lec22 risk lives 05

Civil Systems PlanningBenefit/Cost Analysis: 

Civil Systems Planning Benefit/Cost Analysis Scott Matthews Courses: 12-706 / 73-359 / 19-702 Lecture 22 - 11/14/2005

Administrivia: 

Administrivia PS 6 due Monday How are projects coming along? Office Hours this week: Thursday - 11am Friday - 2pm

Economic valuations of life: 

Economic valuations of life Miller (n=29) $3 M in 1999 USD, surveyed Wage risk premium method WTP for safety measures Behavioral decisions (e.g. seat belt use) Foregone future earnings Contingent valuation Note that we are not finding value of a specific life, but instead of a statistical life

Another CEA Example: 

Another CEA Example Automated defribillators in community http://www.early-defib.org/03_06_09.html What would costs be? What is effectiveness?

Risk Analysis: 

Risk Analysis Study of the interactions between decision making, judgment, and nature Evidence : cost-effectiveness of risk reduction opportunities varied widely - orders of magnitude Economic efficiency problems

Example - MAIS scale: 

Example - MAIS scale Abbreviated Injury Scale (AIS) is an anatomically based system that classifies individual injuries by body region on a six point ordinal scale of risk to life.   AIS does not assess the combined effects of multiple injuries.  The maximum AIS (MAIS) is the highest single AIS code for an occupant with multiple injuries. 

MAIS Table - Used for QALY Conversions: 

MAIS Table - Used for QALY Conversions

Cost-Effectiveness of Life-Saving Interventions: 

Cost-Effectiveness of Life-Saving Interventions From '500 Life-saving Interventions and Their Cost-Effectiveness', Risk Analysis, Vol. 15, No. 3, 1995. ‘References’ (eg #1127) are all other studies Model: Estimate costs of intervention vs. a baseline Discount all costs Estimate lives and life-years saved Discount life years saved CE = CI-CB/EI-EB

Specific (Sample) Example: 

Specific (Sample) Example From p.373 - Ref no. 1127 Intervention: Rear outboard lap/shoulder belts in all (100%) of cars Baseline: 95.8% of cars already in compliance Intervention: require all cars made after 9/1/90 to have belts Thus costs only apply to remaining 4.2% (65,900) cars Target population: occupants over age 4 Others would be in child safety seats What would costs be?

Example (cont): 

Example (cont) 1986 Costs (from study): $6 cost per seat Plus added fuel costs (due to increased weight) = total $791,000 over life of all cars produced Effectiveness: expect 23 lives saved during 8.4 year lifetime of fleet of cars But 95.8% already exist, thus only 0.966 lives saved Or 0.115 lives per year (of use of car) But these lives saved do not occur all in year 0 - they are spread out over 8.4 years. Thus discount the effectiveness of lives saved per year into ‘year 0’ lives..

Cost per life saved: 

Cost per life saved With a 5% discount rate, the ‘present value’ of 0.115 lives for 9 years = 0.817 (less than 0.966) Discounted lives saved = S (0.115)/(1.05)j ; j=1..9 This is basically an annuity factor So cost/life saved = $791,000/0.817 Or $967,700 per life (in '$1986/1986 lives') Using CPI: 145.8/109.6 -andgt; $1,287,326 in $1993 But this tells us only the cost per life saved We realistically care more about quality of life, which suggests using a quality index, e.g. life-years saved.

Slide12: 

Sample Life Expectancy Table 35-year old American expected to live 43.6 more years (newer data than our study) Source: National Center for Health Statistics, http://www.cdc.gov/nchs/fastats/lifexpec.htm

Cost per life-year saved: 

Cost per life-year saved Assume average age of fatality in car accident was 35 years Life expectancy tables suggest a 35 year old person would on average live to age 77 Thus ‘42’ life years saved per fatality avoided 1 life-year for 42 yrs @5%= 17.42 years (ann. factor) $1993 cost/life-year = $1,287,326/17.42 With 2 sig. figures: ~$74,000 as in paper Note $1,287,326 is already in cost/life units -andgt; just need to further scale for life-years by 17.42

Example 2 - Incremental CE: 

Example 2 - Incremental CE Intervention: center (middle) lap/shoulder belts Baseline: outboard only - (done above) Same target population, etc. Cost: $96,771,000 Incremental cost : $96,771,000 - $791,000 Effectiveness: 3 lives/yr, 21.32 discounted Incremental Effectiveness: 21.32 - 0.817= 20.51 Cost/life saved = $95.98 million/20.51 = $4.7 million ($1986) =andgt; $6.22 million in $1993 Cost/life-year = $6.22 million/17.42 = $360,000

Overall Results in Paper: 

Overall Results in Paper Some had andlt; $0 cost, some cost andgt; $10B Median $42k per life year saved Some policies implemented, some only studied Variation of 11 orders of magnitude! Some maximums - $20 billion for benzene emissions control at tire factories $100 billion for chloroform standards at paper mills

Comparisons: 

Comparisons

Agency Comparisons: 

Agency Comparisons $1993 Costs per life year saved for agencies: FAA (Aviation): $23,000 CPSC (Consumer Products): $68,000 NHTSA (Highways): $78,000 OSHA (Worker Safety): $88,000 EPA (Environment): $7,600,000! Are there underlying causes for range? Hint: are we comparing apples and oranges?