6/96 PLATINUM

13454-96-1 6/6/96 PLATINUM TETRACHLORIDE

50-24-8 1/26/96 PREDNISOLONE

121-21-1 5/14/96 PYRETHRIN I

121-29-9 5/14/96 PYRETHRIN II

8003-34-7 6/24/96 PYRETHRUM

50-54-4 5/14/96 QUINIDINE SULFATE

130-95-0 6/6/96 QUININE

36791-04-5 2/1/96 RIBAVIRIN

9009-86-3 1/27/96 RICIN

1302-42-7 6/21/96 SODIUM ALUMINATE

13770-96-2 5/10/96 SODIUM ALUMINUM HYDRIDE

7785-88-8 5/10/96 SODIUM ALUMINUM PHOSPHATE

7631-90-5 7/11/96 SODIUM BISULFITE

7681-57-4 7/11/96 SODIUM METABISULFITE

1344-06-5 5/10/96 SODIUM PHOSPHOALUMINATE

9000-36-6 1/21/96 STERCULIA GUM

17784-12-2 1/26/96 SULFACYTINE

7704-34-9 1/28/96 SULFUR

7446-09-5 6/11/96 SULFUR DIOXIDE

115-44-6 1/26/96 TALBUTAL
Table IV.2.A-1: Chemicals Associated with Asthma in the Hazardous

Substances Data Bank (HSDB) Human Toxicity Excerpts

(metal compounds are assumed to have characteristics of parent element)

CAS

Number

HSDB

Entry

Revision

Chemical name

Appendix IV.2-A IV.2-A-5 Chemicals Associated with Asthma

117-08-8 1/26/96 TETRACHLOROPHTHALIC ANHYDRIDE

26839-75-8 2/1/96 TIMOLOL

26471-62-5 5/14/96 TOLUENE DIISOCYANATE*

95-80-7 7/22/96 TOLUENE-2,4-DIAMINE

25376-45-8 1/31/96 TOLUENE-AR,AR'-DIAMINE

9000-65-1 1/23/96 TRAGACANTH GUM

14913-33-8 5/13/96 TRANS-DIAMMINEDICHLOROPLATINUM

75-69-4 6/11/96 TRICHLOROFLUOROMETHANE*

84-96-8 TRIMEPRAZINE

12035-72-2 6/21/96 TRINICKEL DISULFIDE

1314-62-1 6/11/96 VANADIUM PENTOXIDE

1Compounds of the metals are assumed to fall under the category of compounds listed in

TRI. 
Appendix IV.2.B IV.2.B-1 Drug Therapies Recommended By NHLBI

APPENDIX IV.2-B. DRUG THERAPIES RECOMMENDED BY NHLBI

Tables IV.2.B-1, IV.2.B-2, IV.2.B-3, and IV.2.B-4 in this appendix list the

drug therapies recommended by NHLBI for adults and children. The tables

were copied directly from the NHLBI guidelines website:

 http://www.nhlbi.nih.gov/index.htm

Link to guidelines

A number of alternative therapies are listed for most situations (e.g., longterm control, quick relief). Data were not available on the distribution of

drugs used among asthma patients. To facilitate calculation of costs, a

single drug for each type of therapy was selected for most situations, based

on those that were most commonly referenced in the literature. The

exception to this is the long term control medications. While inhaled

corticosteroids are often prescribed for older patients, most children are

initially prescribed cromolyn or nedocromil, so costs of the two different

groups of medications were considered for the two different age groups. 

The drug therapy used to calculate costs is shown in italics in the tables

that follow. In practice, physicians may choose any of the alternative drug

therapies, depending on the specific characteristics of the medication and

the patient.

The dosages specified in these tables were used to calculate the annual

drug usages and costs. When a range of doses is presented in the tables

(e.g., for methylprednisolone) the midpoint of the range was used to

estimate the average dose. The alternative drug therapies are provided in

this appendix so that the reader can evaluate different alternatives if they

wish. 
Appendix IV.2.B IV.2.B-2 Drug Therapies Recommended By NHLBI

Table IV.2-B-1: Usual Dosages For Long-term-control Medications*

Medication Dosage Form Adult Dose Child Dose Comments

Inhaled Corticosteroids (see Tables IV.2.B-2 and IV.2.B-3)

Systemic Corticosteroids (Applies to all three systemic corticosteroids)

Methylprednisol

one

Prednisolone

Prednisone

2, 4, 8, 16, 32

mg

tablets

5mg tablets,

5mg/5 cc,

15mg/5 cc

1, 2.5, 5, 10, 20,

25 mg tablets;

5 mg/cc, 5mg/5

cc

• 7.5–60 mg daily in

a single dose or qid

as needed for

control

• Short-course

“burst”: 40–60 mg

per day as single or

2 divided doses for

3–10 days

• 0.25–2 mg/kg

daily in single

dose or qid as

needed for

control

• Short course

“burst”: 1–2

mg/kg/day, 

maximum 60

mg/day, for 3–10

days

• For long-term treatment

of severe persistent

asthma, administer single

dose in a.m. either daily

or on alternate days

(alternate-day therapy

may produce less adrenal

suppression). If daily

doses are required, one

study suggests improved

efficacy and no increase

in adrenal suppression

when administered at

3:00 p.m. (Beam et al.

1992).

• Short courses or “bursts”

are effective for

establishing control when

initiating therapy or during

a period of gradual

deterioration.

• The burst should be

continued until patient

achieves 80% PEF

personal best or

symptoms resolve. This

usually requires 3-10

days but may require

longer treatment. There is

no evidence that tapering

the dose following

improvement prevents

relapse.
Table IV.2-B-1: Usual Dosages For Long-term-control Medications*

Medication Dosage Form Adult Dose Child Dose Comments

Appendix IV.2.B IV.2.B-3 Drug Therapies Recommended By NHLBI

Cromolyn and Nedocromyl

Cromolyn MDI 1 mg/puff

Nebulizer

solution

20 mg/ampule

2–4 puffs tid-qid

1 ampule tid-qid

1–2 puffs tid-qid

1 ampule tid-qid

• One dose prior to

exercise or allergen

exposure provides

effective prophylaxis for

1–2 hours.

Nedocromil MDI 1.75

mg/puff

2–4 puffs bid-qid 1–2 puffs bid-qid • See cromolyn above.

Long-Acting beta2 Agonists

Salmeterol Inhaled

MDI 21

mcg/puff,

60 or 120 puffs

DPI 50 mcg/

blister

2 puffs q 12 hours

1 blister q 12

hours

1–2 puffs q 12

hours

1 blister q 12

hours

• May use one dose nightly

for symptoms.

• Should not be used for

symptom relief or for

exacerbations.

SustainedRelease

Albuterol

Tablet

4 mg tablet

4 mg q 12 hours 0.3–0.6

mg/kg/day, not to

exceed 8 mg/day

Methylxanthines

Theophylline Liquids,

sustainedrelease

tablets, and

capsules

Starting dose 10

mg/kg/day up to

300 mg max;

usual max 800

mg/day

Starting dose 10

mg/kg/day; usual

max:

• <1 year of age:

0.2 (age in

weeks) + 5 =

mg/kg/day

• $1 year of age:

16 mg/kg/day

• Adjust dosage to achieve

serum concentration of

5–15 mcg/mL at steadystate (at least 48 hours on

same dosage).

• Due to wide interpatient

variability in theophylline

metabolic clearance,

routine serum

theophylline level

monitoring is important.

• See factors on page 87

that can affect levels.
Table IV.2-B-1: Usual Dosages For Long-term-control Medications*

Medication Dosage Form Adult Dose Child Dose Comments

Appendix IV.2.B IV.2.B-4 Drug Therapies Recommended By NHLBI

Leukotriene Modifiers

Zafirlukast 20 mg tablet 40 mg daily

(1 tablet bid)

• For zafirlukast,

administration with meals

decreases bioavailability;

take at least 1 hour

before or 2 hours after

meals.

Zileuton 300 mg tablet

600 mg tablet

2,400 mg daily

(two 300 mg

tablets or one 600

mg tablet, qid)

• For zileuton, monitor

hepatic enzymes (ALT).

* q indicates “every”, bid indicates “twice a day,” tid indicates “three times a day,” qid indicates “four times a day.”
Appendix IV.2.B IV.2.B-5 Drug Therapies Recommended By NHLBI

Table IV.2.B-2: Estimated Comparative Daily Dosages For Inhaled Corticosteroids

Drug Low Dose Medium Dose High Dose

Adults

Beclomethasone

dipropionate

42 mcg/puff

84 mcg/puff

168-504 mcg

(4-12 puffs — 42 mcg)

(2-6 puffs — 84 mcg)

504-840 mcg

(12-20 puffs — 42 mcg)

(6-10 puffs — 84 mcg)

>840 mcg

(>20 puffs — 42 mcg)

(>10 puffs — 84 mcg)

Budesonide

DPI: 200 mcg/dose

200-400 mcg

(1-2 inhalations)

400-600 mcg

(2-3 inhalations)

>600 mcg

(>3 inhalations)

Flunisolide

250 mcg/puff

500-1,000 mcg

(2-4 puffs)

1,000-2,000 mcg

(4-8 puffs)

>2,000 mcg

(>8 puffs)

Fluticasone

MDI: 44, 110, 220

mcg/puff

DPI: 50, 100, 250

mcg/dose

88-264 mcg

(2-6 puffs — 44 mcg)

OR

(2 puffs — 110 mcg)

(2-6 inhalations — 50

mcg)

264-660 mcg

(2-6 puffs — 110 mcg)

(3-6 inhalations — 100

mcg)

>660 mcg

(>6 puffs — 110 mcg)

OR

(>3 puffs — 220 mcg)

(>6 inhalations — 100

mcg) OR

(>2 inhalations — 250

mcg)

Triamcinolone

acetonide

100 mcg/puff

400-1,000 mcg

(4-10 puffs)

1,000-2,000 mcg

(10-20 puffs)

>2,000 mcg

(>20 puffs)

Children

Beclomethasone

dipropionate

42 mcg/puff

84 mcg/puff

84-336 mcg

(2-8 puffs — 42 mcg)

(1-4 puffs — 84 mcg)

336-672 mcg

(8-16 puffs — 42 mcg)

(4-8 puffs — 84 mcg)

>672 mcg

(>16 puffs — 42 mcg)

(>8 puffs — 84 mcg)

Budesonide

DPI: 200 mcg/dose

100-200 mcg 200-400 mcg

(1-2 inhalations — 200

mcg)

>400 mcg

(>2 inhalations — 200

mcg)

Flunisolide

250 mcg/puff

500-750 mcg

(2-3 puffs)

1,000-1,250 mcg

(4-5 puffs)

>1,250 mcg

(>5 puffs)

Fluticasone

MDI: 44, 110, 220

mcg/puff

DPI: 50, 100, 250

mcg/dose

88-176 mcg

(2-4 puffs — 44 mcg)

(2-4 inhalations — 50

mcg)

176-440 mcg

(4-10 puffs — 44 mcg)

OR

(2-4 puffs — 110 mcg)

(2-4 inhalations — 100

mcg)

>440 mcg

(>4 puffs — 110 mcg)

OR

(>2 puffs — 220 mcg)

(>4 inhalations — 100

mcg) OR

(>2 inhalations — 250

mcg)

Triamcinolone

acetonide

100 mcg/puff

400-800 mcg

(4-8 puffs)

800-1,200 mcg

(8-12 puffs)

>1,200 mcg

(>12 puffs)
Appendix IV.2.B IV.2.B-6 Drug Therapies Recommended By NHLBI

Table IV.2.B-3: Usual Dosages for Quick-relief Medications*

Medication Dosage Form Adult Dose Child Dose Comments

Short-Acting Inhaled Beta2 -Agonists

MDI

Albuterol

Albuterol

HFA

Bitolterol

Pirbuterol

Terbutaline

90 mcg/puff, 200 puffs

90 mcg/puff, 200 puffs

370 mcg/puff, 300 puffs

200 mcg/puff, 400 puffs

200 mcg/puff, 300 puffs

•2 puffs 5

minutes prior

to exercise

•2 puffs tid-qid

prn

• 1-2 puffs 5

minutes prior

to exercise

 • 2 puffs tidqid prn

•An increasing use or lack of expected effect

indicates diminished control of asthma.

•Not generally recommended for long-term

treatment. Regular use on a daily basis indicates

the need for additional long-term-control therapy.

•Differences in potency exist so that all products

are essentially equipotent on a per puff basis.

•May double usual dose for mild exacerbations.

•Nonselective agents (i.e., epinephrine,

isoproterenol, etaproterenol) are not

recommended due to their potential for excessive

cardiac stimulation, especially in high doses.

DPI

Albuterol

Rotahaler

200 mcg/capsule 1-2 capsules

4-6

hours as

needed and

prior to

exercise

1 capsule 4-6

hours

as needed and

prior to

exercise

Albuterol Nebulizer solution

5 mg/mL (0.5%)

1.25-5 mg

(.25-1 cc)

in 2-3 cc of

saline q

4-8 hours

0.05 mg/kg

(min 1.25

mg, max 2.5

mg) in

2-3 cc of saline

q 4-6

hours

May mix with cromolyn or ipratropium nebulizer

solutions. May double dose for mild exacerbations.

Bitolterol 2 mg/mL (0.2%) 0.5-3.5mg

(.25-1 cc)

in 2-3 cc of

saline q 4-

8 hours

Not established May not mix with other nebulizer solutions.

