December 2012 Prepared by:

The High Cost of Excessive Alcohol Consumption in New Hampshire December 2012 Prepared by:

Table of Contents EXECUTIVE SUMMARY... 3 I. INTRODUCTION... 7 II. PRODUCTIVITY COSTS... 8 A. REDUCED LABOR FORCE PARTICIPATION... 11 B. REDUCED EARNINGS OF WORKERS... 13 C. DIRECT COSTS TO INDUSTRY: ABSENTEEISM... 14 D. MORTALITY COSTS... 16 III. HEALTH CARE... 18 A. ALCOHOL TREATMENT COSTS... 18 B. MEDICAL EXPENDITURES... 21 IV. CRIME, JUSTICE, AND CORRECTIONS... 24 A. CRIME... 24 B. JUDICIAL COSTS... 25 C. CORRECTIONS COSTS... 26 V. OTHER COSTS... 27 A. MOTOR VEHICLE CRASHES... 27 B. STATE AND LOCAL TAX REVENUE... 29 VI. WHO BEARS THE COSTS OF EXCESSIVE DRINKING?... 29 VII. POLICY IMPLICATIONS... 31 VIII. CONCLUSIONS... 37 END NOTES... 39 2

Executive Summary The tremendous harm done to individuals and families that result from excessive consumption of alcohol is widely acknowledged. Less well understood are the broader costs that excessive consumption imposes on the New Hampshire economy, on state and local government, and on businesses and individuals in the state. Like all states, New Hampshire faces more challenges than it has time and resources to confront. A thorough understanding of the public and private costs of excessive alcohol consumption is needed to assess the magnitude of the problem, its severity compared to other issues facing the state, and the urgency with which it should be addressed. This report estimates the cost of excessive alcohol consumption in four broad areas: the productivity of individuals and businesses, health care, criminal justice, and other costs. In addition, the report considers the implications of some policies that could impact the costs of excessive alcohol consumption in the state. Throughout this report the terms costs and losses are used interchangeably to represent the monetized impacts of excessive alcohol consumption. Costs occur in the form of direct expenditures, as is the case when alcohol consumption impacts the health of individuals that increase health care or human services expenditures, or indirectly in the form of reductions in economic productivity and wage and salary earnings, as when labor force participation and earnings of individuals (and thus government revenues) is reduced due to individuals excessive use of alcohol. Table 1 Summary of NH Costs of Excessive Alcohol Consumption ($ Millions) Lifetime Costs Related Annual to Annual Costs Impacts Productivity Health Care Criminal Justice Other Costs Lower Labor Force Participation $403.9 Impaired Productivity $325.6 Absenteeism $27.1 Subtotal $756.6 Premature Death* $218.6 Alcohol Abuse Treatment $9.7 Medical Expenditures $154.4 Insurance Administration $17.6 Subtotal $181.7 Police Protection and Crime $41.1 Judicial System $12.0 Corrections $35.1 Cost to Crime Victims not estimated Subtotal $88.2 Motor Vehicle Crashes $78.5 State and Local Tax Revenue $45.99 Subtotal $124.5 Grand Total $1,151.0 $1,369.6 NH Personal Income $ Millions (2011) $60,240.8 $60,240.8 Alc. Costs as a % of Income 1.9% 2.3% *Included in separate total because of difference in calculation & accounting 3

In total, excessive alcohol consumption costs New Hampshire over $1.15 billion annually in increased expenditures and lost productivity and earnings, an amount equal to about 2.0 percent of total personal income in the state. Another $218.6 million in discounted lifetime earnings that are not included in the $1.15 billion total cost to New Hampshire, are lost each year by the almost 300 individuals who die prematurely each year in New Hampshire as a result of excessive alcohol consumption. State and local government s share of the total cost of excessive alcohol consumption in New Hampshire is over $251 million annually. Productivity costs affect the size of New Hampshire s workforce and affect the earnings of those individuals who are in the workforce and who consume alcohol excessively. These impacts on productivity reduce the output of New Hampshire businesses, lower the overall performance of the New Hampshire economy, and account for two-thirds of the annual cost of excessive alcohol consumption. Individuals who work, produce, and earn less because of alcohol represent a waste of resources. Human resources, especially individuals with skills, abilities and initiative are the most valuable resource of the 21 st century. Because of slow population growth, human resources are becoming scarcer each year in New Hampshire and in many states. New Hampshire cannot afford to waste human resources if it wants to maximize the performance of its economy and maintain its tradition of having the strongest economy in the region. Key findings of this report include: Productivity Reduced Labor Force Participation Excessive alcohol consumption resulted in 9,292 fewer male workers in NH s labor force in 2011, an overall reduction in the state s labor force of 1.2 percent with an associated loss of earnings of $403.9 million. Labor force participation rate losses are especially high as a percentage of the population among young males under the age of 25. Lower Earnings of Workers in the Labor Force Impaired productivity of alcohol dependent workers in the NH labor force costs an estimated $325.6 million in reduced earnings, with a median earnings reduction of $4,878 per alcohol-dependent worker. The $729.5 million in earnings costs (labor force participation plus lower earnings) attributable to alcohol dependency have indirect and induced (multiplier impacts) that collectively lower NH employment by an estimated 4,623 jobs.. Direct Costs to Industry: Absenteeism More than 54,000 workers with an alcohol dependency or abuse problem are employed by NH businesses. Over $27 million in alcohol attributed absenteeism costs are incurred by NH businesses because of excessive alcohol use. The implied loss of output by NH businesses resulting from this absenteeism is over $71 million. Industries that employ a high percentage of younger and/ or male workers, such as retail 4

