Local floodplain home buyouts can inform federal plans

As climate change threatens residential areas, a longtime federal home buyout program – designed to eliminate risk to people and property – has become bureaucratically inaccessible and inequitable. To offer solutions, Brooks School senior lecturer Rebecca Morgenstern Brenner and collaborators compared federal home buyout policies with regional and state programs, demonstrating that coordinating local strategies at the federal level may make these buyouts more equitable and effective.

The work “Equitable buyouts? Learning from State, County and Local Floodplain Management Programs” was published in the journal Climatic Change. “We have a major challenge with a spatial mismatch between where people currently live and where it is safe for people to live,” said Linda Shi, assistant professor in the Department of City and Regional Planning in the College of Architecture, Art and Planning. “How do we respond to that kind of a challenge?” The Federal Emergency Management Agency, or FEMA – an agency of the U.S. Department of Homeland Security – runs the Hazard Mitigation Grant Program (HMGP), which accounts for 70% of federally funded home buyouts. It’s bought more than 43,000 homes since 1989, usually after a presidential disaster declaration. The buyouts aim to reduce flood insurance liability and turn the property into green space.

Problems with building homes on floodplains or coastal areas are inherently intricate. The researchers examined the vulnerability of homeowners in floodplains, who are offered a buyout, and what might have been left out of the decision-making process. HMGP procedures favor single-family homeowners, nuclear households, those with a clear mortgage, U.S. citizenship and the ability to endure a burdensome process, according to the paper.

Households with upside-down mortgages – where home loan debt exceeds the pre-disaster market value – are ineligible for a buyout, since such a payment would not resolve the debt.

“When you’re looking at complex problems, it is important to see them through a transdisciplinary lens,” Brenner said. “It helps that we examine these problems from different fields to best understand what these communities are going to face.”

In the paper, Cornell researchers and students examined five different jurisdictions, which offer insight into how buyouts can be more effectively implemented:

• New Jersey, a flood-prone, densely populated state, has seen at least eight federal flood-related disasters in the past 60 years. New Jersey’s buyout program, Blue Acres, has a diverse staff that helps homeowners overcome bureaucratic hurdles and relocate faster. To date, the program has purchased 1,200 properties and demolished 700 properties in flood-susceptible inland municipalities.

• Washington has endured 30 federal flood disaster declarations since 1956, the researchers found. Today, the state promotes the Floodplains by Design program, which integrates floodplain management, salmon recovery and habitat restoration –encouraging communities to solve water, flood, fish, and farm challenges.

• North Carolina’s Mecklenburg County sits on the Catawba River Basin, a network of urban creeks that flash flood regularly during hurricanes. Local floods are not large enough to trigger federal disaster relief, so the region set up stormwater fees to fund an annual local budget for home buyouts – generally for homeowners that would not qualify for federal aid – an approach that enjoys popular public approval.

• Austin, Texas experiences extreme fluctuations in rainfall and is vulnerable to flash flooding, which is exacerbated by climate change. Thirty years ago, Austin formed the Watershed Protection Department, modeled after the federal Uniform Relocation Assistance and Real Property Acquisition Act of 1970. This group provides real estate and relocation assistance to those displaced and draws on funding sources to help owners bridge the cost between their old home and relocation.

• Harris County, Texas – which includes Houston – has suffered seven major floods since 2016, including Hurricane Harvey that caused $125 billion in damage. Before 2018, the Harris County Flood Control District (HCFCD) spent $340 million buying out more than 3,000 properties and plans over 3,000 more under a new bond, the researchers said. Community groups claimed infrastructure investments were disproportionately deployed in wealthy white areas, so the Harris County Commission asked HCFCD to account for social equity and set the goal to assist people likely to experience the worst impacts first.

How much money is too much for obesity treatments?

JOHN CAWLEY

Anew generation of effective weight loss drugs is now available in the U.S., but the drugs’ high cost highlights a reality hurting the nation’s economy and those who want to shed pounds: Obesity is expensive, and so are the treatments.

Economist John Cawley has spent his career studying the economics of obesity, including the economic causes of obesity, the economic consequences of obesity – such as direct medical care costs and the indirect costs of job absenteeism – and evaluating policies and programs to prevent and reduce obesity.

He is a professor in the Department of Economics and in the Cornell Jeb E. Brooks School of Public Policy as well as the director of Cornell in Washington. He serves on the External Scientific Panel of the National Collaborative on Childhood Obesity Research, which advises the National Institutes of Health, the Centers for Disease Control and Prevention, U.S. Department of Agriculture and other groups on priorities for obesity research. Cawley is a contributor to the forthcoming fifth edition of the “Handbook of Obesity,” a standard reference in the field, and in November he presented his research in a President’s Symposium at Obesity Week, the conference of the interdisciplinary research organization The Obesity Society.

Cawley answered our questions about the economics of obesity.

