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The High Cost of Excessive Alcohol Consumption in New Hampshire

December 2012 Prepared by:


Table of Contents EXECUTIVE SUMMARY ............................................................................................................ 3 I.

INTRODUCTION .................................................................................................................. 7

II. PRODUCTIVITY COSTS..................................................................................................... 8 A. B. C. D. III. A. B. IV. A. B. C. V.

REDUCED LABOR FORCE PARTICIPATION ............................................................................ 11 REDUCED EARNINGS OF WORKERS ..................................................................................... 13 DIRECT COSTS TO INDUSTRY: ABSENTEEISM ....................................................................... 14 MORTALITY COSTS .............................................................................................................. 16 HEALTH CARE .............................................................................................................. 18 ALCOHOL TREATMENT COSTS ............................................................................................. 18 MEDICAL EXPENDITURES .................................................................................................... 21 CRIME, JUSTICE, AND CORRECTIONS .................................................................. 24 CRIME ................................................................................................................................. 24 JUDICIAL COSTS .................................................................................................................. 25 CORRECTIONS COSTS .......................................................................................................... 26 OTHER COSTS ................................................................................................................... 27

A. B.

MOTOR VEHICLE CRASHES ................................................................................................. 27 STATE AND LOCAL TAX REVENUE....................................................................................... 29

VI.

WHO BEARS THE COSTS OF EXCESSIVE DRINKING? ...................................... 29

VII.

POLICY IMPLICATIONS ............................................................................................. 31

VIII. CONCLUSIONS............................................................................................................... 37 END NOTES ................................................................................................................................. 39

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Executive Summary The tremendous harm done to individuals and families that result from excessive consumption of alcohol is widely acknowledged. Less well understood are the broader costs that excessive consumption imposes on the New Hampshire economy, on state and local government, and on businesses and individuals in the state. Like all states, New Hampshire faces more challenges than it has time and resources to confront. A thorough understanding of the public and private costs of excessive alcohol consumption is needed to assess the magnitude of the problem, its severity compared to other issues facing the state, and the urgency with which it should be addressed. This report estimates the cost of excessive alcohol consumption in four broad areas: the productivity of individuals and businesses, health care, criminal justice, and other costs. In addition, the report considers the implications of some policies that could impact the costs of excessive alcohol consumption in the state. Throughout this report the terms costs and losses are used interchangeably to represent the monetized impacts of excessive alcohol consumption. Costs occur in the form of direct expenditures, as is the case when alcohol consumption impacts the health of individuals that increase health care or human services expenditures, or indirectly in the form of reductions in economic productivity and wage and salary earnings, as when labor force participation and earnings of individuals (and thus government revenues) is reduced due to individuals excessive use of alcohol.

Table 1 Summary of NH Costs of Excessive Alcohol Consumption ($ Millions) Lifetime Costs Related Annual to Annual Costs Impacts Productivity Lower Labor Force Participation $403.9 Impaired Productivity $325.6 Absenteeism $27.1 Subtotal $756.6 $218.6 Premature Death* Health Care Alcohol Abuse Treatment Medical Expenditures Insurance Administration Subtotal

$9.7 $154.4 $17.6 $181.7

Police Protection and Crime Judicial System Corrections Cost to Crime Victims Subtotal

$41.1 $12.0 $35.1 not estimated $88.2

Motor Vehicle Crashes State and Local Tax Revenue Subtotal

$78.5 $45.99 $124.5

Grand Total

$1,151.0

Criminal Justice

Other Costs

$1,369.6

NH Personal Income $ Millions (2011) $60,240.8 $60,240.8 Alc. Costs as a % of Income 1.9% 2.3% *Included in separate total because of difference in calculation & accounting

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In total, excessive alcohol consumption costs New Hampshire over $1.15 billion annually in increased expenditures and lost productivity and earnings, an amount equal to about 2.0 percent of total personal income in the state. Another $218.6 million in discounted lifetime earnings that are not included in the $1.15 billion total cost to New Hampshire, are lost each year by the almost 300 individuals who die prematurely each year in New Hampshire as a result of excessive alcohol consumption. State and local government’s share of the total cost of excessive alcohol consumption in New Hampshire is over $251 million annually. Productivity costs affect the size of New Hampshire’s workforce and affect the earnings of those individuals who are in the workforce and who consume alcohol excessively. These impacts on productivity reduce the output of New Hampshire businesses, lower the overall performance of the New Hampshire economy, and account for two-thirds of the annual cost of excessive alcohol consumption. Individuals who work, produce, and earn less because of alcohol represent a waste of resources. Human resources, especially individuals with skills, abilities and initiative are the most valuable resource of the 21st century. Because of slow population growth, human resources are becoming scarcer each year in New Hampshire and in many states. New Hampshire cannot afford to waste human resources if it wants to maximize the performance of its economy and maintain its tradition of having the strongest economy in the region. Key findings of this report include: Productivity Reduced Labor Force Participation  

Excessive alcohol consumption resulted in 9,292 fewer male workers in NH’s labor force in 2011, an overall reduction in the state’s labor force of 1.2 percent with an associated loss of earnings of $403.9 million. Labor force participation rate losses are especially high as a percentage of the population among young males under the age of 25.

Lower Earnings of Workers in the Labor Force  

Impaired productivity of alcohol dependent workers in the NH labor force costs an estimated $325.6 million in reduced earnings, with a median earnings reduction of $4,878 per alcohol-dependent worker. The $729.5 million in earnings costs (labor force participation plus lower earnings) attributable to alcohol dependency have indirect and induced (multiplier impacts) that collectively lower NH employment by an estimated 4,623 jobs.

Direct Costs to Industry: Absenteeism .   

More than 54,000 workers with an alcohol dependency or abuse problem are employed by NH businesses. Over $27 million in alcohol attributed absenteeism costs are incurred by NH businesses because of excessive alcohol use. The implied loss of output by NH businesses resulting from this absenteeism is over $71 million. Industries that employ a high percentage of younger and/ or male workers, such as retail 4


and construction, have the highest rates of excessive alcohol use in their workforce. Mortality (Premature Death) Costs  

An average of 290 alcohol-attributable deaths occur in New Hampshire each year. Chronic and acute deaths attributable to alcohol result in the loss of discounted lifetime earnings of $218.6 million annually.

Health Care Alcohol Treatment Services  

Just under 4,000 individuals received services for alcohol abuse at substance treatment facilities in NH, at an estimated cost of $9.7 million in NH in 2010, with $2.7 million of that care provided free of charge. In only one state (Texas) is an individual in need of treatment for substance abuse (primarily alcohol) less likely to receive treatment than in New Hampshire. Only about 4 percent of individuals needing treatment services for excessive alcohol use and 5.6 percent of all substance abusers receive treatment services in New Hampshire. The cost to provide services to all 96,000 NH residents estimated to need treatment for excessive alcohol use is over $200 million.

Medical Costs   

Health care charges attributable to excessive alcohol use are estimated at $206.7 million in 2011, and payments for services estimated at $154 million in New Hampshire, an amount equal to about 1.5 percent of total medical expenditures in the state. Hospital charges accounted for the largest share of alcohol-attributable medical costs. Hospital charges for alcohol-attributable first diagnoses were an estimated $123 million in 2011, and payments to hospitals were $77.5 million. Insurance administration costs associated with alcohol-attributable medical services are estimated to add an additional $17.6 in alcohol-related costs.

Criminal Justice .  Alcohol-attributable offenses account for about 30 percent of all arrests and about 12.8 percent of all crimes committed in New Hampshire.  Policing and public safety costs related to alcohol total $41.1 million in New Hampshire, of which $34.4 million is borne by local government.  Judicial costs attributable to alcohol cost $12 million annually, divided approximately equally between state and local (including counties) government.  Alcohol-attributable incarcerations increase corrections costs by $35.1 million annually in New Hampshire.

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Other Costs Motor Vehicle Crashes 

The estimated cost of alcohol-attributable motor vehicle crashes (after subtracting crash-related medical and productivity which are calculated and included in the medical and productivity sections of the report) was $78.5 million in NH in 2011.

State and Local Government Revenue Loss 

Fewer individuals in NH’s labor force, the lower average earnings and greater absenteeism of workers who consume excessive amounts of alcohol, combine to reduce state and local revenues in New Hampshire by about $46 million annually.

Who Bears The Burden of Alcohol-Attributable Costs 

Individuals, families, and private businesses bear the largest portion of the costs of excessive alcohol consumption in New Hampshire. Of the more than $1.15 billion in annual costs in New Hampshire attributable to excessive alcohol consumption calculated in this report,1 about 70 percent is borne by private individuals and businesses, while state government bears 22 percent of the costs (or $251 million).

Public Policies Increased State Funding for Treatment 

The net benefit to the state and local government from increasing alcohol treatment rates in NH is large enough that if less than half of treatments are successful, net benefits still exceed the costs of increasing treatment rates.