Anticholinergics

MDI

Ipratropium 18 mcg/puff, 200 puffs

Nebulizer solution

.25 mg/mL (0.025%)

2-3 puffs q 6

hours

0.25 mg q 6

hours

1-2 puffs q 6

hours

0.25-0.5 mg q

6 hours

Evidence is lacking for anticholinergics producing

added

benefit to beta2 -agonists in long-term

asthma therapy.
Table IV.2.B-3: Usual Dosages for Quick-relief Medications*

Medication Dosage Form Adult Dose Child Dose Comments

Appendix IV.2.B IV.2.B-7 Drug Therapies Recommended By NHLBI

Systemic Corticosteroids (Applies to all three systemic corticosteroids)

Methylprednisolone

Prednisolone

Prednisone

2, 4, 8, 16, 32 mg

tablets

5 mg tabs, 5 mg/5 cc,

15 mg/5 cc

1, 2.5, 5, 10, 20,

25 mg tabs; 5 mg/cc,

5 mg/5 cc

•Short course

“burst”: 40-60

mg/day as

single or 2

divided doses

for 3-10 days

•Short course

“burst”: 1-2

mg/kg/day,

maximum 60

mg/day, for 3-

10 days

•Short courses or “bursts” are effective for

establishing control when initiating therapy or

during a period of gradual deterioration.

•The burst should be continued until patient

achieves 80% PEF personal best or symptoms

resolve. This usually requires 3-10 days but may

require longer treatment. There is no evidence that

tapering the dose following improvement prevents

relapse.

* “tid qid prn” indicates three to four times per day, according to circumstances; “q” indicates “every.”
Appendix IV.2.B IV.2.B-8 Drug Therapies Recommended By NHLBI

Table IV.2.B-4: Dosages of Drugs for Asthma Exacerbations in Emergency Medical Care or Hospital

Dosages

Medication Adult Dose Child Dose Comments

Inhaled Short-Acting Inhaled Beta2 -Agonists

Albuterol

Nebulizer solution (5

mg/mL)

2.5-5 mg every 20 minutes

for 3 doses, then 2.5-10 mg

every 1-4 hours as needed,

or 10-15 mg/hour

continuously

0.15 mg/kg (minimum dose

2.5 mg) every 20 minutes

for 3 doses, then 0.15-0.3

mg/kg up to 10 mg every 1-

4 hours as needed, or 0.5

mg/kg/hour by continuous

nebulization

Only selective beta2-

agonists are recommended. 

For optimal delivery, dilute

aerosols to minimum of 4

mL at gas flow of 6-8 l/min.

MDI (90 mcg/puff) 4-8 puffs every 20 minutes

up to 4 hours, then every 1-

4 hours as needed

4-8 puffs every 20 minutes

for 3 doses, then every 1-4

hours inhalation maneuver. 

Use spacer/holding

chamber.

As effective as nebulized

therapy if patient is able to

coordinate

Bitolterol

Nebulizer solution (2

mg/mL)

See albuterol dose See albuterol dose; thought

to be half as potent as

albuterol on a mg basis

Has not been studied in

severe asthma

exacerbations. Do not mix

with other drugs.

MDI (370 mcg/puff) See albuterol dose See albuterol dose Has not been studied in

severe asthma

exacerbations. 

MDI (200 mcg/puff) See albuterol dose See albuterol dose; thought

to be half as potent as

albuterol on a mg basis

Has not been studied in

severe asthma

exacerbations. 

Systemic (Injected) Beta2 -Agonists

Epinephrine

1:1000 (1 mg/mL)

0.3-0.5 mg every 20

minutes for 3 doses sq

0.01 mg/kg up to 0.3-0.5 mg

every 20 minutes for 3

doses sq

No proven advantage of

systemic therapy over

aerosol.

Terbutaline

(1 mg/mL)

0.25 mg every 20 minutes

for 3 doses sq

0.01 mg/kg every 20

minutes for 3 doses then

every 2-6 hours as needed

sq

No proven advantage of

systemic therapy over

aerosol.

Anticholinergics

Ipratropium bromide

Nebulizer solution

(.25 mg/mL)

0.5 mg every 30 minutes for

3 doses then every 2-4

hours as needed

.25 mg every 20 minutes for

3 doses, then every 2 to 4

hours

May mix in same nebulizer

with albuterol. Should not

be used as first-line

therapy; should be added to

beta2-agonist therapy.

MDI (18 mcg/puff) 4-8 puffs as needed 4-8 puffs as needed Dose delivered from MDI is

low and has not been

studied in asthma

exacerbations.

Corticosteroids
Table IV.2.B-4: Dosages of Drugs for Asthma Exacerbations in Emergency Medical Care or Hospital

Dosages

Medication Adult Dose Child Dose Comments

Appendix IV.2.B IV.2.B-9 Drug Therapies Recommended By NHLBI

Prednisone

Methylprednisolone

Prednisolone

120-180 mg/day in 3 or 4

divided doses for 48 hours,

then 60-80 mg/day until

PEF reaches 70% of

predicted or personal best

1 mg/kg every 6 hours for

48 hours then 1-2 mg/kg/day

(maximum = 60 mg/day) in

2 divided doses until PEF

70% of predicted or

personal best

For outpatient “burst” use

40-60 mg in single or 2

divided doses for adults

(children: 1-2 mg/kg/day,

maximum 60 mg/day) for 3-

10 days

Note:

• No advantage has been found for higher dose corticosteroids in severe asthma exacerbations, nor is there any advantage for

intravenous administration over oral therapy provided gastrointestinal transit time or absorption is not impaired. The usual

regimen is to continue the frequent multiple daily dosing until the patient achieves an FEV 1 or PEF of 50 percent of predicted or

personal best and then lower the dose to twice daily. This usually occurs within 48 hours. Therapy following a hospitalization or

emergency department visit may last from 3 to 10 days. If patients are then started on inhaled corticosteroids, studies indicate

there is no need to taper the systemic corticosteroid dose. If the follow-up systemic corticosteroid therapy is to be given once

daily, one study indicates that it may be more clinically effective to give the dose in the afternoon at 3:00 p.m., with no increase in

adrenal suppression (Beam et al., 1992).
Appendix IV.2.B IV.2.B-10 Drug Therapies Recommended By NHLBI

Admit to Hospital Ward

•Inhaled beta2-agonist + inhaled

anticholinergic

•Systemic (oral or intravenous) corticosteroid

•Oxygen

•Monitor FEV1 or PEF, O2, saturation, pulse

Admit to Hospital Intensive Care

•Inhaled beta2-agonist hourly or

continuously + inhaled

anticholinergic

•Intravenous corticosteroid

•Oxygen

•Possible intubation and mechanical

ventilation

FEV1 or PEF>50%

•Inhaled beta2-agonist by metered-dose

inhaler or nebulizer, up to three doses in

first hour

•Oxygen to achieve O2 saturation $90%

•Oral systemic corticosteroids if no

immediate response or if patient recently

took oral systemic corticosteroid

Initial Assessment (see figure 3)

History, physical examination (auscultation, use of accessory muscles, heart rate, respiratory rate), PEF or FEV1,

oxygen saturation, and other tests as indicated

FEV1 or PEF<50% (Severe

Exacerbation)

•Inhaled high-dose beta2-agonist

and anticholinergic by nebulization

every 20 minutes or continuously

for 1 hour

•Oxygen to achieve O2 saturation

$90%

•Oral systemic corticosteroid

Impending or Actual Respiratory

Arrest

•Intubation and mechanical

ventilation with 100% O2

•Nebulized beta2-agonist and

anticholinergic

•Intravenous corticosteroid

Repeat Assessment

Symptoms, physical examination, PEF, O2 saturation, other tests as needed

Admit to Hospital Intensive Care

(see box below)

Moderate Exacerbation

FEV1 or PEF 50-80% predicted/personal best

Physical exam: moderate symptoms

•Inhaled short-acting beta2-agonist every 60 minutes

•Systemiccorticosteroid

•Continue treatment 1-3 hours, provided there is

improvement

Severe Exacerbation

FEV1 or PEF <50% predicted/personal best

Physical exam: severe symptoms at rest, accessory muscle use,

chest retraction

History: high-risk patient

No improvement after initial treatment

•Inhaled short-acting beta2-agonist hourly or continuous + inhaled

anticholinergic

•Oxygen

•Systemic corticosteroid

Incomplete Response

•FEV1 or PEF $50% but <70%

•Mild-to-moderate symptoms

Good Response

•FEV1 or PEF $70%

•Response sustained 60 minutes after last treatment

•No distress

•Physical exam: normal

Poor Response

•FEV1 or PEF <50%

•PCO2 $ 42 mm Hg

•Physical exam: symptoms severe,

Individualized decision re: drowsiness, confusion

hospitalization (see text)

Discharge Home

•Continue treatment with inhaled beta2-

agonist

•Continue course of oral systemic

corticosteroid

•Patient education

— Review medicine use

— Review/initiate action plan

— Recommend close medical followup

Discharge Home

•Continue treatment with inhaled beta2-agonist

•Continue course of oral systemic corticosteroid

•Patient education

— Review medicine use

— Review/initiate action plan

— Recommend close medical followup

Improve

Figure IV.2.B-1: Management of Asthma Exacerbations: Home Treatment

Note:

Patients at high risk of asthma-related death (see table IV.2.B-4) should receive immediate attention clinical attention after initial

treatment.

Additional therapy may be required.
Appendix IV.2.B IV.2.B-11 Drug Therapies Recommended By NHLBI

Table IV.2.B-5: Hospital Discharge Checklist for Patients with Asthma Exacerbations

Intervention Dose/Timing Education/Advice M.D./R.N. Initials

Inhaled medication

(MDI + spacer/holding

chamber)

Beta2-agonist

Corticosteroids

Select agent, dose, and

frequency (e.g., albuterol)

2-6 puffs q 3-4 hr prn

Medium dose

Teach purpose

Teach technique

Emphasize need for

spacer/holding chamber

Check patient technique

Oral medications Select agent, dose, and

frequency (e.g., prednisone

20 mg bid for 3-10 days)

Teach purpose

Teach side effects

Peak flow meter Measure a.m. and p.m. PEF

and record best of three

tries each time.

Teach purpose

Teach technique

Distribute peak flow diary

Follow-up visit Make appointment for

follow-up care with primary

clinician or asthma

specialist

Advise patient (or caregiver)

of date, time, and location of

appointment within 7 days of

hospital discharge

Action plan Before or at discharge Instruct patient (or

caregiver) on simple plan

for actions to be taken when

symptoms, signs, and PEF

values suggest recurrent

airflow obstruction

q indicates “every,” prn indicates “according to circumstances.”
Chapter IV.3 IV.3-1 Acute Respiratory Diseases

CHAPTER IV.3 COST OF ACUTE RESPIRATORY DISEASES:

HYPERSENSITIVITY PNEUMONITIS, HUMIDIFIER FEVER,

AND LEGIONNAIRES’ DISEASE

Clicking on the sections below will take you to the relevant text.

IV.3.A Background

IV.3.B Cost Estimation

IV.3.B.1 Sources

IV.3.B.2 Humidifier Fever

IV.3.B.3 Hypersensitivity Pneumonitis

IV.3.B.4 Legionnaires’ Disease (Legionelliosis)
1

Patients with this disease typically have reduced lung function, although this symptom is often not

evaluated.

Chapter IV.3 IV.3-2 Acute Respiratory Diseases

CHAPTER IV.3 COST OF ACUTE RESPIRATORY DISEASES:

HYPERSENSITIVITY PNEUMONITIS, HUMIDIFIER FEVER,

AND LEGIONNAIRES’ DISEASE

IV.3.A Background

Indoor air contamination in non-industrial buildings has received increased

attention in recent years due to improved understanding of the potential

impact of indoor air quality on the health of residents and workers. Air

pollutants that are known to cause irritation, allergic responses, and

infection are numerous, and vary widely in their potency and in the

responses they elicit. Groups of illnesses that result from exposure to

contaminants in indoor air have been categorized as “sick or tight building

syndrome,” or with other designations that encompass a variety of diseases

and symptoms. Some groups of illnesses have highly specific target

organs. For example, hypersensitivity pneumonitis, which includes over 30

specific diseases, is characterized by specific pathology in the lung. 

This chapter addresses illnesses with a rapid onset that are associated with

indoor air pollutants. At this time, three diseases of this type have been

evaluated for direct medical costs:

• Legionnaires’ disease (Legionelliosis), 

• hypersensitivity pneumonitis, and 

• humidifier fever.

Humidifier fever is included because it is considered by some to be a type

of hypersensitivity pneumonitis, even though the most obvious

symptoms are not respiratory.1

Humidifier fever, hypersensitivity pneumonitis, and Legionelliosis are all

illnesses that have been associated with exposure to allergenic or

pathogenic materials in indoor air. The first two are similar in both cause

and resolution. A variety of allergens can trigger these illnesses, which are

mediated by the immune system, and elimination of exposure can eliminate

the illness. Legionelliosis results from exposure to the bacteria of the

genus Legionella. Antibiotics are effective in eliminating the illness.

Hypersensitivity pneumonitis and humidifier fever share the characteristic

that removal of the patient from the contaminated environment, or removal
2This work was done in conjunction with the work on Chapter V.1, Costs of Symptoms, and shares

a common methodology.

3

For example, hypersensitivity pneumonitis associated with agricultural activities may occur with

other, more serious pathological conditions.

Chapter IV.3 IV.3-3 Acute Respiratory Diseases

of the contaminant from the patient’s environment, is the primary and only

fully effective method of treatment. Symptomatic treatments exist (e.g.,

fever-reducing medications for humidifier fever), but do not provide longterm solutions.

Cost estimates for the three diseases were developed to address specific

requirements of the Indoor Environments Division, which was evaluating

impacts of various indoor air pollutants2. The Agency wanted cost

estimates for these diseases developed on a quick-response basis, in the

absence of other complicating factors or diseases. Consequently, the

methods used to estimate costs were relatively simple and direct. The

usual format of chapters in the Handbook, with considerable detail on

medical definition, causality, susceptibility, prognosis, etc., was not

considered appropriate under the circumstances.

