3.4  Coverage

3.4.1  Costs included

In this study “ill” health will be defined to be less than excellent health, which is not the result of injury or pregnancy. That is, excellent health is the base case against which other health states are compared.[10] When estimating the different components of costs a range of questions will be used to define the group in “ill” health. These questions/definitions will be discussed in the method section for each cost component and are defined in Appendix B. This work could potentially be extended in the future to cover injury-related costs.

This analysis is a prevalence cost of illness study. That is, it estimates the cost of ill health for a one-year period regardless of when the ill health started.[11] The assumption made is that the cross-section view of the costs at different stages of ill health represents the progression of ill health. As such, the costs may be seen as those that would be saved in a certain period in the absence of ill health rather than the amount saved if ill health was eradicated, as this amount would be much larger.

Cost estimates refer to Wave 3 of SoFIE as this is the period to which the health questions, and the summary labour force information used in the analysis, relate. The reference period for the survey is not the same for all respondents. They are all interviewed between October 2004 and September 2005 and asked usually about the 12 full months prior to the interview date (see Appendix A for more detail). In order to calculate costs for each person the reference period is used as this enables comparisons to be made between labour force participation and health. Despite the differences in the reference period the resulting total annual costs will be referred to as October 2004 to September 2005. All costs are evaluated at current (2004/05) values.

While all the direct (cost of resources used) and indirect (value of resources lost) costs as a result of ill health would ideally be included, owing to data limitations this is not possible. The costs that can be estimated from SoFIE can be seen in Figure 2, along with the groups for which the costs are estimated. These costs will not apply to everyone in the group. For example, a person of working age with ill health may have no hospital inpatient appointments in Wave 3. However, they may work less than they otherwise would as a result of ill health. Similarly, a participant in the labour force may suffer from presenteeism but may have no absenteeism. The direct costs are estimated for those aged 17 and over; however, indirect costs are only estimated for those aged 17 to 64 (working age) who are non-students.[12]

The main focus of this research is on estimating indirect costs. The only component of direct costs (the cost of resources used) that will be included is hospital inpatient treatments. SoFIE will be the main source used to estimate the hospital inpatient costs despite it being possible to estimate them using MoH published information. SoFIE is used as it enables hospital inpatient appointments to be attributed to people and thus linked to labour market information. However, SoFIE does not allow any other direct health care costs to be attributed to specific individuals. This information feeds into the estimates of the indirect costs, ensuring the cost of appointments and those of lost hours are from the same source. Further, it allows more flexibility in estimating the cost of appointments for specific groups and types of treatments than is available using the published MoH information.

The hospital inpatient costs covered are the medical and surgical costs that are publicly funded (mainly in public hospitals). They include a combination of hospital inpatient, physician inpatient, diagnostic tests, prescription drugs and drug sundries, and medical supplies that are used or carried out within hospitals. At an aggregate level there is little difference in the hospital inpatient costs estimates from SoFIE and those from MoH (see Appendix C).

Figure 2 – Possible ill health-related costs that can be estimated using SoFIE

3.4.2  Costs excluded

The figures that can be estimated from SoFIE will be an underestimate of the total cost of ill health as there are some costs that are not captured by SoFIE and therefore not included in analysis. Examples of these excluded costs are:

• Wider health care costs – such as those for primary and community-based care, pharmaceuticals, emergency services, outpatient appointments or non-medical direct costs (for example, transportation and relocation expenses) whether publicly or privately funded. All non-publicly funded hospital costs in private hospitals – as this treatment information is not available to link to SoFIE meaning it is not possible to estimate treatment costs or absenteeism costs as a result of such appointments.
• Costs of training health care providers for a particular illness or capital costs unless these are reflected in the cost of hospital inpatient care – as these costs are often difficult to attribute to a particular disease.
• Intangible costs of pain, such as the perceived cost associated with the loss of quality of life as a result of poor health – as information on the perceived quality of life is not collected in SoFIE.
• Estimates of the value of output lost owing to not being able to undertake housework owing to ill health – as information on the amount of housework undertaken is not collected in SoFIE.
• Costs for those who die from poor health in the period – as respondents have to be alive at the date of interview in order to respond to the survey and consent for their data to be linked to hospital records.[13]
• Costs to employers of having to recruit new employees as a result of staff members leaving owing to ill health (owing to activity limitations or death) – as the behaviour of employers when a staff member leaves, and the associated costs to employers, are not known.
• Indirect costs for those people aged 65 and over or for full-time students – owing to difficulty in predicting labour market behaviour of these groups in the absence of ill health.[14]
• Reductions in the amount of government benefits paid if health improved – as there are problems in the measurement of income in SoFIE and it is therefore difficult to attribute the amount of Sickness Benefits to each person to calculate the amount for the group of interest for the analysis. Also in some cost of illness studies, benefits are seen as a shift in resources, not a use of them (Segel, 2006). To provide some context, in 2005 the value of Sickness Benefits in total for New Zealand was $510 million, Disability Allowances $267 million and Invalid Benefits $1.026 million (The Treasury, 2008).
• The lost output of carers (perhaps family members or friends) of those with ill health (as a result of the carer not working; working less; being absent from work; or being less productive when at work as a result of worrying about their dependants) – as it is not always possible to identify carers in SoFIE.
• Expenditure on private health insurance.

As mentioned earlier, in addition to some costs being excluded, there are also more general limitations of this analysis. In particular, this study is a preliminary investigation into some of the costs of illness in New Zealand. It does not draw any implications for health care policy and does not provide a cost benefit analysis of improving the health of the working age population.