and construction, have the highest rates of excessive alcohol use in their workforce. Mortality (Premature Death) Costs An average of 290 alcohol-attributable deaths occur in New Hampshire each year. Chronic and acute deaths attributable to alcohol result in the loss of discounted lifetime earnings of $218.6 million annually. Health Care Alcohol Treatment Services Just under 4,000 individuals received services for alcohol abuse at substance treatment facilities in NH, at an estimated cost of $9.7 million in NH in 2010, with $2.7 million of that care provided free of charge. In only one state (Texas) is an individual in need of treatment for substance abuse (primarily alcohol) less likely to receive treatment than in New Hampshire. Only about 4 percent of individuals needing treatment services for excessive alcohol use and 5.6 percent of all substance abusers receive treatment services in New Hampshire. The cost to provide services to all 96,000 NH residents estimated to need treatment for excessive alcohol use is over $200 million. Medical Costs Health care charges attributable to excessive alcohol use are estimated at $206.7 million in 2011, and payments for services estimated at $154 million in New Hampshire, an amount equal to about 1.5 percent of total medical expenditures in the state. Hospital charges accounted for the largest share of alcohol-attributable medical costs. Hospital charges for alcohol-attributable first diagnoses were an estimated $123 million in 2011, and payments to hospitals were $77.5 million. Insurance administration costs associated with alcohol-attributable medical services are estimated to add an additional $17.6 in alcohol-related costs. Criminal Justice. Alcohol-attributable offenses account for about 30 percent of all arrests and about 12.8 percent of all crimes committed in New Hampshire. Policing and public safety costs related to alcohol total $41.1 million in New Hampshire, of which $34.4 million is borne by local government. Judicial costs attributable to alcohol cost $12 million annually, divided approximately equally between state and local (including counties) government. Alcohol-attributable incarcerations increase corrections costs by $35.1 million annually in New Hampshire. 5

Other Costs Motor Vehicle Crashes The estimated cost of alcohol-attributable motor vehicle crashes (after subtracting crash-related medical and productivity which are calculated and included in the medical and productivity sections of the report) was $78.5 million in NH in 2011. State and Local Government Revenue Loss Fewer individuals in NH s labor force, the lower average earnings and greater absenteeism of workers who consume excessive amounts of alcohol, combine to reduce state and local revenues in New Hampshire by about $46 million annually. Who Bears The Burden of Alcohol-Attributable Costs Individuals, families, and private businesses bear the largest portion of the costs of excessive alcohol consumption in New Hampshire. Of the more than $1.15 billion in annual costs in New Hampshire attributable to excessive alcohol consumption calculated in this report, 1 about 70 percent is borne by private individuals and businesses, while state government bears 22 percent of the costs (or $251 million). Public Policies Increased State Funding for Treatment The net benefit to the state and local government from increasing alcohol treatment rates in NH is large enough that if less than half of treatments are successful, net benefits still exceed the costs of increasing treatment rates. Medicaid Expansion An estimated 58,247 non-disabled individuals, aged 18-64, without children, who have earnings less than 133 percent of federal poverty guidelines, could become eligible for Medicaid in NH if the state elects to expand Medicaid under the provisions of the Affordable Care Act (ACA). The newly eligible Medicaid population is expected to have higher rates of alcohol disorders and higher levels of health care costs than the existing Medicaid population in NH. NH and its economy will incur direct and indirect public and private costs of the newly eligible individuals in need of treatment regardless of whether they are on Medicaid or not. Under the new ACA Medicaid provisions, however, treatment costs for these individuals can be borne primarily by the federal government if NH has the capacity to serve them. 6

Cost Mitigation New Hampshire could recoup the unrecovered cost to government of alcohol by adopting an alcohol cost mitigation fee of $.03 per drink that would translate into an effective tax rate on alcoholic beverages that ranges for 1.3 to 3.5 percent. A per drink alcohol cost mitigation fee would reduce alcohol sales and related revenues in New Hampshire by an amount that is not estimated in this report. I. Introduction A majority of adults in New Hampshire consume alcohol in a variety of contexts and for a variety of purposes. Alcohol consumption has been a part of America s culture throughout its history for social, religious, and other purposes. Many people who consume alcohol perceive that there are benefits to their actions, and some studies have documented an association between moderate alcohol consumption and reduced risk for coronary heart disease. 2 In addition, sales of alcoholic beverages provide jobs in the alcohol manufacturing, wholesaling, retail and service industries. On the negative side, illness, disability, and premature death can be directly attributed to excessive consumption of alcohol. Excessive use of alcohol also contributes to other costs to society, including injuries, criminal activity, and motor vehicle crashes, and the loss of productive capacity among those who consume excessive amounts of alcohol. Throughout this report the terms costs and losses are used interchangeably to represent the monetized impacts of excessive alcohol consumption. Costs occur in the form of direct expenditures, as is the case when alcohol consumption has health effects that increase health care or human services expenditures, or indirectly in the form of reductions in economic productivity and wage and salary earnings, as when labor force participation and earnings of individuals (and thus government revenues) is reduced due to individuals excessive use of alcohol. Each year, the State of New Hampshire, its businesses and its citizens, incur costs resulting from excessive alcohol use including the costs of providing medical care for people with alcohol-related illness, treatment and prevention costs, costs to the law enforcement system, costs resulting from alcohol-related motor vehicle crashes and other injuries, and the costs associated with disability, diminished productivity, and premature death from alcohol-related causes. An estimated 96,000 New Hampshire residents are in need of treatment for alcohol use, while fewer than 4,000 received treatment specifically for excessive alcohol consumption in 2010, giving NH one of the lowest treatment rates of any state in the nation. 3 This study documents some of the public and private sector costs attributable to excessive alcohol consumption in New Hampshire and the implications if it remains largely untreated in the state. Excessive alcohol consumption commonly includes binge drinking, heavy drinking, underage drinking, and drinking by pregnant women. This report follows many of the procedures used in a seminal national study of the costs of excessive drinking, 4 including defining the measures of excessive alcohol use on which to base economic cost estimates. The authors of that study note: Because most excessive drinkers are not alcohol dependent and 7

