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INSTITUTE OF MEDICINE COSTS OF ENVIRONMENT-RE~ATED HEALTH EFFECTS A PLAN FOR CONTINUING STUDY Report of a Study by the Committee for a Planning Study for an Ongoing Study of Costs of Environment-Related Health Effects January 1981 National Academy Press Washington, D.C.

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NOTICE The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the Councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competencies and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences , the National Academy of Engineering, and the Institute of Medicine. The Insti tote of Medicine was chartered in 197() by the National bcaclemy of Sciences to enl ist di~tingui shed members of the appropriate professions in the examination of policy matters pertainin.g to the health of the public. In this, the Institute acts under both the Academv's 1863 congressional charter responsibility to be an advisor to the federal government, and its own initiative in identi tying i ssues of medical care, research, and education. This study was supported by the National Center for Health Statistics of the Department of Heal th and Human Servi ces, Contract No. 282-78-0163, T.C. 12 2101 Constitution Avenue, N.W. Washington, r.C . 20418 202/389-~87 Pub l i ca t i on IOM-8 l -01

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INSTITUTE OF MEDICINE PLANNING STUDY FOR AN ONGOING STUDY OF COSTS OF ENV IRONMENT-RELATED HEALTH EFFECTS COMMITTEE POSTER CHAIRMAN Kenneth J. Arrow, Ph.D. Professor of Economi cs Professor of Operations Research Stanford Univers i ty Stanford, Cal i forni a MEMBERS: Theodore Cooper, M.D., Ph.D. Execut ive Vice Presi dent The Upj ohn Company Kalamazoo, Michigan Ralph C. d'Arge, Ph.D. Professor of Economics University of Wyoming Larami e, Wyomi ng Philip J. Land rigan, M.D. Director, Division of Surveillance, Hazard Evaluation and Field Studies National Institute for Occupational Safety and Health Cincinnati, Ohio Alexander Leaf, M.D. Chief of Medical Services Massachusetts General Hospital Boston, Massachusetts Joshua Lederberg, Ph.~. President The Rockefeller University New York, New York Paul A. Marks, M.D. President Memorial Sloan Kettering Cancer Center New York, New York Frederick Mosteller, Ph.D. Professor and Chairman Department of Biostatistics Harvard School of Public Health Boston, Massachusetts Evelyn F. Murphy, Ph.D. Department of Urban Studies Massachusetts Institute of Technology Cambridge, Massachusetts _ ~ ~ ~ _

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Robert F. Murray, Jr., M.D. Senior scholar-in-residence Institute of Medicine (July 1980 to June 1981) and Professor of Pediatrics, Medicine and Oncology Chief, Division of Medical Genetics Howard University College of Medicine Washington, D.C. Don K. Price Professor of Government Kennedy School of Government Harvard University Cambridge, Massachusetts Frederick C. Robbins, M.D. President Institute of Medicine National Academy of Sciences Washington, D.C. (Beginning October 1980) Dean School of Medicine Case Western Reserve University Cleveland, Ohio (Prior to October 1980) Anne A. Scitovsky, M.A. Chief, Health Economics Division Palo Alto Medical Research Foundation Palo Alto, California Irving J. Selikoff, M.D. Professor of Community Medicine Director, Environmental Sciences Laboratory Mount Sinai School of Medicine New York, New York Herman A. Tytoler, M.D. Professor of Epidemiology School of Public Health University of North Carolina Chapel Hill, North Carolina Arthur C. Upton, M.D. Professor and Chairman Department of Environmental Medicine Director, Institute of Environmental Medicine New York University Medical Center New York, New York Richard Zeckhauser, Ph.D. Professor of Political Economy Kennedy School of Government Harvard University Cambridge, Massachusetts ~ v

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TpSTITL~E OF MEDICINE President David A. Hamburg, M.D.* Frederick C. Bobbins, M.~.** STAFF Consultant Elena O. Nightingale, 'l.D., Phil., Senior Program Officer; Director,* Division of Health Promotion and Disease Prevention Vicki Weisfeld, M.P.~., Acting Director,** Division of Health Promotion and Disease Prevention Barbara Mandu l a , Ph . ~ ., Study Di rec tar Enriqueta Bond, Ph.D., Senior Staff Officer Mary Cureton, M..., Pesearch Associate Allyn Mortimer, Research Assi stant Constance Shuck, Secretary Alan A. Carber, National Bureau of Economic Pesearch, gala Alto, Cal ~ forn i a Additional assistance from: Frederic Kass , J.D., Cambridge Research Institute, Cambridge, Massachusetts ; Michael Stoto, Ph.~., Harvard University, Cambridge, Massachusetts Acknowledgment In addition to appreciating the contributions of the many persons and organizations listed in the Work of the Committee (Appendix G), the Institute of Medicine especially thanks Jack Feldman, Thomas Hodgson, and Dorothy Rice of the National Center for Health Statistics for providing information and valuable guidance throughout the study. *Prior to October 1980 **Beginning October 1980 v

