An Unhealthy America: The Economic Burden of Chronic Disease Charting a New Course to Save Lives and Increase Productivity and Economic Growth

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1 An Unhealthy America: The Economic Burden of Chronic Disease Charting a New Course to Save Lives and Increase Productivity and Economic Growth Ross DeVol Director, Center for Health Economics Director, Regional Economics (310) rdevol@milkeninstitute.org Presentation for Stakeholder Forum Santa Monica, CA October 11, 2007

2 Economic Burden of Chronic Disease Introduction: Two Paths, Two Choices 1. What Does Chronic Disease Currently Cost Us? 2. Where Is the Current Course Taking Us? 3. What Costs Are Avoidable If We Make Improvements in Prevention and Treatment? 4. What Are the Impacts of Chronic Disease at the State Level? 5. What Is the Long-term Impact of Reducing the Disease Burden? 6. What Are the Conclusions and Recommendations of our Findings?

3 The Human Cost: Number of People Reporting Chronic Disease Number Reporting Seven Common Chronic Diseases, U.S., 2003 Pulmonary Conditions 49.2 Hypertension 36.8 Mental Disorders 30.3 Heart Disease 19.1 Diabetes Cancers Stroke Population Reporting Condition (Millions)

4 The Human Cost: Number of People Reporting Selected Cancers U.S., Other Cancers Breast Cancer Prostate Cancer Lung Cancer Colon Cancer Population Reporting Condition (Millions)

5 The Human Cost: Number of People Reporting Chronic Disease Number Reporting Seven Common Chronic Diseases, California, 2003 Diabetes 1,573K Ca se s Ca nce rs 1,155K Pulmonary Conditions 5,301K Hypertension Stroke Heart Disease 1,860K 3,660K 241K Mental Disorders 2,534K PRC per Ca pita Relative to U.S. (U.S.=1)

6 The Human Cost Milken Institute State Chronic Disease Index: States in Top Quartile have the Lowest Rates of Seven Common Chronic Diseases Top Quartile Second Third Bottom Quartile

7 The Human Cost: Milken Institute State Chronic Disease Index Composite Scores State Rank Composite Score State Rank Composite Score Utah Vermont Alaska Maryland Colorado Michigan New Mexico Ohio Arizona Oregon California Georgia Hawaii New Jersey Idaho North Carolina Washington Connecticut Wyoming Delaware Minnesota South Dakota Texas Louisiana Nevada Florida North Dakota South Carolina Illinois Massachusetts Kansas Alabama Nebraska Oklahoma New Hampshire Maine Montana Rhode Island Virginia Pennsylvania Wisconsin Mississippi New York Kentucky Indiana Arkansas Iowa Tennessee Missouri West Virginia

8 The Economic Cost: Treatment Expenditures by Chronic Disease U.S., 2003 Heart Disease $65 Cancers Mental Disorders Pulmonary Conditions $46 $45 $48 Hypertension Diabetes $27 $33 Stroke $14 $0 $10 $20 $30 $40 $50 $60 $70 US$ Billions

9 The Economic Cost: Lost Productivity by Source, U.S. US$ Billions, 2003 Lost Workdays Individual, $127.5 Presenteeism Caregiver, $80.2 Lost Workdays Caregiver, $10.8 Presenteeism Individual, $828.2 Total Lost Productivity in 2003 = $1,046.7

10 The Economic Cost: Lost Productivity by Chronic Disease U.S., 2003 Hypertension Cancers $280 $271 Mental Disorders $171 Diabetes Heart Disease Pulmonary Conditions $105 $105 $94 Stroke $22 $0 $50 $100 $150 $200 $250 $300 $350 US$ Billions

11 Total Economic Cost of Chronic Disease U.S., 2003 Cancers Hypertension Mental Disorders Heart Disease $48 $271 $33 $280 $46 $171 $65 $105 Pulmonary Conditions Diabetes Stroke $45 $94 $27 $105 $22 Total Treatment Expenditures = $277B Total Lost Economic Output = $1,047B $0 $50 $100 $150 $200 $250 $300 $350 US$ Billions

12 Total Economic Cost of Chronic Disease California, 2003 Ca nce rs $4.7 $29.6 Hypertension $3.1 $27.8 Mental Disorders $4.4 $14.3 Heart Disease $6.0 $10.2 Diabetes Pulmonary Conditions Stroke $3.0 $12.0 $4.4 $10.1 $1.3 $2.2 Tota l Tre a tm e nt Ex penditure s = $26.9B Total Lost Economic Output = $106.2B $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 US$ Billions

13 Projection of Cases and Treatment Costs Baseline vs. Optimistic Scenario Process 1. Develop Based on Aging Population 2. Develop Based on Behavioral Risk Factors and Other Demographics 3. Develop Based on Screening, Early Detection and Medical Innovations 4. Develop Based on Different Health Care Cost Growth 5. Avoidable Cost = Difference in Expenditure Between Baseline and Optimistic Scenarios