the diagnoses of alcohol dependence/alcohol abuse generally involves a history of excessive drinking over an extended period of time, these diagnoses were considered an outcome of excessive drinking and not the primary basis for assessing economic costs. However, a history of alcohol dependence or abuse was used as a specific indicator of excessive drinking in some analyses (e.g., productivity losses based on lost earnings). This study adopts or modifies many of the methods used in national studies to calculate the economic costs of excessive alcohol consumption. We also develop new methodologies to estimate economic costs where state-level data is limited or missing, where no cost estimation methodologies have yet been developed by national studies, or where we believe better methodologies could be employed. Our report examines several categories of alcohol-attributable costs: the cost of treating alcohol use disorders, medical costs, justice and public safety costs, productivity costs, and costs associated with alcohol-attributable motor vehicle crashes. The costs associated with excessive use of alcohol are often borne by someone other than the drinker. Productivity losses associated with alcohol abuse by working individuals are borne by drinkers but also by employers and governments, medical treatments related to alcohol abuse are paid in part by insurers or federal or state programs, crime costs are borne by citizens via increased police, justice, and corrections costs, and some intervention/prevention programs are funded by state and federal agencies or private foundations. Yet unlike other legal substances consumed by a large number of citizens, such as tobacco, public and policymaker concerns over the net public and private costs associated with alcohol appear more limited. This, despite the fact that alcohol consumption is far more prevalent than is smoking in NH, and the fact that alcohol has impacts that reach far beyond individual and public health costs. Alcohol is the most socially acceptable, potentially addictive substance in the United States. At a time when the nation and individual states are more aggressively battling long-standing fiscal imbalances by tackling factors that are driving public expenditures (such things as demographic trends, healthcare costs and reforms, rising corrections costs etc.), it seems surprising that the costs and consequences of excessive alcohol use are not higher on New Hampshire s and the nation s policy agenda. The purpose of the study is to develop estimates of the economic costs of excessive alcohol consumption in New Hampshire, not to ignite additional ideological debates. A more thorough, non-ideological, understanding of the impacts that excessive drinking has on the private and public sectors of the New Hampshire economy is necessary to evaluate the adequacy of current policies (public and private) to limit or reduce those costs. II. Productivity Costs According to traditional economic growth theory, growth occurs by employing more basic inputs - more labor, capital, or land. 5 If more basic inputs are used, more output will be produced. Output will also increase if basic inputs (labor, capital, land) can be used more efficiently to produce more output per unit of labor, capital, or land. Increasing output (the value of goods and services produced) is necessary to increase prosperity because output determines the amount of income earned in an economy. When an economy is able to produce more output with smaller or no increases in inputs, productivity is increasing. All economies have limits on the amount of labor, land and capital available to increase output and grow an economy, so 8

maximizing the productivity of limited resources is a key to increasing economic growth and prosperity. Because the subject of this report is the high cost of excessive alcohol consumption, the focus of this section is the impact of excessive alcohol consumption on the productivity of the basic input of labor. One way to grow an economy faced with limited increases in inputs, such as the size of the labor force, is to utilize the existing resources more fully or more efficiently. Getting more individuals into the labor force (increasing the labor force participation rate) is one way to utilize limited labor resources more fully. Another way is to have workers in the labor force work more and/or more efficiently. Increasing productivity, or getting more done for each hour of work, has the effect of increasing the labor supply. Labor can become more productive if: there is more physical capital employed per worker (physical capital includes equipment and structures as well as public infrastructure); the health or skills of human beings increases this is known as human capital; or, the stock of accumulated knowledge in the workforce (or know how ) grows, thereby increasing knowledge capital. (The primary distinction between human capital and knowledge capital is that human capital cannot be separated from the human who possesses it.) Excessive use of alcohol has important implications for the productivity of the New Hampshire workforce, economy, and its limits for growth. Excessive alcohol consumption reduces the productivity of the labor force by reducing both labor force participation and the productivity of individuals in the labor force. Excessive alcohol consumption can interfere with an individual s ability to gain employment and with their productivity at work. Excessive alcohol use can interfere with an individual s ability to work (due to physical and/or mental illness, impairment, or death); ability to find a job (lack of skills, experience, or reliability); and potentially with an individual s willingness to enter the labor force. Thus, labor force participation as well as the wages or salaries among workers with excessive alcohol use may be lower than it is for similar individuals and workers without such problems. Excessive alcohol use is also associated with increased workplace accidents and deaths and other problems in the workplace but we limit our analysis to the impact of excessive drinking on earnings. This report does not argue that any alcohol use reduces human capital and the productivity of the New Hampshire economy. There is little evidence that adult alcohol use in moderation detracts directly from either labor market participation or from the productivity of individuals in the labor force, The distinction between moderate consumption and heavy or excessive consumption appears to be important in the literature on the labor market effects of alcohol use. French and Zarkin (1995) and Berger and Leigh (1988) find positive effects of moderate alcohol consumption on wages. In contrast, Mullahy and Sindelar (1993, 1991, 1989) and Ettner, Frank and Kessler (1997) all find negative effects of alcoholism on wages and employment. Similarly, Mullahy and Sindelar (1996) and Terza (2002) find negative effects of problem drinking on employment. 9