Question: The medical complications of obesity are well known, ranging from diabetes to heart disease and cancer. You’ve recently been speaking and writing about a topic that is less familiar: the economic costs of obesity. What are they?

Answer: The costs of obesity can be categorized as direct medical care costs and indirect productivity costs. As you said, obesity is associated with a higher risk of a wide range of medical conditions, including heart disease, stroke, cancer and Type 2 diabetes. These conditions are expensive to the health care system; we estimate that obesity in adults raises annual medical care costs by $2,781 per year, or 107%, relative to those of healthy weight. Nationally, the direct medical care costs of obesity total $289 billion per year. Obesity increases costs in all categories of care, including inpatient hospital stays, outpatient doctor visits and prescription drugs. Interestingly, medical care costs don’t change much with body mass index (a measure of weight-forheight) until one is well into the obese range, and then costs rise exponentially. So, what’s really expensive is not obesity, but extreme obesity.

The indirect costs of obesity arise from lower workplace productivity, such as increased job absenteeism. Relative to people of healthy weight, workers with obesity miss three additional work days per year due to poor health; the aggregate annual cost of this nationwide is between $14.9 and $29.8 billion.

Q: What’s confounding about this situation is that treatments for obesity are available and increasingly effective. But many people aren’t using them, even with celebrities such as Elon Musk vouching for them. Can you give us some examples?

A: One example of an effective treatment is bariatric surgery. After such surgery, patients average about 29% weight loss at one year, and many patients experience remission of their Type 2 diabetes. However, the surgery is invasive, can have complications and costs roughly $25,000.

Historically, anti-obesity drugs led to only modest weight loss, and several were withdrawn for causing dangerous side effects. However, a new generation of weight loss drugs called GLP-1s seem to result in perhaps two to three times more weight loss than previous drugs. These drugs enhance insulin secretion, slow gastric emptying and reduce appetite and food intake. They’re also much more expensive – around $1,200 per month, compared to the previous generation’s cost of $200 or less.

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Are costly new prescription drugs worth the price?

As more and more prescription drugs hit the market with eyepopping price tags, it can be difficult to know whether they’re worth it.

Some countries use a relatively straightforward cost-effectiveness analysis to decide. The United Kingdom’s National Institute for Health and Care Excellence, for instance, covers medications based on a single threshold of £20,000-£30,000 per quality-adjusted life year (QALY) gained.

Such cost-effectiveness analysis helps countries with single-payer health care to control costs. It has been suggested as a way for Medicare and other U.S. insurers to do the same.

But using a single threshold to decide whether a particular medication is costeffective assumes that all patients value what a medication offers in the same way. As a result, this one-size-fits-all approach can broadly paint costly drugs as not worth the price and prevent new drugs from entering the market, creating a barrier to treatment for patients who would value costlier care.

These are the findings of a study published in the July 2022 edition of the Journal of Health Economics. Authors include Sean Nicholson, director of the Sloan Program in Health Administration in the Brooks School and a professor in the Department of Economics, Claudio Lucarelli, associate professor of

Healthcare Management at University of Pennsylvania’s Wharton School and Leonard Davis Institute Senior Fellow, and Nicholas Tilipman of the University of Illinois/Chicago.

The researchers suggest that a better approach than relying on a single threshold would be to also consider the preferences of different patient subpopulations when assessing value. They developed a series of qualityadjusted price indices that accounted for preferences among patients and their prescribing physicians.

They focused on colorectal cancer—a disease for which the 6-month cost of medications jumped from $127 in 1993 to $36,300 in 2005. They assessed the value of the different drug regimens using a model that accounts for various outcome measures, the convenience of administration, patient tolerance for side effects, and willingness to accept greater toxicity for greater efficacy.

Using this approach that accounts for differences in patient preferences, here’s what they found: While efficacy gains from newer drugs did not justify their high prices for the population on average, they were justified for sicker, late-stage cancer patients. According to the model, if high-cost drugs were restricted based on an average cost-effectiveness analysis, then the sickest patients would experience a welfare loss.

“A uniform rule preventing patients with advanced cancer from receiving newer treatments could make their illness even less tolerable because they have no choice but to use a medication that is less effective or comes with more side effects,” Nicholson said.

Assessing value is complicated, and few studies have examined whether the value of pharmaceuticals is rising or falling once their attributes and consumers’ valuations of those attributes are considered. With this study, the authors show how it can be done.

They propose that health insurance needs to find ways to “allow for differences in value to express themselves in the market”—such as patients with advanced cancer placing greater value on hope and being willing to pay more for drugs that offer the possibility of longer survival. Suggested options include (1) insurers offering a variety of plans with varying premiums that accommodate differences in preferences and (2) allowing patients to internalize treatment costs at the margin by using “top-up” insurance, in which patients pay the incremental cost relative to a fully covered baseline treatment.

These suggestions, along with the novel model described in the paper, provide new perspectives for how to value new— and often—expensive prescription drugs.