New Zealand Estimates of the Total Social and Economic Cost of Injuries. For All Injuries, and the Six Injury priority areas

New Zealand Estimates of the Total Social and Economic Cost of Injuries For All Injuries, and the Six Injury priority areas For Each of Years 2007 to 2010 In June 2010 dollars July 2012 By Des O Dea Health Economist With introduction by John Wren, ACC Research

Authors Des O Dea and John Wren Citation O Dea D. and Wren J. 2012. New Zealand Estimates of the Total Social and Economic Cost of Injuries. For All Injuries, and the Six Injury priority areas. For Each of Years 2007 to 2010. In June 2010 dollars. Report to New Zealand Injury Prevention Strategy. Wellington, New Zealand. Acknowledgement The truly valuable assistance of Marie O Sullivan (marios_2@xtra.co.nz) in editing this report is gratefully acknowledged. Contact details Des O Dea Phone 04-385-5541 or 027-449-5975 des.odea@otago.ac.nz or desodea@paradise.net.nz 2

Table of Contents Executive Summary... 8 Background... 8 Key Results... 8 Rank Orders for the Priority Areas... 9 Sensitivity Analyses... 10 Extension of Analyses to Maori and Children... 10 Total Cost per Fatality Total, Maori and Children... 11 How do the Estimates in this Report Differ from Previous Estimates?... 11 Introduction by John Wren... 13 Background to Estimates and the Methodological Approach Taken... 13 Policy Background... 13 Rationale for Methodological Approach... 14 Other Frequently Asked Questions... 16 Estimates of the Burden and Cost of Injury in New Zealand, 2007-2010... 21 Objective of this Study... 21 Framework... 21 Estimates of Un-compensated Occupational Disease Costs... 24 Comment... 25 Estimates of Cost Components... 32 Main ACC Claim Expenditure Categories... 32 Output and Productivity Costs... 33 Human Costs... 34 Caveats on the Estimation of DALY Cost, and Lost Economic Contribution Costs... 36 Possible Over-Estimation of Lost Economic Contribution Costs... 37 Social Contribution... 37 Presentation of Results for Lost Economic Contribution and Human Cost... 37 Summary: Total Social and Economic Cost for 2010 Base-Case Estimate... 38 Discount Rates and Valuations of Life-Years and DALYs... 40 Choosing a Discount Rate... 40 Valuing Life-Years and DALYs... 40 Discussion of the Assumptions... 41 Sensitivity Analyses... 43 3

Sensitivity to Changes in the Value of a Preventable Fatality... 43 Sensitivity to Changes in the Discount Rate... 44 Summary... 45 Rank Ordering of Priority Areas... 46 Dependence of Human Cost Estimates on the Outcome Measure... 46 Sensitivity Analyses... 46 Recommendations for Further Work... 47 Estimates of the Cost of Injury for Maori... 49 Fatalities... 49 ACC Claim Expenditure... 50 Other Components of Total Cost of Injury for Maori... 51 Sensitivity Analyses... 52 Conclusion... 54 Estimates of the Cost of Injury for Children... 55 Fatalities... 55 ACC Claim Expenditure... 56 Other Components of Total Cost of Injury for Children... 58 Sensitivity Analyses... 59 Conclusion... 61 References... 62 Appendix A... 65 Supplementary Tables to Tables in Main Text... 65 Appendix B... 76 Estimates of Un-compensated Occupational Disease Costs... 76 4

List of Tables Table 1: Summary of Injury Costs by Cost Category and Priority Area, 2010... 9 Table 2: Total Economic and Social Cost per Fatality for Total Population, Maori Population, and Children, 2008, 2010 dollars... 11 Table 3: Differences in Parameters and Methodology; Consequences for Estimates of the Cost of Injury in the Current Report Compared with the 2010 Report... 12 Table 4: Annual ACC Claim Expenditure, 2007-2010... 27 Table 5: Fatalities and Serious Non-Fatal Injuries Requiring Hospital Admission, by Priority Area, 2007-2008 to 2008-2009... 28 Table 6: 2007 Number of Injury Related Deaths, Average Age at Death and Average and Total YLLs by Injury Category and Gender... 29 Table 7: 2008 Number of Injury-Related Deaths, Average Age at Death, and Average and Total YLLs by Injury Category and Gender... 30 Table 8: 2007 Injury-Caused Deaths, Total YLLs and DALYs, Genders Combined... 31 Table 9: 2008 Injury-Caused Deaths, Total YLLs and DALYs, Genders Combined... 31 Table 10: Claims Expenditures by ACC 2010. $ Million (excl. GST). by Cost Categories by Six Priority Areas... 32 Table 11: 2010 Estimated Lost Income Due to Premature Externally Caused Mortality, at June 2010 Incomes... 34 Table 12: Ratios of DALYS to Life-Years Lost, for Injury Category... 35 Table 13: Years of Life Lost (YLLs) to Injury-caused Mortality By Discount Rate and Injury Category 2010... 35 Table 14: DALY Totals 2010... 36 Table 15: Value of DALYs by Discount Rate and Injury Category 2010 (illion, 2010 Dollars... 36 Table 16: Economic and Social Cost and Burden of Injury 2010... 38 Table 17: Condensed Table of Injury Costs, by Cost Category and Priority Area... 39 Table 18: Value of a Life-Year (2010 Dollars) for Different New Zealand VPFs and a Range of Discount Rates... 41 Table 19: Sensitivity Analyses around 2010 Base Case Changing Values of Life-Years... 43 Table 20: 2010 Total Injury Costs Testing Sensitivity to Discount Rate Variations, Totals and Composition by Priority Area... 44 Table 21: 2010 Summary Percent of Injury Cost by Cost Category, by Priority Area... 45 Table 22: Estimated Number of GP Type Claims, and ACC Gross Expenditure 2008... 48 Table 23: Maori Injury Fatalities, 2007 and 2008 by Priority Area Total Deaths... 50 Table 24: Maori Fatalities as Percentage of All Ethnicities... 50 Table 25: ACC Expenditure in 2010 Dollars on Claims by Māori, by Main Expenditure Categories 2007-2010... 51 Table 26: Maori Claim Payments By Priority Areas as Proportion of Total Maori Claims, 2007-2010... 51 Table 27: Condensed Table of Maori Injury Costs, 2008, by Cost Category and Priority Area... 52 Table 28: Comparing Maori and Total Population Injury Costs, 2008... 52 Table 29: Sensitivity Analyses for Maori Cost of Injury, 2007 and 2008 Changing DALYs in Proportion to VPFs... 53 5