14 Population Projections U.S., 65 and Over Percent Male 65 and over Female 65 and over History Forecast

15 Cancers Mental Disorders Diabetes Heart Disease Hypertension Pulmonary Conditions Stroke Our Current Path: Projected Rise in the Cases of Chronic Disease U.S., From 2003 to % Population Growth = 19% 60 54% 53% 50 41% 39% 40 31% 29% Percent

16 Our Current Path Combined Value of Treatment Expenditures and Productivity Losses, U.S. Total Economic Costs (US$ Billions) $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 Lost Economic Output Treatment Expenditures $

17 Percent Growth in Number of People Reporting Chronic Diseases Current Path Versus Alternative Path, U.S., ALL CANCERS Breast Cancer Colon Cancer Lung Cancer Prostate Cancer Other Cancer Pulmonary Conditions Diabetes ALL CARDIOVASCULAR Hypertension Heart Disease Heart Disease Stroke Mental Disorders Total 9% 9% 13% 6% 13% -8% 5% 17% 31% 33% 29% 32% 32% 33% 34% 35% 35% 38% 39% 39% 41% 42% 51% 53% 54% 62% 65% 75% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% Curre nt Pa th Alternative Path

18 Avoidable Treatment Expenditures U.S., 2023 Heart Disease $110 $76 Ca nce rs $109 $37 Mental Disorders $107 $28 Pulmonary Conditions $92 $26 Hypertension Diabetes $65 $23 $63 $17 Alternative Future Expenditures Avoided Stroke $27 $10 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Treatment Expenditures (US$ Billions)

19 Avoidable Productivity Losses U.S., 2023 Cancers Hypertension Mental Disorders Diabetes $587 $373 $666 $173 $480 $88 $277 $73 Heart Disease Pulmonary Conditions Stroke $182 $137 $218 $47 $47 $14 Alternative Future Productivity Losses Avoided Productivity Losses (US$ Billions)

20 Avoidable Treatment Costs and Output Losses U.S., 2023 Ca nce r Heart Disease Hypertension Mental Disorders Diabetes Pulmonary Conditions Stroke $37 $373 $76 $137 $23 $172 $28 $88 $17 $73 $26 $47 $10 $14 Dire ct Costs Indirect Impacts $0 $100 $200 $300 $400 $500

21 Avoided Treatment Costs and Output Losses California, 2023 Ca nce r $3.2 $41.8 Heart disease $6.7 $14.8 Hypertension Diabetes Mental disorders $2.0 $18.2 $1.7 $9.0 $2.3 $7.7 Direct Costs Indirect Impacts Pulmonary conditions Stroke $2.1 $5.1 $0.8 $1.6 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 US$ Billions

22 Costs That Can Be Avoided Each Year US$ Billions Economic Costs Avoided (US$ Billions) $1,200 $1,000 $800 $600 $400 $200 Lost Economic Output (Indirect) Treatment Expenditures (Direct) $

23 Avoidable Economic Costs Attributable to Decline in Obesity U.S., 2023 Cancers $85 $312 =$397 Heart Disease $73 $118 =$191 Hypertension $100 $87 =$187 Diabetes $52 $39 =$92 Obesity Other Factors Stroke $3 $15 =$19 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 Avoidable Economic Impact (US$ Billions)

24 Long-Term Economic Impacts Overview Attempt to quantify health (chronic disease) impact on human and physical capital formation the restrictions imposed on intergenerational economic growth Determinants of economic growth and model specification Historically, only few have been found to be significant in explaining growth Human capital s role Dynamic economic growth depends upon health (life expectancy at 65), stock of labor (labor force), quality of labor (percent of adult population with bachelor s degree or above), physical capital (real stock of equipment and structures) Good health increases the rate of return to investments in education Improves the nation s competitiveness in the long-term The higher the income earner s human capital, the greater the probability that they will invest in their children s and grandchildren's education

25 Intergenerational Impact of Health on Education 2000, Actual versus Fitted Explained by Life Expectancy 40 Percent of Population with a Bachelor's Degree States in Descending Order Actual Values Fitted Values

26 Health and Human Capital 2003 Life Expectancy at 65 Population with Bachelor s Degree, Percent Top Quartile Second Third Bottom Quartile Top Quartile Second Third Bottom Quartile

27 U.S. Long-Term Forgone Economic Output Change in Real GDP Between Baseline and Optimistic Scenarios 6 5 US$ Trillions Year

28 California Long-Term Forgone Economic Output Change in Real GDP Between Baseline and Optimistic Scenarios US$ Trillions Year

29 Economic Burden of Chronic Disease: Conclusions and Recommendations Conclusions: Lost Productivity Surpasses Treatment as the Cause of Economi Burden Early Interventions and Medical Innovations Improve Quality and Longevity of Life Healthcare Expenditure Accounts by Disease Are Needed Good Health Is an Investment in Economic Growth Recommendations: Incentives for Prevention and Early Intervention We need private-public partnerships to incentivize patients and providers to prevent chronic disease e ectively Healthy Body Weight Initiative We need a strong, long-term national commitment to promote health, wellness, and healthy body weight