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Valuing intangible costs of substance abuse in monetary terms

Valuing intangible costs of substance abuse in monetary terms. Claude Jeanrenaud, Sonia Pellegrini IRER, University of Neuchâtel Neuchâtel October 25 th , 2003. Purpose. (1) Defining the notion of « intangible costs »

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Valuing intangible costs of substance abuse in monetary terms

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  1. Valuing intangible costs of substance abuse in monetary terms Claude Jeanrenaud, Sonia Pellegrini IRER, University of Neuchâtel Neuchâtel October 25th, 2003

  2. Purpose (1) Defining the notion of « intangible costs » (2) Discussing some of the methodological questions that arise when valuing the intangible costs of addictive products

  3. What are intangible costs ?

  4. Tangible vs. intangible costs Substance abuse generate: • Tangibles costs : • forgone production • material costs Intangible costs : change in health-related quality of life (HRQOL),excluding any direct and indirect costs

  5. Both the tangible and the intangible costs affect the well-being

  6. Can intangible costs be ignored? • Ignoring this component because we don’t know how to measure it leads to a gross under-estimation of the consequences of substance abuse • When both tangible and intangible costs are valued, the latter constitute a considerable part of the total costs: • Violent crime : 82.6% • Multiple sclerosis: 89.9% • Smoking : 50.0% • Alcohol abuse : 66.2%

  7. Valuing intangible costs • Intangible costs are the monetary (or income) equivalent of the loss of health per se • Most studies only value direct and indirect costs(tangible costs) • Intangible costs are said to be difficult or impossible to assess • Missing markets : one cannot rely on market prices to place a value on changes in HRQOL

  8. Conversion of health units (natural units) in money units

  9. Some methodological issues • A preference- or non preference-based approach ? • A restricted or a global approach ? • A disaggregated or an all-inclusive approach? • A one-step or two steps procedure? • Survey design

  10. Preference- or non preference-based approach

  11. Preference-based (willingness-to-pay approach) • The conversion of natural units in monetary terms is based on preferences • People are asked how they would trade health against money • Income equivalent of a reduced HRQOL • Method : contingent (CV) survey

  12. Income equivalent of a reduced HRQOL • CV method : allows us to learn how people value health • People are asked to state : • the maximum amount of the income they would accept to forgo to avoid a deterioration of their health state (keeping their well-being constant)

  13. Non preference-based (short cut) The analyst decides how much people would pay to avoid drug harm (hypothesis) • Bernasconi (1993) : for each drug user, there is at least a member of the household who would accept to sacrifice all his assets. • Collins & Lapsley (1996): The value of the goods that the deceased would have consumed plus a lump sum amount for each year of life lost provide a lower bound for the intangible costs

  14. Restricted or global approach?

  15. Restricted or global approach? • Both the HC and the WTP methods can be used in a global or restricted perspective: • Human capital : • global if used to value all aspects of substance use or abuse • restrictive if used to value only part of the burden (resources costs) • WTP approach : • global if used to value all health and non-health implications • restricted if use to value intangible costs only

  16. WTP : global perspective • WTP global perspective: applied to assess all the costs borne by the community, i.e. tangible and intangible: • Difficulties : • The stated value depends on which costs are carried by the social security system • It doesn’t reflect the total cost for the community

  17. WTP : restricted perspective • WTP restricted : applied to assess the intangible costs only • Difficulties : • The questionnaire must be carefully designed so that the respondent does not take possible losses in future income or out-of-pocket payments when stating his WTP • Is it sufficient to tell the respondents not to do it ?

  18. Disaggregated or all-inclusive approach ?

  19. Alcohol abuse is a complex problem • Alcohol abuse has many health implications : Abusers face a higher risk for more than 60 diagnoses groups • Excessive alcohol consumption also has behavioral and psycho-social consequences • How to include all these effects in the cost estimate ?

  20. Valuing each effect separately and summing them up • Procedure: • Identify the adverse health effects related to excessive alcohol consumption • Value the health implications of the most significant alcohol-related diseases • Problems: • The risks for the different alcohol-related diseases are not independent • Risk of overestimation (embedding effect, budget constraint)

  21. Valuing a profile • Procedure: • Specify a life time profile for (typical) excessive drinkers • Value the change in HRQOL using a CV survey • Problems : • What is a representative abuser ? • How to attach a probability to each profile ?

  22. From health metrics to money metrics

  23. From health metrics to money metrics • One-step conversion • Change in health state (natural units) is converted directly in monetary units • CV survey (profile or specific diagnoses) • Two-step conversion • Change in health state (natural units) is converted in utility units (QALY or DALY) • Utility weights are assessed through a time-trade-off or a standard gamble survey • Use an estimate of the income equivalent of a QALY or use some standard value

  24. Survey design

  25. Ex ante or ex post approach • Ex ante : WTP for a risk reduction • Ex post : WTP of a (potential or real patient) for retrieving perfect health • WTP is higher when ex ante approach is used

  26. Surveyed population : real patients or potential patients • Real patients have a better knowledge of the health implications of the illness on their well-being • Potential patients tend to overstate the consequences of a specific disease (ex: potential patients would prefer to die, real patients prefer to live with the disease)

  27. What should the respondent consider : a change in his own health state or in that of someone else ? • Sometimes, the respondents cannot imagine to be at risk. Example: a scenario in which an abstinent must imagine to be an alcoholic. • Alternative scenario : the respondent express his WTP to provide a treatment for a member of his family or a close friend.

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