Author’s Note on the Calculation of
Updates to the Alcohol Cost Calculator
To update The Alcohol Cost Calculator in December, 2007 from its 2003 original, Ensuring Solutions followed methodology offered in 1998 by H.J. Harwood in Updating Estimates of the Economic Costs of Alcohol Abuse in the United States. Below is a summary of how Ensuring Solutions arrived at these updated costs.
Treatment of Alcohol Medical Consequences/Related Insurance Administration Costs
Harwood assumed that health care costs related to the treatment of the medical consequences of alcohol use increased at the same rate as total health care spending. Data on total health care spending was taken from the National Health Expenditure Accounts data compiled by the federal Health Care Financing Administration (now Centers for Medicare & Medicaid Services). Table A shows the calculation of the update factor and the 1998 and 2007 estimated costs.
| 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 1998-2007 % Change | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| National health expenditures (in billions) | 1,190.9 | 1,265.3 | 1,353.3 | 1,469.6 | 1,602.8 | 1,733.4 | 1,858.9 | 1,987.7 | 2,122.5 | 2,262.3 | 89.97% |
| Direct Health Care Costs (in millions) | 1998 | 2007 | |||||||||
| Treatment of the medical consequences of alcohol consumption | $15,196 | $28,867 | |||||||||
| Treatment of the medical consequences of fetal alcohol syndrome | $2,769 | $5,260 | |||||||||
| Insurance administration related to medical consequences | $906 | $1721 | |||||||||
Prevention and Early Intervention
Harwood used data from the Office of National Drug Control Policy (ONDCP) to calculate an update factor for the estimated cost of prevention and early intervention activities. He assumed that the changes in drug abuse prevention spending by the ONDCP mirror changes in alcohol abuse prevention spending from all sources. Table B shows the calculation of the update factor and the 1998 and 2007 estimated costs.
| 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 1998-2007 % Change | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Federal drug abuse prevention expenditures (in millions) | 1,330.8 | 1,407.6 | 1,445.8 | 1,540.8 | 1,629.0 | 1,553.6 | 1,543.5 | 1,530.1 | 1,451.1 | 1,445.9 | 8.65% |
| Direct Health Care Costs (in millions) | 1998 | 2007 | |||||||||
| Prevention and Early Intervention | $1,397 | $1,518 | |||||||||
Treatment of Alcoholism and Alcohol Abuse/Related Insurance Administration Costs
The latest information about alcohol abuse treatment costs is from a February 2001 study that analyzed treatment cost increases between 1987 and 1997. This study (R. Coffey et al, “National Estimates of Substance Abuse Treatment, 1997”) found an average annual growth rate for alcohol treatment spending between the years 1987 and 1997 of just 1.1 percent (after adjusting for inflation). The low growth rate was due to decreased use of inpatient hospital care for alcohol treatment. To update the alcohol treatment costs, this growth rate was combined with each year’s general price inflation rate to calculate an update factor for each year from 1999 through 2007. Table C shows the calculation of the update factor and the 1998 and 2007 estimated costs.
| 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 1998-2007 % Change | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Avg. annual growth rate for alcohol treatment spending (after inflation) | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | ||
| General price inflation as measured by the CPI-U | 2.2 | 3.4 | 2.8 | 1.6 | 2.3 | 2.7 | 3.4 | 3.2 | 2.7 | ||
| Annual update factor | 3.3 | 4.5 | 3.9 | 2.7 | 3.4 | 3.8 | 4.5 | 4.3 | 3.8 | ||
| Estimated treatment costs (in millions) | 5,506 | 5,688 | 5,944 | 6,175 | 6,342 | 6,558 | 6,807 | 7,113 | 7,419 | 7,701 | 19.10 |
| Direct Health Care Costs (in millions) | 1998 | 2007 | |||||||||
| Treatment of alcoholism and alcohol abuse | $5,506 | $7,701 | |||||||||
| Insurance administration related to treatment | $248 | $347 | |||||||||
** For 2007 data was averaged through November to derive the annual inflation rate
The following table brings together the updated estimates of the direct health care costs related to alcohol use and completes the updated estimate of cost per employee.
| Direct Health Care Cost Related to Alcohol Use | 2007 Estimated Cost |
|---|---|
| Treatment of alcoholism and alcohol abuse | $7.7 billion |
| Prevention and early intervention | $1.5 billion |
| Treatment of the medical consequences of alcohol consumption | $28.9 billion |
| Treatment of the medical consequences of fetal alcohol syndrome | $5.3 billion |
| Insurance administration | $2.1 billion |
| Total cost | $45.5 billion |
| 2003 U.S. population (in millions) | 302.6 |
| 2003 Alcohol cost per capita | $150.35 |
| Average household size of adult workers | 2.61 |
| Alcohol cost per employee | $391.40 |
Mary Gabay, Eric Goplerud, Kelli Joubran, and Laura-Jacobus-Kantor
December, 2007