Table 30: Sensitivity of Maori Injury Cost to Discount Rate Variations Totals, and Composition by Priority Area, 2007 and 2008... 54 Table 31: Number of Fatalities, Children under 15, by Priority Area 2007 and 2008... 56 Table 32: ACC Expenditure in 2010 Dollars on Claims for Children, by Main Expenditure Categories 2007-2010... 57 Table 33: Comparison Children and All Ages, All Claim Categories... 57 Table 34: Children s Claim Payments, by Priority Areas, as Proportion of Total Child Claims 2007-2010 (2010 Dollars)... 58 Table 35: Summary of Child Injury Costs, 2007 and 2008 All Children under 15, by Priority Area... 59 Table 36: Comparing Children under 15 and All Ages, Injury Costs, 2008... 59 Table 37: Sensitivity Analyses for Child Cost of Injury 2007 and 2008 Changing Values of Life-Years in Proportion to VPFs... 60 Table 38: Sensitivity of Child Injury Cost to Discount Rate Variation Totals, and Composition by Priority Area 2007 and 2008... 61 Table 39: Nominal Expenditures by ACC 2007 to 2010, $ Million (excl GST) By Cost Categories by Six Priority Areas... 65 Table 40: Inflation-adjusted Expenditures by ACC. 2007 to 2010. By Cost Category, by Six Priority Areas. 2010 prices.... 66 Table 41: Estimated Lost Income due to Premature Externally Caused Mortality. 2007 to 2010... 68 Table 42: Years of Life Lost (YLL) to Injury Caused Mortality. By Injury Category and range of discount rates. 2007-2010.... 69 Table 43: Disability-Adjusted Life-Year (DALY) Totals. By Injury Category and range of discounts rates. 2007-2010... 70 Table 44: Value of Disability-Adjusted Life-years. By Injury Category and range of discount rates. 2007 2010... 71 Table 45: Economic and Social Cost and Burden of Injury. 2007 2010. 'Base Case'. Discount Rate 3.5%... 72 Table 46: Condensed Table of Injury Costs 2007 to 2010 by Cost Category and Priority Areas. Base Case Estimate using Official Transport Sector VPF. Discount Rate 3.5%... 73 Table 47: Total Injury Costs. Testing Sensitivity to Discount Rate changes. Totals, and Composition by Priority Area. 2010... 74 Table 48: Summary Table. Percent of Injury Cost by Cost Category, by Priority Area. 2007 to 2010. Base Case: 3.5% Discount Rate. 2010 prices.... 75 Table 49: Compensated and Un-compensated Workplace-Related Cases, NOHSAC 2004/05... 77 Table 50: Adjustment of Estimates of Workplace Injury and Disease Costs to Include Un-compensated Cases. For 3.5% discount rate... 77 6

List of Acronyms ACC DALY MVTC NZIPS QALY VFP VoSL VoSLY WtP YLD YLL Accident Compensation Corporation Disability-Adjusted Life-Year Motor Vehicle Traffic Crashes New Zealand Injury Prevention Strategy Quality Adjusted Life-Years Value of a Preventable Fatality Value of a Statistical Life Value of a Statistical Life-Year Willingness to pay Years of Quality Life Lost to Disability Year of Life Lost 7

Executive Summary Background Injuries are a significant burden on New Zealand society, and a cause of pain and suffering for many. There were 1,876 injury deaths in 2008. In 2009 there were 10,314 first admissions to hospital for serious non-fatal injuries and about 70,000 first admissions for non-serious injuries. Many more injuries did not require hospital inpatient or day-patient treatment, but did require care from other health providers. In 2010 the Accident Compensation Corporation (ACC) spent approximately $2.5 billion on treatment and rehabilitation, income maintenance (for injured people unable to return to their preinjury employment, who are entitled to 80% of their previous employment income), and other benefits and support. This figure includes approximately $370 million on administrative (overhead) expenses. ACC spending is not the largest part of the burden of injury. As is evident in the numbers in this report, the largest component is the human cost the Years of Life Lost (YLLs) because of premature mortality from injury and the effects of injury-caused disability on quality of life. Disability Adjusted Life-Years (DALYs) is the measure used in this report to combine these two consequences. This report updates and extends an earlier report (O Dea and Wren, 2010) that provided cost of injury estimates for the year 2006. It has been commissioned under the ambit of the New Zealand Injury Prevention Strategy (NZIPS), which defines six priority areas for injury prevention work: Four are for accidental injuries; those caused by falls, drowning, and motor vehicle traffic crashes (MVTCs), and workplace and work-related injuries. Two are for intentional injuries: assault and suicide and deliberate self-harm. This report provides updated estimates of the total burden of injury for: the years 2007-2010 the six injury priority areas. Information on the cost of injury in each priority area could be useful for identifying possible imbalances in the current allocation of preventive expenditure. That is, of course, only a first step. Interventions that are cost effective need to be identified as well. Key Results Table 1 summarises the information in this report. The numbers are the base-case estimates for the cost of injury in New Zealand in 2010. Dollar costs are measured in New Zealand dollars of 2010, as are the costs for the years 2007-2009 for which estimates are given in later parts of this report. Goods and Services Tax (GST) is excluded. The discount rate used for the base case is 3.5% per annum, in real terms. It is worth noting that there were substantial falls in many ACC expenditure categories in 2010, compared with earlier years. 8