Medicaid Expansion 

 

An estimated 58,247 non-disabled individuals, aged 18-64, without children, who have earnings less than 133 percent of federal poverty guidelines, could become eligible for Medicaid in NH if the state elects to expand Medicaid under the provisions of the Affordable Care Act (ACA). The newly eligible Medicaid population is expected to have higher rates of alcohol disorders and higher levels of health care costs than the existing Medicaid population in NH. NH and its economy will incur direct and indirect public and private costs of the newly eligible individuals in need of treatment regardless of whether they are on Medicaid or not. Under the new ACA Medicaid provisions, however, treatment costs for these individuals can be borne primarily by the federal government if NH has the capacity to serve them.

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Cost Mitigation  

I.

New Hampshire could recoup the unrecovered cost to government of alcohol by adopting an alcohol cost mitigation fee of $.03 per drink that would translate into an effective tax rate on alcoholic beverages that ranges for 1.3 to 3.5 percent. A per drink alcohol cost mitigation fee would reduce alcohol sales and related revenues in New Hampshire by an amount that is not estimated in this report. Introduction

A majority of adults in New Hampshire consume alcohol in a variety of contexts and for a variety of purposes. Alcohol consumption has been a part of America’s culture throughout its history for social, religious, and other purposes. Many people who consume alcohol perceive that there are benefits to their actions, and some studies have documented an association between moderate alcohol consumption and reduced risk for coronary heart disease.2 In addition, sales of alcoholic beverages provide jobs in the alcohol manufacturing, wholesaling, retail and service industries. On the negative side, illness, disability, and premature death can be directly attributed to excessive consumption of alcohol. Excessive use of alcohol also contributes to other costs to society, including injuries, criminal activity, and motor vehicle crashes, and the loss of productive capacity among those who consume excessive amounts of alcohol. Throughout this report the terms “costs” and “losses” are used interchangeably to represent the monetized impacts of excessive alcohol consumption. Costs occur in the form of direct expenditures, as is the case when alcohol consumption has health effects that increase health care or human services expenditures, or indirectly in the form of reductions in economic productivity and wage and salary earnings, as when labor force participation and earnings of individuals (and thus government revenues) is reduced due to individuals excessive use of alcohol. Each year, the State of New Hampshire, its businesses and its citizens, incur costs resulting from excessive alcohol use including the costs of providing medical care for people with alcohol-related illness, treatment and prevention costs, costs to the law enforcement system, costs resulting from alcohol-related motor vehicle crashes and other injuries, and the costs associated with disability, diminished productivity, and premature death from alcohol-related causes. An estimated 96,000 New Hampshire residents are in need of treatment for alcohol use, while fewer than 4,000 received treatment specifically for excessive alcohol consumption in 2010, giving NH one of the lowest treatment rates of any state in the nation.3 This study documents some of the public and private sector costs attributable to excessive alcohol consumption in New Hampshire and the implications if it remains largely untreated in the state. Excessive alcohol consumption commonly includes binge drinking, heavy drinking, underage drinking, and drinking by pregnant women. This report follows many of the procedures used in a seminal national study of the costs of excessive drinking,4 including defining the measures of excessive alcohol use on which to base economic cost estimates. The authors of that study note: “Because most excessive drinkers are not alcohol dependent and

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the diagnoses of alcohol dependence/alcohol abuse generally involves a history of excessive drinking over an extended period of time, these diagnoses were considered an outcome of excessive drinking and not the primary basis for assessing economic costs. However, a history of alcohol dependence or abuse was used as a specific indicator of excessive drinking in some analyses (e.g., productivity losses based on lost earnings).� This study adopts or modifies many of the methods used in national studies to calculate the economic costs of excessive alcohol consumption. We also develop new methodologies to estimate economic costs where state-level data is limited or missing, where no cost estimation methodologies have yet been developed by national studies, or where we believe better methodologies could be employed. Our report examines several categories of alcohol-attributable costs: the cost of treating alcohol use disorders, medical costs, justice and public safety costs, productivity costs, and costs associated with alcohol-attributable motor vehicle crashes. The costs associated with excessive use of alcohol are often borne by someone other than the drinker. Productivity losses associated with alcohol abuse by working individuals are borne by drinkers but also by employers and governments, medical treatments related to alcohol abuse are paid in part by insurers or federal or state programs, crime costs are borne by citizens via increased police, justice, and corrections costs, and some intervention/prevention programs are funded by state and federal agencies or private foundations. Yet unlike other legal substances consumed by a large number of citizens, such as tobacco, public and policymaker concerns over the net public and private costs associated with alcohol appear more limited. This, despite the fact that alcohol consumption is far more prevalent than is smoking in NH, and the fact that alcohol has impacts that reach far beyond individual and public health costs. Alcohol is the most socially acceptable, potentially addictive substance in the United States. At a time when the nation and individual states are more aggressively battling long-standing fiscal imbalances by tackling factors that are driving public expenditures (such things as demographic trends, healthcare costs and reforms, rising corrections costs etc.), it seems surprising that the costs and consequences of excessive alcohol use are not higher on New Hampshire’s and the nation’s policy agenda. The purpose of the study is to develop estimates of the economic costs of excessive alcohol consumption in New Hampshire, not to ignite additional ideological debates. A more thorough, non-ideological, understanding of the impacts that excessive drinking has on the private and public sectors of the New Hampshire economy is necessary to evaluate the adequacy of current policies (public and private) to limit or reduce those costs. II. Productivity Costs According to traditional economic growth theory, growth occurs by employing more basic inputs - more labor, capital, or land.5 If more basic inputs are used, more output will be produced. Output will also increase if basic inputs (labor, capital, land) can be used more efficiently to produce more output per unit of labor, capital, or land. Increasing output (the value of goods and services produced) is necessary to increase prosperity because output determines the amount of income earned in an economy. When an economy is able to produce more output with smaller or no increases in inputs, productivity is increasing. All economies have limits on the amount of labor, land and capital available to increase output and grow an economy, so 8


maximizing the productivity of limited resources is a key to increasing economic growth and prosperity. Because the subject of this report is the high cost of excessive alcohol consumption, the focus of this section is the impact of excessive alcohol consumption on the productivity of the basic input of labor. One way to grow an economy faced with limited increases in inputs, such as the size of the labor force, is to utilize the existing resources more fully or more efficiently. Getting more individuals into the labor force (increasing the labor force participation rate) is one way to utilize limited labor resources more fully. Another way is to have workers in the labor force work more and/or more efficiently. Increasing productivity, or getting more done for each hour of work, has the effect of increasing the labor supply. Labor can become more productive if: 

there is more physical capital employed per worker (physical capital includes equipment and structures as well as public infrastructure);

the health or skills of human beings increases—this is known as human capital;

or, the stock of accumulated knowledge in the workforce (or “know how”) grows, thereby increasing knowledge capital. (The primary distinction between human capital and knowledge capital is that human capital cannot be separated from the human who possesses it.)

Excessive use of alcohol has important implications for the productivity of the New Hampshire workforce, economy, and its limits for growth. Excessive alcohol consumption reduces the productivity of the labor force by reducing both labor force participation and the productivity of individuals in the labor force. Excessive alcohol consumption can interfere with an individual’s ability to gain employment and with their productivity at work. Excessive alcohol use can interfere with an individual’s ability to work (due to physical and/or mental illness, impairment, or death); ability to find a job (lack of skills, experience, or reliability); and potentially with an individual’s willingness to enter the labor force. Thus, labor force participation as well as the wages or salaries among workers with excessive alcohol use may be lower than it is for similar individuals and workers without such problems. Excessive alcohol use is also associated with increased workplace accidents and deaths and other problems in the workplace but we limit our analysis to the impact of excessive drinking on earnings. This report does not argue that any alcohol use reduces human capital and the productivity of the New Hampshire economy. There is little evidence that adult alcohol use in moderation detracts directly from either labor market participation or from the productivity of individuals in the labor force, The distinction between moderate consumption and heavy or excessive consumption appears to be important in the literature on the labor market effects of alcohol use. French and Zarkin (1995) and Berger and Leigh (1988) find positive effects of moderate alcohol consumption on wages. In contrast, Mullahy and Sindelar (1993, 1991, 1989) and Ettner, Frank and Kessler (1997) all find negative effects of alcoholism on wages and employment. Similarly, Mullahy and Sindelar (1996) and Terza (2002) find negative effects of problem drinking on employment.

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Key Findings:  

Productivity losses account for the largest share of costs associated with excessive alcohol consumption in NH, an estimated $756.5 million in 2011. The $729.5 million in of earnings costs attributable to alcohol dependency (via labor force participation and productivity impairment – another $27 million is attributable to absenteeism) have indirect and induced (multiplier) impacts that collectively lower employment in the State of New Hampshire by an estimated 4,623 jobs.

