Health Risk Policy Analysis - Economic Consideration

Economic evaluation is the comparative analysis of alternative courses of action considering both their costs and their consequences. There must always be at least two alternatives; otherwise there is no need for an analysis.  In the simplest case, one of the alternatives is represented by the status quo, while the other alternative is the new program under consideration.  The evaluation is then based on the incremental costs and consequences of the new program as compared to those for the existing situation.
 
Because society's resources for health improving programs are scarce, both costs and consequences must be considered in evaluating a risk reduction program.  It is also essential to specify the viewpoint of the analysis.  Possible viewpoints include that of the producer, consumer, government, or society as a whole. Although costs and consequences can differ from one viewpoint to another, the societal viewpoint would seem most appropriate for purposes of public policy decision making.  

A schematic representation of the major costs and consequences of a toxic chemical control program is shown in Figure 1. Three categories of cost are identified: program costs, producer costs and consumer costs. A good program will have desirable consequences in terms of reduced human exposure and subsequent improve­ments in human health and environmental status.  

The program costs incurred by the responsible agency are those that would be required for a particular toxic chemical control program. These costs include those associated with program design, implementation and operation, including the enforcement of any regulations that may be established.   Producer costs are additional costs to industry of program compliance, including both direct costs associated with modifications to the production process and indirect costs due to reduced productivity.  Consumers may incur higher costs as a result of increased production costs, a reduction in the quality or availability of goods, or a preference for more expensive but less hazardous alternatives. The most immediate consequence of a good toxic chemical control    program will be a reduction in human exposure. 
 
This will be followed by a corresponding improvement in human health status expressed in terms of direct health effects, the intrinsic value of improved human health to the individuals affected, and the economic benefits of improved health in the population at large. The improvement in human health due to the control program is defined in terms of conventional health indicators such as disability days prevented, reduction in morbidity and mortality, or life-years gained. The value of health improvements per se is the value attached to being healthy rather than sick.  Direct economic benefits may occur due to reductions in health care costs while indirect benefits may arise as a result of increased productivity in a healthier population.   

Other benefits unrelated to human health are also possible.  For example, there are economic benefits associated with healthier crops and livestock arising from reduced production costs as well as greater yields. There are also intangible benefits such as the aesthetic value of a cleaner environment.