Table 1 shows the total of all costs as $10.2 billion. Of this, treatment and rehabilitation costs of $1.3 billion represent the economic costs for ACC s purchase of these services. The total does not include the approximate $370 million spent on ACC overheads. The lost economic contribution cost of $1.9 billion has two components, approximately equal in size. The first is the lost production from those still suffering consequences of their injuries and not yet able to return to paid employment. The second component is more hypothetical, being the lost future economic contribution of those who die prematurely because of their injuries. TABLE 1: SUMMARY OF INJURY COSTS BY COST CATEGORY AND PRIORITY AREA, 2010 Priority Area Base-Case Estimate Using Official Transport Sector VPF*, 3.5% Discount Rate, June 2010 dollars Cost Categories Treatment and Rehabilitation Lost Economic Contribution Human Costs Total Social and Economic Cost % of Total Cost All Injuries Assault $19.2 $53.6 $272.3 $345.1 3% Falls $352.4 $237.3 $1,266.2 $1,855.8 18% Drowning $0.7 $45.3 $267.2 $313.2 3% MVTCs $176.6 $424.4 $1,629.9 $2,231.0 21% Suicide and Deliberate Self-Harm $3.4 $355.9 $1,827.6 $2,186.9 21% Workplace Injuries $236.3 $462.1 $349.0 $1,047.4 10% Six Priority Areas $788.6 $1,578.7 $5,612.2 $7,979.5 77% Other $481.2 $421.3 $1,505.9 $2,408.3 23% All Injuries $1,269.7 $2,000.0 $7,118.1 $10,387.8 100% *Value of Preventable Fatality The final component, the human cost of $7.1 billion, is derived by calculating the DALYs incurred from premature mortality and disability associated with injury, then placing a dollar value on each DALY. The value used here is $165,815 per DALY. The full report provides a justification for this figure, but in brief the value of a life-year (or DALY) is linked to the official transport sector Value of a Statistical Life (VSL) or Value of a Preventable Fatality (VPF), which was derived from willingness to pay surveys in the late 1980s. The original estimate has been adjusted upwards for subsequent increases in average ordinary-time earnings. The VSL in June 2010 dollars was $3.54 million. Rank Orders for the Priority Areas The rank order of the different priority areas in terms of total cost is shown by comparing the percentages in the summary table. The first is MVTCs, followed very closely by suicide and deliberate self-harm, then falls and workplace injuries. The human cost component is influential in determining this rank order. Workplace and fall injuries rank highly or relatively highly for the first two components mentioned, but less so for human costs, particularly for workplace injuries. This is because actual fatalities from workplace injuries are relatively low; in 2008 they numbered 79 compared with 520 from suicide, 473 for falls and 398 from MVTCs. There is a different reason for the relatively low ranking of falls in the final column, compared with motor vehicle fatalities. Although fatalities from falls are relatively numerous, they happen more often among the aged than do fatalities from other causes of injury. This means that many fewer life-years are lost because of fall-caused fatalities than is the case for other causes of injury. Hence a lowering of the human cost. 9

Sensitivity Analyses The above results have been subjected to sensitivity analyses, which are described in detail in the body of the report. The dollar value of a DALY has been either increased in line with the higher value estimated for a VSL by the Ministry of Transport in a 1998 research report, or decreased in line with a lower value estimated by BERL (Sanderson et al., 2007) for fire-caused fatalities. Naturally, the total cost changes as a result of these variations. However, while the percentages of total cost for the different priority areas do vary, they do so by relatively small amounts, and rank orderings are unchanged except that for the highest value of a life-year, suicide costs move into first ranking, ahead of MVTCs. This reflects the fact that the costs of suicide are predominantly the human costs of the lost potential years of life. The results were also tested for changes in the discount rate. The total cost was little affected by these variations because, in the methodology used for this study, the discount rate and the cost assigned to a DALY move inversely. However, the rank ordering of the priority areas was affected, with higher discount rates (at 7% and 10%) moving falls into the highest ranking category. This is because deaths from falls are, as already noted, most prevalent among the elderly. The lost life-years are, therefore, much more nearer term than for other categories and less affected by increases in the discount rate. This means that the rank ordering does show some response to changes in the parameters. In general, however, it is not especially responsive. The total costs of suicide and deliberate self-harm and MVTC injuries are currently almost equal. Falls, in general, have the third highest burden, followed by workplace injuries in fourth place. Extension of Analyses to Maori and Children The main focus of this report is on injury costs for the whole population. However, it also contains analyses for two important sub-populations: Maori, and children under 15. Of the 1,876 injury fatalities in 2008, 323 were Maori and 103 were children aged under 15. Sections Estimates of the Cost of Injury for Maori and Estimates of the Cost of Injury for Children of this report provide detailed analyses, with points of interest being that: a substantial proportion (about 30%) of the total injury cost for Maori is accounted for by MVTCs. This might be simply because a larger proportion of Maori are in the most at risk age-groups, but it deserves further investigation of the approximately 100 child injury fatalities in both 2007 and 2008, almost two-thirds were in the youngest age group, children aged under five around 30% of the child injury fatalities in 2008 were accounted for by MVTCs over half of the total burden of child injury falls outside the six priority areas, signalling the need to rethink these priority areas to achieve improvements in child injury prevention. 10

