Transcript NIOSH’s Director Award for 2007, Lecture The Costs of

Costs of Occupational Injury and
Illness Combining All Industries
for November 3, 2008 Seminar for Western Center for Agriculture
Health and Safety
By J. Paul Leigh, Professor of Health Economics
Center for Healthcare Policy and Research, Department of Public
Health, University of California, Davis, MS1C.
One Shields Ave, Davis, California, 95616-8638
Phone: 530-754-8605
Fax: 530-752-3239
Email: [email protected]
1
Outline for Talk


Introduction
Second, methods and estimates of costs for occupational injury
and illness

Third, estimates for Agriculture

Fourth, under-reporting cases to Bureau of Labor Statistics

Fifth, cost-shifting

Sixth, interesting data on dangerous jobs

Seventh, time-trend in reported injuries

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Eighth, free market proposal to provide OSH information to
workers, an OSH Report Cards for as many jobs as possible
Ninth, conclusion
2
Introduction
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Most Americans between ages 22 and 65 spend 50%
waking time at work.
Every year millions Americans experience injuries, illnesses
and even deaths in workplace.
Costs occupational injury and illness in 2005 nearly 80%
as large as cancer, roughly same as diabetes, and greater
than Alzheimer’s.
This large size sometimes underestimated since federal
government statistics systematically under-count
occupational injury and virtually ignore fatal occupational
disease.
3
Intro Cont.
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Despite large costs, federal budgets for research and statistics on
occupational safety and health are fraction those for cancer,
diabetes and Alzheimer’s.
Most these costs not absorbed by workers compensation insurance
carriers; they are passed-on to non-workers compensation private
medical insurance carriers, to Medicare, to Medicaid, and to
individual injured workers and their families.
Disproportionate inefficient number low-income persons
experience these injuries.
Failure to address these costs has number economic consequences
since “an ounce of prevention is worth a pound of cure.”
4
Intro Cont.
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First, prevention of occupational injuries and illnesses would
partially restrain escalating costs of medical care, now pegged at
16% of GDP and rising.
Second, prevention would decrease high costs of workers’
compensation insurance which now extracts $ 88 billion annually
from business and government.
Third, prevention would improve productivity since there would be
fewer workers who become disabled (father of economics, Adam
Smith, recognized this productivity consequence and called for
government intervention to reduce occupational hazards).
Fourth, fewer number disabled workers result in fewer federal
dollars spent for Social Security Disability Insurance and fewer
dollars spent by state and local governments for welfare.
5
2. National costs of occupational
injury and illness, 2005 1.a. Method

2.a. Method
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Cost-of-Illness method divides costs into direct and indirect categories
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Direct costs include medical spending on hospitals, physicians, drugs,
and nursing homes.
Indirect costs, productivity losses include wage losses and household
production losses; as well as employer productivity losses, which
include time spent by supervisors recruiting and training replacements
for injured workers.
Costs were expressed in 2005 dollars
6
2.a Method
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Used epidemiologic method (the population attributable risk,
AR model) to estimate numbers and costs of illnesses.
Epidemiologic AR method measures portion of prevalence of
disease due to particular exposure or risk factor such as
benzene, arsenic, or asbestos.
This epidemiologic AR method been applied to many diseases
and causes, not just occupational
For example, study estimated if smoking eliminated,
prevalence pneumonia decline by 32%
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2.a Method, Cont.
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We (Steve Markowitz and Marianne Fahs) developed
estimates for 1992.
For this lecture, generated preliminary estimates for
2005, extrapolated from 1992 estimates based on
growth or reduction in prevalence or incidence of
illnesses and injuries as well as inflation.
Despite preliminary nature of estimates, believe
conclusions drawn (e.g. comparing these costs to costs
of cancer or diabetes) still hold.
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2.b Estimates
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Estimates for diseases presented first; injuries second; diseases and
injuries combined, third.
Table 1 lists costs of diseases attributed to job-exposures.
All disease age ranges had lower limit of age 25. Most had no upper
limit with exception of circulatory disease, upper age limit of 64.
In addition to fatal diseases, nonfatal illnesses measured in Bureau
of Labor Statistics (BLS) files. BLS illness data included carpal tunnel
syndrome, dermatitis and tendonitis, many others.
Job-related osteoarthritis most frequently develops after age 60, and
can be attributed to an on-the-job injury. Typical case, worker
seriously injures knee on-the-job age 40 develops osteoarthritis in
knee age 70. Knee may be replaced, expensive.
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2.b Estimates, Cont.
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Greatest contributors in Table 1 are cancer, circulatory
disease, respiratory disease and job-related arthritis. The
number job-related deaths Table 1 sums 66,239. Total costs
including job-related osteoarthritis and nonfatal illnesses:
$49.1266 billion in 2005.
Workers compensation not likely cover fatal diseases or jobrelated osteoarthritis since diseases do not manifest until
retirement.
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Table 1
Diseases and Costs, 2005, Preliminary Estimates
Disease
Percent
Attributed
To Jobs
Estimated
Job-Related
Deaths
Estimated Job
Related Costs
(Billions$2005)
140-209
8%
44,445
$16.3293
ICD-9 Codes
1
Cancer
2
Circulatory disease
(heart and stroke)
410-414, 430
438, 440
10%
7155
$4.5070
3
Chronic obstructive
pulmonary disease
and asthma
490-496
10%
11,880
$6.4660
4.
Pneumonoconioses
500- 505
100%
1136
$0.1268
5.
Nervous system
disorders
323.7, 331, 332,
349.82, 356,
357.7, 359.4
2%
712
$0.1985
6.
Renal disease
580-589
2%
911
$0.4586
7.
Osteoarthritis
715
8%
0
$14.4652
8.
Non-fatal illnesses
from BLS
N/A
100%
0
$6.5752
66,239
$49.1266
TOTAL
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Estimates for Agriculture,
2005
Injuries
Number of nonfatal
at least 1 day work loss
Fatalities
263,757
145,061
641
Cost
Total
Direct
Indirect
$3.74 billion
$1.367 billion
$2.373 billion
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2.b Estimates, Cont.