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NATIONAL ACADEMY OF SCIENCES OFFICE OF THE PRESIDENT 2101 CONSTITUTION AVENUE WAS - INGTON, C). C. 204~8 January 20, 1981 The Secretary Department of Health and Human Services Washington, D. C. 20201 Dear Mr. Secretary: I am pleased to transmit a report entitled "Costs of Envi- ronment-Related Health Effects: A Plan for Continuing Study," prepared in our Institute of Medicine by the Committee for a Planning Study for an Ongoing Study of Costs of Environment- Related Health Erefects. This planning study was undertaken as an initial response to Pubic c Law 95-623, the Health Services Research, Health Statistics, and Health Care Technology Act of 1978, Section 7 of which calls for the Department and the National Academy of Sciences, acting through the Institute of Medl cone and other appropriate units, to conduct an ongoing study that would provide estimates of the "reduction in health costs which would result from each incremental reduction" in environmental hazards caused by human activity. The report of this planning study, which was chaired by Professor Kenneth J. Arrow of Stanford University, is a thorough and thoughtful document explicitly directed to the terms of the charge described in Section 7 of Public Law 95-623; it outlines what will be required to make a best faith ef fort to achieve the goals envisioned in the Act, and fairly represents some of the difficulties in so doing. In transmitting their report, I f ind it necessary to of fer two comments. (1) Section 7 specifies that ''The Secretary and the National Academy of Sciences (acting through the Institute of Medicine and other appropriate units) shall, jointly and in cooperation with the Administrator of the Environmental Protection Agency, the Secretary of Labor, the Consumer Product Safety Commission, the Council of Economic Advisers, the Council on Wage and Price Stability, the Council on Environmental Quality, and Ether Yi

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The Secretary January 20, 1981 Page Two entities of the Federal Government which the Secretary determines have the expertise in the subject of the study prescribed by this paragraph, conduct, with funds appropriated under Section 308(i)~2), an ongoing study of the present and projected future health costs of pollution and other environmental conditions resulting from human activity...." Although my colleagues and I deeply appreciate the confidence in this institution thus expressed by the Congress, we consider the proposed arrangement to be inappropriate. This Academy is not a Federal agency. It is a private body albeit chartered by the Congress to serve, in effect, as an ally of the government. Our role is advisory--not operational. The very genius of the Act by which the Academy was chartered is that it provided, for the government and for the American people, an authoritative independent voice on those matters within its areas of competence, free of political considerations. To convey to the Academy, with respect to a specific activity, responsibility and authority co- equal with that of the Department and an array of other Federal agencies is both to give to the Academy an inappropriate authority and to raise the possibility that, in such instance, our indepen- dent voice may be lost. An Academy committee functioning in concert with representatives of a series of Federal agencies might well become but one component of what is, in effect, an interagency committee of the Executive Branch. Accordingly, _ this will propose that, as arrangements are formulated for the future of the ongoing study mandated by the Act, the Academy function in a manner more suitable to its role in our national life. For example, we could envision an Academy committee which would offer to the Department a preliminary plan for the first phase of the ongoing study, and which would have suitable opportunity to comment on the final design of the study and any subsequent modifications as they are developed by the Department and other agencies. The Academy committee would be kept informed of major developments in the course of the study and would provide, to the Department and to the Congress, con- current but independent formal commentary on the biennial reports to be prepared by the Department as stipulated in the Act. I sincerely hope that the Department will join the Academy in seeking, by appropriate routes, to secure approval of such an arrangement by the Congress and by such instrumentalities of the Executive Branch as may be required. vii