Total Cost per Fatality Total, Maori and Children It is interesting to compare the total cost per fatality across the three populations examined in this report, while remembering that not all of the total cost is a consequence of fatal injuries. Table 2 gives the comparisons. The total cost per fatality ranges from $5.74 million for the general population to $8.05 million for children. TABLE 2: TOTAL ECONOMIC AND SOCIAL COST PER FATALITY FOR TOTAL POPULATION, MAORI POPULATION, AND CHILDREN, 2008, 2010 DOLLARS Total Maori Children Population Total Social and Economic Cost () $10,770.4 2,170.9 829.2 Number of Fatalities 1,876 323 103 Cost per Fatality () $5.74 $6.72 $8.05 The ratios for Maori and, especially, children are significantly higher than that for the total population. This could be for a number of reasons, including different compositions by injury type. But the main cause is probably the greater number of life-years lost per fatality by children and the relatively youthful Maori population than by the general population. This implies that it is worth making a special effort to reduce the number of injuries and injury-caused fatalities suffered by children and Maori. How do the Estimates in this Report Differ from Previous Estimates? The base-case estimates in Table 1 of this report are for the year 2010, in June 2010 dollars, while the corresponding Table 1 estimates in the 2010 report are for the year 2008, in June 2008 dollars. There have also been changes in coverage and methods. This report s base-case estimate of the total social and economic costs of injury for 2010 is $10.2 billion, while the corresponding estimate in the report for 2008 was $9.7 billion. Table 2 gives details of the differences in parameters and in methodology, and some approximate indications of how much they affect the estimates. After adjusting for all the differences listed in the table, and using 2010 dollars, the total costs in 2008 exceed those in 2010. This is consistent with the significant fall in ACC claim expenditure in 2010 (shown later in this report), associated with economic conditions at the time. 11

TABLE 3: DIFFERENCES IN PARAMETERS AND METHODOLOGY; CONSEQUENCES FOR ESTIMATES OF THE COST OF INJURY IN THE CURRENT REPORT COMPARED WITH THE 2010 REPORT NZIPS (2010) estimate for 2008 (June 2008 dollars) NZIPS (2012) estimate for 2010 (June 2010 dollars) b Number of Fatalities a 1,681 (2006) 1,876 (2008) Number of Serious Non-fatal Hospital 9,865 (2008) 10,314 (2009) Admissions a Discount Rate c 3% 3.5% Type of Cost of Illness Study Prevalence or Incidence d Allocation of ACC Spending on Non-priority Areas ACC Spending on Sensitive Cases Mixed. Prevalence approach for treatment and rehabilitation costs, and for lost economic contribution due to injury-caused absence from workforce. Incidence approach for human cost (YLLs and DALYs), and lost economic contribution due to premature death $382 million of non-priority expenditure allocated pro rata to six priority areas Excluded. Spending in this category, plus that on treatment injuries (below) amounted to about $110 million in 2008, in 2008 dollars Same as in earlier report Decision made not to make this allocation Included ACC Spending on Treatment Injuries Excluded Included Workplace Injuries and Work-Related Illnesses ACC Overheads (excluding overheads for preventive expenditure) Un-compensated cases (those not funded by ACC) of workplace injuries and illnesses excluded Not included Estimates of costs for un-compensated cases included as a sensitivity analysis variation Estimated from ACC financial reports at approximately $370 million in 2010. Not included in detailed tables by priority areas Notes to Table 3: a. The fatality numbers and serious non-fatal hospital admission numbers in the table are those available at the time of producing the estimates in this report. The latest numbers, in Statistics New Zealand 2011 reports, show some differences, more especially for serious non-fatal incidents (8,452 in 2008; 8,536 in 2009; and provisionally 8,662 in 2010). b. Two inflation series were used in producing the estimates in 2010 dollars in this report: The average ordinary-time hourly earnings series, which increased by 5.6% from 2008 to 2010. This series applies to the human cost and lost economic contribution components of the total cost (approximately 86% of total costs). The Ministry of Health s cost-weight price multiplier series, which increased by 12.95% from 2008 to 2010. The weighted overall increase in the two years approximates 6.7%. This gives an inflation-caused increase in total costs of approximately $645 million from 2008 to 2010. c. The shift from a 3% to a 3.5% discount rate increases the value of a life-year by 8.2% (see section Discount Rates and Valuation of Life Years and DALY s for more on this). Total human costs would increase by the same proportion. This is equivalent to increasing the total costs, as given in the earlier report, by $512 million in 2008 dollars. In 2010 dollars this becomes $540 million. d. For a detailed discussion of the differences, see section Prevalence or Incidence Framework. Briefly, a prevalence study measures costs in the current period, caused by current events plus events in earlier years. An incidence study measures the costs of events in the current year, plus the consequential costs of those same current-year events but occurring in future years. 12