This chapter contains a discussion of incremental direct medical costs

incurred by individuals in whom these diseases occur in response to poor

indoor air quality. The symptoms associated with these diseases could also

result from other causes, but the cost may be different, depending on the

circumstances (indicating differences in underlying pathology)3. The costs

are for a single occurrence of the disease, which can last from one day to a

few months, depending on the disease.

Regulation of ambient air pollutants may result in a reduced number of

individuals with air-related symptoms. Programs to reduce indoor air

pollutants are also crucial in reducing adverse health effects. The benefits

of such activities can be estimated in part by evaluating the direct medical

costs avoided as a result. Some elements of total benefit, such as the

avoided indirect medical costs, willingness to pay to avoid pain and

suffering, the value of lost time of unpaid caregivers, the value of lost

productivity of patients, etc., are not included here. These costs may be

substantial. The direct medical costs presented in this chapter may be

useful in providing a lower-bound measure of total benefit. The reader is

referred to Chapter I.1 for a discussion of direct cost estimation methods

and cost elements that are relevant to all benefits estimates. 
Chapter IV.3 IV.3-4 Acute Respiratory Diseases

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1 and IV.1

Link to inflation factors

IV.3.B Cost Estimation

IV.3.B.1 Sources

Medical costs were estimated for this chapter by:

1) describing the anticipated diagnosis and treatment services using

national guidelines and the medical literature, and 

2) assigning costs to those services, based on current (1999) Medicare

reimbursement values. 

The primary sources consulted to identify medical services were clinical

practice guidelines (AHCPR, 1999; CDC, 1999), medical texts (e.g.,

Bennett and Plum, 1996), and the Medicare reimbursement Federal

Register notices regarding costs (numerous; discussed Chapter IV.2). EPA

also reviewed numerous journal article abstracts, but used these primarily

as supporting information (to confirm other sources). The abstracts are

cited when used as the only source. EPA obtained most information on

medical services from the National Guidelines Clearinghouse

(www.guidelines.gov) developed by clinicians and researchers, which

provides clinical practice guidelines for specific diseases. 

Link to Chapter IV.2

EPA estimated costs of medical services using current (1999) Medicare

reimbursements. The rationale for using this source of cost information is

that it is a national system for medical services reimbursement that

approximates the average cost of medical services in the United States. 

For a more detailed discussion of the use of Medicare information, see

Section B in Chapter IV.2, Medical Costs of Asthma. Supporting

information for medical services came from the medical and economics

literature.

Link to Chapter IV.2, Section B.

EPA estimated medication costs for common, over-the-counter

medications (i.e., those available at both drug and other types of stores

such as groceries and discount stores) using the lowest cost for a generic
Chapter IV.3 IV.3-5 Acute Respiratory Diseases

product, based on prices obtained from a relatively low-cost national

pharmacy chain store on October 27, 1999. EPA preferred prices taken

directly from consumer goods over those taken from an industry source

(e.g., the Red Book) because these are over-the-counter medications and

their consumer prices were readily available directly from the marketplace. 

Since the medications considered are very common (e.g., aspirin) and there

is a high demand for these products, market pressures have made their

prices fairly uniform. Most patients are not expected to pay substantially

higher prices than those used in this analysis. For prescription medications,

the Health Care Financing Authority (HCFA) prices were used.

IV.3.B.2 Humidifier Fever

Humidifier fever, which may be a type of hypersensitivity pneumonitis, is a

hypersensitivity disease that occurs in response to exposure to a variety of

airborne organisms and materials, often organic (EPA, 1999; Mamolen, et

al., 1993). Responses will vary considerably from individual to individual

because it is an immune system-mediated disease. The disease will affect

some but not all individuals who are exposed. Humidifier fever has a

delayed onset of a few hours from the time of exposure and usually is selflimiting. Fever, myalgia, and other symptoms last up to 24 hours. 

Humidifier fever may also cause transient changes in lung function and

white blood cell count, although these changes are not the focus of clinical

evaluation for a single event of a short-term fever. Numerous studies

confirm the short-term nature of the illness and the lack of long-term

effects (Teake et al., 1999; Baur et al., 1988; McSharry et al., 1987;

Edwards, 1980; Philipp, 1983; Belin, et al., 1979; Anderson et al., 1989;

Mamelon et al, 1993; Cockcroft et al., 1981). 

Due to the short-term and mild nature of its effects, individuals with

humidifier fever would not be expected to see a physician when allergic

response first occurs. According to EPA’s Indoor Environments Division

webpage, “It [humidifier fever] normally subsides within 24 hours without

residual effects, and a physician is rarely consulted” (EPA, 1999). The

likely course would be to take one of the following over-the-counter

medications for a maximum of one day: aspirin, ibuprofen, or

acetaminophen. These medications lower fever and lessen pain (e.g., those

associated with myalgia), and are the most commonly used fever-reducing

medications.

If the illness recurs repeatedly, an individual might visit a physician. The

length of the office visit would depend on the patient and physician, and no

estimate is made here of the level of visit that would occur. This report

presents all five levels of both new and established patient visit costs. The

analyst can choose the level determined to be most appropriate. 
Chapter IV.3 IV.3-6 Acute Respiratory Diseases

If a cluster of individuals experienced this illness at the same time (as

reported in the literature), a local or state health department would likely

investigate the cause. The costs of this type of effort are not estimated in

this analysis, but could be substantial as a public sector expense.

Table IV.3-1 provides cost estimates for medications. A 12-hour average

duration of illness was assumed because it is one half, or the midpoint, of

the total potential duration of 24 hours. Table IV.3-1 also lists costs for

the five potential levels of office visits. Using the values in this table, the

costs could range from $0.03 (three cents) for a patient who takes two

doses of aspirin only and does not visit a physician, to $139.02 for a patient

who has an extended new patient visit to a physician’s office (level 5) and

takes acetaminophen for fever and pain. It is not possible to accurately

estimate the average cost, but the literature suggests that most patients

would not see a physician. This assumption would indicate a cost of less

than one dollar for most patients. Patients can incur other costs if they visit

a physician who in turn performs some tests. This alternative appears very

unlikely for a 24-hour fever.

Table IV.3-1. Cost components for humidifier fever

Goods or Service Medicare Code Cost (1999$)

aspirin: 2 doses not applicable 0.03 

acetaminophen: 2 doses not applicable 0.09

ibuprofen: 2 doses not applicable 0.08

office visit: new patient

 level 1

99201 34.73

 level 2 99202 53.53

 level 3 99203 76.06

 level 4 99204 111.14

 level 5 99205 138.93

office visit: established patient 

level 1

99211 16.32

level 2 99212 30.22

level 3 99213 41.68

level 4 99214 63.56

level 5 99215 97.94

If the episodes of humidifier fever are frequent, and humidifier fever is not

diagnosed on the first visit, further investigation by a physician might

include blood tests for white cell counts, tests of delayed hypersensitivity

allergic response, and respiratory function tests. The costs of these tests
Chapter IV.3 IV.3-7 Acute Respiratory Diseases

are not listed above because they are not anticipated. These costs are

described in the next section of this chapter on hypersensitivity pneumonitis

and in Chapter IV.2, submitted on October 22, 1999. Additional office

visits may also occur in response to these symptoms.

Link to Chapter IV.2

Humidifier lung appears to be a more advanced form of this disease,

wherein the response is also seen prominently in the respiratory system

(Bauer et al., 1988).

IV.3.B.3 Hypersensitivity Pneumonitis

This group of similar illnesses encompasses a very large number of different

diseases (Pitcher, 1990), with 30 or more specific diseases defined (Ando

and Suga, 1997). This type of pneumonitis is characterized by diffuse,

predominantly mononuclear inflammation of the lung parenchyma,

particularly the terminal bronchioles and alveoli. Hypersensitivity

pneumonitis may progress to fibrosis under extreme conditions. This

illness is suspected when repeated bouts of influenza-like pneumonitis, or

active interstitial lung disease occur. No single clinical feature or

laboratory test is diagnostic of the disease. In addition to symptoms and

physical findings, X-rays, pulmonary function tests, and immunological

tests are used to diagnose the disease. Numerous immunological tests may

be considered because a large group of potential antigens can cause the

disease. IgG immunoglobulins occur as serum precipitins in the presence

of the causative antigens (CDC, 1996; Pitcher, 1990). 

Hypersensitivity pneumonitis is treated through removal of either 1) the

allergen(s) from the patient’s environment, or 2) the patient from the

contaminated environment (all sources consulted). Treatment may also

involve the use of steroids, such as prednisone (at 40 mg/day in doses of 10

mg for 10 days) to reduce lung inflammation (Pitcher, 1990). Steroid use

is not a long-term solution and is not recommended for the majority of

patients. Only 10 percent of patients are assumed to receive this

medication because routine use of steroids is discouraged (Pitcher, 1990). 

Hypersensitivity pneumonitis is not a bacterial disease, and therefore

requires no antibiotics (unless an infection secondary to hypersensitivity

pneumonitis occurs).

Table IV.3-2 lists the direct medical costs of diagnosis and treatment. The

patient is assumed to have an initial office visit of average duration (level

3), during which a chest X-ray, lung function test, and allergen test for 20

allergens are administered. The patient is assumed to be established,
Chapter IV.3 IV.3-8 Acute Respiratory Diseases

because the nature of IgG allergic responses would likely lead most people

to have seen a physician in the past. Costs are available for new patients

visits and for all level of office visits in Table IV.3-1 above.

Link to Table IV.3-1

Although the diagnosis procedures are fairly well-defined, the average

period of illness prior to disease diagnosis is not described and will vary,

depending on the patient and physician. When not diagnosed and treated,

this disease can cause fever, chills, malaise, dry cough, dyspnea, tiredness,

weight loss, and other effects. If diagnosis is delayed, these effects can

lead to lost work time and the use of over-the-counter medications. 

Table IV.3-2. Cost components for hypersensitivity pneumonitis

Goods and Services Medicare Code Cost (1999$)

office visit: established patient , level 3 99213 41.68

chest X-ray in physician’s office 71020 34.74

allergen tests, delayed type: 20 allergens 95028 8.68 x 20 = 173.60

lung function test 94010 30.56

prednisone (HCFA price) x 10% of patients not applicable 1.80 x 0.1 = 0.18 *

Total 280.76

* The cost of this medication is very low and is assumed to be provided to only 10 percent of patients

(as discussed in the text). The listed cost represents the cost for the full course of treatment.

Patients may be hospitalized if the disease becomes severe. Although no

statistics were located on its probability, hospitalization is unlikely, based

on qualitative information provided in the sources reviewed for this

analysis. Hypersensitivity pneumonitis, aggregated with other types of

interstitial lung diseases as a diagnostically related group (DRG) category

(93), is often not treated as a specific disease in hospitalization information. 

The National Hospital Discharge Database does not make distinctions

among different categories within DRG 93. Additional information may be

obtainable on hospitalization probabilities, but extensive searching and

consulting was not performed due to the quick-turnaround nature of this

task 

If the Agency plans to include hospitalization costs, then the Medicare

hospitalization cost for interstitial lung disease without complications

(DRG 93) can be used. This category maps to the International

Classification of Diseases Code (ICD-9) for hypersensitivity pneumonitis

(495.9). The Medicare reimbursement values for adult hospitalizations are

$3450.58 for urban areas and $3262.43 for rural areas.
4

 Doxycycline, which is somewhat less expensive, was cited as the drug of choice in one paper

(Klein and Cunha, 1998). The authors note, however, that erythromycin is the most commonly used. 

Erythromycin is therefore used in this analysis.

Chapter IV.3 IV.3-9 Acute Respiratory Diseases

IV.3.B.4 Legionnaires’ Disease (Legionelliosis)

Legionnaires’ disease is a respiratory disease caused by the pathogen

Legionella. Patients with this disease may have numerous symptoms, with

fever and pneumonia predominating. The pneumonia is not clinically

distinguishable from the most common type of pneumonia (pneumococcal),

and some cases of Legionnaires’ disease are indistinguishable from other

causes of pneumonia. One to five percent of all pneumonias are estimated

to be due to Legionnaires disease (Edelstein, 1996); many cases of

Legionnaires’ disease may not be diagnosed as such. 

Although a variety of clinical test results may be abnormal, the definitive

diagnosis is made through a positive test for the pathogen Legionella

(Edelstein, 1996; CDC, 1994; CDC, 1997). 

As with hypersensitivity pneumonitis described in this chapter, the period

prior to diagnosis may vary widely, depending on the physician(s)

consulted and patient characteristics. When not diagnosed and treated, the

disease may cause numerous symptoms and lead to lost work time and the

use of over-the-counter medications. The costs associated with delayed

diagnosis are not considered in this analysis.

Diagnostic tools specifically used for Legionnaires’ disease include chest

X-ray and sputum culture for Legionella. Serological testing is primarily

useful for epidemiologists rather than for clinicians, and is not considered in

this analysis. The first choice for therapy is erythromycin, which may be

administered orally, or, when the patient is hospitalized with a serious case,

intravenously. Oral dosage is 500 mg, four times per day for 14 to 21 days

(the average of 18 days was used) (Edelstein, 1996)4. Most patients

respond within one to two days of specific antimicrobial therapy. Fever

may persist for a week, and weeks to months are required to resolve

pulmonary infiltrates. Patients with respiratory failure due to Legionnaires’

disease have a relatively poor prognosis and a much slower recovery

(CDC, 1994). Other antibiotics and therapy regimens may be used to treat

this disease and are likely to incur different costs than those reported in this

chapter.