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The Secretary January 20, 1981 Page Three (2) The language of the Act indicates that it was the intent of Congress that the ongoing study should (a) attempt to establish the magnitude of the insults to the public health that arise from diverse environmental factors and, further, should (b) attempt to establish the costs, in economic terms, of those insults. It is apparent from the present report, from the history of the Act. and from a voluminous relevant literature including _ various reports from this Academy, that even the first part of this charge, (a) above, represents a difficult and remote goal, albeit impor- tant and highly worthy. _ ~ In accord with the sentiments of the American people, the Congress has put in place a series of Acts intended to achieve maj or ~ mprovements in air and water quality, to protect the food supply from noxious contaminants, and to protect the American people from environmental hazards in the work place, the school- room, and the home. These actions were taken in awareness of the existence of diverse hazards but without definitive knowledge of the magnitude of those hazards. That is the gap which the ongoing study is intended to fill. But the effort required is great, and there is no guarantee of success. In most areas of concern, the uncertainties involved in making such estimates at this time are huge, perhaps orders of magnitude. And, in such instances, it is not necessarily true that the best available "guesstimate" is better than none--it may be seriously misleading. Only in a few specific instances do reasonably useful data appear to be avail- able, but these constitute a minor fraction of the total problem. Given reliable estimates of the magnitude of the burden of disease and illness imposed by environmental factors, one might proceed to estimate the economic costs thereof, were there also available an agreed~upon calculus for such procedures. But such is not yet the case; indeed the uncertainties inherent in current methodology to this end seem as great again as those in estimating the health effects of major environmental systems. To multiply these two sets of uncertainties and offer estimates of costs, in dollars, could, if taken literally, serve only to confuse the American public, no matter how well intentioned the attempt to inform. Accordingly, it would appear wise to attempt these analyses as essentially independent exercises, reporting the results separately. This would free the responsible group to develop more sophisticated methodologies appropriate to the cost estimates, to address their calculations only to those -viil-

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The Secretary January 20, 1981 Page Four specif ic environmental hazards for which the health eff ects are learned to an acceptable degree of certainty and, as emphasized in the present report, to present each cost estimate with an explicit statement of the associated range of. uncertainty. Admittedly, this large lacuna in understanding would continue to leave us, for some time, without a significant reference point. The costs of pollution abatement, for example, can be very large, and it is certainly not unreasonable to ask how those costs relate to the costs, in dollars, of not taking such actions, viz., the economic costs of unmitigated damage to the public health from environmental hazards. Yet, as the Act recognized, that is the circumstance in which the nation finds itself; that question, today, has no reasonably reliable answer. The costs of presumably protective actions, already mandated; can be reckoned; the magnitudes of the resultant health benefits, and their economic equivalents, in dollars, are largely unknown. However, in matters of public policy, this circumstance is not unusual. Our nation does not price-out the dollar value of the benefits of national security when appropriating funds to the Defense Depart- ment; it does not price-out the economic value of a national park; it does not price-out the economic benefits of passenger safety in appropriating funds to the Federal Aviation Authority ; indeed, it does not price-out the economic values of a host of social and educational programs . Instead, it is the norm of political behavior to reckon benefits within the framework of a general set of subjective public value judgements rather than out of hard knowledge of their dollar equivalents--which are rarely available in any case. We ask what kind of country we want ours to be, and we ask what we can afford--and act accordingly. This is not to argue against the proposed attempt to estimate the economic costs of the impact on our health by environmental factors; it is only to ask that reports of these mandated efforts be made public only as they can rest on both a public health data base and an economic calculus that are reasonably acceptable. Meanwhile, the primary task of the ongoing study is to identify and quantify those hazards to human health posed by the environ- ment. When these have been established to an acceptable degree of certainty, a rational government will surely arrange that the extent of our various responses will, in a general way, relate to the relative magnitudes of the various hazards. If the ongoing study can achieve that end, the nation will have been richly Six

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The Secretary January 20, 1981 Page Five rewarded. If, in due course, the study also produces reasonably reliable estimates of the economic costs of the health effects of environmental hazards, we may learn to respond yet more rationally. Sincerely yours, bin Philip Handler President Enclosure