Introduction by John Wren Background to Estimates and the Methodological Approach Taken This section outlines the background to the preparation of this cost of injury update, and the rationale for the methodological approach taken. It also addresses frequently asked questions since the publication of the original O Dea and Wren (2010) cost of injury report: New Zealand Estimates of the Total Social and Economic Cost of All Injuries and the Six Priority Areas Respectively, at June 2008 Costs1. Policy Background In 2009 the New Zealand Injury Prevention Strategy Secretariat (the Secretariat) asked ACC Research to provide comparative New Zealand total social and economic cost estimates of all injuries and the New Zealand Injury Prevention Strategy s (NZIPS s) six injury priority areas: assault, falls, drowning, motor vehicle traffic crashes (MVTCs), suicide and deliberate self-harm, and workplace injuries. The report was to provide up-to-date estimates of the costs of injury in New Zealand, with the expectation that they could be used to inform future economic cost-benefit analyses, and help to establish how the costs of injuries compared with government expenditure on injury prevention. The report, by Des O Dea and John Wren, was published in 2010 in time to inform the NZIPS s fiveyear evaluation report to the government 2, which recommended that the Secretariat: take a more robust monitoring, auditing and reporting role evaluate the performance of the priority area strategies and focus areas report on outcomes, trends and value for money with a view to: drawing attention to the size of the injury problem in New Zealand improving knowledge of what is being achieved improving lead agency accountability helping with decision-making on injury prevention and where attention needs to be focused. The evaluation s recommendations were endorsed by Cabinet and the cost of injury estimates were included in the first New Zealand Injury Prevention Outcomes Report of June 2011 3. To help inform these reports in future, there is a need to prepare updates of the cost of injury estimates to reflect changes over time in the costs and rates of injury mortality and morbidity. 1 O Dea, D., and Wren, J. (2010). New Zealand Estimates of the Total Social and Economic Cost of All Injuries and the Six Priority Areas Respectively, at June 2008 Prices: Technical Report Prepared for NZIPS Evaluation. Accident Compensation Corporation, Wellington, New Zealand. February 2010. 2 New Zealand Injury Prevention Strategy Five Year Evaluation Final Report May 2010. New Zealand Injury Prevention Strategy Secretariat: website www.nzips.govt.nz. 3 New Zealand Injury Prevention Outcomes Report, NZIPS, June 2011. www.nzips.govt.nz 13

Rationale for Methodological Approach Essential Background Research In 2010 ACC Research prepared and published an important background briefing report on the use of economic methods to inform injury prevention prioritisation decisions 4. With the purpose of helping to inform thinking about the NZIPS evaluation, the report reviewed the: range of health economics models and associated issues relevant to undertaking cost of injury studies published New Zealand cost of injury studies to identify the methods used and the size of the cost estimates calculated for various injury events ways in which economic methods can be used to inform injury prevention investment decisions, and made recommendations for their use in New Zealand. These recommendations suggested ways to better standardise approaches and achieve greater cost discrimination between injury areas. The report was subject to robust external expert review and informed the methodological approach for preparing the 2010 and 2011 cost of injury estimates. Readers interested in learning more about the history of New Zealand cost of injury studies and the associated methodological issues can read the background report, which is available for download at www.nzips.govt.nz/documents/report4.pdf. Key Factors in Choosing the Methodological Approach Cost of injury studies have been around for approximately 30 years; they made their first appearance in relation to major policy decisions on the reform of workplace health and safety laws in the United States and Great Britain in the 1970s. For policy purposes, the studies usefulness lies in their ability to place a monetary value on a health event of interest, such as injury. This value can be used to compare the costs of the event of interest and assess the relative benefit of a proposed investment compared with an investment in an alternative investment of value. While costs of injury studies have a well established philosophical basis in welfare economics, and a set of techniques with which to estimate costs, they are not an exact science. There is considerable debate about how costs should be categorised and the value that should be placed on a human life. In addition, there are differences in datasets over time. All these factors add to uncertainty on the accuracy of any given cost estimate. Given the current policy setting in New Zealand and the debates in the literature, it was decided that the methodological approach for this study had to: be conservative, consistent and recognisably set within accepted economic/health economics frameworks 4 Wren, J., and Barrell, K. (2010). The Costs of Injury in New Zealand and Methods for Prioritising Resource Allocation: A Background Briefing Paper to Inform the Evaluation of the New Zealand Injury Prevention Strategy. New Zealand Injury Prevention Strategy Secretariat, ACC, Wellington, New Zealand. 14