Method: Our estimates of productivity losses associated with excessive alcohol consumption are divided into four categories:  Losses related to reduced labor force participation;  Losses associated with reduced earnings of those in the labor force who consume alcohol excessively;  Losses associated with alcohol-related absenteeism; and  The cost of the lost productive capacity of individuals who die prematurely due to excess alcohol consumption. In calculating the productivity losses from excessive alcohol consumption in New Hampshire, we relied heavily on a 2010 analysis of national data conducted by the Lewin Group.6 and current New Hampshire data from the Current Population Survey conducted by the United States Bureau of Labor Statistics and the United States Census Bureau. The Lewin Group (2010) performed extensive analyses on the 2001-2002 National Epidemiologic Survey on Alcohol and Related Conditions (NESARC) to assess labor market participation and earnings impacts related to alcohol dependency. We applied the parameter estimates from their study to the characteristics of NH’s population and our estimates of the number of working-age individuals who excessively use alcohol to assess the productivity impacts on labor market participation and earnings by age group in NH. Several studies have failed to find statistically significant impacts on labor force participation and earnings for women who consume alcohol excessively. As noted in Lewin (2010), this result “defies biologic plausibility.” The finding does not mean that there are no labor market effects for women who consume excessive amounts of alcohol, only that the magnitude of the effect of alcohol use is not large enough to be 95 percent certain that it did not occur by chance. The implausible finding of no negative impacts on women is likely the result of several factors. According to the Lewin Group it is: “more likely due to imprecise estimation resulting from several common problems and data gaps that plague attempts to estimate women’s wages (e.g., breaks in the earnings histories of women because of childbirth). Further, the surveys that were used to assess the impact of alcohol dependence on earnings included a relatively small number of women, which made it difficult to accurately assess the impact of alcohol dependence on earnings history.”

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Nevertheless because of the absence of significant impacts for females, we calculate the impact of excessive alcohol use on labor force participation and earnings only for males age 1864. The result is an underestimate of the true productivity costs of excessive alcohol consumption. For each working age group of males in NH we calculated the expected labor force participation and earnings in the absence of excessive alcohol consumption. Total annual productivity impacts are the sum of labor force participation impacts, the earnings impacts of excessive alcohol consumption by those employed in the labor force, and the impacts of absenteeism caused by one particular type of excessive consumption: binge drinking. Premature deaths related to excessive alcohol consumption also reduce productivity as society loses individuals who would otherwise be working and earning if their lives had not been shortened by alcohol-related causes. The calculation of those costs involves a discounted, present value analysis of lifetime earnings for those who die prematurely rather than a single year cost estimate. For that reason the mortality costs of excessive alcohol consumption are reported but not tallied in our annual cost estimates. Instead, they are reported as separate cost. A.

Reduced Labor Force Participation

Key Findings:  

Alcohol dependency resulted in an estimated 9,292 fewer male workers in NH’s labor force in 2011, an overall reduction in the state’s labor force of 1.2 percent. The alcohol-attributable reduction in the state’s labor force results in an associated loss of earnings in the NH economy of $403.9 million.

Results: For this analysis, labor force participation impacts were estimated using a definition of excessive alcohol use as evidenced by a lifetime history of alcohol dependency or abuse. Alcohol dependency and abuse among males in NH age 18-64 results in an estimated loss in labor force participation of 9,292 males from the NH workforce, representing an overall reduction in labor availability of about 1.2 percent in the Granite State. Figure 1 shows a breakdown of the labor force participation losses for males in New Hampshire among alcohol dependent individuals by age.

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Figure 1

Alcohol Dependency and Abuse Reduces NH’s Labor Force by an Estimated 9,292 Workers or 2.2% of the Male Labor Force and 1.2% of the Total Labor Force 0 18-19

20-24

25-34

35-44

45-54

55-64

(500)

(774)

(1,000) (1,217)

(1,500)

(1,478)

(1,426)

(2,000) (2,093) (2,303)

(2,500)

Table 2 presents our estimates of the loss of earnings in the New Hampshire economy that results from the lower labor force participation rates associated with alcohol dependency. The table shows that the impact of 9,292 fewer workers in the NH labor force as a result of alcohol dependency is an associated productivity loss (as measured by earning loss) of $403.9 million.

Table 2 Labor Force Participation and Associated Earnings Effects of Excessive Alcohol Use in NH

Age

Male Pop.

LF Partic. Rate

Current Labor Force

Mean Earnings

Total Wages ($ Millions)

Number Alcohol Dependent

LF W/O Alcohol Depend

LF Change

Total Wages W/O Depend.

Dependency Cost ($ Millions)

18-19

19,809

37.3%

7,389

$1,643

$12.14

1,388

8,163

+774

$13.41

($1.27)

20-24

43,731

73.3%

32,055

$14,938

$478.83

7,732

33,272

+1,217

$497.02

($18.19)

25-34

74,019

89.3%

66,099

$37,447

$2,475.21

14,304

67,577

+1,478

$2,530.56

($55.35)

35-44

85,398

94.3%

80,530

$56,016

$4,510.99

16,009

81,956

+1,426

$4,590.87

($79.89)

45-54

110,326

91.5%

100,948

$64,975

$6,559.12

17,949

103,041

+2,093

$6,695.10

($135.99)

55-64

92,116

78.1%

71,943

$49,170

$3,537.42

9,360

74,245

+2,303

$3,650.65

($113.23)

$17,573.70

66,741

368,256

+9,292

$17,977.62

($403.92)

Totals

425,399

358,964

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B.

Reduced Earnings of Workers

Key Findings: 

The impaired productivity of alcohol dependent workers in the NH labor force costs the NH economy an estimated $325.6 million reduced earnings, with a mean earnings reduction of $4,878 per alcohol-dependent worker.

Results: Estimates of the prevalence (percentage of the population in each age group) of male alcohol dependency by age group from the National Epidemiologic Survey on Alcohol and Related Conditions (NESARC) were applied to the population of males in New Hampshire to arrive at an estimate of alcohol dependency in NH’s working-age population. This procedure results in over 66,000 working age males in the New Hampshire labor force estimated to have an alcohol dependency. Impaired productivity associated with alcohol dependency is estimated to cost these individuals over $325.6 million in lowered earnings annually, with a mean reduction in earnings of $4,878. Lower earnings imply lower output by industry, meaning NH businesses as well as individuals bear this cost. Figure 2 shows the difference in actual mean earnings of male workers in NH by age, and the estimated earnings of alcohol dependent workers, derived from the parameter estimates of earnings impacts developed by The Lewin Group (2010). The data from Figure 2 suggests that the longer workers continue an alcohol dependency through their working lives, the greater is the degree that alcohol affects earnings. Figure 2

Mean Earnings of NH’s 66,000 Alcohol-Dependent Male Workers are Significantly Lower Than Workers Without Alcohol Dependency Mean Earnings by Age $49,170 $44,267

55-64

$64,975

45-54

$58,659 $56,016

35-44

$50,083 $37,447 $33,395

25-34

$14,938 $13,242

20-24

18-19

$0

Mean of All Workers Mean of Alcohol-Dependent Workers

$1,643 $1,448

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Source: Author’s calculation using data from the Treatment Episode Data Set (TEDS), SAMHSA

Table 3 provides details of the calculation of costs of the reduced earnings of alcohol dependent male workers in the NH workforce. Finally, the impact that reduced labor force participation and productivity have on earnings means lower aggregate personal income in the

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state than would have occurred in the absence of alcohol dependency. Table 3 Earnings Impacts From Alcohol Dependency (Males in the Labor Force) Male Labor Force

Age

Mean Earnings

Number Alcohol Dependent

Mean Earnings of Alcohol Dependent

Total Earnings of Alcohol Dependent

Total Earnings if Not Alcohol Dependent

Alcohol Dependency Cost

18-19

7,389

$1,643

1,388

$1,448

$2,009,824

$2,280,484

($270,660)

20-24

32,055

$14,938

7,732

$13,242

$102,387,144

$115,500,616

($13,113,472)

25-34

66,099

$37,447

14,304

$33,395

$477,682,080

$535,641,888

($57,959,808)

35-44

80,530

$56,016

16,009

$50,083

$801,778,747

$896,760,144

($94,981,397)

45-54

100,948

$64,975

17,949

$58,659

$1,052,870,391

$1,166,236,275

($113,365,884)

55-64

71,943

$49,170

9,360

$44,267

$414,339,120

$460,231,200

($45,892,080)

$2,851,067,306

$3,176,650,607

($325,583,301)

Totals

358,964

66,741

Combined, the lower levels of earnings of alcohol dependent individuals that result from lower labor force participation and the reduced earning of alcohol-dependent workers will have indirect and induced “multiplier impacts” on the NH economy. We estimate that these multiplier impacts result in 4,623 fewer jobs in the state and $227.8 million in labor income. C. Direct Costs to Industry: Absenteeism Key Findings:   

More than 54,000 workers who use alcohol excessively by binge drinking are employed by NH businesses. Over $27 million in alcohol attributed absenteeism costs are incurred by NH businesses because of alcohol problems. The output (value of goods and services) of industries was reduced by more than $71 million because of alcohol-attributable absenteeism in NH in 2011.