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FOREWORD CHAIRMAN ' S PREFACE SUMMARY CHAPTER 1. INTRODUCTION CONTENTS Approach f or the Ongoing S tudy Improving Information for the Ongoing Study Conclusion Goals of the Planning S tudy Historical Background: Estimating Benef its of Environmental Regulations Information Needed by the Ongoing Study Early Phases of the Ongoing Study Usefulness of the Ongoing Study REFERENCES CHAPTER 2. DATA RELATED TO ENVIRONMENTAL HAZARDS AND HUMAN EXPOSURE Existing Studies Sources of Hazards, Types of Data Needed Environmental Monitoring Exposure REFERENCES CHAPTER 3. INFORMATION NEEDED TO ASSESS AND QUANTIFY HEALTH EFFECTS RISK EXTRAPOLATION FROM NON-HUMAN DATA Short-term Tests Animal Tests Risk Extrapolation CLINICAL STUDIES EPIDEMIOLOGIC STUDIES Types of Studies Surveillance Occupational Data Effects of Acute Environmental Exposures Susceptible Populations Effects of Environmental Agents on Human Reproduction REFERENCES xi Page xv xvii 1 3 8 14 15 15 17 19 27 30 31 37 37 39 41 43 45 49 51 51 52 52 53 54 54 59 60 64 66 69 71

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CHAPTER 4. COSTS OF HEALTH EFFECTS Costs Listed in Public Law 95-623 Estimating Costs of Illness and Disease by the Output-Accounting Method Output Accounting Applied to Costs of Health Effects of Environmental Hazards The Willingness-to-pay Approach to Costs of Disease Conclusion REFERENCES CHAPTER 5. ISSUES RELATED TO ADMINISTRATION AND COORDINATION ISSUES AT THE FEDERAL LEVEL Coordination Among Federal Agencies The Process of Administration of the Ongoing Study COORDINATION AMONG VARIOUS GROUPS State and Local Government Involvement Industry and Labor Public Interest Groups Private Foundations and Voluntary Health Organizations Int erna t tonal Organiza Lions EDUCATION AND INFORMATION DISSEMINATION REFERENCES CHAPTER 6. CONCLUSIONS AND RECOMMENDATIONS PURPOSES AND PROCEDURES OF THE ONGOING STUDY The Early Years of the Ongoing Study The Biennial Reports Administrative Arrangements for the Ongoing Study DATA AND METHODOLOGIES TO AS SOCIATE EXPOSURES AND HEALTH EFFECTS Existing Data and Data Systems New Data and Data Systems ESTIMATING COSTS Direct Costs Indirect Costs Willingness-to-pay Estimates Costs of Pain and Suffering ISSUES RELATED TO COORDINATION AND PLANNING Planning CONCLUSION xli 77 82 85 93 96 100 102 105 106 106 114 119 119 122 123 124 125 126 127 133 133 138 142 144 148 148 150 155 157 160 161 162 162 163 166

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APPENDIXES Appendix A: Public Law 95-623, text of Sections 7 and ~ A-1 Appendix B: Chronology of Maj or Federal Laws Relating to Environmental Quality and Health B-1 Appendix C: Table of Known and Suspec ted Environment-Rela~ced Health Ef fects Appendix D: Listing of Federal Coordinating Groups Concerned with Environmental Health and Toxic Substances D-1 C1 Appendix E: Table E-1. Approximate Costs Associated with Some Epidemiologic Studies E-1 Appendix F: Table F-1. Some Inherited Disorders that }lay Influence Individual Susceptibility to Specif ic Environmental Agents F-1 Appendix G: Work of the Committee G-1 List of Background Papers Prepared for the Committee G-6 Appendix H: Abbreviations H-1 xiii

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FOREWORD This report, Costs of Environment-Related Health Effects. ~ Plan for Continuing Study, was prepared in response to Public Law - 95-623, wki ch requested that a study of costs of environment-related health effects be carried out TV the National Academy of Sciences (acting through the Institute of Medicine and other units), and vari ous federal agent ies . It i s my opinion that this report clear' y states the diicu'ties that are inherent in the task proposed by Congress. It suggests ~ practical and logical approach that, if implemented, would provide useful information to those responsible for deciding matters of public policy. At the same time, the approach would expand our knowledge concerning envi ronmental factors and hea 1 th and thei r ecor~omi c consequences . The goal that Congress had in mind in requesting this study, that is, documenting the costs in economic terms of the health effects resulting from environmental pollution, is of great importance. Although this coal is not at present achievable, it is well worth striving towards. The commi t tee has pointed cut clearly the limi Cations of the science data base avai fable to support causal relationships between environmental factors and heal th. They have suggested ways to improve the available data and methods, placing particular importance on the need for proper linkage and utilization of the many relevant data Bye tems now i n exi stence . The economi c es timates are limi ted by the paucity of avai fable health data. Even when these data are avai table, however, there are methodological and theoretical problems that require active research in order to develop better ways to use the data. A framework Is proposed for the ongoing study that would provide a mechanism for working toward the goal of P.L. 95-623 in a stepwise fashion that would continually advance both our theoretical and practical knowledge. However, the overall goals of the congressional request cannot be achieved in the near future. The ongoing study