be flexible in method and presentation to enable policy-makers to make decisions and provide injury prevention practitioners with choice on the use of monetised and non-monetised measures of the costs of injury provide a consistent methodological basis for: placing the cost burden of injury in the context of other health events in a way widely acknowledged by the health sector, which uses Years of Life Lost (YLLs) and Disability-Adjusted Life-Years (DALYs) to measure the burden monitoring change over time between the priority injury events of interest that would allow for changes in the population age structure, changes in patterns of injury in the population, and anticipated future methodological changes in how New Zealand DALYs are estimated recognise the range of uncertainties in the preparation of such estimates and provide indicators of that variability by preparing sensitivity analyses for the main cost categories used enable future cost of injury update estimates to be prepared in a cost-effective way that other researchers can easily replicate. Using YLLs/DALYS to Enable Flexibility in Analysis, and Managing the Debate on Placing a Monetary Value on Human Life Placing a monetary value on human life is a controversial subject for many, particularly in the health sector. In cost of injury studies (in New Zealand and internationally), the human costs typically account for 50% to 70% of the reported total social and economic costs of injury. An alternative to placing a dollar value on life is the concept of YLLs, DALYs and Quality Adjusted Life- Years (QALYs). These measures were first developed by the World Bank and the World Health Organization to estimate the burden of premature death and loss due to illness and disability in a population. They have been used by the New Zealand Ministry of Health to measure the health burden of various health events (Ministry of Health, 2001). These measures can also be used to prepare cost trade-offs between one type of health investment and another in terms of the YLLs, DALYs and QALYs that each type of investment is estimated to save (or, in the case of QALYs, gain). While this approach works when making investment decisions in the health sector, it is not as applicable when making large macro-level decisions that aim to balance investment with other competing areas of social and economic demand. To help inform these types of decision, economists have argued that it is appropriate to place monetary values on YLLs and DALYs. Note there is some evidence to suggest that people place different values on preventing death according to its causes such as death caused by an MVTC compared with death resulting from fire which the YLL or DALY approach does not recognise. Economists have developed two key approaches to valuing a human life: human capital and willingness to pay (WtP). Of these, a recent analysis of the international literature on the Value of a Statistical Life (VSL) by Access Economics (2008) indicates that WtP stated preference or revealed preference methods currently dominate the literature. WtP estimates put a substantially higher value on the saving of a life than does the human capital approach, which is based on lifetime income. 15

In New Zealand, the WtP stated preference approach to valuing a human life was first used by the Ministry of Transport in the 1990s, to assess the New Zealand population s willingness to pay for road safety prevention. The government of the day accepted the approach and mandated its use in preparing all future cost-benefit estimates for the transport sector (comprising the road, aviation and maritime sectors). The approach has since become widely accepted by policy-makers across government. Other Frequently Asked Questions Have ACC Public Health Acute Services (PHAS) payments to MOH been included in the cost of injury estimates? ACC purchases over 35 services from District Health Boards (DHBs) with current total value of approximately $550m per annum. The largest cost category is Public Health Acute Services. PHAS services include acute inpatient care, Emergency Department and follow-up outpatient visits for up to 6 weeks. For the 2009/10 financial year, the PHAS cost was $408 million, and for the 2010/11 year $421m. PHAS costs are paid through a bulk-funding arrangement that is set out at a high level in legislation and regulations and in an annual service agreement between the Minister for ACC and the Minister of Health. The amount ACC pays for PHAS is mainly negotiated using price indices. Due to the legislative set-up, direct access to DHB client data is not available for analytical purposes. Consequently, PHAS costs have not been included in the Cost of Injury estimates because of the significant analytical issues outlined below. 1. Currently we are not able to allocate PHAS costs appropriately to each of the national priority areas because the cost data does not include a breakdown by type of injury event, injury severity, or type of primary treatment service. Theoretically, a cost allocation could be made on the assumption of proportionally allocating PHAS cost according to the frequency of injury events in each priority area. The assumption being that each injury priority has the same proportion of type of injury / injury severity and equal admission to hospital based primary care treatment. However, we know from the epidemiological analyses of injury that such an assumption is highly flawed. Each of the national priorities has different patterns of types of injury and injury severity. 2. There is considerable uncertainty about the degree to which the PHAS costs represent an under or over payment for injury treatment which means there is a considerable "sensitivity analysis" issue with the PHAS dollar value. 3. In terms of the impact of PHAS costs on the total cost of injury estimates, the inclusion or exclusion of PHAS costs do not make that much difference to the range of total cost estimates as highlighted in the sensitivity analysis that has been presented. Factors such as the choice of the Value of Preventable Fatality / Serious Injury, and the age structure of the injury events in the population in each priority area are more important in influencing the size of the costs. 4. It is important to remember the cost estimates are significantly influenced by the Social Cost component and reflects the differences in the DALY estimates for each priority area. The social cost component dwarfs the ACC cost including any PHAS value. One interesting hypothesis is that in 20 years the total social cost of injury may significantly reduce because of aging population effects. 16

Why are the costs of the court system not included when considering the costs of assault-related injuries to government? There is considerable debate about how costs should be categorised and what should be included in each category. Typically, costs such as court (or enforcement) costs are not included in cost of injury studies because they can be classified as a cost of the normal law-enforcement system, which would have to be paid for irrespective of the occurrence of injury events. They can be seen as secondary costs, not directly related to the cost of injury, although such costs are indeed a cost to government. These types of cost can also be said to apply to other injury areas in particular road safety and workplace injuries, which both have regulatory and enforcement components. As a general rule, preventive and enforcement expenditure is not considered part of the overall cost burden, but rather as expenditure aimed at reducing that burden. Why was the cost of occupational health and diseases omitted from the 2010 cost of workplace injury estimates? There are several reasons for the cost of occupational health and disease estimates being omitted from the 2010 study. The causes of occupational diseases, as opposed to occupational injuries, are difficult to recognise for a range of reasons. For many occupational health and safety professionals, regulators and workers compensation authorities, they are the icebergs whose invisible parts pose significant challenges. The international and New Zealand literature accepts that, by definition, occupational disease and illness events are not injuries. Typically, an occupational disease or illness is any abnormal condition or disorder, other than one resulting from an occupational injury, caused by exposure to factors associated with employment. Occupational diseases and illness disorders cover a wide range of medical conditions that often (but not exclusively) result from exposure to various hazards in the workplace. Examples include asthma caused by chemicals such as isocyanides, carpal tunnel syndrome caused by repetitive movements, and contact dermatitis among metal workers. For many people, diseases, illnesses and harms arising from occupation-related exposure may not show until a considerable time after the exposure. In addition, and unlike for injuries, the nature of occupational diseases makes it difficult to count them and to obtain routine robust measures of their frequency in New Zealand. The reasons for this were well described in the 2005 NOHSAC (National Occupational Health and Safety Advisory Committee) report Surveillance of Occupational Disease and Injury in New Zealand 5. 5 Pearce, N., Dryson, E., Feyer, A-M., Gander, P., McCracken, S., & Wagstaffe, M. (2005). Surveillance of Occupational Disease and Injury in New Zealand: Report to the Minister of Labour. NOHSAC: Wellington. 17

