The economic cost of illness: fiscal 1975

Abstract

In 1963, Rice estimated the costs of illness and then allocated these costs by disease. She and Cooper in 1972 updated the original estimates and developed a more sophisticated methodological approach. This paper updates further the costs of illness to 1975 and presents further methodological changes. Analysis of the direct and indirect costs of illness for 1975 reveals that the upward trend into total costs continued, reaching $264 billion. The indirect costs are loss of earnings due to morbidity or premature mortality estimated at various discount rates allocated into 18 categories by disease. The direct costs include such payments as those made for hospital care, physician services, and drugs which are allocated by disease and unallocated costs such as construction and research. The proportion of total costs due to premature mortality were found to drop slightly from 1972 to 1975, while the morbidity share increased slightly. Direct costs account for approximately the same share of total illness in 1975 as in 1972. The proportion of total costs accounted for by direct costs varies directly with the discount rate selected, with the direct costs accounting for 50 per cent of the total at the 10 per cent discount rates and 37 per cent at 2.5 per cent rate. The proportion due to morbidity costs also varies directly with the discount rate, although the changes are small. There is an inverse relationship between the share for premature mortality costs and discount rate.