Table IV.3-3 summarizes the direct medical costs of goods and services

and hospitalization for Legionnaires’ disease. For patients who do not

require hospitalization, costs for a chest X-ray, sputum culture, and

erythromycin are listed with an office visit (level 3, established patient) in

Table IV.3-3 below. 
Chapter IV.3 IV.3-10 Acute Respiratory Diseases

Table IV.3-3 also lists hospitalization costs for the more seriously affected

patients. An office diagnosis may be made prior to hospitalization. Given

the relatively low cost of office visit diagnoses and treatment compared

with hospitalization, the addition of the office visit costs will have a

minimal impact on the overall cost estimate. 

Hospitalization costs should not always be added to the other costs

because they are relevant to a different patient subset. To obtain

hospitalization costs from Medicare reimbursement data, the ICD-9 code

for Legionella (482.4) was mapped to DRG codes 80 and 81 for

hospitalization of adults and children, respectively. Hospitalization costs

vary considerably between adults and children. 

No data were located on the percentage of patients with Legionnaire’s

disease who are hospitalized. Analysts may use the costs in Table IV.3-3

with a proportionate allocation of patients to hospital and non-hospital

treatment, based on their best judgement. The likelihood of hospitalization

varies with many factors, including health status of the patient (i.e., other

respiratory diseases), age, and promptness of diagnosis and treatment.

Table IV.3-3. Cost components for Legionelliosis

Goods and Services Medicare Code Cost (1999$)

office visit: established patient level 3 99213 41.68

chest X-ray, physician’s office 71020 34.74

sputum culture for Legionella

(least expensive culture option)

87278 16.58

erythromycin (HCFA price) not applicable 25.82

Total outpatient care 118.82

Hospitalization DRG Code Cost (1999$)

hospitalization: urban, adult 80 4,093.17

hospitalization urban, child 0 - 17 years 81 6,756.17

hospitalization rural, adult 80 3,869.99

hospitalization: rural, child 0 - 17 years 81 6,387.78
1

Illness and disease are used in this handbook to designate any adverse health condition.

Chapter V.1 V.1-1 Symptoms

CHAPTER V.1 SYMPTOMS

Symptoms are “subjective evidence of a disease or a patient’s condition”

(Dorland’s Medical Dictionary, 1982), and are often the first indication of

an adverse response to environmental pollutants. They may be relatively

mild, such as a slight headache or runny nose, or be much more severe in

nature. Symptoms are of interest because in some cases they are the only

information sources available that describe the adverse response effect to

pollutant exposure. This situation is commonly encountered in the study of

indoor air pollutants, which may elicit a number of symptoms in the

absence of a definitive disease diagnosis. Symptoms that have been linked

to indoor air pollutants are grouped and discussed in Chapter V.2. 

Evaluation of symptoms can be complex because they are not diseases per

se. Symptoms are typically evaluated with other clinical information by a

medical professional to determine an underlying cause. This evaluation

usually results in the diagnosis of a specific illness.1 For example, a sore

throat may be associated with a streptococcal infection, a cold, or a variety

of other causes. A runny nose may be due to a cold, allergies, or some

other cause. When symptoms arise due to a low level physiological

response to a pollutant, however, the patient and the physician may not

determine cause and effect, or may not have the means to eliminate the

source. Consequently, some symptoms occur over long periods of time. 

Symptoms usually incur relatively low medical costs and are often treated

with over-the-counter (OTC) medications, but exceptions exist. An

aggressive medical investigation of a patient’s symptoms and underlying

causes may involve computed tomography (CT) scans, magnetic resonance

imagery (MRIs), and other expensive medical tests. It is difficult to

determine the probability of intensive diagnostic analysis, which introduces

uncertainty into the cost analysis of symptoms. An additional source of

uncertainty is the differing responses of patients to their symptoms. Some

may seek medical attention quickly; others may tolerate headaches,

tiredness, sore throat, and symptoms for a long time without seeking

medical attention, or may use only OTC medications.

As our understanding of symptoms and illnesses associated with

environmental pollutants improves, fewer symptoms may be considered in

isolation — they will be linked to diseases or syndromes that can then be

treated effectively. At this point in time (2000), however, it is useful to

have estimates of some potential costs which may be incurred by people

experiencing symptoms in the absence of obvious disease. This section of

the COI Handbook provides that type of information.
Chapter V.2 V.2-1 Symptom Groups

CHAPTER V.2. SYMPTOM GROUPS

Clicking on the sections below will take you to the relevant text.

V.2.A. Background

V.2.A.1. Symptoms Evaluated

V.2.A.2 Nature of Symptoms

V.2.B. Methods of Cost Estimation

V.2.B.1 Sources

V.2.B.2. Approaches Considered

V.2.B.3 Additional Diagnostic Costs

V.2.B.4 Symptom Treatment Description

V.2.B.5. Cost Estimate Assumptions

V.2.B.6. Cost Estimates for Symptom Groups

Appendix V.2.A. Medication Cost Calculations

Appendix V.2.B. Supplemental Cost Information

Appendix V.2.C. Costs of Allergy Diagnosis and Treatment
11

 Some of these cost elements, especially pain and suffering, may comprise a very large portion of

the benefits of avoiding symptoms. Because these cost elements are difficult to assess, it was not feasible

to estimate them for this chapter.

Chapter V.2 V.2-2 Symptom Groups

CHAPTER V.2. SYMPTOM GROUPS

V.2.A. Background

Many environmental irritants and allergens, whether chemical or biological,

can cause systemic toxicity and irritation of mucous membranes, leading to

pain and related symptoms. The Indoor Environments Division has been

evaluating impacts of various indoor air pollutants. This analysis examines

the direct medical costs of addressing symptom groups, such as eye

irritation, throat irritation and pain, coughing, headaches, and other nonlife-threatening medical conditions, to address the division’s specific

requirements. 

This chapter contains a discussion of the methods used to estimate the

annual direct medical costs of treating specific symptoms in the absence of

serious disease. It does not include information on cost elements such as

indirect medical costs, pain and suffering, lost time, etc.1 The reader is

referred to Chapter I.1 for a discussion of the general methods and cost

elements relevant to all benefits estimates, and for a discussion of the

limitations of estimating medical costs. 

The costs presented in this chapter were current in the year the chapter was

written. They can be updated using inflation factors accessible by clicking

on the sidebar at left.

Link to Chapters I.1

Link to inflation factors

V.2.A.1. Symptoms Evaluated

The symptoms evaluated in this chapter are:

• dry, itching or irritated eyes; 

• headaches; 

• sore or dry throat; 

• unusual tiredness; 

• fatigue or drowsiness; 

• stuffy or runny nose or sinus congestion; and 

• dry or itchy skin. 

The costs of diagnosis and treatment are moderate because these symptoms

are hypothesized in this analysis to result from irritation and allergies. They
2

Illness and disease are used in this handbook to designate any adverse health condition.

Chapter V.2 V.2-3 Symptom Groups

may also indicate, but are not considered in this chapter to be symptoms of,

more serious diseases. In addition to treating the symptoms listed above,

this analysis includes the cost of evaluating allergic responses that may also

trigger these symptoms. The allergic diagnosis and treatment costs may be

applicable to many of the symptom groups for some patients.

This chapter contains a discussion of the annual incremental direct medical

costs incurred by individuals experiencing symptoms assumed to be related

to poor indoor air quality. The symptoms could also result from other

causes but may incur different costs, depending on the circumstances

(indicating differences in underlying pathology). The methods used to

estimate costs are relatively simple and direct because the symptoms are

evaluated under the specified condition that they occur in the absence of

other complicating factors and are not a result of serious diseases. 

Consequently, this chapter does not follow the usual format of chapters in

the Handbook. Many details on medical definition, causality, susceptibility,

prognosis, etc., are omitted because they are not appropriate to this

chapter.

Patients may experience the symptoms for weeks, months, or years. The

costs, presented as annual costs, can be pro-rated for the duration of time

appropriate to the analysis being performed. An exception is made for the

costs of allergy treatment, included here as supplementary information. 

This information includes those costs associated with the usual five-year

course of allergy treatment. This analysis also provides sufficient

information for the reader to calculate allergy treatment costs for periods

other than five years. 

The costs provided in this chapter may be used in a variety of applications;

but the data have limitations. Regulation of air pollutants may result in a

reduced number of individuals with air-related symptoms. Programs to

reduce indoor air pollutants, such as environmental tobacco smoke (ETS),

are also crucial in reducing adverse health effects. The benefits of such

activities can be estimated, in part, by evaluating the direct medical costs

avoided. As noted above, a full measure of cost would also include direct

non-medical costs and indirect costs. The direct medical costs presented in

this chapter may be useful in providing a lower-bound measure of

willingness-to-pay.

V.2.A.2 Nature of Symptoms

As discussed in Chapter V.1 , evaluation of symptoms can be complex

because they are not diseases per se. Symptoms are evaluated with other

clinical information by a medical professional to determine an underlying

cause that usually results in the diagnosis of a specific illness.2 For
Chapter V.2 V.2-4 Symptom Groups

example, a sore throat may be associated with a streptococcal infection, a

cold, or a variety of other causes. Unusual tiredness may be linked to

chronic fatigue syndrome (CFS), anemia, pregnancy, stress, and multiple

other causes. A runny nose may be due to a cold, allergies, or some other

cause. It is not always possible to link the symptoms and clinical data to a

specific disease, and may be very difficult especially in the case of indoor

pollutant-induced symptoms. Many physicians are not familiar with the

potential effects of such pollutants and consequently may not consider

them as a source of the patient’s symptoms.

The difficulties in estimating costs for symptoms are twofold:

1. symptoms related to irritation and allergic responses vary widely in

their severity, from a barely noticeable annoyance to a lifethreatening systematic response; and 

2. the medical literature and system of payments for care is based on

diagnosis of a disease or the cause of the medical visit. 

Cost data are derived from a description of the medical services most likely

to be provided to a patient seen for a specific symptom or array of

symptoms. Determining which services are likely to be provided then

yields reasonable cost estimates. In the specific case of indoor air

pollution, symptoms can be associated with a variety of indoor air quality

problems. Consequently, most cases involve no specific, readily

identifiable disease. It is an open question as to whether physicians could

discern from the patient’s medical history and a physical examination that

the symptoms are the result of indoor air quality problems. If they do not

diagnose the actual cause of the symptoms, and the symptoms persist, the

physician may do a wide variety of tests to try to determine the cause. 

These tests can be very expensive. 

Allergies pose a particular problem, and illustrate the dilemma posed by

symptom cost analysis. Allergies are a common cause of most of the

symptoms listed above. Allergy screening and follow-up allergy

management are relatively expensive when compared with the cost of

treating only the symptoms. In addition, medications to treat allergies may

cause other diseases, which in turn require treatment. The medications

may also cause activity restrictions and limit school and job performance. 

Various components of the immune system mediate many types of

allergies. Due to the complexity of diagnosing and treating allergies,

patients are commonly referred to an allergist when allergies are suspected

by a primary care physician. This chapter provides data on one type of

allergy testing and treatment, IgE-mediated, which is the most common

type of allergy and often causes the symptoms listed above. Its

applicability will depend on the agents responsible for causing the allergy. 
Chapter V.2 V.2-5 Symptom Groups

Symptoms do not necessarily indicate relevance; other types of allergic

responses may cause the same symptoms as those listed. Determining

which allergic responses apply requires a clinical understanding of symptom

induction, likely immune system response (e.g., IgE, IgG), and responses

to various medical tests. The IgE-mediated allergic response is used as an

example in this discussion of allergy testing and treatment costs. Medical

diagnosis and treatment of other types of allergic responses may have

higher or lower costs than those reported in this chapter.

Numerous other difficulties are associated with evaluating the medical

costs of diagnosing and treating symptoms. Evaluating some symptom

groups can result in extensive testing. Unusual tiredness, fatigue, or

drowsiness may result from a large number of diseases and disorders,

including (but not limited to) anemia, sleep disorders, apnea, leukemia, and

chronic fatigue syndrome. Screening for all these diseases would be very

costly and time consuming. Headaches may also be evaluated through

sophisticated methods, including magnetic resonance imaging (MRI),

computed tomography (CT) scans, spinal taps, evaluations by neurological

specialists or ophthalmologists, and many other procedures. 

Although extensive testing and referrals to a specialist may be used in some

cases, the percentage of patients who will undergo this level of evaluation

is unclear for most symptom groups. Data were located on CT scan use

for patients with headaches in a study of 58 medical practices. The study

found that CT scans were ordered for only 3 percent of patients, mainly

for those believed by physicians to have a tumor. Additional neurological

signs and symptoms beyond the presence of a headache would indicate this

procedure. The percentage of patients with only a headache who would

receive a CT scan is unclear, but is likely to be considerably less than 3

percent. This example illustrates the difficulty, even in the presence of

studies, in assessing the probability of medical services for symptoms that

go beyond a basic examination. 

One of the more difficult symptom groups to evaluate is fatigue and

drowsiness. These symptoms are similar to those reported for chronic

fatigue syndrome, and it was felt that the diagnosis might have some

common elements. EPA consulted a project manager of a large study of

chronic fatigue syndrome to gain some insight into what tests might likely

be conducted on patients who visit a physician due to fatigue. Her

observations of numerous physicians’ methods indicated that careful

history taking and physical examination were of paramount use and the

most common diagnostic tools. In addition, physicians usually do a simple

blood screen (complete blood count and in some cases thyroid screening)

to rule out anemia, hypothyroidism and other obvious and common causes
3

 Published articles from the Abt study will not be available for some time. The study focuses on

chronic fatigue syndrome, not air-related fatigue, but the diagnosis of chronic fatigue syndrome has clear

implications for this analysis.