The best New Zealand estimates of the burden of occupational disease and illness and the issues associated with preparing those estimates are reported in a 2004 NOHSAC report on the burden of occupational disease and injury in New Zealand 6. In preparation for this report, the Department of Labour commissioned Deloitte Access Economics to prepare an update based on the 2004 NOHSAC methodology; this report uses that update s estimates of the frequency of occupational disease events in New Zealand. Given the issues described above, the cost of occupational disease has been included in this update as a sensitivity analysis. This means that the costs are treated as a separate sub-category that policy-makers or practitioners can use, depending on their information needs and the intended purposes of their use. To ensure consistency and robustness in comparing cost estimates across NZIPS injury priority areas, it is recommended that the costs of occupational disease not be included when comparing the costs of workrelated injuries with other injury priority areas. Why place a dollar value on human life? Because the public sector is a major user of economic resources, there is a need to ensure that any proposal for government investment (such as in injury prevention) clearly sets out the business case in a way that is consistent and allows for comparison across options in terms that can be commonly understood (New Zealand Treasury, 2005). One important tool for doing this is cost-benefit analysis, a subset of which are analyses using monetised health measures, which include placing a dollar value on human life. Two key assumptions underpin the need for an economic cost-benefit analysis: 1. That resources are finite. 2. That investment in one activity imposes an opportunity cost in the form of the lost opportunity to carry out alternative social and economic investments. The following two examples illustrate the social and economic opportunity cost trade-offs in injury prevention. Road safety example 1. Lowering speed is an effective road safety intervention that reduces the risks and severity of road-related injuries and associated costs. However, the trade-off is that travel times are increased, and this lost time is an economic and social cost. Child safety example 1. Lowering the heights of forts in playgrounds is known to reduce the risk and severity of serious fall injuries. However, it can be argued that the trade-off is that the intervention could be detrimental to children s physiological development and limits their outdoor life experience, which has some importance to many New Zealanders. 6 Driscoll, T., Mannetje, A., Dryson, E., Feyer, A-M., Gander, P., McCracken, S., Pearce, N., & Wagstaffe. M. (2004) The Burden of Occupational Disease and Injury in New Zealand: Technical Report. NOHSAC: Wellington. 18

A full discussion of the use of economic methods to inform injury prevention investment decisions can be found in the 2010 NZIPS report The Costs of Injury in New Zealand and Methods for Prioritising Resource Allocation: A Background Briefing Paper to Inform the Evaluation of the New Zealand Injury Prevention Strategy. Are all injuries of equal value? In economic terms, all injuries are not equal for two broad reasons: 1. Injuries vary in their medical complexity, treatment and rehabilitation, which means costs are not equal. For example, brain and burn injuries are generally more costly than other types of injury, and complex fracture injuries are more complex to treat than other types of fracture. Injuries with other health issues present (for example diabetes and cardiovascular disease) cost more because of the need to treat the other health issues in order to treat the injuries. 2. In terms of social cost, there is evidence to suggest that people place different dollar values on the prevention of different types of injury harm, such as preventing suicide/deliberate self-harm and preventing road crash injuries or burns fires in the home. People may also place different values on preventing injuries to children versus preventing injuries to older adults. A review of the international and New Zealand evidence on the variations in values that people place on preventing different types of injury can be found in the 2010 NZIPS report The Costs of Injury in New Zealand and Methods for Prioritising Resource Allocation: A Background Briefing Paper to Inform the Evaluation of the New Zealand Injury Prevention Strategy. Why do some cost of injury estimates differ from others? There are many reasons for variations in cost estimates, including different cost categories and time points, the use of different datasets to estimate costs, and different ways of counting injury events and defining injury severity (such as what represents a major, moderate and minor injury). Two important differences are that the human cost estimates in this report are based essentially on a unit cost per year lost to death and disability, whereas some other published estimates are based on the cost of an individual fatality. This can give quite variant estimates in some categories. Consider the falls category: most deaths from falls occur in the elderly, who lose a relatively small number of life-years for each death compared with the life-years lost by those dying at a younger age, for example by suicide and motor-vehicle accident. Another significant difference is that some published estimates have much broader definitions of serious injury and accord much higher unit costs to serious injury than that used in this update. For a full discussion of the main reasons for the variation in estimates, see the 2010 NZIPS report 7 7 The Costs of Injury in New Zealand and Methods for Prioritizing Resource Allocation: A Background Briefing Paper to Inform the Evaluation of the New Zealand Injury Prevention Strategy. 19