Method: To develop our estimate of the prevalence of binge drinking by industry in NH, we began with an analysis by the Center for Integrated Behavioral Health Policy7 that estimates the prevalence of excessive alcohol use, by industry, using data from the National Survey on Drug Use and Health. These national data were adjusted to alcohol consumption patterns in New Hampshire to estimate the number of employees in NH who binge drink. The difference between the mean numbers of reported days missed from work between employees who binge drink and those who do not binge drink was used to estimate the impact that binge drinking has on the absenteeism of employees by industry. Applying adjusted rates of binge drinking by industry

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from national surveys, to the number of employees by industry in NH, provides an estimate of the number of workers in each industry in NH who binge drink. The number of binge drinking employees was multiplied by the mean number of additional days of missed work attributable to binge drinking in each industry to arrive at a total number of alcohol-attributable days absent by industry. Average hourly earnings by industry in NH (from the Current Population Survey) was converted to a daily wage for each industry and multiplied by alcohol-attributable days absent for each industry to arrive at a total wage cost for alcohol-attributable absenteeism by industry. Absenteeism reduces the earnings of employees but the true cost to business is the lost productivity and output of goods and services that occurs when workers are absent. Employee compensation as a percentage of industry output is a measure of how much labor compensation goes into each dollar of industry output. Absenteeism may or may not result in lost earnings for all workers but a missing worker can produce no goods or services. We calculated compensation as a percentage of industry output in NH for each of 13 major industry groupings. Dividing the loss of compensation in each industry by the ratio of employee compensation in the industry to industry output yields an implied loss of industry output (production of goods or services) resulting from alcohol-attributable absenteeism in NH. Results: There are an estimated 54,550 employees in NH businesses who are binge drinkers.8 Figure 3 shows the number and percentage of workers employed in each industry at a NH located business, estimated to be a binge drinker. Differences in rates are attributable to several factors that are associated with excessive alcohol consumption. Industries with higher percentages of male and younger workers (25 and under) can be expected to have higher rates of binge drinking than industries that employ a higher percentage of female and older workers. Other demographic and socioeconomic factors also influence the rates of binge drinking across industries. As Figure 3 shows, arts, entertainment and recreational workers, wholesale and trade retail, and construction Figure 3

Industries that Employ a Higher Percentage of Younger and Male Workers Have Higher Rates of Binge Drinking in Their Workforce 10,000

16.0% 8,819

9,000

Number

8,000

% of Emp. In NH

8,882

14.0% 14.0%

13.4%

12.0%

12.3%

7,000

6,534 6,089

6,000 5,000

5,542

10.0%

9.3%

9.1%

3,243

3,078

1,005

1,197

8.0% 6.0%

3,231 6.0% 5.4%

5.3%

2,000

9.6%

8.6%

8.2%

4,000 3,000

10.0%

5,726

4.0%

1,204

1,000

2.0%

0

0.0% Arts/Ent./Rec.

Retail

Prof. Srvcs.

Educ & Health.

Manufacturing

Government

Wholesale

Construction

F.I.R.E

Trans./Ware/Util.

Other Services

Information

15


industries have among the highest rates of alcohol problems, while educational, health and social services have the lowest rates. The employee compensation value of alcohol-attributable absenteeism in NH is estimated to be $27.1 million in 2011. Retail (because of the high number of absences) and business and professional service (because of the high hourly wage in the industry) had the highest losses in terms of employee compensation (Table 4). Table 4 also includes estimates of the lost output of each industry attributable to alcohol-related absenteeism.9 Combined, the implied loss of industry output in NH from alcohol-attributable absenteeism was over $71 million 2011. Again, the retail industry has the greatest loss of industry output, with manufacturing second because of the relatively high rates of productivity of its workers (low employee compensation as a percentage of output indicates high output or productivity per worker). Table 4 Cost of Absenteeism, by Industry, Resulting from Binge Drinking in NH

Industry

Emp.

Est. % Who are Binge Drinkers

Est. # of Binge Drinkers

Total Excess Days Absent

Mean Wage/Hr

Cost/Pers./ Per Day

Aggregate Industry Cost

Earnings/ Output Ratio

Impact on Industry (Output)

Arts/Ent./Rec.

63,600

14.0%

8,882

15,984

$13.23

$99.23

$1,586,012

29.9%

$5,300,251

Educ & Health.

113,700

5.4%

6,089

21,192

$23.64

$177.30

$3,757,342

51.0%

$7,367,336

F.I.R.E

34,700

9.3%

3,243

3,504

$27.88

$209.10

$732,686

31.0%

$2,363,505

Information

11,100

9.1%

1,005

1,932

$31.58

$236.85

$457,594

26.2%

$1,747,553

Manufacturing

66,500

8.6%

5,726

15,120

$23.70

$177.75

$2,687,580

26.6%

$10,095,193

Construction

22,900

13.4%

3,078

8,124

$25.41

$190.58

$1,548,231

26.8%

$5,770,067

Other Services

22,800

5.3%

1,197

6,468

$20.50

$153.75

$994,455

35.0%

$2,838,124

Prof. Services

65,500

10.0%

6,534

22,740

$27.76

$208.20

$4,734,468

48.3%

$9,811,723

Government

92,600

6.0%

5,542

13,968

$23.67

$177.53

$2,479,669

43.6%

$5,690,224

Retail

92,300

9.6%

8,819

40,283

$15.86

$118.95

$4,791,663

39.5%

$12,134,969

Trans./Ware/Util.

14,700

8.2%

1,204

3,612

$25.64

$192.30

$694,588

40.7%

$1,707,001

Wholesale

26,300

12.3%

3,231

13,188

$26.37

$197.78

$2,608,257

38.5%

$6,777,107

54,550

166,115

Totals

626,700

D.

$27,072,545

$71,603,054

Mortality Costs

Premature death due to alcohol use and abuse imposes a major economic loss on society. Premature death through illness or injury can occur as a result of a number of causes, including: auto accidents involving alcohol, through increasing the risk of cancer or cerebrovascular disease, or through violence involving alcohol. When an individual dies prematurely, there is an economic cost to society in the form of loss of that individual’s productive capacity. Although calculated as

16


a productivity cost, our mortality estimates are not included in our estimates of the total annual cost to New Hampshire of excessive alcohol consumption. They are presented here to illustrate the discounted lifetime earnings costs associated with one year of alcohol-related premature deaths. Key Findings:  

An average of 290 alcohol-attributable deaths occurred annually in New Hampshire between 2001 and 2005. Diseases of the liver, motor vehicle crashes, and suicides account for more than half of the premature alcohol-attributable deaths in NH. Combined, however, accidental deaths from poisoning, falls, drowning and fire comprise the largest single cause of premature death attributable to alcohol. Chronic and acute deaths attributable to alcohol result in the loss of discounted lifetime earnings of $218.6 million annually.

Methods: The cost of alcohol-related premature deaths (mortality costs) in NH were estimated using the Alcohol-Related Disease Impact (ARDI) software of the Centers for Disease Control and Prevention, except for motor vehicle crashes where alcohol-related deaths are directly reported by the Federal Accident Reporting System (FARS). The largest cause of annual alcohol attributable deaths in New Hampshire were motor vehicle crashes, alcoholic cirrhosis and other liver diseases, and suicide. Table 5 Deaths Due to Excessive Alcohol Use in New Hampshire

Chronic Causes Acute Causes Total for All Causes

Overall 151 139

Males 103 101

Females 48 38

295

204

86

We used estimates of the net present value of the stream of future lifetime earnings by age and gender at a 3 percent discount rate from a study conducted at the University of California, San Francisco10 and adjusted them to 2011 values using the consumer price index. Because individual earnings change over a lifecycle for a number of reasons, estimating changes in earnings for individuals of different ages and by gender was beyond the scope of this report. The estimates prepared by UC San Francisco researchers have been used by many researchers in calculating mortality costs. Results: Table 6 shows that the estimated cost of NH’s annual average of 290 alcohol-attributable deaths is $218.6 million in 2011 dollars. On average, 204 deaths attributable to alcohol are male

17


and 86 are female. The average net present value of lifetime earnings lost as a result of premature death attributable to alcohol range from a low of $26,709 for a female age 65 and above who dies prematurely because of alcohol, to a high of $1,581,538 for a male under age 20. Table 6 Cost of Alcohol-Attributable Premature Deaths in NH # of Deaths Male Female

0-19 6 3

20-34 25 10

35-49 57 25

50-64 50 21

65+ 65 28 Total

Totals 204 86 290

Present Value of Lost Earnings 0-19 $1,581,538 Per Male Death $9,489,227 Total Male

20-34 $1,934,897 $48,372,422

35-49 $1,418,365 $80,846,822

50-64 $580,598 $29,029,882

65+ $55,407 $3,601,463

$ 171,339,816

$1,166,588 $3,499,765

$1,339,551 $13,395,509

$903,747 $22,593,687

$332,877 $6,990,410

$26,709 $747,850

$ 47,227,222

Per Female Total Female

Grand Total

III.

Total

$ 218,567,038

Health Care

Treatment services available in New Hampshire to help persons who use alcohol excessively include inpatient residential programs, outpatient programs, detoxification, and special youth treatment programs. Resources, both public and private, used to support these services constitute one of the types of economic costs associated with excessive use of alcohol. Alcohol abuse can increase the risk of illness or injury and thereby increase the use and cost of health care services. The cost of providing medical care for ailments that result from alcohol use in New Hampshire is significant. We estimate that in 2011, the costs borne by individuals, governments, hospitals, and other health payers statewide was $206.7 million, with $154.4 million in payments made for alcohol-attributable medical services. These include hospital costs, both inpatient and outpatient/emergency room care, physicians charges, prescription drug costs, and the costs of nursing home care. A. Alcohol Treatment Costs Key Findings:   

Treatment services for alcohol abuse provided at substance abuse and treatment facilities in NH cost an estimated $9.7 million in NH in 2011, with $2.7 million of that uncompensated or provided free of charge. Another $18.2 million in hospital charges (an estimated $11.5 million in payments) were incurred at hospitals for admission directly caused by alcohol abuse. In only one state (Texas) is an individual in need of treatment for alcohol dependency or abuse less likely to receive treatment than in New Hampshire. Only about 4 percent of individuals needing treatment services for alcohol receive them in New Hampshire. 18


  

Based on the percentage of residents in NH needing treatment but not receiving, we estimate the potential cost of alcohol abuse treatment in NH to be over $200 million. A high percentage of payments for alcohol treatment is paid for “out-of-pocket” by individuals in New Hampshire, and this may contribute to the low percentage of individuals in need of treatment receiving services. Recent reductions in state funding for substance abuse treatment programs may further reduce the percentage of individuals in need of treatment who receive them.