Key Findings: Productivity losses account for the largest share of costs associated with excessive alcohol consumption in NH, an estimated $756.5 million in 2011. The $729.5 million in of earnings costs attributable to alcohol dependency (via labor force participation and productivity impairment another $27 million is attributable to absenteeism) have indirect and induced (multiplier) impacts that collectively lower employment in the State of New Hampshire by an estimated 4,623 jobs. Method: Our estimates of productivity losses associated with excessive alcohol consumption are divided into four categories: Losses related to reduced labor force participation; Losses associated with reduced earnings of those in the labor force who consume alcohol excessively; Losses associated with alcohol-related absenteeism; and The cost of the lost productive capacity of individuals who die prematurely due to excess alcohol consumption. In calculating the productivity losses from excessive alcohol consumption in New Hampshire, we relied heavily on a 2010 analysis of national data conducted by the Lewin Group. 6 and current New Hampshire data from the Current Population Survey conducted by the United States Bureau of Labor Statistics and the United States Census Bureau. The Lewin Group (2010) performed extensive analyses on the 2001-2002 National Epidemiologic Survey on Alcohol and Related Conditions (NESARC) to assess labor market participation and earnings impacts related to alcohol dependency. We applied the parameter estimates from their study to the characteristics of NH s population and our estimates of the number of working-age individuals who excessively use alcohol to assess the productivity impacts on labor market participation and earnings by age group in NH. Several studies have failed to find statistically significant impacts on labor force participation and earnings for women who consume alcohol excessively. As noted in Lewin (2010), this result defies biologic plausibility. The finding does not mean that there are no labor market effects for women who consume excessive amounts of alcohol, only that the magnitude of the effect of alcohol use is not large enough to be 95 percent certain that it did not occur by chance. The implausible finding of no negative impacts on women is likely the result of several factors. According to the Lewin Group it is: more likely due to imprecise estimation resulting from several common problems and data gaps that plague attempts to estimate women s wages (e.g., breaks in the earnings histories of women because of childbirth). Further, the surveys that were used to assess the impact of alcohol dependence on earnings included a relatively small number of women, which made it difficult to accurately assess the impact of alcohol dependence on earnings history. 10

Nevertheless because of the absence of significant impacts for females, we calculate the impact of excessive alcohol use on labor force participation and earnings only for males age 18-64. The result is an underestimate of the true productivity costs of excessive alcohol consumption. For each working age group of males in NH we calculated the expected labor force participation and earnings in the absence of excessive alcohol consumption. Total annual productivity impacts are the sum of labor force participation impacts, the earnings impacts of excessive alcohol consumption by those employed in the labor force, and the impacts of absenteeism caused by one particular type of excessive consumption: binge drinking. Premature deaths related to excessive alcohol consumption also reduce productivity as society loses individuals who would otherwise be working and earning if their lives had not been shortened by alcohol-related causes. The calculation of those costs involves a discounted, present value analysis of lifetime earnings for those who die prematurely rather than a single year cost estimate. For that reason the mortality costs of excessive alcohol consumption are reported but not tallied in our annual cost estimates. Instead, they are reported as separate cost. Key Findings: A. Reduced Labor Force Participation Alcohol dependency resulted in an estimated 9,292 fewer male workers in NH s labor force in 2011, an overall reduction in the state s labor force of 1.2 percent. The alcohol-attributable reduction in the state s labor force results in an associated loss of earnings in the NH economy of $403.9 million. Results: For this analysis, labor force participation impacts were estimated using a definition of excessive alcohol use as evidenced by a lifetime history of alcohol dependency or abuse. Alcohol dependency and abuse among males in NH age 18-64 results in an estimated loss in labor force participation of 9,292 males from the NH workforce, representing an overall reduction in labor availability of about 1.2 percent in the Granite State. Figure 1 shows a breakdown of the labor force participation losses for males in New Hampshire among alcohol dependent individuals by age. 11

Figure 1 Alcohol Dependency and Abuse Reduces NH s Labor Force by an Estimated 9,292 Workers or 2.2% of the Male Labor Force and 1.2% of the Total Labor Force 0 18-19 20-24 25-34 35-44 45-54 55-64 (500) (1,000) (774) (1,500) (1,217) (1,478) (1,426) (2,000) (2,093) (2,500) (2,303) Table 2 presents our estimates of the loss of earnings in the New Hampshire economy that results from the lower labor force participation rates associated with alcohol dependency. The table shows that the impact of 9,292 fewer workers in the NH labor force as a result of alcohol dependency is an associated productivity loss (as measured by earning loss) of $403.9 million. Age Table 2 Labor Force Participation and Associated Earnings Effects of Excessive Alcohol Use in NH LF Total LF Current Number W/O Wages Partic. Labor Mean Total Wages Alcohol Alcohol LF W/O Rate Force Earnings ($ Millions) Dependent Depend Change Depend. Male Pop. Dependency Cost ($ Millions) 18-19 19,809 37.3% 7,389 $1,643 $12.14 1,388 8,163 +774 $13.41 ($1.27) 20-24 43,731 73.3% 32,055 $14,938 $478.83 7,732 33,272 +1,217 $497.02 ($18.19) 25-34 74,019 89.3% 66,099 $37,447 $2,475.21 14,304 67,577 +1,478 $2,530.56 ($55.35) 35-44 85,398 94.3% 80,530 $56,016 $4,510.99 16,009 81,956 +1,426 $4,590.87 ($79.89) 45-54 110,326 91.5% 100,948 $64,975 $6,559.12 17,949 103,041 +2,093 $6,695.10 ($135.99) 55-64 92,116 78.1% 71,943 $49,170 $3,537.42 9,360 74,245 +2,303 $3,650.65 ($113.23) Totals 425,399 358,964 $17,573.70 66,741 368,256 +9,292 $17,977.62 ($403.92) 12