Also updated 1992 fatal and nonfatal injury estimates to 2005.

Adjusting fatalities yielded 5,876 deaths and $5.007 billion in costs.

Adjusting nonfatal injuries yielded 8,181,583 number of cases and
$110.0706 billion in costs.

Combining two injury costs yielded $115.0776 billion.

Combined estimates appear in Table 2.

Assuming same percentage difference between direct and indirect
costs in 2005 as were estimated in 1992, estimated 66% or $108.8
billion for indirect costs and $54.5 of direct costs.
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Table 2
Number and Cost for Job-Related Injuries and Illnesses in US
($Billions) 2005, Preliminary Estimates
I Injuries
A. Deaths
B. Nonfatal
Number
Costs, billions
8,186,792
$115.0776
5,876
$5.0070
8,180,916
$110.0706
$49.1266
II. Illnesses
A. Deaths
66,239
$28.0862
B. Nonfatal injuries
726,325
$6.5752
C. Job-related arthritis
III. Grand total
$14.4652
$163.2042
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2.c Comparisons
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Liberty Mutual, one largest workers’ compensation insurance
carriers in US.
They estimated direct and indirect costs (not just those covered by
workers’ compensation) from $155 billion to $232 billion in 1998.
(One reason Liberty Mutual’s estimates exceed ours is they allow
for more categories of productivity costs to employers such as
overtime pay).
My estimates and Liberty Mutual’s indicate higher percentage of
indirect costs to total costs when compared other diseases such as
heart disease or cancer.
15
2.c Comparisons Cont.
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Reason for high indirect costs is over 70% of occupational costs due
injuries; more harm to younger persons than are accounted for by
diseases.
Occupational injury deaths frequently occur among persons their
20s, 30s and 40s whereas cancer and especially heart disease deaths
occur among persons in their 60s, 70s and 80s.
Whereas all deaths are losses, deaths among younger persons mean
many more years of productive life lost than deaths of older persons.
Moreover, deaths among parents with young children especially
tragic. Neither our estimates nor those from Liberty Mutual account
for emotional costs to young children losing parent.
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2.c Comparisons Cont.
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Occupational injury and illness costs large when compared to other
diseases.
Costs cancer in 2005, $210 billion. Our costs estimates ($163 billion)
roughly 78% as large as for cancer. Upper range Liberty Mutual’s
estimates exceed cancer.
Costs diabetes 2007, $174 billion. Accounting for inflation our
estimates on a par with diabetes. Upper range Liberty Mutual
estimates exceed diabetes.
Costs of Alzheimer’s Disease, $148 billion. Our $163 billion exceeds.
17
2.c Comparisons Cont.
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Comparisons, federal government funding for health research.
National Institute for Occupational Safety and Health (NIOSH)
consistently received among smallest amounts funding
compared to other institutes.