Methods: Complete information regarding treatment utilization and costs is difficult to obtain because of the multiplicity of funding sources and the large number of programs. Though reasonably accurate information is available for public clients, little information is available for private clients. Information on treatment admissions and costs was obtained from several different sources. According to National Survey of Substance Abuse Treatment Services (N-SSATS) there were 50 facilities offering substance abuse treatment services in New Hampshire, 37 of which provide treatment for alcohol abuse. The majority (9) of the 13 facilities not offering alcohol treatment are private, for-profit facilities. Overall, 30 of the facilities offering alcohol treatment services are private, not-for-profit facilities, 8 of 17 for-profit facilities offer alcohol treatment while all three government facilities offer alcohol treatment. Admissions to these facilities over the entire year are reported to the Substance Abuse and Mental Health Services Administration (SAMHSA) of the U.S. Department of Health and Human Services as part of its Treatment Episode Data Set (TEDS) project. In 2010, there were 3,963 admissions for abuse of alcohol at NH treatment facilities, exclusively as well as in combination with one or more drugs. Summary data from the 2010 Treatment Episode Data Set (TEDS) is the source of admissions data. TEDS includes admissions to treatment programs that receive any public funding either directly or through state agencies. Programs report on all admissions not just those admissions representing public clients. Thus, while not providing a complete count of all admissions, TEDS provides the most complete data on admissions to treatment. The degree of undercounting inherent in TEDS data is unknown. Given the limitations of the data used for the treatment cost estimates, readers should use caution in interpreting the cost estimates. The cost figures presented here underestimate the true costs by some unknown amount. Results: Figure 4 shows that a much higher percentage of alcohol abuse treatments in NH were paid for primarily “out-of-pocket” than were in the U.S. as a whole (48 percent to 22 percent). Government funding other than Medicaid and Medicare (primarily state and local) funded a much lower percentage of treatments in NH than in the U.S.

19


Figure 4

In Two-Thirds of Treatments for Alcohol Abuse in NH, Primary Payment Was ‘Out-of-Pocket” or Provided Free-of-Charge % of Alcohol Treatment Services by Primary Payer (2010) 21.9%

Self-Pay

48.3% 6.7%

Free/Charity/Research

28.0% 6.2%

Private Insurance

13.4% 14.3%

Medicaid

6.4% 37.8%

Other Government

Medicare/Workers comp

1.5% 0.8%

Other

1.3%

NH

U.S.

12.3%

1.2%

0%

10%

20%

30%

40%

50%

60%

Source: Author’s calculation using data from the Treatment Episode Data Set (TEDS), SAMHSA

The Substance Abuse and Mental Health Services Administration (SAMHSA) of the U.S. Department of Health and Human Services reported on average treatment costs nationally (2004), including personnel, materials, administrative, equipment, and depreciation costs. Applying these cost estimates to treatment frequencies in New Hampshire in 2010 and adjusting costs to 2011 prices yields total spending on treatment due to alcohol abuse of an estimated $9.7 million. Subtracting treatments provided free-of-charge; the amount spent on treatment is estimated to be about $7 million (Table 7). Table 7 Alcohol Abuse and Dependency Treatment Expenditures at Treatment Facilities in NH Type of Service Detox 24hr freestanding Rehab. (short-term) Rehab. long-term Intense outpatient Non-intense outpatient Total

Self-Pay $276,123 $766,585 $209,533 $592,042 $2,449,270 $4,293,553

Private Ins. $10,102 $61,327 $25,553 $580,602 $562,722 $1,240,305

Medicare $6,735 $2,555 $5,111 $48,622 $57,226 $120,248

Medicaid $6,735 $0 $0 $54,342 $440,640 $501,716

Other Gov. $20,204 $25,553 $10,221 $2,860 $74,394 $133,232

Research $1,586,023 $94,545 $511,056 $500,519 $625,670 $3,317,814

Other $10,102 $22,998 $10,221 $14,301 $53,411 $111,032

Hospital Charges for Acute Alcohol Related Diagnoses(For illustration Only - These Charges are included Under the "Medical Care" cost section of this report) Total Treatment Costs Adjusted for Free Care Hospital Charges Adjusted for Payments vs. Charges Total Adjusted Expenditures

Total $1,916,023 $973,562 $771,695 $1,793,287 $4,263,332 $9,717,900

$18,182,110 $27,900,010 $6,993,553 $11,454,729 $18,448,282

20


Hospital charges for alcohol abuse-related diagnoses are also a form of treatment, and charges for those services at NH hospitals are presented in Table 7 for illustrative purposes only. Those costs are included in the medical cost section of this report. For our purposes we consider the direct costs of treatment for alcohol abuse to be the $9.7 million in services ($7 million in charges) provided by treatment facilities. In addition, the State of New Hampshire’s Alcohol Prevention and Treatment Fund provided funding grants to treatment providers totaling $2.5 million in 2010. Reductions in state appropriations to the Alcohol Fund reduced the amount of treatment grants to $1.5 in FY 2011. Combining TEDS data with estimates of the number of individuals in New Hampshire in need of alcohol treatment services from a 2011 study by the Center for Behavioral Health Statistics and Quality (CBHSQ), at SAMHSA suggest that only about 4 percent of those needing treatment in NH receive it.11 This implies that the cost of meeting all needs for treatment in NH would likely be over $200 million, or about 2 percent of total medical expenditures in the state. Assuming some treatment occurs in hospital settings rather than specialized treatment facilities, the vast majority of NH residents in need of alcohol treatment still do not obtain services. According to the CBHSQ study, only one state (Texas) has a lower percentage of persons in need of treatment for substance abuse who receive treatment than does NH (Figure 6).

Figure 5

Pct. of Individuals in Need of Substance Abuse Treatment Who Receive Treatment Services 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0%

0.0%

Texas NH Georgia Arizona Nevada Colorado Florida North Dakota Mississippi Nebraska South Carolina New Mexico Illinois Louisiana California Massachusett Minnesota Vermont District of Co Ohio Wyoming Arkansas Missouri Michigan Kentucky Oklahoma Connecticut Maine Washington West Virginia Iowa Wisconsin Tennessee Idaho Pennsylvania Virginia Montana Oregon South Dakota Indiana New York Alaska North Carolina New Jersey Maryland Kansas Utah Rhode Island Alabama Delaware

2.0%

Source: Center for Behavioral Statistics and Quality, SAMHSA, U.S. Dept. of Health and Human Services

B. Medical Expenditures Key Findings: 

Health care expenditures attributable to excessive alcohol uses were an estimated $206.7 in total charges and $154.4 million in payments for medical services in New Hampshire in 2011.

21


  

Insurance administration costs associated with these costs add another $17.6 million of costs. Alcohol-attributable medical expenditures accounted for about 1.5 percent of total medical expenditures in New Hampshire in 2009. Hospital charges attributable to alcohol amounted to $122 million in 2011, and payments for those charges equaled and estimated $77 million, accounting for the largest share of medical costs attributable to alcohol.