B. Reduced Earnings of Workers Key Findings: The impaired productivity of alcohol dependent workers in the NH labor force costs the NH economy an estimated $325.6 million reduced earnings, with a mean earnings reduction of $4,878 per alcohol-dependent worker. Results: Estimates of the prevalence (percentage of the population in each age group) of male alcohol dependency by age group from the National Epidemiologic Survey on Alcohol and Related Conditions (NESARC) were applied to the population of males in New Hampshire to arrive at an estimate of alcohol dependency in NH s working-age population. This procedure results in over 66,000 working age males in the New Hampshire labor force estimated to have an alcohol dependency. Impaired productivity associated with alcohol dependency is estimated to cost these individuals over $325.6 million in lowered earnings annually, with a mean reduction in earnings of $4,878. Lower earnings imply lower output by industry, meaning NH businesses as well as individuals bear this cost. Figure 2 shows the difference in actual mean earnings of male workers in NH by age, and the estimated earnings of alcohol dependent workers, derived from the parameter estimates of earnings impacts developed by The Lewin Group (2010). The data from Figure 2 suggests that the longer workers continue an alcohol dependency through their working lives, the greater is the degree that alcohol affects earnings. Figure 2 Mean Earnings of NH s 66,000 Alcohol-Dependent Male Workers are Significantly Lower Than Workers Without Alcohol Dependency Mean Earnings by Age 55-64 $49,170 $44,267 45-54 35-44 $64,975 $58,659 $56,016 $50,083 25-34 20-24 $14,938 $13,242 $37,447 $33,395 Mean of All Workers 18-19 $1,643 $1,448 Mean of Alcohol-Dependent Workers $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 Source: Author s calculation using data from the Treatment Episode Data Set (TEDS), SAMHSA Table 3 provides details of the calculation of costs of the reduced earnings of alcohol dependent male workers in the NH workforce. Finally, the impact that reduced labor force participation and productivity have on earnings means lower aggregate personal income in the 13

state than would have occurred in the absence of alcohol dependency. Age Male Labor Force Mean Earnings Table 3 Earnings Impacts From Alcohol Dependency (Males in the Labor Force) Number Alcohol Dependent Mean Earnings of Alcohol Dependent Total Earnings of Alcohol Dependent Total Earnings if Not Alcohol Dependent Alcohol Dependency Cost 18-19 7,389 $1,643 1,388 $1,448 $2,009,824 $2,280,484 ($270,660) 20-24 32,055 $14,938 7,732 $13,242 $102,387,144 $115,500,616 ($13,113,472) 25-34 66,099 $37,447 14,304 $33,395 $477,682,080 $535,641,888 ($57,959,808) 35-44 80,530 $56,016 16,009 $50,083 $801,778,747 $896,760,144 ($94,981,397) 45-54 100,948 $64,975 17,949 $58,659 $1,052,870,391 $1,166,236,275 ($113,365,884) 55-64 71,943 $49,170 9,360 $44,267 $414,339,120 $460,231,200 ($45,892,080) Totals 358,964 66,741 $2,851,067,306 $3,176,650,607 ($325,583,301) Combined, the lower levels of earnings of alcohol dependent individuals that result from lower labor force participation and the reduced earning of alcohol-dependent workers will have indirect and induced multiplier impacts on the NH economy. We estimate that these multiplier impacts result in 4,623 fewer jobs in the state and $227.8 million in labor income. C. Direct Costs to Industry: Absenteeism Key Findings: Method: More than 54,000 workers who use alcohol excessively by binge drinking are employed by NH businesses. Over $27 million in alcohol attributed absenteeism costs are incurred by NH businesses because of alcohol problems. The output (value of goods and services) of industries was reduced by more than $71 million because of alcohol-attributable absenteeism in NH in 2011. To develop our estimate of the prevalence of binge drinking by industry in NH, we began with an analysis by the Center for Integrated Behavioral Health Policy 7 that estimates the prevalence of excessive alcohol use, by industry, using data from the National Survey on Drug Use and Health. These national data were adjusted to alcohol consumption patterns in New Hampshire to estimate the number of employees in NH who binge drink. The difference between the mean numbers of reported days missed from work between employees who binge drink and those who do not binge drink was used to estimate the impact that binge drinking has on the absenteeism of employees by industry. Applying adjusted rates of binge drinking by industry 14

Arts/Ent./Rec. Retail Prof. Srvcs. Educ & Health. Manufacturing Government Wholesale Construction F.I.R.E Trans./Ware/Util. Other Services Information from national surveys, to the number of employees by industry in NH, provides an estimate of the number of workers in each industry in NH who binge drink. The number of binge drinking employees was multiplied by the mean number of additional days of missed work attributable to binge drinking in each industry to arrive at a total number of alcohol-attributable days absent by industry. Average hourly earnings by industry in NH (from the Current Population Survey) was converted to a daily wage for each industry and multiplied by alcohol-attributable days absent for each industry to arrive at a total wage cost for alcohol-attributable absenteeism by industry. Absenteeism reduces the earnings of employees but the true cost to business is the lost productivity and output of goods and services that occurs when workers are absent. Employee compensation as a percentage of industry output is a measure of how much labor compensation goes into each dollar of industry output. Absenteeism may or may not result in lost earnings for all workers but a missing worker can produce no goods or services. We calculated compensation as a percentage of industry output in NH for each of 13 major industry groupings. Dividing the loss of compensation in each industry by the ratio of employee compensation in the industry to industry output yields an implied loss of industry output (production of goods or services) resulting from alcohol-attributable absenteeism in NH. Results: There are an estimated 54,550 employees in NH businesses who are binge drinkers. 8 Figure 3 shows the number and percentage of workers employed in each industry at a NH located business, estimated to be a binge drinker. Differences in rates are attributable to several factors that are associated with excessive alcohol consumption. Industries with higher percentages of male and younger workers (25 and under) can be expected to have higher rates of binge drinking than industries that employ a higher percentage of female and older workers. Other demographic and socioeconomic factors also influence the rates of binge drinking across industries. As Figure 3 shows, arts, entertainment and recreational workers, wholesale and trade retail, and construction Figure 3 Industries that Employ a Higher Percentage of Younger and Male Workers Have Higher Rates of Binge Drinking in Their Workforce 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 9.1% 1,005 Number % of Emp. In NH 9.3% 8.2% 3,243 5.3% 1,197 1,204 13.4% 12.3% 3,078 3,231 5,542 6.0% 5,726 8.6% 6,089 5.4% 6,534 10.0% 8,819 8,882 9.6% 14.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0 0.0% 15