2006 fiscal year funding for NIOSH was $254 million
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$4,793 million (19 times NIOSH) for National Cancer Institute
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$1,844 million (7.3 times NIOSH) for National Institute Diabetes,
Digestive, Kidney
$508 million (2 times) National Institute of Arthritis and
Musculoskeletal Disorders.
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3. Undercount
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Number of studies indicate BLS’s estimates of numbers
nonfatal injuries and illnesses significantly below actual.
BLS may miss from 20% to 70% nonfatal injuries and illnesses.
In part, due to BLS exclusion self-employed and government
workers.
More important are exclusions of cases private firms do not
report to BLS.
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3. Undercount Cont.
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First, firms have economic incentive to under-report.
Some experience-rated workers’ compensation systems penalize
firms with high premiums if report high numbers injuries.
Firms may want government contracts and want look attractive to
government agencies
But not just firms.
Employees may voluntarily decline to report for fear of being labeled
accident-prone or fear denied a promotion.
Finally, undercount may have resulted from increasing number of outsourcing firms who employ contingent workers (#1 ref. Cummins).
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3. Undercount Cont.
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Greatest data gap in government statistics lies with measuring
fatal occupational fatal disease.
Information available on coal workers’ pneumoconiosis,
silicosis, byssinosis, and mesothelioma.
But these comprise fewer than 5% all occupational disease
deaths.
In my view, more resources should be devoted to datagathering for fatal occupational disease.
21
4. How much of the costs do Workers
Compensation insurers cover? Who pays for
the rest? Implications for cost shifting
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Workers Compensation insurers paid $55.3 billion for medical
care and indemnity payments in 2005.
Comparison to our estimates suggests t 66% of costs, or $108
billion, not covered by workers compensation.
Who pays when workers compensation does not? Short answer
is “everybody else.”
Likely that medical costs absorbed by existing payment
mechanisms outside workers compensation.
22
4. Workers Compensation Cont.
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Using figures from National Center for Health Statistics (NCHS),
roughly 15% will be out-of-pocket, 40% will be private health
insurance, 33% will be Medicare, 10% will be Medicaid and 2% will
be “other.”
If $108 is not covered, and 33% of $108 is direct costs, then $36
billion will be spread across the NCHS categories.
Roughly $14.4 billion will be paid by non-workers’ compensation
private insurance.
Roughly $15.6 billion will be paid by taxpayers: Medicare ($12
billion), Medicaid ($3.6 billion).
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4. Workers Compensation Cont.
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Bulk uncovered indirect costs ($72 billion) absorbed by individual
workers and families but also by the economy at large, since
more disabled workers will mean less output.
Some indirect costs also absorbed by Social Security Disability
Insurance.
Reville and Schoeni (#2 ref.) find “among Disability Insurance
recipients, 45 percent of men and 26 percent of women are
disabled because of workplace accidents, injuries, or illnesses.
The annual cost of workplace injuries to Medicare and Social
Security Disability Insurance is roughly $33 billion.”
Economic implications for substantial cost-shifting.
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4. Workers Compensation Cont.
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Poor health of workers viewed as economic externality, an
unwelcome by-product of production, similar to air pollution.
Economic efficiency requires that private costs of production
equal social costs.
If private costs too low, firms will produce inefficient amount (too
much) pollution or, in our case, too many occupational injuries.
Aggregate private costs, reflected by workers compensation
premiums, are too low.
If premiums higher, and if firms experienced-rated so that they
face true costs, then they firms would have economically
appropriate incentive to reduce injuries.
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4. Workers Compensation Cont.
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This reduction likely involve prevention strategies.
This prevention would mean reduction in costs borne by private
non-workers compensation medical insurance carriers, Medicare
and Medicaid.
Given the high and rising cost of medical care (currently 16% of
GDP) this trade-off of more prevention spending for less cure
spending would be welcome.
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5. Interesting Data on
Dangerous Jobs
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For many workers in jobs with especially high fatal injury rates,
hazards likely well-known. e.g. police officers, firefighters, fishers,
airplane pilots, US Presidents.
But the list of well-know dangerous jobs is short.
Most consumers know more about the fat content of the potato
chips before they purchase them than prospective workers know
about job hazards before they take them.
The list of high death-injury rate jobs that are not well-know is long.
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5. Interesting Data Cont.
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The occupation list includes surveying assistants, laborers, farm
workers, apprentices in construction trades, garbage collectors,
warehouse workers, bakers, geologists, truck drivers, mechanics,
gas-station attendants, delivery workers, driver-sales workers, metal
molders, and convenience store clerks, to name a few.
The industry list includes trucking, fats and oils, care dealers,
warehousing, dairy products, bakery products, and real estate.
But these lists do not account for non-fatal injuries.
One of most hazardous jobs for women is nursing aide at nursing
homes. Relatively small female aides required to transport relatively
large men from beds to gurneys and back again. Back injuries
