Valuing intangible costs of substance
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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

Valuing intangible costs of substance abuse in monetary terms

Claude Jeanrenaud, Sonia Pellegrini IRER, University of Neuchâtel

Neuchâtel

October 25th, 2003


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

What are intangible costs ?


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

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%


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

Conversion of health units (natural units) in money units


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

Preference- or non preference-based approach


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

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)


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

Restricted or global approach?


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

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 ?


Valuing intangible costs of substance abuse in monetary terms

Disaggregated or all-inclusive approach ?


Valuing intangible costs of substance abuse in monetary terms

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 ?


Valuing intangible costs of substance abuse in monetary terms

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)


Valuing intangible costs of substance abuse in monetary terms

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 ?


Valuing intangible costs of substance abuse in monetary terms

From health metrics to money metrics


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

Survey design


Valuing intangible costs of substance abuse in monetary terms

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


Valuing intangible costs of substance abuse in monetary terms

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)


Valuing intangible costs of substance abuse in monetary terms

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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