industries have among the highest rates of alcohol problems, while educational, health and social services have the lowest rates. The employee compensation value of alcohol-attributable absenteeism in NH is estimated to be $27.1 million in 2011. Retail (because of the high number of absences) and business and professional service (because of the high hourly wage in the industry) had the highest losses in terms of employee compensation (Table 4). Table 4 also includes estimates of the lost output of each industry attributable to alcohol-related absenteeism. 9 Combined, the implied loss of industry output in NH from alcohol-attributable absenteeism was over $71 million 2011. Again, the retail industry has the greatest loss of industry output, with manufacturing second because of the relatively high rates of productivity of its workers (low employee compensation as a percentage of output indicates high output or productivity per worker). Table 4 Cost of Absenteeism, by Industry, Resulting from Binge Drinking in NH Industry Emp. Est. % Who are Binge Drinkers Est. # of Binge Drinkers Total Excess Days Absent Mean Wage/Hr Cost/Pers./ Per Day Aggregate Industry Cost Earnings/ Output Ratio Impact on Industry (Output) Arts/Ent./Rec. 63,600 14.0% 8,882 15,984 $13.23 $99.23 $1,586,012 29.9% $5,300,251 Educ & Health. 113,700 5.4% 6,089 21,192 $23.64 $177.30 $3,757,342 51.0% $7,367,336 F.I.R.E 34,700 9.3% 3,243 3,504 $27.88 $209.10 $732,686 31.0% $2,363,505 Information 11,100 9.1% 1,005 1,932 $31.58 $236.85 $457,594 26.2% $1,747,553 Manufacturing 66,500 8.6% 5,726 15,120 $23.70 $177.75 $2,687,580 26.6% $10,095,193 Construction 22,900 13.4% 3,078 8,124 $25.41 $190.58 $1,548,231 26.8% $5,770,067 Other Services 22,800 5.3% 1,197 6,468 $20.50 $153.75 $994,455 35.0% $2,838,124 Prof. Services 65,500 10.0% 6,534 22,740 $27.76 $208.20 $4,734,468 48.3% $9,811,723 Government 92,600 6.0% 5,542 13,968 $23.67 $177.53 $2,479,669 43.6% $5,690,224 Retail 92,300 9.6% 8,819 40,283 $15.86 $118.95 $4,791,663 39.5% $12,134,969 Trans./Ware/Util. 14,700 8.2% 1,204 3,612 $25.64 $192.30 $694,588 40.7% $1,707,001 Wholesale 26,300 12.3% 3,231 13,188 $26.37 $197.78 $2,608,257 38.5% $6,777,107 Totals 626,700 54,550 166,115 $27,072,545 $71,603,054 D. Mortality Costs Premature death due to alcohol use and abuse imposes a major economic loss on society. Premature death through illness or injury can occur as a result of a number of causes, including: auto accidents involving alcohol, through increasing the risk of cancer or cerebrovascular disease, or through violence involving alcohol. When an individual dies prematurely, there is an economic cost to society in the form of loss of that individual s productive capacity. Although calculated as 16

a productivity cost, our mortality estimates are not included in our estimates of the total annual cost to New Hampshire of excessive alcohol consumption. They are presented here to illustrate the discounted lifetime earnings costs associated with one year of alcohol-related premature deaths. Key Findings: An average of 290 alcohol-attributable deaths occurred annually in New Hampshire between 2001 and 2005. Diseases of the liver, motor vehicle crashes, and suicides account for more than half of the premature alcohol-attributable deaths in NH. Combined, however, accidental deaths from poisoning, falls, drowning and fire comprise the largest single cause of premature death attributable to alcohol. Chronic and acute deaths attributable to alcohol result in the loss of discounted lifetime earnings of $218.6 million annually. Methods: The cost of alcohol-related premature deaths (mortality costs) in NH were estimated using the Alcohol-Related Disease Impact (ARDI) software of the Centers for Disease Control and Prevention, except for motor vehicle crashes where alcohol-related deaths are directly reported by the Federal Accident Reporting System (FARS). The largest cause of annual alcohol attributable deaths in New Hampshire were motor vehicle crashes, alcoholic cirrhosis and other liver diseases, and suicide. Table 5 Deaths Due to Excessive Alcohol Use in New Hampshire Overall Males Females Chronic Causes 151 103 48 Acute Causes 139 101 38 Total for All Causes 295 204 86 We used estimates of the net present value of the stream of future lifetime earnings by age and gender at a 3 percent discount rate from a study conducted at the University of California, San Francisco 10 and adjusted them to 2011 values using the consumer price index. Because individual earnings change over a lifecycle for a number of reasons, estimating changes in earnings for individuals of different ages and by gender was beyond the scope of this report. The estimates prepared by UC San Francisco researchers have been used by many researchers in calculating mortality costs. Results: Table 6 shows that the estimated cost of NH s annual average of 290 alcohol-attributable deaths is $218.6 million in 2011 dollars. On average, 204 deaths attributable to alcohol are male 17