Method Data on hospital discharges by primary diagnosis at admission in NH, collected for the national Healthcare Cost and Utilization Project (HCUP), was combined with the fraction of each illness, accident or condition determined to be attributable to alcohol use from the AlcoholRelated Disease Impact software of the Centers for Disease Control and Prevention12 to determine the number of hospital stays in NH (by ICD-9 diagnosis) attributable to alcohol use. The number of alcohol-attributable hospital stays by primary diagnosis was then multiplied by the average charge for each diagnosis to estimate the total amount of hospital charges for each diagnosis that are attributable to NH in 2009. The amounts were summed to arrive at a total estimate of alcoholattributable hospital charges in NH. This total was inflated to 2011 values using the consumer price index. We also estimated the additional costs incurred by people hospitalized with a secondary condition related to alcohol abuse. This cost was characterized by Harwood as the “additional days from co-occurring alcohol disorders” (Harwood, 1998). Harwood and his colleagues, following Rice and her colleagues (Rice et al., 1990), estimated this cost by adding up the excess days of hospitalization and the associated cost. Some of the effects of these costs from the cooccurrence of substance abuse may result from alcohol in combination with another substance. The NH hospital cost estimates from our analysis of inpatient discharge data were decreased by approximately one-third (to 14 percent) of the percentage of co-occurrence found in the Harwood study to arrive at our estimate of co-occurring costs related to alcohol abuse where the primary diagnoses was not alcohol-attributable, but where the co-occurrence of alcohol abuse increased the length or costs of hospital stays. We made other adjustments to the data as well. In order to estimate the cost of alcohol abuse, one would ideally like to know the actual payments made for hospital services. However, the patient discharge data only report hospital “charges” and not actual payments. Most payers negotiate a contract which includes payments that are less than, and in some cases substantially less than, reported charges. For our estimates, we converted charges to expenditures, using a mean expenditure-to-charge ratio of 63 percent. In addition to hospital inpatient costs, other cost estimates representing outpatient medical care, prescription drugs, nursing home care and other professional care are presented. Estimating these types of costs is difficult because there is no readily available data source which contains NH specific, utilization and cost data that is equivalent to HCUP. For our estimates of outpatient, nursing home, and prescription drug costs we rely on national studies which estimate the percentage of these costs attributable to alcohol abuse. For alcohol-attributable outpatient charges, applying methods from three different studies resulted in estimates of outpatient charges

22


as a percentage of hospital inpatient charges of from 24.5 percent to 39 percent. For example, Harwood found that for every dollar spent in a non-federal short-stay hospital, 39.3 cents was spent on outpatient care. For our cost estimates we used a conservative middle-ground figure of 30 percent. A 2010 study for the Centers for Disease Control and Prevention found that 0.8 percent of nursing home costs were alcohol-attributable13 while a 2007 Kaiser Family Foundation study estimates that 1 percent of nursing home costs are alcohol-attributable.14 Here, we adopt the more conservative estimate of 0.8 percent for our estimates. Based on national studies, two methods of estimating alcohol-attributable prescription drug costs were examined. One study (The Lewin Group 2010) estimates that alcohol-attributable prescription drug costs represent 0.39 percent of all personal health care expenditures. This method would yield estimates of more than $40 million for NH in 2009. A study conducted for the Kaiser Family Foundation (2007) estimates that 2.2 percent of prescription drug costs are attributable to alcohol abuse. Here we continue our practice of adopting the more conservative estimate (the Kaiser Family Foundation study), which yields an estimate of $21.3 million for 2009, and inflation adjusted to 2011 of $22.3 million. Finally, the cost of health insurance administration for medical care attributable to alcohol was estimated as a percentage of health treatment costs attributable to alcohol. Administration costs vary substantially by payment source, ranging from a low of 0 percent for out-of-pocket payments to 14.6 percent for private insurance. Here, we use a weighted average of payers (8.5 percent) as calculated by The Lewin Group (2010). Results Our total estimate of the cost of medical care in NH that is directly attributable to alcohol use is $206.7 million in charges for medical care, with $154.4 million in actual payments for services being made. This total represents about 1.5 percent of NH’s total health care spending of $10.4 billion. In addition to direct medical expenditures, the insurance administration costs related to charges for alcohol-attributable medical costs are estimated to be $17.6 million in 2011. Figure 6 presents a breakdown of alcohol-attributable medical and insurance expenditures in NH. Figure 6

Alcohol Abuse Increases Health Care Charges in New Hampshire by $207 Million and Payments by $154 Million. Administering Insurance Claims Adds Another $17.6 Million Medical Payments in NH Attributable to Alcohol Abuse

$6,071,977 $17,568,799

Hospital Inpatient Co_Occuring $22,321,828

$77,472,062

Ambulatory/Outpatient Prescription Drug Nursing Home

$36,891,458 $11,614,023

Insurance Admin.

23


IV.

Crime, Justice, and Corrections

Criminal justice system costs estimated here include costs for police protection, the NH court system, and NH correctional institutions. Evidence accumulated over the past twenty years has shown a strong link between drug and alcohol abuse and crime. Surveys of incarcerated populations provide further evidence of the strong link between crime and substance abuse. In 2004, approximately one in four federal inmates (26 percent) and one in three state inmates (32 percent) reported that they were under the influence of alcohol or illicit drugs at the time of their current offense (U.S. Department of Justice, 2007). 

A.

Combined, police, judicial, and corrections costs attributable to alcohol in New Hampshire equaled an estimated $88.2 million in 2011

Crime

Key Findings:  

Alcohol-attributable offenses account for about 30 percent of all arrests and about 12.8 percent of all crimes committed in New Hampshire. Policing and public safety costs related to alcohol total $41.1 million in New Hampshire, of which $34.4 is borne by local government.

Methods To calculate the percentage of police protection costs related to alcohol, the total number of violent, property offenses, and motor vehicle offenses attributable to alcohol was divided by the total number of offenses (reported crimes, motor vehicle offenses, etc.) in the state. To calculate the percentage of crimes attributable to alcohol we applied the alcohol-attributable fractions (AAF’s) for violent and property crimes as reported in The Lewin Group (2010) to NH crime data reported as reported by the Uniform Crime Reporting (UCR) system of the Federal Bureau of Investigation. Reports filed by local governments in NH capture over 90 percent of the crimes reported in the state. To those estimates are added all directly-attributable alcohol offenses (offense such as liquor law violations, and DWI, which by definition are alcohol related, and divided the number of alcohol-attributable crimes by total crimes to arrive at a percentage. A relatively small percentage of violent and property crime arrests in NH (about 5 percent) are attributable to alcohol. For some offenses, such as homicides, the AAF is close to 50 percent, while the alcohol-attributable fraction (AAF) for burglaries is quite low (3.6 percent). A large number of offenses in NH are completely attributable to alcohol, such as public drunkenness and liquor law violations). Driving while-under-the-influence is at least 90 percent related to alcohol. Overall, violent and property crimes take more police resources per offense and are a much smaller percentage of crimes committed, but a much larger percentage of policing and public safety time is spent on more routine offenses (such as disorderly conduct, traffic offenses, etc.) that are much more affected by alcohol. Simply adding the percentage violent crime arrests that are alcohol-attributable to the more numerous arrests that are completely alcohol-attributable

24


would likely overstate the role of alcohol in policing costs. We adjusted crime and arrest data in the following manner to more accurately reflect the impact of alcohol on policing costs in NH. A high percentage of violent (52.8 percent) and property crimes (81.7 percent) nationally do not result in arrest. When arrest data for violent and property crimes are adjusted to reflect the likely number of crimes versus the number of arrests in NH, the percentage of crimes attributable to alcohol is reduced. For this analysis we, conservatively, estimate the percentage of offenses (crimes) attributable to alcohol at 12.8 percent in NH in 2009. This percentage was multiplied by state and local police protection expenditures in NH (as reported in the U.S. Census Bureau, “Census of State and Local Government Finance, 2007” ) and inflated to 2011 values arrives at our estimate of police protection costs of alcohol. Results: Table 8 shows that the our estimated costs of police protection attributable to alcohol in NH are $41.1 million in 2011, with nearly 80 percent of the policing costs attributable to alcohol being borne by local governments in New Hampshire.

B.

Table 8 Alcohol-Attributable Policing Costs in NH ($000’s)

State Counties Municipalities Total

Police Protection Costs $52,006.5 $16,410.5 $252,372.3 $320,789.2

Alcohol Attributable @12.8% $6,656.8 $2,100.5 $32,303.6 $41,061.0

% of Costs 16.2% 6.5% 77.3%

Judicial Costs

Key Findings: 

The judicial costs to New Hampshire that are attributable to alcohol are estimated to be $12 million annually, divided approximately equally between state and local (including counties) government.15

Methods A majority of the offenses that are directly (by definition) attributable to alcohol, such as liquor law violations, drunkenness, and driving under the influence of alcohol, are resolved with a limited impact on judicial costs, while violent and property crimes are much more likely to involve extensive use of the resources of the state’s judicial system. In addition, a significant portion of judicial costs in the state are unrelated to criminal cases. To estimate judicial costs attributable to alcohol, the percentage of violent or property crimes (5 percent) was multiplied by judicial expenditures in NH in 2007 and inflated to 2011 values. In addition, for directlyattributable alcohol offenses, such as driving under the influence, liquor law violations etc., we multiplied the number of offenses in NH times the estimated judicial cost per arrest, as reported in The Lewin Group (2010), and inflated to 2011 values ($1,044 for driving under the influence, and $132 for all others). While many arrests result in much higher judicial costs, many alcoholattributable driving offenses and liquor law violations are resolved with guilty pleas or otherwise little judicial costs.

25


Results: Table 9 shows estimated judicial Table 9 costs related to alcohol in NH in 2011. Alcohol-Attributable Judicial Costs in NH ($000’s) Overall, alcohol-attributable judicial costs Judicial Alcohol % are estimated to be $12 million, or Costs Attributable Attributable approximately 9.1 percent of total judicial State $107,025.6 $6,932.1 6.5% $13,627.8 $2,584.5 19.0% Counties costs in the state. Municipal and county $12,264.2 $2,521.0 20.6% Municipalities governments are likely to be more Total $132,917.6 $12,037.6 9.1% affected by the lower-cost but directly attributable offenses related to alcohol and we estimate that the percentage of judicial costs of county and municipal governments that are alcohol-attributable are accordingly much higher (19.0 percent and 20.6 percent respectively). C.

Corrections Costs

Key Findings: 

Alcohol-attributable incarcerations increase corrections costs by $35.1 million annually in New Hampshire.