Chapter V.2 V.2-6 Symptom Groups

(systemic infections, etc). Even though chronic fatigue syndrome is a

diagnosis of exclusion, extensive diagnostic testing was not done routinely

(Carrol Emmons, Abt Associates, 1999).3 

If patients are screened to rule out most other possible disorders, then

medical costs will be high and treatment may be time consuming. There

are many options for the evaluation of each group of symptoms listed

above, including x-rays, laboratory tests, biopsies, and other costly

diagnostic tools. Even the treatment of symptoms that may be considered

minor, such as runny nose, may be costly. Treatment of runny nose

(rhinitis) is considered costly by some practitioners, and rhinitis and its

treatment can complicate other illnesses (Guarderas, 1996). 

Due to the potential variability in diagnosis and treatment practices and

costs, it is not possible to precisely describe the “likely” approaches taken

by clinicians. To clearly define the basis of cost, however, it is necessary to

either establish the way in which symptoms will be approached by the

“average” physician, or make explicit assumptions regarding medical

services. The cost estimation method used in this analysis, as stated above,

is based on a best cost-conservative estimate of how the average physician

will diagnose and treat the patient. 

V.2.B. Methods of Cost Estimation

Medical costs were estimated for this chapter by:

1) describing the anticipated diagnosis and treatment services using

national guidelines and the medical literature;

2) assigning costs to those services, based on current (1999) Medicare

reimbursement values; and 

3) estimating the costs over a period of one year for all symptom

groups and over five years for allergy treatment.

V.2.B.1 Sources

The primary sources consulted for this chapter were clinical practice

guidelines (AHCPR, 1999; CDC, 1999), medical texts (e.g., Bennett and

Plum, 1996), and the Medicare reimbursement Federal Register notices
Chapter V.2 V.2-7 Symptom Groups

regarding costs (numerous; discussed in Chapter IV.2 on asthma). This

chapter relies extensively on the National Guidelines Clearinghouse

(www.guidelines.gov) developed by clinicians and researchers, which

provides clinical practice guidelines. EPA also reviewed numerous journal

article abstracts, but used these primarily as supporting information (to

confirm other sources). The abstracts are cited when used as the only

source.

Link to Chapter IV.2

Link to www.guidelines.gov

EPA used current Medicare reimbursement guidelines (1999) to obtain

cost estimates for medical services. Supporting information came from the

medical and economics literature. As a national system for medical

services reimbursement, Medicare approximates the average cost of

medical services in the United States. EPA therefore considered Medicare

to be a reliable source for the cost estimates. For a more detailed

discussion of the use of Medicare information, see Section B in Chapter

IV.2, Medical Costs of Asthma.

Link to Chapter IV.2, Section B.

EPA determined medication costs using consumer prices for the common,

over-the-counter (OTC) medications used to treat the symptoms. These

costs are discussed in detail below. 

V.2.B.2. Approaches Considered

There are at least two ways to approach the cost estimation of these

symptom groups. The first is based on an assumption that a physician

would not readily determine that the patient’s symptoms were related to

indoor air quality problems. Using this approach would involve estimating

the likelihood that physicians would carry out numerous diagnostic tests,

estimating the costs of each test and/or referral to a specialist, evaluating

treatment options with their probability and cost, and summing these across

all patients. This approach requires data on:

1) the specific services that may be provided, 

2) the probability of any service being provided to the cross-section

of patients within the symptom group, and 

3) national average costs for the treatment or service. 

Demographic characteristics would also be important because there are

differences in treatment of children, adults, and elderly adults. 
Chapter V.2 V.2-8 Symptom Groups

The second approach, and the one used in this analysis, is based on the

much simpler assumption that the physician would diagnose the cause of

the problem during the first visit, based on a careful review of the patient’s

history and symptoms. Additional cost data are provided to supplement the

rapid diagnosis approach and can be used at the analyst’s discretion.

This rapid diagnosis assumption has three advantages:

1) From a medical/scientific perspective, it is reasonable to assume

that many physicians are aware of sick building syndrome or other

potential effects of indoor air pollution. Sufficient information is

provided in the medical literature to alert them to the problem. 

2) This approach provides cost-conservative values and avoids

overestimation of costs. The assumptions made using this approach

are that symptoms result from relatively simple causes and that they

will require relatively simple treatments. (These assumptions also

pose a disadvantage, as noted below). It is extremely likely that the

cost estimates provided in this report will NOT overestimate costs. 

This approach is more likely to underestimate costs because some

physicians will do additional testing or refer the patient to a

specialist. 

3) This approach is a rapid and cost-effective response required for

this analysis, and provides a quick and low-cost evaluation. 

The major drawback of this approach is that it is likely to underestimate

costs. It is not likely that all physicians will diagnose the symptoms listed

above as a syndrome related to air quality problems on the first visit. In

fact, there is considerable variation in how medicine is practiced and how

aware physicians are of new types of diagnoses. 

V.2.B.3 Additional Diagnostic Costs

To address the contingency that additional office visits may be made and

that tests unrelated to the actual cause of the symptoms may be performed,

additional information is provided for each symptom group regarding

various medical actions that may be taken. These services and evaluations

would not be included in a quick diagnosis of the source and resolution of

the problem (i.e., removing the environmental cause of the symptom), but

may be carried out for some patients. The analyst can use this information

to construct a more complex and costly diagnostic scenario. 

“Assumptions” regarding diagnosis and treatment are listed for each

symptom group and area based on the simplest likely approach to

diagnosis. To address additional diagnostic costs, they include a list of

services that are not considered in this analysis (e.g., no referral to an
4

 If the cause of the symptoms is through some other media (e.g., drinking water), then the

environmental trigger would need to be removed as well.

Chapter V.2 V.2-9 Symptom Groups

allergist). These elements can also be considered as additional costs, based

on the application of these data. 

A separate listing is provided of some other symptom causes that may be

considered during diagnosis, tests that may be done, and referrals that

could be made with costs for some of the more complex procedures. This

supplementary information is provided under the heading “other costs,”

and may be used to estimate the costs of services, evaluations, and/or

diagnostic tests that are not considered very likely to but which may be

incurred. Use of these values can also provide a range of cost estimates. 

Obtaining information on all potential screening tests for symptoms would 

necessitate consultation with a number of physicians (e.g., physician

panels), which is beyond the scope of this work. The information 

provided here (as noted above) is based on a brief review of clinical

practice guidelines, medical texts, and journal articles. 

V.2.B.4 Symptom Treatment Description

To obtain a diagnosis and treatment description for each symptom group,

clinical practice guidelines, medical abstracts, and clinical texts were

reviewed. These sources all focus on linking symptoms to specific diseases

or underlying causes (as discussed in Section V.2.A, above). When they

proceeded to address the problem of poor indoor air quality, all the sources

reiterated the most obvious medical approach to symptoms resulting from

indoor air quality problems: altering the air quality in the environment of

the patient. This change is accomplished through either moving the

patient’s indoor location, or by improving the air quality where that patient

is exposed.4 Most practice guidelines specify this approach as the only

effective method of eliminating symptoms that result from poor indoor air

quality. 

Changing the worker’s environment is legally enforceable for most jobs

under the Americans With Disabilities Act (according to Occupational

Medicine specialists). In practice this is not always a solution. Changing a

home environment, while possible, may also be difficult. 

When the assumption is being made that members of the exposed

population cannot improve their air quality, the treatment of the symptoms

becomes “symptomatic.” This means that physicians will provide patients

with recommendations about how they can minimize the discomfort

associated with their symptoms. In some cases, the patients may not see a

physician and may determine on their own that they should use

symptomatic treatment. To address this option, costs are presented
Chapter V.2 V.2-10 Symptom Groups

below, in sufficient detail so that calculations can be made of total medical

costs both with and without physician’s office visits. For purposes of

totaling the costs, it is assumed that persistent symptoms would result in an

office visit. 

The exposures resulting in these symptoms are unlike “dangerous”

occupational exposures, which can lead to permanent major physical

damage (e.g., liver or kidney disease, cancer, birth defects). The symptoms

caused by air quality problems would not routinely be expected to result in

medical problems requiring surgery, other in-hospital treatments, or

ongoing in-office treatments. For most symptom groups, diagnosis is likely

to consist of one visit and one or a few diagnostic tests. Treatment may

consist of obtaining OTC medication, such as analgesics (e.g., aspirin,

ibuprofen, acetaminophen), sore throat lozenges, body lotion, eye drops,

etc. 

Although standard practices are discussed in this chapter, there are

substantial differences in how medicine is practiced. Even when diagnoses

are identical, physicians differ in their acceptance of, and adherence to,

clinical guidelines. The physician may also want to see the patient for

follow-up periodically, or the patient may want further consultation after

the initial visit. Individual cost elements, such as the cost of office visits,

are described below so that different assumptions can be made regarding

the number of office visits. Relatively simple assumptions are made to

calculate total costs in this analysis, but it is very straightforward to alter

these assumptions if necessary.

V.2.B.5. Cost Estimate Assumptions

Cost estimation usually relies on either: 

1) obtaining cost data from the literature for a specific disease; or 

2) describing a treatment profile, consisting of treatments and

services that would commonly be followed for a particular disease,

and obtaining probabilities of use and expenditure values for each

treatment component. 

This analysis follows the latter approach because recent publications did

not contain information on the costs of treating the symptom groups. 

The descriptions of diagnosis and treatment services contain many options. 

These options, discussed below, were selected to provide the most

representative approach, based on the information reviewed. They were

also selected to provide a reasonable low-cost estimate, assuming that the

consumer would make wise choices when options are available (e.g.,

choose generic low-cost aspirin, rather than expensive name brand
5Additional information on the Medicare reimbursement system, and specific sources within the

system that were used for costs of office visits and diagnostic tests, are listed in Section B of the Chapter

IV.2 (asthma).

Link to IV.2.B

Chapter V.2 V.2-11 Symptom Groups

options). Consequently, the assumptions that were made contribute to the

overall cost-conservative approach taken in this analysis.

V.2.B.5.1 Office Visits

EPA used the Medicare reimbursement system was used as a source of

cost information for medical treatments and tests. This system designates

each reimbursable event with a Current Procedural Terminology CPT code,

which is listed with the cost data below.5 A basic diagnostic process is

assumed, with history-taking and physical examination. Only those tests

are included that are recommended in clinical practice guidelines (AHCPR,

1999; CDC, 1999) or commonly referred to in the medical literature. As

indicated in the discussion above, it was assumed that a patient would have

one diagnostic visit in a physician’s office. 

Costs for office visits differ based on their length. Visits are designated as

levels 1 through 5, with 5 being the longest and most expensive. All office

visits in this analysis were assumed to be at level 3, because it is the

midpoint in both duration and cost. Office visit costs also differ, depending

on whether the visit is for a new patient or an established patient (i.e., one

who was seen previously by the same physician). It was assumed that half

the patients had a personal physician and had been seen before by

whomever they visited, and the other half were new patient visits. The

costs are allocated between new and established patients with 50 percent in

each group. A second visit during the same year was assumed to take

place for 50 percent of patients; all patients were assumed to be established

for the second visit. Using the above assumptions, the full cost for office

visits is approximately $80.00 per year. This value, broken out into specific

visits and the probability of receiving services, is shown in tables of each

symptom’s costs in later sections of this chapter.

Including this level of detail makes it possible to analyze different

assumptions regarding the length and cost of the visit. In addition,

Appendix V.2.B provides costs for the full spectrum of office visits (levels

1 through 5) for new and established patients. 

Link to Appendix V.2.B

V.2.B.5.2 Medications

All medications considered in this analysis are common, OTC medications

available at both drug and other types of stores (e.g., groceries, discount

stores). EPA estimated medication costs using the lowest cost for a
Chapter V.2 V.2-12 Symptom Groups

generic product, based on prices obtained from a relatively low-cost

national pharmacy chain store on October 27, 1999. EPA preferred prices

taken directly from consumer goods over those taken from an industry

source (e.g., the Red Book) because these are OTC medications and their

consumer prices were readily available directly from the marketplace. 

The medications considered are very common (e.g., aspirin) and there a

high demand for these products, market pressures have therefore made

their prices fairly uniform. Most patients are not expected to pay

substantially higher prices than those used in this analysis. When more than

one medication could commonly be used for a particular purpose (e.g.,

analgesics), EPA calculated the average of the costs for the different types

of medications. If one option was much more expensive than others,

consumers were assumed to make an informed choice to use the less

expensive option.

Medications were assumed to be taken daily. Most package regimens

indicate they are taken more than once per day and were assumed to be

taken throughout the day, not to exceed the recommended dose. When the

medication is to be taken more than once per day (e.g., every 4 hours) the

daily dose was calculated for only waking hours. It was assumed that

symptoms will not be sufficiently bad that someone would get up at night

to take the medication. Sore throat medication is assumed not to be taken

at mealtime (which occurs 3 times per day), thus reducing the daily dose

frequency. Medications were assumed to be taken at the average

recommended dose levels for adults. Lacking an average level, it was

assumed that the lowest recommended dose was taken. For example, if

one to two tablets are recommended, it was assumed that one would be

taken. Eye drops and nose drops can be applied to one or two eyes or

nostrils. It was assumed that both eyes or both nostrils would be affected

and require medication. 

It is not known what percentage of patients with these types of symptoms

actually use the recommended daily dose. Assuming a full set of doses per

day may be appropriate for some people, but may overestimate or

underestimate doses and costs for others. Some patients use more than the

recommended dose. For the medications considered in this analysis, such

practices would not usually result in overt symptoms associated with an

overdose. Consequently, patients could continue to exceed the

recommended dose. Some patients are likely not to use any medication for

symptoms, due to personal beliefs, or interactions of the symptom

medications with other medications or conditions. Costs for medical

treatments without medication can be calculated from the other cost

components listed in the tables that follow. Due to the popularity of

“natural” medicines and the common nature of the symptoms, it is very

likely that some people may treat their symptoms using this approach. 
6

 Note that office visit costs do not vary by the level or type of practitioner specialization. 