and 86 are female. The average net present value of lifetime earnings lost as a result of premature death attributable to alcohol range from a low of $26,709 for a female age 65 and above who dies prematurely because of alcohol, to a high of $1,581,538 for a male under age 20. Table 6 Cost of Alcohol-Attributable Premature Deaths in NH # of Deaths 0-19 20-34 35-49 50-64 65+ Totals Male 6 25 57 50 65 204 Female 3 10 25 21 28 86 Total 290 Present Value of Lost Earnings 0-19 20-34 35-49 50-64 65+ Total Per Male Death $1,581,538 $1,934,897 $1,418,365 $580,598 $55,407 Total Male $9,489,227 $48,372,422 $80,846,822 $29,029,882 $3,601,463 $ 171,339,816 Per Female $1,166,588 $1,339,551 $903,747 $332,877 $26,709 Total Female $3,499,765 $13,395,509 $22,593,687 $6,990,410 $747,850 $ 47,227,222 Grand Total $ 218,567,038 III. Health Care Treatment services available in New Hampshire to help persons who use alcohol excessively include inpatient residential programs, outpatient programs, detoxification, and special youth treatment programs. Resources, both public and private, used to support these services constitute one of the types of economic costs associated with excessive use of alcohol. Alcohol abuse can increase the risk of illness or injury and thereby increase the use and cost of health care services. The cost of providing medical care for ailments that result from alcohol use in New Hampshire is significant. We estimate that in 2011, the costs borne by individuals, governments, hospitals, and other health payers statewide was $206.7 million, with $154.4 million in payments made for alcohol-attributable medical services. These include hospital costs, both inpatient and outpatient/emergency room care, physicians charges, prescription drug costs, and the costs of nursing home care. A. Alcohol Treatment Costs Key Findings: Treatment services for alcohol abuse provided at substance abuse and treatment facilities in NH cost an estimated $9.7 million in NH in 2011, with $2.7 million of that uncompensated or provided free of charge. Another $18.2 million in hospital charges (an estimated $11.5 million in payments) were incurred at hospitals for admission directly caused by alcohol abuse. In only one state (Texas) is an individual in need of treatment for alcohol dependency or abuse less likely to receive treatment than in New Hampshire. Only about 4 percent of individuals needing treatment services for alcohol receive them in New Hampshire. 18

Based on the percentage of residents in NH needing treatment but not receiving, we estimate the potential cost of alcohol abuse treatment in NH to be over $200 million. A high percentage of payments for alcohol treatment is paid for out-of-pocket by individuals in New Hampshire, and this may contribute to the low percentage of individuals in need of treatment receiving services. Recent reductions in state funding for substance abuse treatment programs may further reduce the percentage of individuals in need of treatment who receive them. Methods: Complete information regarding treatment utilization and costs is difficult to obtain because of the multiplicity of funding sources and the large number of programs. Though reasonably accurate information is available for public clients, little information is available for private clients. Information on treatment admissions and costs was obtained from several different sources. According to National Survey of Substance Abuse Treatment Services (N-SSATS) there were 50 facilities offering substance abuse treatment services in New Hampshire, 37 of which provide treatment for alcohol abuse. The majority (9) of the 13 facilities not offering alcohol treatment are private, for-profit facilities. Overall, 30 of the facilities offering alcohol treatment services are private, not-for-profit facilities, 8 of 17 for-profit facilities offer alcohol treatment while all three government facilities offer alcohol treatment. Admissions to these facilities over the entire year are reported to the Substance Abuse and Mental Health Services Administration (SAMHSA) of the U.S. Department of Health and Human Services as part of its Treatment Episode Data Set (TEDS) project. In 2010, there were 3,963 admissions for abuse of alcohol at NH treatment facilities, exclusively as well as in combination with one or more drugs. Summary data from the 2010 Treatment Episode Data Set (TEDS) is the source of admissions data. TEDS includes admissions to treatment programs that receive any public funding either directly or through state agencies. Programs report on all admissions not just those admissions representing public clients. Thus, while not providing a complete count of all admissions, TEDS provides the most complete data on admissions to treatment. The degree of undercounting inherent in TEDS data is unknown. Given the limitations of the data used for the treatment cost estimates, readers should use caution in interpreting the cost estimates. The cost figures presented here underestimate the true costs by some unknown amount. Results: Figure 4 shows that a much higher percentage of alcohol abuse treatments in NH were paid for primarily out-of-pocket than were in the U.S. as a whole (48 percent to 22 percent). Government funding other than Medicaid and Medicare (primarily state and local) funded a much lower percentage of treatments in NH than in the U.S. 19

Figure 4 In Two-Thirds of Treatments for Alcohol Abuse in NH, Primary Payment Was Out-of-Pocket or Provided Free-of-Charge % of Alcohol Treatment Services by Primary Payer (2010) Self-Pay 21.9% 48.3% Free/Charity/Research 6.7% 28.0% Private Insurance Medicaid 6.2% 6.4% 13.4% 14.3% Other Government 1.5% 37.8% Medicare/Workers comp 0.8% 1.3% NH U.S. Other 1.2% 12.3% 0% 10% 20% 30% 40% 50% 60% Source: Author s calculation using data from the Treatment Episode Data Set (TEDS), SAMHSA The Substance Abuse and Mental Health Services Administration (SAMHSA) of the U.S. Department of Health and Human Services reported on average treatment costs nationally (2004), including personnel, materials, administrative, equipment, and depreciation costs. Applying these cost estimates to treatment frequencies in New Hampshire in 2010 and adjusting costs to 2011 prices yields total spending on treatment due to alcohol abuse of an estimated $9.7 million. Subtracting treatments provided free-of-charge; the amount spent on treatment is estimated to be about $7 million (Table 7). Table 7 Alcohol Abuse and Dependency Treatment Expenditures at Treatment Facilities in NH Type of Service Self-Pay Private Ins. Medicare Medicaid Other Gov. Research Other Total Detox 24hr freestanding $276,123 $10,102 $6,735 $6,735 $20,204 $1,586,023 $10,102 $1,916,023 Rehab. (short-term) $766,585 $61,327 $2,555 $0 $25,553 $94,545 $22,998 $973,562 Rehab. long-term $209,533 $25,553 $5,111 $0 $10,221 $511,056 $10,221 $771,695 Intense outpatient $592,042 $580,602 $48,622 $54,342 $2,860 $500,519 $14,301 $1,793,287 Non-intense outpatient $2,449,270 $562,722 $57,226 $440,640 $74,394 $625,670 $53,411 $4,263,332 Total $4,293,553 $1,240,305 $120,248 $501,716 $133,232 $3,317,814 $111,032 $9,717,900 Hospital Charges for Acute Alcohol Related Diagnoses(For illustration Only - These Charges are included Under the "Medical Care" cost section of this report) $18,182,110 Total $27,900,010 Treatment Costs Adjusted for Free Care $6,993,553 Hospital Charges Adjusted for Payments vs. Charges $11,454,729 Total Adjusted Expenditures $18,448,282 20