Methods A high percentage of incarcerated individuals have substance abuse problems and onequarter to one-third report being under the influence of alcohol or drugs when committing offenses. Crime-related alcohol-attributable fractions (AAF’s) reported by the Lewin Group (2010) applied to the offenses for which inmates were sentenced suggests that about 21.2 percent of state inmates and 16.9 percent of local (county) inmates nationally, are incarcerated because of alcohol-attributable offenses. Lacking more specific detail on the inmate populations of NH’s state and county jails, we adopted these estimates for our analysis. We multiplied the percent of incarcerations attributable to alcohol by NH’s state and county corrections expenditures for 2007 (as reported in the Census of State and Local Government Finances) and inflated this amount to 2011 dollars to estimate alcohol-attributable corrections expenditures in NH. Results: Because surveys of inmate Table 10 populations show that drinking preceded Alcohol-Attributable Corrections Costs in NH ($000's) a high-percentage of crimes which Correctional Alcohol % resulted in incarceration, it is easy to Costs Attributable Attributable overstate the role of alcohol and other $118,595.5 $25,142.2 21.2% State substances on crime and corrections $58,871.4 $9,949.3 16.9% Counties $0.0 $0.0 costs. A number of factors contribute to Municipalities Total $177,466.8 $35,091.5 19.8% crimes that result in incarceration and in many cases consumption of alcohol is a correlate rather than a cause of criminal activity. That said, high-quality studies with sound methodologies still demonstrate a strong causal link between alcohol and criminal activity that leads to incarceration, even if the relationship is not as strong as many assume. Corrections costs resulting from excessive alcohol consumption in NH are estimated at $35.1 in 2011, with $25.1 of that amount at the state level, and $10 million at the 26


county level. This represents just under 20 percent of NH’s total incarceration costs (Table 10). V.

Other Costs

Two other alcohol-attributable costs, the cost of motor vehicle crashes and the reduction in state and local revenues from lower productivity attributable to alcohol, are estimated for this report. Several other costs related to excessive alcohol consumption have been estimated in national studies but have not been estimated for NH in this report. These include such things as costs incurred by crime victims, the cost of fires attributable to alcohol use, private legal costs, the cost of fetal alcohol syndrome, and several others. For most, data limitations made estimates of costs in New Hampshire problematic. In general, these costs tend to be of a smaller magnitude than those estimated in prior sections of this report. Nevertheless, to the extent that known costs attributable to alcohol are not included in this report it will underestimate the true costs of excessive alcohol use in New Hampshire. A. Motor Vehicle Crashes Alcohol consumption is a major cause of motor vehicle crashes and injury. According to the National Highway Traffic Safety Administration (2002), alcohol is involved in crashes that account for 21 percent of the costs that result from nonfatal traffic crashes and 46 percent of the costs that result from fatalities. Overall, alcohol involved crashes are responsible for 22 percent of the total economic costs associated with motor vehicle crashes. Key Findings:  

The overall cost of motor vehicle crashes in NH is conservatively estimated at $832 million annually. After subtracting medical and productivity costs associated with crashes from total costs (to avoid double counting from our prior medical and productivity cost analyses) the estimated annual costs of alcohol-attributable motor vehicle crashes is $78.5 million in NH.

Methods: The annual report of the New Hampshire Highway Safety Agency contains data on the number of motor vehicle crashes in NH. It includes information on the number of fatal crashes, the number of crashes with no reported injuries, and the number of crashes where injuries were reported. T he per crash unit costs cost of alcohol-related motor vehicle crashes in New Hampshire was drawn from a U.S. Department of Transportation National Highway Traffic Safety Administration (NHTSA) Report, “The Economic Impact of Motor Vehicle Crashes, 2000.” The per crash unit costs reported by the NHTSA were applied to the number of fatal crashes and crashes without injury in NH in 2009 and inflated to 2011 values to estimate the total cost of crashes with fatalities and crashes where no injury was reported. For crashes that involved injury, the NHTSA reports unit costs according to the severity of injuries in the crash along the “maximum injury severity index” (MAIS 0-5) scale. NH crash data does not report crashes involving injury according to the MAIS scale so NH crashes involving injuries were allocated to MAIS categories of severity in the same percentages as reported nationally. Crashes by severity

27


were multiplied by the unit costs for crashes of each severity to produce our estimate of the total costs of crashes by severity of injury. For all crashes, medical costs included in NHTSA estimates of crash costs were excluded from our cost calculations to avoid double counting because those costs are captured in our estimates of medical costs related to alcohol. Similarly, productivity costs are excluded to avoid double counting. Total motor vehicle crash costs, excluding medical and productivity costs, were multiplied by the NHTSA estimate of 22 percent of crash expenditures being alcohol attributable to arrive at our final estimate of alcohol-attributable motor vehicle crash costs. Results: Our methodology indicates that alcohol related motor vehicle crashes cost NH citizens over $183 million annually out of a total estimated cost of crashes of $832 million (Table 11). When we subtract medical costs (shaded cells) that are included in our analysis of alcoholattributable medical expenditures, and market productivity costs (shaded cells) that are captured in our estimates of mortality costs and productivity costs that may be partially captured in our analysis of productivity losses due to alcohol, and multiply the NHTSA determined percentage of all crash costs attributable to alcohol involving crashes, the result is a conservative estimate of $78.5 million in annual motor vehicle crash costs attributable to alcohol. Table 11 Cost of All (Alcohol-Attributable and Not-Alcohol Attributable) Motor Vehicle Crashes in New Hampshire ($ Millions)

# of Crashes INJURY COMPONENTS Medical Emergency Market Productivity HH Productivity Insurance Admin. workplace Costs Legal Costs Subtotal NON-INJURY COMP. Travel Delay Property Damage Subtotal Totals

PDO

MAIS0

MAIS1

MAIS2

MAIS3

MAIS4

MAIS5

Fatal

Total

20,062

4,406

6,122

1,731

619

156

73

97

33,265

$0.00 $0.81 $0.00 $1.23 $3.04 $1.34 $0.00 $6.42

$0.01 $0.13 $0.00 $0.19 $0.46 $0.20 $0.00 $0.98

$23.58 $0.78 $14.54 $4.57 $5.72 $2.02 $1.38 $52.58

$43.26 $0.48 $62.86 $17.40 $17.33 $4.42 $13.62 $159.36

$38.07 $0.30 $62.63 $17.87 $16.08 $3.45 $13.92 $152.32

$31.21 $0.17 $23.60 $6.14 $7.26 $0.96 $7.64 $76.97

$34.44 $0.08 $47.76 $16.15 $7.18 $0.78 $8.48 $114.88

$2.80 $0.11 $90.56 $25.68 $4.70 $1.10 $12.94 $137.89

$173.37 $2.85 $301.95 $89.23 $61.78 $14.25 $57.97 $701.40

$21.04 $38.89 $59.94 $66.36

$4.45 $5.86 $10.31 $11.29

$6.21 $30.74 $36.95 $89.54

$1.91 $8.94 $10.85 $170.21

$0.76 $5.49 $6.25 $158.57

$0.20 $2.01 $2.21 $79.18

$0.87 $0.90 $1.78 $116.66

$1.16 $1.30 $2.46 $140.35

$36.62 $94.14 $130.76 $832.15

Totals Excluding Medical & Market Productivity

$356.83

x .22 = $78.50 Note: MAIS is the maximum injury severity level experienced by the victim. PDO is property damage only Totals may not add due to rounding.

28


B. State and Local Tax Revenue The productivity and earnings losses attributable to alcohol in New Hampshire reduce income, expenditures, and output in the state that would have yielded significant revenue for state and local governments. Key Findings: 

State and local revenue is New Hampshire is lowered by $46 million annually as a result of the losses in productivity and earnings attributable to excessive use of alcohol.

Methods: We used alcohol-attributable productivity losses in just two areas: those resulting from lower labor force participation and those related to lower earning of alcohol dependent workers, along with an economic model of the State of New Hampshire16 to estimate the overall reduction in the volume of economic activity in New Hampshire from alcohol-attributable productivity losses. The revenue impact estimated here ($46 million) is a ratio-based estimate based on the overall reduction in the volume of economic activity in NH resulting from productivity losses attributable to alcohol. Using ratios derived from the U.S. Census Bureau’s “Census of Government Finances” reports for NH, and its local governments, along with measures of the overall level of economic activity in the state and region (gross state product and gross regional product) from the U.S. Department of Commerce, Bureau of Economic Analysis, we can estimate the amount of state and local tax revenue and sources likely to be generated by the increase in economic activity resulting from the project

VI.

Who Bears the Costs of Excessive Drinking?