Consequently, a single cost for any single level of office visit is provided. 

Chapter V.2 V.2-13 Symptom Groups

“Natural” medications are often more expensive than those evaluated in

this analysis.

Appendix V.2.A contains information on the cost calculations for

medications.

Link to Appendix V.2.A

V.2.B.6. Cost Estimates for Symptom Groups

This section contains information on the cost of medical services and

products used to address the symptoms. These costs are summarized in a

table for each symptom group. Diagnostic tests and medications are listed

along with assumptions regarding the medical services. The assumptions

listed with each symptom group table itemize treatment options that were

NOT used in this analysis because they are considered unlikely, based on

the literature reviewed. The sources of additional costs that may be

incurred but are unlikely are listed under “other costs” at the end of each

symptom group discussion. The dollar values of these services are listed in

Appendix V.2.B for office visits and services, and in Appendix V.2.C for

services related to allergy diagnosis and treatment.6 This information can

be used as the basis for additional evaluations if the cost of more complex

diagnosis and treatment is desired. The basic cost information presented in

the tables below can be modified using the data in the appendices, and

through making different assumptions regarding the length of services and

other parameters, depending on the nature of the cost analysis being carried

out. 

Link to Appendix V.2.B

Link to Appendix V.2.C

The costs of each good or service are listed in the table with their

probability of use. The weighted cost is the unit cost times the probability

of service. The cost estimates below are for a one-year period, and rely on

specific assumptions about the number of office visits and medications

taken (e.g., one office visit is assumed for all patients and 50 percent of

patients, are assumed to have a follow up visit within a year). 

In all cases, the referral to a specialist is possible and is not considered in

this analysis. Lacking reliable information in the literature on these and

other cost factors (e.g., testing), assumptions were made that are relatively

cost-conservative. When using these numbers in specific analyses, the

actual duration of the symptoms (if known) can be used to pro-rate the

costs appropriately. Likewise, specific information on the severity of
Chapter V.2 V.2-14 Symptom Groups

symptoms, physician practice patterns, and patient behavior can be used

with the cost information below, to tailor an economic analysis to

appropriately fit the exposure and response scenarios of interest. 

The costs of treating allergies that may be responsible for symptoms are

described in Appendix V.2.C. Whether or not these costs are added to

symptom group costs when symptoms are likely to occur in response to

allergens will depend on the specific pollutant eliciting the symptom. The

proportion of patients electing to undergo allergy therapy will vary based

on many factors. No estimate of the proportion of patients who undergo

allergy treatment as a result of the symptoms discussed is made in this

chapter.

Link to Appendix V.2.C
Chapter V.2 V.2-15 Symptom Groups

V.2.B.6.1 Dry, Itching or Irritated Eyes

Diagnostic tests: none

Medications: eye drops

Assumptions: a full evaluation for “dry eye” will not be done, referral to an

opthamologist or allergist will not take place, and an allergic work up will

not be done.

Annual Estimated Direct Medical Costs for the Average Patient

Cost Category 

(CPT code for medical services)

Cost Probability

of Use (%)

Weighted

Cost

office visit: new patient, level 3

(CPT code: 99203)

$76.06 50 $38.03

office visit: established patient, level 3 $41.68 50 $20.84

second office visit: established patient, level 3 $41.68 50 $20.84

medication: eye drops $ 17.76 100 $ 17.76

Total cost $ 97.27

Other costs: additional office visits to an opthamologist or allergist. Office

visit costs are listed in Appendix V.2.B, and the costs of allergy diagnosis

and treatment are listed in Appendix V.2.C.

Link to Appendix V.2.B

Link to Appendix V.2.C
7

 One study of clinical practices found that approximately 3 percent of patients complaining of

headaches were given CT scans. These were primarily patients who were thought to have tumors (Becker

et al., 1993).

Chapter V.2 V.2-16 Symptom Groups

V.2.B.6.2. Headaches

Diagnostic tests: none

Medications: analgesics. The average of the costs for aspirin,

acetaminophen, and ibuprofen was calculated.

Assumptions: CT scans, MRIs, and other sophisticated tests to evaluate

anatomical or physiologically-based brain disorders will not be done and

the patient will not be referred to a neurologist.7

Annual Estimated Direct Medical Costs for the Average Patient

Cost Category 

(CPT code for medical services)

Cost Probability

of Use (%)

Weighted

Cost

office visit: new patient, level 3

(CPT code: 99203)

$76.06 50 $38.03

office visit: established patient, level 3 $41.68 50 $20.84

second office visit: established patient, level 3 $41.68 50 $20.84

medication: analgesics $42.27 100 $42.27

Total cost $121.98

Other costs: additional office visits to an neurologist or allergist. Office

visit costs and costs associated with CT scans and MRIs are also listed in

Appendix V.2.B, and the costs of allergy diagnosis and treatment are listed

in Appendix V.2.C.

Link to Appendix V.2.B

Link to Appendix V.2.C
Chapter V.2 V.2-17 Symptom Groups

V.2.B.6.3. Sore or dry throat

Diagnostic tests: strep throat (for streptococcal pharyngitis)

Medications: throat lozenges

Assumptions: these patients would be screened for the most common cause

of sore throat that requires medical treatment (strep throat), but would not

be evaluated for gastric reflux, cardiac disorders, or other relatively

uncommon causes of sore throat; referral to an ear, nose, and throat

specialist will not occur. 

Annual Estimated Direct Medical Costs for the Average Patient

Cost Category 

(CPT code for medical services)

Cost Probability

of Use (%)

Weighted

Cost

office visit: new patient, level 3

(CPT code: 99203)

$76.06 50 $38.03

office visit: established patient, level 3 $41.68 50 $20.84

second office visit: established patient, level 3 $41.68 50 $20.84

Diagnostic tests: streptococcal throat culture $13.05 100 $13.05

medication: throat lozenges $201.76 100 $201.76

Total cost $294.32

Other costs: additional office visits to an ear, nose, and throat specialist or

allergist. Office visit costs are listed in Appendix V.2.B, and the costs of 

allergy diagnosis and treatment are listed in Appendix V.2.C.

Link to Appendix V.2.B

Link to Appendix V.2.C
Chapter V.2 V.2-18 Symptom Groups

V.2.B.6.4. Unusual tiredness, fatigue, or drowsiness

Diagnostic tests: complete blood count (CBC), thyroid screen

Medications: CDC specifies that there are no known treatments for chronic

fatigue syndrome (the most analogous medical condition), although there is

not complete medical consensus on this. Some physicians recommend

nutritional changes. These changes are not anticipated to incur additional

direct medical costs.

Assumptions: these patients would be screened for very common causes of

fatigue, such as anemia and thyroid deficiencies, but they would not be

intensively evaluated for apnea, sleep disorders, or other disease-related or

structural causes of fatigue. 

Annual Estimated Direct Medical Costs for the Average Patient

Cost Category 

(CPT code for medical services)

Cost Probability

of Use (%)

Weighted

Cost

office visit: new patient, level 3

(CPT code: 99203)

$76.06 50 $38.03

office visit: established patient, level 3 $41.68 50 $20.84

second office visit: established patient, level 3 $41.68 50 $20.84

diagnostic tests: CBC, thyroid screen (T3, T4, TSH) $62.40 100 $62.40

medication: none not

applicable

not applicable not

applicable

Total cost $141.91

Other costs: additional office visits to an allergist. Office visit costs and the

costs of allergy diagnosis and treatment are listed in Appendix V.2.C. 

Link to Appendix V.2.C
Chapter V.2 V.2-19 Symptom Groups

V.2.B.6.5. Stuffy or runny nose (rhinitis) or sinus congestion

These symptoms are evaluated as rhinitis, defined as an imflammation of

the mucous membranes in the nose (Dorland’s, 1994). Diagnosis is

subjective; a runny nose may not be considered rhinitis, and sinus

congestion may not be considered sinusitis under all circumstances. If a

runny nose or sinus congestion continue for a long time or recur many

times, they are more likely to be considered rhinitis or sinusitis, leading to

the medical tests listed below.

Diagnostic tests: nasal cytology. The Medicare reimbursement system

does not list costs for nasal cytology, which is likely for rhinitis (based on

the literature). It is recommended that the cost of throat culture be used,

due to their similarity.

Medications: nose drops. Oral antihistamines and other medications could

be used, but they act systemically, causing side effects. It was assumed

that patients would select the medication with the most specific action and

minimal side effects, so nose drops were chosen for the analysis.

Assumptions: these patients would be screened for common causes of

rhinitis (via nasal cytology tests), but would not be extensively evaluated

for sinusitis (e.g., via x-rays), or allergies. They would not be referred to

an allergist.

Annual Estimated Direct Medical Costs for the Average Patient

Cost Category 

(CPT code for medical services)

Cost Probability

of Use (%)

Weighted

Cost

office visit: new patient, level 3

(CPT code: 99203)

$76.06 50 $38.03

office visit: established patient, level 3 $41.68 50 $20.84

second office visit: established patient, level 3 $41.68 50 $20.84

Diagnostic tests: streptococcal throat culture $13.05 100 $13.05

medication: nose drops $42.66 100 $42.66

Total cost $137.22

Other costs: additional office visits to an ear, nose, and throat specialist or

to an allergist. Office visit costs and the costs of nasopharyngoscopy and

rhinometry, and x-rays to examine the sinuses, are included in Appendix

V.2.B. The costs of allergy diagnosis and treatment are listed in Appendix

V.2.C.

Link to Appendix V.2.B

Link to Appendix V.2.C
Chapter V.2 V.2-20 Symptom Groups

Additional information on rhinitis (runny nose) was collected that may be

relevant. Rhinitis is associated with sleep loss, secondary daytime fatigue,

learning impairment, acute and chronic sinusitis, nasal polyps, otitis media

with and without effusion, hearing impairment, abnormal cranofacial

development in children, apnea, and asthma aggravations. There is also an

increased likelihood of developing asthma. Sedating antihistamines used to

treat rhinitis may cause dangerous situations due to sleepiness (Settipane,

1999).

A survey of 2,600 adults with seasonal and allergic rhinitis determined the

following medication patterns: 18 percent used prescription drugs, 17

percent used prescription and OTC drugs, 46 percent used OTC only, and

18 percent used no medications. Severely-affected patients need

environmental control and immunotherapy (Slavin, 1999).
Chapter V.2 V.2-21 Symptom Groups

V.2.B.6.6. Dry or itchy skin

Diagnostic tests: none

Medications: skin lotion

Assumptions: the patient would not be evaluated for allergies or for rare

skin disorders.

Annual Estimated Direct Medical Costs for the Average Patient

Cost Category 

(CPT code for medical services)

Cost Probability

of Use (%)

Weighted

Cost

office visit: new patient, level 3

(CPT code: 99203)

$76.06 50 $38.03

office visit: established patient, level 3 $41.68 50 $20.84

second office visit: established patient, level 3 $41.68 50 $20.84

medication: dry skin lotion $ 6.66 100 $ 6.66

Total cost $86.17

Other costs: additional office visits to a dermatologist or an allergist. 

Office visit costs are listed in Appendix V.2.B, and the costs of allergy

diagnosis and treatment are listed in Appendix V.2.C.

Link to Appendix V.2.B

Link to Appendix V.2.C
Appendix V.2.A V.2.A-1 Medication Cost Calculations

APPENDIX V.2.A. MEDICATION COST CALCULATIONS

This appendix presents the calculation of medication costs for each

symptom group. EPA estimated annual doses using the recommended

daily doses on each package, multiplied by 365. Assumptions regarding

dose are discussed in Section V.2.B.5.2. The cost calculations are carried

out by dividing the annual dose by the number of doses per package,

yielding the number of packages per year. That number is multiplied by the

cost per package to obtain the annual cost.

Analgesics:

ingredient cost per pkg/ daily dose annual dose annual cost

 doses per pkg

aspirin 6.49/500 6 2190 $28.43

acetaminophen 8.59/200 4 1460 $62.71

ibuprofen 12.22/500 4 1460 $35.68

The average was calculated based on an assumption that a third of patients

would use each of the three options above; the average cost per year is

$42.27. Consumer choice in this case is not based solely on price. The

more expensive options have characteristics that may make them more

advisable for some groups (e.g., children cannot take aspirin and some

physicians won’t prescribe ibuprofen to them, so acetaminophen may be

the only option).

ingredient cost per pkg/ daily dose annual dose annual cost

 doses per pkg

Eye Drops:

tetrahydrozoline 3.59/590 8 2920 $ 17.76 

Throat Lozenges:

dyclonine 1.99/18 5 1825 $201.76

hexylresourcinol 1.99/18 5 1825 $201.76

menthol 1.59/16 10 3650 $362.72

The cost of menthol lozenges was not used in the analysis because it was

assumed that consumers would choose the less expensive therapy, and

because menthol drops are taken hourly, which would also be a

disincentive to using this product.
Appendix V.2.A V.2.A-2 Medication Cost Calculations

ingredient cost per pkg/ daily dose annual dose annual cost

 doses per pkg

Nose drops:

phenylephrine 4.27/590 16 5840 $ 42.66

Dry skin lotion:

numerous 2.19/120 1 365 $ 6.66

The use of dry skin lotion was very difficult to assess because people may

apply it to some or all of their body. This could easily generate an order of

magnitude difference in dose and cost estimates. There is no standard

“dose.” For purposes of this analysis, it was assumed that the areas of skin

normally not covered with clothes among indoor workers (hands and face)

would be treated. It was also assumed that no expensive prescription

medications were used. It was not possible to precisely determine the

quantity of lotion used; EPA estimated that people would use 1/8 ounce

per day, and would use it once per day. This assumption may

underestimate costs for some people.
Appendix V.2.B V.2.B-1 Supplemental Cost Information

APPENDIX V.2.B. SUPPLEMENTAL COST INFORMATION

This appendix provides cost information for services that are designated in

the “other” category for each symptom group. These services are unlikely

to be carried out, but may be used by some practitioners. In addition,

hospitalization costs are provided for some symptoms (this is discussed in

more detail below). 