Texas NH Georgia Arizona Nevada Colorado Florida North Dakota Mississippi Nebraska South Carolina New Mexico Illinois Louisiana California Massachusett Minnesota Vermont District of Co Ohio Wyoming Arkansas Missouri Michigan Kentucky Oklahoma Connecticut Maine Washington West Virginia Iowa Wisconsin Tennessee Idaho Pennsylvania Virginia Montana Oregon South Dakota Indiana New York Alaska North Carolina New Jersey Maryland Kansas Utah Rhode Island Alabama Delaware Hospital charges for alcohol abuse-related diagnoses are also a form of treatment, and charges for those services at NH hospitals are presented in Table 7 for illustrative purposes only. Those costs are included in the medical cost section of this report. For our purposes we consider the direct costs of treatment for alcohol abuse to be the $9.7 million in services ($7 million in charges) provided by treatment facilities. In addition, the State of New Hampshire s Alcohol Prevention and Treatment Fund provided funding grants to treatment providers totaling $2.5 million in 2010. Reductions in state appropriations to the Alcohol Fund reduced the amount of treatment grants to $1.5 in FY 2011. Combining TEDS data with estimates of the number of individuals in New Hampshire in need of alcohol treatment services from a 2011 study by the Center for Behavioral Health Statistics and Quality (CBHSQ), at SAMHSA suggest that only about 4 percent of those needing treatment in NH receive it. 11 This implies that the cost of meeting all needs for treatment in NH would likely be over $200 million, or about 2 percent of total medical expenditures in the state. Assuming some treatment occurs in hospital settings rather than specialized treatment facilities, the vast majority of NH residents in need of alcohol treatment still do not obtain services. According to the CBHSQ study, only one state (Texas) has a lower percentage of persons in need of treatment for substance abuse who receive treatment than does NH (Figure 6). 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Figure 5 Pct. of Individuals in Need of Substance Abuse Treatment Who Receive Treatment Services Source: Center for Behavioral Statistics and Quality, SAMHSA, U.S. Dept. of Health and Human Services B. Medical Expenditures Key Findings: Health care expenditures attributable to excessive alcohol uses were an estimated $206.7 in total charges and $154.4 million in payments for medical services in New Hampshire in 2011. 21

Insurance administration costs associated with these costs add another $17.6 million of costs. Alcohol-attributable medical expenditures accounted for about 1.5 percent of total medical expenditures in New Hampshire in 2009. Hospital charges attributable to alcohol amounted to $122 million in 2011, and payments for those charges equaled and estimated $77 million, accounting for the largest share of medical costs attributable to alcohol. Method Data on hospital discharges by primary diagnosis at admission in NH, collected for the national Healthcare Cost and Utilization Project (HCUP), was combined with the fraction of each illness, accident or condition determined to be attributable to alcohol use from the Alcohol- Related Disease Impact software of the Centers for Disease Control and Prevention 12 to determine the number of hospital stays in NH (by ICD-9 diagnosis) attributable to alcohol use. The number of alcohol-attributable hospital stays by primary diagnosis was then multiplied by the average charge for each diagnosis to estimate the total amount of hospital charges for each diagnosis that are attributable to NH in 2009. The amounts were summed to arrive at a total estimate of alcoholattributable hospital charges in NH. This total was inflated to 2011 values using the consumer price index. We also estimated the additional costs incurred by people hospitalized with a secondary condition related to alcohol abuse. This cost was characterized by Harwood as the additional days from co-occurring alcohol disorders (Harwood, 1998). Harwood and his colleagues, following Rice and her colleagues (Rice et al., 1990), estimated this cost by adding up the excess days of hospitalization and the associated cost. Some of the effects of these costs from the cooccurrence of substance abuse may result from alcohol in combination with another substance. The NH hospital cost estimates from our analysis of inpatient discharge data were decreased by approximately one-third (to 14 percent) of the percentage of co-occurrence found in the Harwood study to arrive at our estimate of co-occurring costs related to alcohol abuse where the primary diagnoses was not alcohol-attributable, but where the co-occurrence of alcohol abuse increased the length or costs of hospital stays. We made other adjustments to the data as well. In order to estimate the cost of alcohol abuse, one would ideally like to know the actual payments made for hospital services. However, the patient discharge data only report hospital charges and not actual payments. Most payers negotiate a contract which includes payments that are less than, and in some cases substantially less than, reported charges. For our estimates, we converted charges to expenditures, using a mean expenditure-to-charge ratio of 63 percent. In addition to hospital inpatient costs, other cost estimates representing outpatient medical care, prescription drugs, nursing home care and other professional care are presented. Estimating these types of costs is difficult because there is no readily available data source which contains NH specific, utilization and cost data that is equivalent to HCUP. For our estimates of outpatient, nursing home, and prescription drug costs we rely on national studies which estimate the percentage of these costs attributable to alcohol abuse. For alcohol-attributable outpatient charges, applying methods from three different studies resulted in estimates of outpatient charges 22