Statistics and Data

Updating the Hu 1981 Estimates of the Economic Costs of Visual Disorders and Disabilities

On May 31, 1982, Professor Teh-Wei Hu of Pennsylvania State University submitted a report to the National Eye Institute (NEI) entitled "Economic Costs of Visual Disorders and Disabilities: United States, 1981". Hu's analysis used traditional 'cost of illness' methodology in estimating the direct and indirect costs of ocular-related morbidity. The result was an estimate of total economic costs for visual disorders/disabilities in 1981 of $14.1 billion -- consisting of direct costs of $7.9 billion and indirect costs of $6.2 billion. (Hu's original direct cost estimate of $8.6 billion was subsequently revised to remove double counting of some optometry services.)

Direct medical costs are those connected with the use of medical care in the prevention, diagnosis, and treatment of disease, or in the continuing care and rehabilitation of patients. Direct non-medical costs, such as transportation to providers and household help, were not included in Hu's estimates. Today, however, it is common to also include non-medical direct costs in cost of illness estimates.

Indirect costs measure the value of time that patients lose from employment or other productive activity due to morbidity (and early mortality). Indirect costs also include the value of time lost from work, housekeeping, etc., by family members who transport, visit, or care for patients. Estimation of indirect costs beyond those experienced the patient, by family members and others, are not reflected in Hu's estimates.

In 1991, the Hu estimates were subjected to inflationary adjustment by the NEI in an attempt to obtain a more current cost estimate. In assuming annual inflationary increases of 10% over 1981 costs, the 1991 cost figure was estimated to have risen to $38.4 billion. The tables shown below represent yet another attempt at current projections - for the 2003 calendar year - again, based on the 1981 data.

Clearly, projections to 2003 from data representing ocular morbidity and eye care services 22 years earlier must be viewed with caution, if not skepticism. Indeed, the inflationary adjustments take no explicit account of changes to the age- and gender-specific composition of ocular disease/conditions and services since the 1981 period. The upward adjustments to direct costs of ocular-related services and goods are based entirely on the aggregate growth in national health expenditures (which include all diseases/medical conditions). The introduction of new drugs and medical technologies over the past two decades has, undoubtedly, altered the mix and quantity of services - possibly different from that reflected in the aggregate growth of health expenditures. For example, the variety and utilization of glaucoma drugs has increased dramatically over the past two decades, refractive surgery did not even exist in 1981, and virtually all ocular surgery is now conducted on an out-patient setting. Similarly, to the extent that an aging population may have a disproportionate effect on the prevalence of ocular morbidity and associated service utilization, aggregate increases in health expenditures will underestimate ocular-related medical costs - and indirect costs as well.

The projections of 2003 indirect cost incorporate a straight forward upward adjustment of 1981 estimates to reflect the growth of the total U. S. population over the intervening 22 years. Structural changes in the population associated with differential change among the employed, those unable to work, those keeping house, or those institutionalized were not considered. Indirect costs are also adjusted to take into account updated earnings data. This adjustment was based on the increase in the median income of full-time, year-round workers. Considering both population and income growth adjustments, each of the original indirect cost components was inflated by a factor of 3.031.

Leon B. Ellwein
National Eye Institute
National Institutes of Health
March 23, 2004

Table 1: Inflation Adjustments Used in the Estimation of 2003 Costs from 1981 Estimates

Direct Costs: a	CMS Expenditure Type	Expenditure Growth Adjustment
Visits to Ophthalmologists	Physician/Clinical Services	7.208
Visits to Other M.D.s	Physician/Clinical Services	7.208
Eye Surgery (M.D. fees)	Physician/Clinical Services	7.208
Optometrists' Services/Materials	Physician/Clinical Services	7.208
In-patient Hospital Care	Hospital Care	4.793
Nursing Home Care	Nursing Home Care	5.831
Ophthalmic Drugs	Prescription Drugs	13.533
Optical Goods	Non-Durable Medical Products	3.235
Rehabilitation Services/Equipment	Other Medical Products	3.686
Indirect Costs: b	Populations Growth Adjustment	Income Growth Adjustment
Days Lost from Work (acute episodes)	1.267	2.392
Persons Unable to Work	1.267	2.392
Women Unable to Keep House	1.267	2.392
Institutionalized Persons	1.267	2.392
Waiting Time for Eye Care	1.267	2.392

Notes:

a  Inflation adjustment for direct costs over the 22-year period is based on growth in national health expenditures by type of expenditure (1980-2002). Source: Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Statistics Group; "National Health Expenditures Tables (Table 2) http://www.cms.hhs.gov/statistics/nhe/historical/t2.asp

b  Inflation adjustment for indirect costs over the 22-year period is based on growth in the total U.S. population (1980-2002) and the increase in median income (1979-2001). Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003 (page 8); "No. 2. Population: 1960 to 2002 http://www.census.gov/prod/2004pubs/03statab/pop.pdf and U.S. Census Bureau, Housing and Household Economic Statistics Division; "Historical Income Tables - People (Table P-38) http://www.census.gov/hhes/income/histinc/p38.html

Table 2: Economic Costs of Visual Disorders and Disabilities in the United States: in 1981 and 2003

	Economic Costs (in millions of dollars)
Category of Costs	1981	2003
Direct Costs
Visits to Ophthalmologists	$ 924.5	$ 6,663.8
Visits to Other M.D.s	115.5	832.5
Eye Surgery (M.D. fees)	1,134.0	8,173.9
Optometrists' Services and Materials	2,061.9	14,862.2
In-patient Hospital Care	762.7	3,655.6
Nursing Home Care	1,517.2	8,846.8
Ophthalmic Drugs and Optical Goods a	1,185.7	5,050.9
Rehabilitation Services and Equipment	178.1	656.5
TOTAL	$ 7,879.6	$ 48,742.2
Indirect Costs
Days Lost from Work (acute episodes)	$ 109.8	$ 332.8
Persons Unable to Work	4,636.9	14,054.4
Women Unable to Keep House	973.5	2,950.7
Institutionalized Persons	438.7	1,329.7
Waiting Time for Eye Care	75.9	230.1
TOTAL	$ 6,234.8	$ 18,897.7
GRAND TOTAL	$ 14,114.4	$ 67,639.9

Note:

a  Drugs comprised approximately 10% ($ 118m) of this cost category in 1981, with the remaining 90% ($ 1067.7m) for optical goods.