Services:

The costs of diagnostic tests and all levels of office visits are listed in Table

V.2.B-1 below, with their Medicare code (HCPCS), costs, and potential

relevance to symptom groups. Many of the tests are relevant to multiple

symptom groups. As the table shows, each type of test has many

variations. The MRI and CT scans costs represent the total or “global”

reimbursement, including both professional and technical services related to

performing and interpreting the test. Two new medical tests for rhinitis are

included in Table V.2.B-1, based on a review of the literature. These two

tests, listed under “special otorhinolaryngologic services,” are used to

diagnose and determine both the severity of disease and the cause.

Hospitalization:

Although expected to be rare, hospitalization may occur for some

symptoms, when they are diagnosed as serious forms of some diseases:

rhinitis and sinusitis. The costs for other potential diseases related to the

symptoms groups are not listed; no diseases were identified that require

hospitalization and are likely to occur as a result of poor indoor air quality

in a non-industrial setting. Although indoor air contaminants are not

expected to result in hospitalization, these data can be used to estimate an

upper bound on costs that may be incurred under unusual circumstances. 

The Medicare costs associated with hospitalizations for sinusitis and rhinitis

are listed with the costs of otitis media and URI (upper respiratory system

infection) in the Medicare system (the ICD-9 code for these diseases is

linked to the DRG in the Medicare system). Hospitalization costs are listed

for urban and rural areas in Table V.2.B-2 below (there is no single average

value).
Appendix V.2.B V.2.B-2 Supplemental Cost Information

Table V.2.B-1: Cost of Services

HCPCS Description Source

1999

Medicare

Relevance to

Symptoms

Diagnostic Radiology

70210 X-ray exam, sinuses, less than three views 1 $32.30 headache, sinus

70220 X-ray exam, sinuses, complete, minimum of three

views

1 $42.72 headache, sinus

70450 CT scan, head or brain, without contrast material 1 $221.93 headache, sinus

70460 CT scan, head or brain, with contrast material 1 $270.91 headache, sinus

70470 CT scan, head or brain, without and with contrast

material

1 $331.34 headache, sinus

70486 CT scan, maxillofacial area, without contrast

material

1 $236.17 headache, sinus

70487 CT scan, maxillofacial area, with contrast material 1 $279.59 headache, sinus

70488 CT scan, maxillofacial area, without and with

contrast material

1 $339.33 headache, sinus

70551 MRI, brain, without contrast material 1 $497.36 headache, sinus

70552 MRI, brain, with contrast material 1 $597.03 headache, sinus

70553 MRI, brain, without and with contrast material 1 $1,057.57 headache, sinus

Special Otorhinolaryngologic Services

92511 Nasopharyngoscopy with endoscope (separate

procedure)

1 $63.56 nose

92512 Nasal function studies (e.g., rhinomanometry) 1 $41.33 nose

Office Visits

99201 Office/outpatient visit, new patient, level 1 1 $34.73 all

99202 Office/outpatient visit, new patient, level 2 1 $54.53 all

99203 Office/outpatient visit, new patient, level 3 1 $76.06 all

99204 Office/outpatient visit, new patient, level 4 1 $111.14 all

99205 Office/outpatient visit, new patient, level 5 1 $138.93 all

99211 Office/outpatient visit, established patient, level 1 1 $16.32 all

99212 Office/outpatient visit, established patient, level 2 1 $30.22 all

99213 Office/outpatient visit, established patient, level 3 1 $41.68 all

99214 Office/outpatient visit, established patient, level 4 1 $63.56 all

99215 Office/outpatient visit, established patient, level 5 1 $97.94 all

* Source 1: Medicare Physician Fee Schedule

Source 2: Medicare Clinical Laboratory Fee Schedule

** “all” refers to all symptom groups
Appendix V.2.B V.2.B-3 Supplemental Cost Information

Table V.2.B-2: Cost of Inpatient Hospital Care for Sinusitis/Rhinitis

DRG DRG Description

ICD-9 Diagnosis

Codes

DRG Relative

Weight

DRG Payment for

Operating and

Capital for Large

Urban Areas

DRG Payment for

Operating and

Capital for Other

Areas

68

Otitis Media & URI 

Age > 17 

With Complications*

477.0, 477.8,

477.9 0.6699 $2,997.72 $2,834.27 

69

Otitis Media & URI 

Age > 17 

Without Complications

477.0, 477.8,

477.9 0.5053 $2,261.16 $2,137.86 

70 Otitis Media & URI 

Age 0-17

477.0, 477.8,

477.9 0.3841 $1,718.80 $1,625.08 

* URI refers to upper respiratory infection
Appendix V.2.C V.2.C-1 Costs of Allergy Diagnosis and Treatment

APPENDIX V.2.C. COSTS OF ALLERGY DIAGNOSIS AND TREATMENT

A brief analysis of the likely costs of diagnosing and treating allergies for

five years is provided in this appendix. Of the various diagnostic

investigations that may take place beyond primary care office visits

(described above), allergy screening is most likely because many of the

symptoms, as chronic events, would be suspected of arising from allergies. 

In addition, some symptoms may actually be due to allergic responses (e.g.,

to molds and mildews). Most symptom groups could be associated with

allergies under some conditions. For example, rhinitis is often associated

with headache and tiredness when it is due to allergies. In this case, the

presenting symptom may be headache or tiredness if the runny nose is mild,

while the underlying cause remains an allergic response. The distinction

among the clusters of symptoms is to some degree anatomical, rather than

functional.

This appendix provides cost data on allergy diagnosis and therapy because

allergies may be suspected of causing many of the symptom groups

considered in this chapter. Patients who have one or more symptoms that

indicate allergy may undergo allergy screening. The patients may or may

not ultimately be diagnosed as having allergies. Consequently, costs are

provided for both diagnosis and treatment. Patients found to have allergies

may not have “treatable” allergies. Only those patients found to be allergic

to substances for which desensitization is possible will incur the treatment

costs. Whether or not a patient can be treated depends on the nature of the

allergy (i.e., the type of immune response elicited). Consequently, a small

subset of patients with indoor air-induced symptoms may actually be

treated for allergies. 

Although numerous types of allergies are mediated by different

components of the immune system, this section examines the most common

type, IgE-mediated. Other types may result in higher diagnostic expenses

and may not necessarily be treatable. 

Allergy diagnosis usually involves exposing the patient to trace amounts of

suspected allergens through various types of skin tests. This section

provides a summary of costs for one approach: using numerous individual

allergenic screens via skin testing. Sources reviewed for this work

indicated that allergen tests relying on grouped allergens were less reliable

and often produced results that are difficult to interpret. It was assumed

that percutaneous skin tests would be done, rather than sequential tests,

intradermal tests, etc. Table V.2.C-1 lists many of the allergy-related

diagnostic tests and treatments that are carried out, along with their

Medicare costs. 
Appendix V.2.C V.2.C-2 Costs of Allergy Diagnosis and Treatment

Table V.2.C-1: Cost of Allergy Services

HCPCS Description Source

1999

Medicare

Payment

Immunology

86003 Allergen specific IgE, quantitative or semiquantitative, each

allergen

2 $7.22 

86005 Allergen specific IgE, qualitative, multiallergen screen

(dipstick, paddle, or disk)

2 $11.02 

Allergy Testing

95004 Percutaneous (scratch, puncture, prick) tests with allergenic

extracts, immediate type reaction

1 $3.82 

95010 Percutaneous (scratch, puncture, prick) tests, sequential and

incremental, with drugs, biologicals or venoms, immediate type

reaction

1 $11.46 

95015 Intracutaneous (intradermal) tests, sequential and incremental,

with drugs, biologicals or venoms, immediate type reaction

1 $12.16 

95024 Intracutaneous (intradermal) tests with allergenic extracts,

immediate type reaction

1 $5.56 

95027 Skin end point titration 1 $5.56 

95028 Intracutaneous (intradermal) tests with allergenic extracts,

delayed type reaction, including reading

1 $8.68 

95044 Patch or application test(s) 1 $7.64 

95060 Ophthalmic mucous membrane tests 1 $13.20 

95065 Direct nasal mucous membrane test 1 $7.64 

Allergen Immunotherapy

95115 Professional services for allergen immunotherapy not including

provision of allergenic extracts; single injection

1 $14.59 

95117 Professional services for allergen immunotherapy not including

provision of allergenic extracts; two or more injections

1 $18.76 

95165 Professional services for the supervision and provision of

antigens got allergen immunotherapy; single or multiple

antigens

1 $7.29 

99205 Office/outpatient visit, new patient, level 5 1 $138.93

* Source 1: Medicare Physician Fee Schedule

Source 2: Medicare Clinical Laboratory Fee Schedule

** “all” refers to all symptom groups

Percutaneous administration, the approach selected for cost evaluation, is

the least expensive and generates the most cost-conservative estimate. The

other tests are used less frequently, and are used primarily when

percutaneous tests do not provide clear results. It was not known how

often these or other tests listed (e.g., ophthalmic mucous membrane tests,

direct nasal mucous membrane test) are used. Based on a rapid review of
Appendix V.2.C V.2.C-3 Costs of Allergy Diagnosis and Treatment

the past two years of medical journals on allergy, they do not appear

frequently. Cost data for these less common tests can be used to generate

estimates using other assumptions regarding diagnosis and treatment. 

In this analysis, the number of office visits, types of diagnostic screening,

and treatment methods are estimated based on a review of national

guidelines (CPG, 1995, and 1996). These guidelines are not very specific

with regard to testing and treatment, because the course of action depends

on the patient. EPA assumed that testing would be carried out for 50

allergens. More than 200 indoor air pollutants can be tested as allergens; a

review of the literature indicated that 50 allergens would be a reasonable

number. In the absence of specific statements regarding the “average”

amount of testing, EPA used 50 as an estimate. Due to the number of tests

performed, and the fact that the results are obtained through observation

during the office visit, EPA assumed that a level 5 office visit would be

required. It was assumed that the patient’s first visit to the allergist is

designated as a “new patient visit.”

If an allergic response is diagnosed as the cause of the symptoms, the

patients may choose to: 

1) take over-the-counter (OTC) medications (or prescriptions) for the

relief of symptoms and avoid allergy treatment, 

2) remove the allergens from their environment or themselves from the

environment and avoid allergy treatment, or 

3) undertake therapy for desensitization to the allergen. 

Symptomatic relief costs are shown for each symptom group in the body of

the chapter above. The costs associated with option 2 are not direct

medical costs. Option 3 costs are described here. 

Immunotherapy treatment was assumed to be conducted over a five-year

period. This duration appeared several times in the literature, although no

clear statements were found regarding “average” treatment duration. After

five years of treatment, many patients (although not all) can cease

treatment and will probably be symptom-free. Allergy shots

(immunotherapy) are administered on a regular basis. It was assumed in

this analysis that they were administered weekly.

Medicare lists specific reimbursement for allergen immunotherapy, rather

than using office visit costs plus specific services costs. The Medicare cost

is listed in Table V.2.C-2 below. This cost analysis used the least

expensive option. If the costs were assigned to an office visit, as may be

the case for some private insurers, one could assume that administration of

the immunotherapy injection would require little time in the office and a
8

 Given the difficulty and expense of desensitizing someone with allergies, it seems quite unlikely

that the patient would take no steps to remove the allergen during the five-year period.

Appendix V.2.C V.2.C-4 Costs of Allergy Diagnosis and Treatment

level 1 office visit.8 The costs of levels 1 through 5 office visits are listed in

Table V.2.B-1 ($16.32 through $97.94) so that this cost can be estimated,

if so desired.

The costs of allergy treatment and diagnosis, based on the assumptions

stated above, are summarized in Table V.2.C-2, with a total cost estimate

of approximately $4,500 for a five-year period. The majority of costs for

allergic patients occurs during the long-term treatment to desensitize them

to the allergens. This cost can be added to the costs described for those

symptom groups where some percentage of patients are to be assumed to

undergo allergy diagnosis and/or treatment. OTC medications were

included in the symptom treatment cost estimate above, however, so are

not included in Table V.2.C-2. Patients are unlikely to take both

immunology and OTC medications.

Patients who are tested but determined not to have allergies (or who have

allergies that cannot be treated) will incur only the costs of diagnosis. 

Based on the costs presented in Table V.2.C-2, these costs would total

$690.93. 
Appendix V.2.C V.2.C-5 Costs of Allergy Diagnosis and Treatment

Table V.2.C-2. Costs of Allergy Diagnosis and Treatment for Five Years

(undiscounted, 1999$)

Procedure Medicare HSPCS Code Cost Calculation and

Result

Allergy testing for 50

allergens — materials

86003 $7.22 per allergen × 50

allergens = $361.00

Allergy testing for 50

allergens — services

95115 $3.82 per allergen × 50

allergens = $191.00

Office visit level 5 —

new patient

99205 $138.93

Immunotherapy for

allergen

95115 $14.59 for a single

allergen × 5 years of

treatment × 52 visits per

year = $3,793.40

Total cost $4,484.33

Average annual cost for five-year period from

diagnosis to completion of treatment*

$ 896.87

* The costs in the first year are higher due to diagnosis. This value is the average cost

over the average period of treatment of 5 years.
Appendix A A-1 Inflation and Discounting Factors

APPENDIX A: INFLATION AND DISCOUNTING FACTORS

Clicking on the sections below will take you to the relevant text.