result. In addition, some of these men are demented and violent.
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5. Interesting Data Cont.
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There are unexpected differences in the sizes of fatal and nonfatal
injury rates across occupations and industries.
For occupations, roofers, truck drivers and farm workers have
fatality rates roughly 80% larger than police officers.
Construction laborers have a fatality rate nearly double that of
police.
Groundskeepers and welders have higher fatality rates than
carpenters.
For nonfatal rates resulting in days away from work, cashiers have
higher rates than cooks who exceed stock handlers and all three
exceed non-construction laborers.
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5. Interesting Data Cont.
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Also surprising methods whereby workers experience injury
deaths on the job.
Convenience store clerks, cashiers at liquor stores, restaurant
managers, receptionists and lawyers are frequently murdered.
Nearly as many vehicle crashes kill police officers as violent
attacks.
Farm workers and garbage collectors most frequently die of
vehicle crashes.
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5. Interesting Data Cont.
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In general, vehicle crashes and homicide account for far more
on-the-job injury deaths than is usually imagined. Studies
show that even coroners fail to recognize homicides and
vehicle crash deaths as job-related.
Not just employees. The self-employed have one of the
highest rates for fatal injury of all job classifications. Small
firms, in general, have high fatality rates.
31
5. Interesting Data Cont.
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List of ten (nonfatal number of cases and average wage, for 2005 and 2006)
are as follows: laborers and freight, stock, and material movers (92,240,
$11.08)
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Truck drivers, heavy and tractor-trailer (65,930, $17.46)
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Nursing aides, orderlies, and attendants (52,150, $11.04)
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Construction laborers (39,270, $14,39)
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Truck drivers, light and delivery services (32,740, $13.23)
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Retail salespersons (32,300, $11.51)
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Janitors and cleaners, except maids and housemen (31,440, $10.45)
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Carpenters (31,270, $19.20)
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Maintenance and repair workers, general (23,170,$16.11)
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Stock clerks and order filers (23,060, $10.79)
With the exception of carpenters’ wages, the remaining nine of these
“top 10” wages are well below the average for the nation, $18.84.
32
6. Trend
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Has been downward time trend for numbers and rates of
occupational injury (but not disease).
roughly 8% reduction for injury deaths occurred from 1992 to 2005
and 38% reduction for nonfatal cases from 1994 to 2005.
Lead some observers to suggest “nothing more needs to be done,”
since time will obviate OSH problems.
At least three responses.
First, academic researchers question whether and how much
reduction there has actually been, especially given controversy
about BLS undercount.
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6. Trend Cont.
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One study found 83% of BLS reported decline due to changes in
OSHA record-keeping rules.
Second, for other diseases, just because downward trend does not
mean we quit.
Breast cancer mortality for white women slowly but steadily
dropping, perhaps 25%, since 1984. Yet the NCI funding for breast
cancer research has been increasing.
The same true for heart disease. The age-adjusted death rate for
heart disease dropped 42% from 1980 to 2002 but funding for the
National Heart Lung and Blood Institute has expanded from 1980 to
2002.
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6. Trend Cont.
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As breast cancer and heart disease deaths drop we
congratulate funding agencies and reward with more
resources.
We should do same for occupational safety and health.
Third response is: no evidence that numbers fatal
occupational diseases (66,239 in 2005) falling over time.
35
7. Free-Market Proposal
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Low-cost suggestion: require health and safety information
attached to job application forms.
Like most economists, believer in free markets.
As all economists acknowledge, free market efficiency
enhanced with better information.
Today, information on job hazards workers can easily grasp
sadly lacking.
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7. Free-Market Proposal
Cont.
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For example, do not believe most clerks in convenience stores realize risks of
murder higher than those for police officers.
Do not believe most women seeking jobs as aides in nursing homes realize
nursing home aides experience more serious injuries than women in any
other job in the country.
We know more about the health content of potato chips before we purchase
them (thanks to federally-mandated nutrition content notices) than we do
about the health and safety content of jobs before we take them.
I think every job application form should carry a page of information and
statistics---including death rates---particular to specific occupations and
industries relevant to the job applicant. This would permit prospective
workers to turn down dangerous jobs, thus providing a free market incentive
for employers to improve job safety.
37
8. Conclusion
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Costs of occupational injuries and illnesses high, almost as
much as cancer.
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30%-70% under report el BLS
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Cost shift lead to inefficiency

OSHA & NIOSH should be rewarded for down trend

Death rates on job application forms should improve free
market.
38