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must be continued over a period of many years if it is to provide the information requested by Congress. A short-term effort would be of limited value. The committee also has commented on administrative arrangements for the continuing study and the appropriate relationship between the TOM/NAS and government for conduct of the continuing~study. The committee recommends that the IOM/NAS maintain its traditional advisory role while participating actively in the continuing study. In summary, I believe that the committee and staff have done an outstanding job in dealing with a subject that is complex and difficult but of increasingly great import to the nation. Frederick C. Robbins, M.D. President Institute of Medicine xvi

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CHAIRMQN'S PREFACE The evolution of environmental policy has reflected the many pressures inherent in issues with complex and diverse ramifications. On the one hand, there are the perceptions of adverse health effects, illness and mortality, and other environmental degradations, of visibility, noise, smell, and injury to fellow-species associated with the release of chemicals and other pollutants into the air and water used by the populace at large and more intensely into the Occupational environment. On the other hand, there are the easily visible costs of complying with environmental regulations designed to control the flow of pollutants into the ambient media restrictions on the location and volume of certain kinds of production, use of more expensive material inputs, and purchase of pollution-control equipment. At some point, the balancing of the disutilities of pollution against the production costs in protecting against them becomes a major aspect of policy formation. It is as part of this debate that the United States Congress enacted Public Law 95-623, the Health Services Research, Health Stati sties, and Health Care Technology Act of 1978. Congress recognized that information on the health effects of environmental alterations due to human activi ty was inadequate to the needs of rational decision making. In Section 7 of the law, the (now) Department of Health and Human Services and the National Academy of Sciences, acting through the Institute of Medicine, are asked to conduct an ongoing study, with biennial reports, to estimate the relevant health effects and their costs and to provide advice on improving the data needed. The Institute of Medicine has prepared this planning study to set guidelines for the conduct of the ongoing study. We saw the charge basically as specifying the contents of an information system useful for decision making. It was not to be a complete specification of the decision process in any case, for the law prescribes only the estimation of health effects and costs. The task of the commi t tee was to survey exi sting methods of gathering the relevant information and proposing additions to the xvii

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data system. The info`~.ation must be relevant to the decisions that will and can be taken; but also it must be feasible to obtain. The data to be caller ted must especially be evaluated for their abi li ty to cast light on red ations between exposures to pollutants and the resulting health effects. Any decision tC? change, for example, air quality standards requires an evaluation of the resulting effect on mortality and morbidity. Existing data are usually collected with different aims in view. Though valuable inferences can sometimes be made from them, new types of data can be more powerful in detecting such relations. Pollution or other man-made alterations in the environment affect health through a two-staze process (1) the pollution enters an ambient medium to which human beings are exposed 5 (' ~ the exposure causes a response in terms of health effects. For comparison with production costs needed for decision making, a third step is needed, an equivalence between health effects and costs in terms of resources. The study ouickly-found that data on all three stages were sadly lacking, and the bulk of the report concerns itself with analysis and recommendations for better information. However, our di scussion of the first stage, the impact of sources of environmental hazards on human exposures, must be regarded as inadequate, due to lack of time and of relevant expertise on the committee. Further study of this area is of high priority. With regard to the other stages, considerations of feasibility and of relevance to decision making about externalities led to recommendation of severe restriction on the scope of the ongoing study. Some of the reviewers of this study feel we may sti 11 have been too optimistic about the possibilities for useful results. We do urge that the uncertainty inherent in all data used in environmental decision making (indeed, in most data on which public and private decisions are based) be explicitly recognized. Even if all our recommendations are accepted and prove as useful as we think they will, there will be large uncertainties. It is important to recognize them, both to motivate the search for better data and more accurate relationships and to influence the kind of decisions that are made, for rational behavior under uncertainty would lead to decisions qualitatively as we] 1 as quantitatively different from those under certainty. The- notion of a continued ongoing study includes, as we have recommended, evolution of the data system based on continued self-appraisal. Our report will be most successful if it is soon superseded . Kenneth J. Arrow, Chairman Committee for a Planning Study for an Ongoing Study of Costs of Environment-Pelated Health Effects xviii