A.1 Introduction

A.2 Inflation

A.3 Discounting
Appendix A A-2 Inflation and Discounting Factors

APPENDIX A: INFLATION AND DISCOUNTING FACTORS

A.1 Introduction

This appendix provides information on the inflation of medical services and

computations that can be used to calculate the present value of future

costs. This information can be used to modify the values presented in the

various Handbook chapters.

The chapters typically present various cost components that are expressed

in the year that the data were obtained (i.e., unadjusted, or “original,”

dollar value). The final cost estimates are presented inflated to the dollar

value in the year the chapter was completed (i.e., adjusted, or “present,”

dollar value). For example, in the tables leading up to the final cost

calculations, data from a 1995 study are listed in the original (1995)

dollars. When the various cost components are summed to calculate a total

estimated medical cost, the final results are presented in present dollars for

the year that the Handbook chapter was prepared, usually 1996 through

1999. The inflation factors data provided in this appendix, which are based

on the Consumer Price Index Medical Care Services, can be used to obtain:

 1) a current valuation of an interim cost component to a year

other than the year of the Handbook presented in one of the

early tables in a chapter, or 

2) an inflated valuation of the final cost estimate (e.g., prior to

1999). 

Methods to do this are described below. Inflation factors for future years

will be added to this appendix as they become available. 

Each chapter presents the final estimated costs with both zero discounting

and with various discount rates, usually, one, three, five, and seven percent. 

The cost components leading up to the final cost estimate, however, are

presented without discounting. Discounting of individual cost components

is not usually required, and is therefore not included in the chapter. If

those data are required, then the discounting factors and methods described

below can be used to carry out discounting of any value presented in the

Handbook, projected into the future for up to 20 years. It is assumed that

if an analyst wishes to discount further into the future, then he or she can

use the formula provided below to perform those calculations.
Appendix A A-3 Inflation and Discounting Factors

A.2 Inflation

Medical costs, along with most other costs, increase over time. These

increases have been borne out especially in recent decades. The Consumer

Price Index (CPI), which is determined by the U.S. Department of

Commerce’s Bureau of Labor Statistics, provides a U.S. Medical Care

Services inflation value for each year, based on a review of the costs of

medical services. A variety of services are reviewed by the Department of

Commerce to calculate this value. Detailed information on their methods

of calculation and sources of information can be obtained at their website

URL (click below to link): 

http://146.142.4.24/cgi-bin/surveymost?cu

CPI Medical Care Services inflation are provided in Table A.1 below for

the years 1980 through 1999. The factor listed for each year can be used to

inflate the cost provided in the previous years dollars (see text). Because

the inflation rate is based on data from the entire year, the value to be used

for the year 2000 will not be available until 2001. The for future years can

be obtained directly from the above-listed URL when they become

available.

Table A.1 Inflation Factors from the CPI 

Year Annual Factor Factor to Convert to 1999$ 

1980 74.80 3.41

1981 82.80 3.08

1982 92.60 2.75

1983 100.70 2.53

1984 106.70 2.39

1985 113.20 2.25

1986 121.90 2.09

1987 130.00 1.96

1988 138.30 1.84

1989 148.90 1.71

1990 162.70 1.57

1991 177.10 1.44

1992 190.50 1.34

1993 202.90 1.26

1994 213.40 1.20

1995 224.20 1.14
Table A.1 Inflation Factors from the CPI 

Year Annual Factor Factor to Convert to 1999$ 

Appendix A A-4 Inflation and Discounting Factors

1996 232.40 1.10

1997 239.10 1.07

1998 246.80 1.03

1999 255.10 1.00

Adapted from the U.S. Department of Commerce Bureau of Labor

Statistics, 2000. URL: http://146.142.4.24/cgi-bin/surveymost?cu

The information in Table A.1 can be used with a cost provided in dollars

for any year from 1980 through 1998 (1999 does not need adjustment

during the year 2000). The table is set up so that data from any of these

years can easily be carried forward to 1999 dollars. For example, if a

medical cost of $200.00 was incurred in 1983, then the multiplier of 2.53

would be applied to yield the following:

$200.00 × 2.53 = $506 in 1999 dollars.

Although costs can be calculated for years prior to the current year (i.e.,

1999), this requires an additional calculation. It was assumed that such a

calculation would rarely be used, since interim year costs are not generally

of use. For example, if a 1987 cost of $200.00 was desired in 1991 dollars,

then a new conversion factor would need to be calculated. The conversion

factor is determined by dividing the CPI value of the year to which the

analyst wishes to inflate (in this case 1991) by the CPI value of the year

from which the data are taken. In this example, the CPI value is 177.10 for

1991, and 130.00 for 1987. The new conversion factor is the quotient of

these two numbers:

CPI value 1991/CPI value 1987 = 177.10/130.00 = 1.36

This new conversion factor is multiplied by the 1987 cost of $200.00 to

obtain the 1991 cost:

1.36 × $200.00 = $272.00 in $1991.

There are uncertainties associated with use of these factors. The CPI are

based on average increases in costs. Some medical services increase more

than others during a given year. Given the uncertainty inherent in the

estimated medical costs provided in this Handbook, such uncertainties are

not likely to have a substantial impact. Most medical costs of diseases that

are presented in the Handbook represent an aggregate of costs arising from
Appendix A A-5 Inflation and Discounting Factors

many types of services and materials, and can be inflated with the CPIgenerated inflation factors, which also are derived from a spectrum of

services and materials. 

A.3 Discounting

Discounting is used by economists when costs are to be incurred in the

future. It is applied to make future costs comparable to current costs

because consumers have a preference for current consumption compared to

future consumption. Because health-related costs limit the funds available

for consumption, a consumer would prefer to postpone payment of a given

cost and the resulting reduction in consumption into the future. The current

value of a given dollar amount to a consumer is therefore less if it has to be

paid in the future than if it is incurred today.

The present value of costs are calculated by taking into account the amount

of time between the present and the point when the costs are incurred, and

by making some assumption regarding the degree to which current

consumption is more highly valued. This amount is usually expressed as a

present value discount rate ranging from one to ten percent, although it is

possible to use no (0) discounting or to apply a higher rate. This chapter

uses the discount rates most commonly used by EPA of one, three, five,

and seven percent. Costs are also presented in undiscounted form.

The basic equation used to carry out discounting is: 

PV = C (1+r)-t 

where: PV = present discounted value

C = future cost to be incurred

r = discount rate

t = number of years to be discounted 

Table A.2 shows the factors that can be used to apply this equation to a

specific cost (C), when one uses these discount rates over specific periods

of time. The number of years is calculated by subtracting the present year

from the future year. For example, to discount a cost to be incurred in

2010 to the year 2000, a discounting factor for year 10 in the table would

be used (2010-2000 = 10). These factors were calculated using the portion

of the above equation: (1+r)-t , to obtain a simple multiplier corresponding

to each discount rate and the first 20 years into the future. For example, a

cost of $300 discounted for 10 years at five percent would result in the

following calculating using the equation above without discounting factors:

PV = $300 × (1 + 0.05)-10 = $183
Appendix A A-6 Inflation and Discounting Factors

Using the factors in Table A.2, a simpler equation can be used with the

factor of 0.61 for five percent at 10 years: 

PV = $300 × .61 = $183.

It is important to note that the years listed in the table represent the number

of years in the future one wishes to discount to (i.e. Year 1 represents one

year in the future). The number of years is calculated by subtracting the

present year from the future year of interest. For example, to discount a

cost to be incurred in 2010 to the year 2000, a discounting factor for year

10 from Table A.2 would be used (2010 ! 2000 = 10). The discounting

factors can be applied to costs presented in the Handbook to obtain the

present discounted value of an individual cost or a stream of costs, as

discussed below.

Table A.2 Discounting Factors for 20 Years into the Future 

Factors are the multipliers applied to the original cost to obtain a

discounted cost (see text).

Year 1% 3% 5% 7%

1 0.99 0.97 0.95 0.93

2 0.98 0.94 0.91 0.87

3 0.97 0.92 0.86 0.82

4 0.96 0.89 0.82 0.76

5 0.95 0.86 0.78 0.71

6 0.94 0.84 0.75 0.67

7 0.93 0.81 0.71 0.62

8 0.92 0.79 0.68 0.58

9 0.91 0.77 0.64 0.54

10 0.91 0.74 0.61 0.51

11 0.90 0.72 0.58 0.48

12 0.89 0.70 0.56 0.44

13 0.88 0.68 0.53 0.41

14 0.87 0.66 0.51 0.39

15 0.86 0.64 0.48 0.36

16 0.85 0.62 0.46 0.34

17 0.84 0.61 0.44 0.32

18 0.84 0.59 0.42 0.30

19 0.83 0.57 0.40 0.28

20 0.82 0.55 0.38 0.26
Appendix A A-7 Inflation and Discounting Factors

Often, analysts evaluate a stream of costs incurred on a regular basis over

many years. This method requires a more complex calculation. The

present discounted value must be calculated independently for each year

that new costs are introduced. When medical costs are likely to occur

sequentially over time, such as long term care or monitoring for chronic

diseases, the present discounted value is calculated for those costs incurred

in each year in the future. That is, the appropriate factor is multiplied by

the cost for each individual year of service. These costs are then summed

to obtain the total present discounted value of the long-term treatment. 

 For example, a common occurrence is that follow up medical monitoring

is required after an initial high cost treatment year. If the follow up costs

$500.00 per year for five years into the future, then the total present value

of the follow-up care can be calculated by summing the present for each of

those five years. Assume that the monitoring costs are discounted at three

percent. The factors taken from Table A.2 for a three percent discount rate

are multiplied by $500 as follows:

0.97 × $500 + 0.94 × $500 + 0.92 × $500 + 0.89 × $500 + 0.86 × $500 = $2,289.85.

(Year 1) (Year 2) (Year 3) (Year 4) (Year 5)

It is usually advisable to set up the factors in a spreadsheet to carry out this

type of calculation if costs extend long into the future, or if there are

numerous discount rates or cost elements being considered.

When calculating the present value of medical services, it is essential to

determine the timing of those services. In many cases, there are various

levels of care that gradually decline over time, but in some cases these may

increase (e.g., when it is estimated for non-surviving patients that terminal

care will be provided at some point in the future). Consequently, there may

be different costs incurred at different points in the future, and these must

each be discounted appropriately. As noted above, each chapter presents

the final medical cost estimates both of undiscounted and present

discounted , that take the specific staging and timing of services into

account. It is therefore not necessary to perform discounting calculations

unless interim or partial cost calculations are required, as in the case, for

example, of the need for only hospitalization or pharmaceutical costs for

asthmatics, but not the full spectrum of costs for all medical services. Due

to the relatively unlikely need for such data, the discounted of components

of total costs were not provided in the chapters. 

Additional data or guidance needed on the genesis and application of

inflation or discounting factors can be found in most basic economic text

books.
Cost of Illness G-1 Glossary and Abbreviations

GLOSSARY AND ABBREVIATIONS

This glossary provides brief definitions of some technical terms used in the handbook. Special

effort was made to include those that are used repeatedly or that may cause confusion because

they have a number of different meanings (e.g., colloquial versus technical). It does not provide

definitions of many medical terms used in the Background section of the chapters to describe a

disease because it is assumed that if the reader wishes to obtain more detailed information on a

disease they will consult a medical text book. Commonly used abbreviations are also included

with their full spelling.

antineoplastic: anticarcinogenic.

ATSDR: Agency for Toxic Substances and Disease Reduction.

carcinomas: malignant tumor.

CDC Centers For Disease Control.

cellular proliferation: cell growth.

CFS: chronic fatigue syndrome.

chelation therapy: therapy to remove metals.

chemotherapeutics: chemical therapy, usually.

chromosomal aberrations.

chronic bioassays: studies over long periods of time.

congenital anomalies: birth abnormalities.

COPD: chronic obstructive pulmonary disease.

CPI: consumer price index.

CPT: current procedural terminology.

CT: computerized tomography.

cytogenic abnormalities: cell abnormalities.

DRG: diagnostically related group.

EKG:electrocardiogram.

embryogenesis: development of an embryo.

environmental agents (e.g., DDT and its metabolites).

ER: emergency room.

ETS: environmental tobacco smoke.

FEV: forced expiratory volume.

genotoxicity: toxic to genetic material.

GI: gastrointestinal.

hepatic: liver.

heritable cell lines: genetic information passed from one generation to the next.

histology: cell evaluation.

HMO: Health Maintenance Organization.

HSDB: Hazardous Substances Data Base.

ICD: International Classification of Disease.

immunotherapy: therapy involving the immune system.

indigent population: population with very limited financial resources.

involvement of nodes: lymph node pathology.

IV: intervenous.

latency period: time between exposure and disease onset or detection.

LRI: lower respiratory infection.
Cost of Illness G-2 Glossary and Abbreviations

metasticize: pathological spread of disease.

MRI: magnetic resonance imagery.

mucosa: mucous membranes.

mutagenicity: causing genetic change.

NAS: National Academy of Sciences.

NCHS: National Center for Health Statistics.

NCI: National Cancer Institute.

NHLBI: National Heart, Lung, and Blood Institute.

NIH: National Institutes of Health.

OTC: over the counter.

palliative care: care for terminally ill patients.

peripheral neuropathy: nerve damage affecting limbs.

placental barrier: barrier preventing transfer of some materials from mother to fetus.

sarcomas: malignant tumor of specific mesinchymal origin.

SNF: skilled nursing facility.

somatic cell lines: genetic information relevant to one individual, not heritable.

TRI: Toxic Release Inventory.

URI: upper respiratory infection.

WTP: willingness-to-pay.

xenoestrogens: estrogens introduced from outside sources.
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