What new information is provided in this 2011 update? This update differs from the 2010 report in that it: has new sections presenting cost of injury estimates for Māori and children adds more recent years to the time series of analysis updates the cost estimates to more current values clarifies and briefly extends the information on the methods used includes a new section on the costs of occupational disease to provide context for the costs of workplace injuries. What significant findings have changed between the 2010 and 2011 reports? The most significant new findings relate to the cost estimates for Māori and children, and their placement in the context of the costs of injury in the population as a whole. The update also confirms the importance of the 2010 finding that, if all other things are deemed constant (in particular the monetary value placed on a human life), the general cost of each injury priority area reflects the underlying frequency of that injury event in the population. What are the implications of this work for the future focus of injury prevention? This work supports other evidence presented in the New Zealand Injury Prevention Outcomes Report, which suggests there is a case for a stronger focus on suicide and fall-related injury prevention than that on MVTC, drowning and workplace injuries. (The expenditure in the main priority areas is given in the NZIPS 2010 report, Estimating Government Expenditure on Injury Prevention.) In addition, in terms of long-term human economic costs, this work clearly makes a case for investing in child injury prevention. 20

Estimates of the Burden and Cost of Injury in New Zealand, 2007-2010 Objective of this Study This report has been commissioned by the Accident Compensation Corporation (ACC). Its primary objective is to provide updated estimates of the costs of injury in New Zealand for each of the years 2007 to 2010. This will enable a comparison with earlier estimates for 2006. The estimates are required for all injuries in total, and for each of the NZIPS s six injury priority areas: assault, falls, drowning, MVTCs, suicide and deliberate self-harm, and workplace injuries. It is expected that the estimates will be used to inform future economic cost-benefit analyses and help to determine how the cost of injuries compares with government expenditure on injury prevention 8. An earlier report provided estimates for the year 2006, in June 2008 dollars (O Dea and Wren, 2010). This report covers the four-year period 2007 to 2010, with values in June 2010 dollars. Framework The estimates are for the consequential costs of injury only. They do not include preventive costs. Cost Categories Estimates are provided for three cost categories: Treatment and rehabilitation costs. Output and productivity costs. Human costs. These categories are based on those in a 2004 Department of Labour report on methods for measuring the costs of injury in New Zealand by government agencies. Treatment and rehabilitation costs refer to all the (out-of-pocket) monetary payments made in relation to diagnosis, treatment and rehabilitation of injuries sustained by the made in relation to the diagnosis, treatment and rehabilitation of injuries sustained by the population (of interest). Associated costs include transport, home modifications and ongoing assistance with impairment. Services are both publicly funded and privately paid for by individuals. Output and productivity costs result from individuals not being able to work as a consequence of injury. Loss of income (earnings to individuals and their friends and family, and loss of profit to employers) is the primary flow-on economic cost that can be measured. This includes the productivity of those who work voluntarily or who are too young or old to earn taxable incomes. 8 The NZIPS report of February 2010, Estimating Government Expenditure on Injury Prevention, provides information on injury prevention expenditure. 21

Human costs from an injury or a premature death include the psychosocial effects of injury, psychological distress, impaired physical or mental health, pain and suffering. These costs are often non-figurative and difficult to measure. A 2002 BERL report for government agencies on methods for estimating the costs of injuries discusses these costs in considerable detail (Goodchild at al, 2002). A wider range of costs is provided in reports commissioned by the Department of Labour from Deloitte Access Economics of Australia (NOHSAC, 2006) Deloitte Access Economics, 2011). They include: deadweight costs: the distortionary effects on the economy of levies and taxes to fund the ACC scheme administrative costs ( overheads ). This report does not include estimates of deadweight costs. However, the 2011 Deloitte Access Economics report on occupational diseases did include an estimate for this cost component. It was set at 18% of the total of taxation receipts lost, welfare payments made and other government expenditures incurred (Deloitte Access Economics, 2011, p 21). Applying this to ACC s total annual expenditure of around $2.5 billion suggests a deadweight cost for New Zealand in the order of $500 million. The New Zealand Treasury in its cost-benefit analysis primer (2005) suggested that the decision on whether or not to include deadweight losses in a cost-benefit analysis should be made on a case-by-case basis. However, this is in the context of cost-benefit analyses rather than a cost of illness study such as this report. The Treasury primer also notes that deadweight losses are notoriously difficult to quantify. Estimates vary from 14% up to 50% of the revenue collected. Deloitte Access Economics acknowledged this, using variants of 5% and 24.6% about its base-case value of 18% for sensitivity analyses. It is because of these uncertainties that this report does not include an estimate of deadweight costs. Overheads are included as genuine economic costs, although they were not part of the 2010 report. Data on these are available from annual ACC financial accounts (ACC, 2010a). At $368 million in 2010 (excluding injury prevention overheads), they represented 16% on top of ACC s total claim expenditure of $2,299 million. Perspective The estimates in this report are from the perspective of society as a whole, rather than individuals and family, employers or government. Six Injury priority areas Estimates are provided for each of the six NZIPS injury priority areas, as well as total injuries, including non-priority areas. In 2004 the six priority areas were claimed to account cumulatively for 80% of injury deaths and serious injuries in New Zealand (Department of Labour, 2004, p 2). The remaining non-priority 20% are simply those not included in the six priority areas. Table 5 shows that in 2008 15% of injury fatalities and 15% of serious non-fatal initial hospital admissions were in non-priority areas. Note that a substantially higher proportion of ACC claim expenditure (some 33.3% in 2010) goes to nonpriority areas rather than priority areas higher than the proportions for deaths and serious injuries above. 22