Excessive use of alcohol is often and incorrectly viewed as a private cost, primarily borne by individual drinkers and their families, with some externalities related to drinking in the form of crime and motor vehicle crashes being borne by others. The lost or reduced earnings of excessive drinkers do impact drinkers and their families but, collectively, these costs impact businesses, governments, and the economy of New Hampshire and these costs comprise the largest portion of costs attributable to excessive use of alcohol. The lower productivity reduced earnings of an employee who drinks excessively implies a reduction in productivity of the business in which he or she is employed. An individual who needs medical services as a result of excessive drinking may well bear some costs in terms of lost earnings and medical expenses, but businesses or governments will also bear a cost if they are the primary payers (by providing medical insurance) for the drinker’s medical treatments. In addition, some costs are more directly borne by someone other than the individual drinker and his or her family, such as when excessive alcohol use results in criminal

29


activity, or motor vehicle crashes that injure or kill someone other than the drinker. Table 12 The Cost of Excessive Alcohol Consumption to the Private and Public Sectors of New Hampshire Private (Individuals Annual State & Local & Businesses) Productivity Costs % Government % Lower Labor Force Participation $403.9 $344.19 85.2% $42.65 10.6% Impaired Productivity $325.6 $277.47 85.2% $34.38 10.6% Absenteeism $27.1 $23.09 85.2% $2.86 10.6% Subtotal $756.6 $644.75 85.2% $79.90 10.6% Medical Alcohol Abuse Treatment Medical Expenditures Insurance Administration Subtotal

$9.7

$4.85

50.0%

$2.91

30.0%

$154.4

$92.64

60.0%

$23.16

15.0%

$17.6 $181.7

$11.44 $108.93

65.0% 60.0%

$2.64 $28.71

15.0% 15.8%

$41.1 $12.0 $35.1 not estimated $88.2

$0.00 $0.00 $0.00

0.0% 0.0% 0.0%

$41.10 $12.00 $35.10

100.0% 100.0% 100.0%

$0.00

0.0%

$88.20

100.0%

$78.5

$70.21

89.4%

$8.29

10.6%

$45.99 $124.5

$0.00 $70.21

0.0% 56.4%

$45.99 $54.28

100.0% 43.6%

$1,151.0

$823.89

71.6%

$251.09

21.8%

Criminal Justice Police Protection and Crime Judicial System Corrections Cost to Crime Victims Subtotal Other Costs Motor Vehicle Crashes State and Local Tax Revenue Subtotal Grand Total

Table 12 presents our estimates of the cost of excessive alcohol use in New Hampshire to private individuals and businesses as well as state and local governments. The costs to the federal government are not included. The estimates contain significant caveats. These estimates are affected by the costs that are included or excluded in this report. Some costs that are most directly borne by the federal government were not included in our estimates. In addition, for some costs such as medical costs, the primary payer for alcohol-related costs is not readily determinable. These estimates of cost allocations should be viewed with caution, but because this report looks to inform policymaking it is important to develop some metric for the cost of excessive alcohol use to state and local government, as well as for the larger NH economy. We believe that 30


the overall estimate of costs related to excessive alcohol consumption is accurate within a reasonable margin for error. In all cases we have adopted the more conservative estimate of costs where assumptions or choices could lead to significantly higher or lower costs. That is particularly true in the case of assigning costs to state and local governments where our estimate of the annual cost of excessive alcohol consumption is about $251 million. VII. Policy Implications Alcohol plays a prominent role in society and in the culture of our nation. In New Hampshire, the sale and regulation of alcoholic beverages provides the state with significant resources with which to fund government services. At the same time this report documents the fact that excessive alcohol use is responsible for substantial costs that are borne by the citizens of New Hampshire. Many of the costs of alcohol are imposed on people and institutions other than the drinker, including family members, state and local government, and private businesses. At a time when state and local governments across the county are facing unprecedented pressures to eliminate waste and reduce or restrain expenditures, it is imperative that governments find ways to eliminate or reduce unnecessary and avoidable expenditures. Many government expenditures related to excessive alcohol use can be avoided; eliminating the need for them (by reducing excessive drinking) would not affect the overall quality of life in New Hampshire. When government can reduce or eliminate avoidable expenditures, failing to do so is a form of government waste. The private sector in New Hampshire is also facing challenges that impede the long-term performance of the state’s economy. Slow labor force growth in the coming decades means that in order to realize strong economic growth, the state’s economy must increasingly rely on increases in the productivity of its existing labor force. As this report documents, excessive alcohol use both reduces the size of New Hampshire’s labor force and decreases the overall productivity of a significant portion of those in the labor force. The productivity losses to the NH economy are also a form of waste that the private sector can help eliminate. What Can Be Done? The first step in policy making to combat the costs of excessive alcohol consumption in New Hampshire is to integrate the impact of excessive drinking into the fiscal and economic policymaking of the state. Alcohol is already factored into the revenue side of New Hampshire’s fiscal policy, as alcohol sales contribute a substantial amount of revenue to the state’s general fund. However, little attention is focused on alcohol’s impact on the expenditure side of the state’s fiscal policies. More attention should be given to assuring that the costs of excessive alcohol consumption can be balanced by the revenues provided by its sale. This balance can occur by reducing the expenditures attributable to alcohol dependence and abuse through greater prevention and treatment efforts, by increasing the revenues provided to the state from alcohol sales in order to offset a larger percentage of alcohol-attributable costs, or some combination of the two.

31


Increasing Treatment Rates For every NH resident in need of treatment for excessive alcohol use (about 96,000),17 the public and private costs are approximately $11,98918, with state and local government bearing at least $2,61519 of that cost. In contrast the average annual per person treatment cost is estimated at $2,452 in 2011. Moreover, the cost to government of each individual in need of alcohol treatment services who does not receive treatment is ongoing, continuing for as long as an individual does not receive treatment. Thus any small, short-term, savings to the state budget related to reductions in alcohol treatment funds would quickly be erased over time. As an example, state support for alcohol treatment services was reduced by at least $1.5 million annually in the 2012/2013 state budget. At average treatment costs ($2,452 in 2011), this implies that about 611 fewer residents will receive treatment services (reducing the number treated from 3,963 to 3,300), further reducing NH’s already low rates of treatment. Because reducing treatment services to 611 residents will, on average cost the state and local government an estimated $2,615 per resident (implying a cost to government of $1,597,765), the net savings from the $1.5 million is likely to result in no long term savings to the state, but will instead result in an increased cost of almost $100,000. The combined government and private costs to New Hampshire for every individual in need of alcohol treatment is estimated to be $11,989, thus the broader implication of reducing treatment services for alcohol to 611 residents is an overall public and private cost increase of $7.3 million to achieve a general fund saving of $1.5 million. We estimate that NH state government directly or indirectly (through grants to treatment programs) assumed about 20 percent of alcohol treatment costs for the 3,963 individuals who received treatment in 2010.20 Increasing the percentage of individuals receiving treatment when state government assumes just 20 percent of the costs creates significant fiscal benefits over costs for state and local governments in NH. Figure 7 shows the net fiscal impact (net benefits in terms of lower alcohol-attributable expenditures less the cost of increasing treatment rates), on NH government of increasing alcohol treatment rates, according to the percentage of cost to increase treatment rates that is paid for by state government. The chart shows that increasing treatment rates can yield significant fiscal benefits to state and local government. A number of public and private programs and organizations fund or provide alcohol treatment services to NH residents. If treatment rates can be increased with state government responsible for less than 100 percent of the treatment costs, then state and local governments realize even greater fiscal benefits. Currently, NH state government directly or indirectly pays for just an estimated 20 percent of the alcohol treatments costs for the 4 percent of individuals in need of treatment services who receive them. If treatment rates are increased to say 10 percent of those in need, and state government leverages its resources so that it assumes just 50 percent of the increased treatment expenses, then net fiscal benefits to state and local governments are an estimated $7.8 million. If state government pays 75 percent of the expenses to increase treatment rates to 10 percent, then net fiscal benefits are $4.4 million.

32


Figure 7

Because Treatment Costs Avg. Less Than the Cost to Government of Excessive Alcohol Use, Increasing Treatment Rates Can Produce Net Fiscal Benefits – Especially When State Government Shares the Expense of Increasing Treatment Rates Net Fiscl Impact to State & Local Gov. of Increasing % Receiving Treatment by % of Treatment Cost Paid by Government $35,000,000 $30,000,000

30%

% of Treatment Costs Paid for by State Government

50%

$25,000,000

75% $20,000,000

100%

$15,000,000

50% Effective & 50% Treatment Cost Paid by Gov.

$10,000,000

Currently ~ 4% Receive Treatment

$5,000,000 $0

0% ($5,000,000)

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

% “In Need” Receiving Treatment

($10,000,000)

The chart also demonstrates the net fiscal impacts on state and local government if 50 percent of increased treatment costs are paid for by state and local government but only half of those treatments are effective. Even in that case, there are small net fiscal benefits to state and local government, and as we demonstrate below, the overall net fiscal impact on NH (state government and the private sector), is strongly positive. In sum, the chart suggests that there are fiscally sound ways for the state to increase funding to allow alcohol treatment rates in the state to rise, that maximize the return to state and local government in NH. Encouraging methods to reduce NH’s high percentage of “self-payers” for treatment, which discourages individuals from seeking treatment, is one way. Currently selfpayers are the largest source of funding for alcohol treatment in the State of New Hampshire. As long as alcohol abuse is viewed as a private problem with costs only accruing to the drinker or his or her family, relying on self-payment for alcohol treatment will be acceptable. But as this report highlights, a large share of the cost of alcohol abuse is not borne by the drinker. In that case, moral arguments aside, there is a compelling economic rationale for not depending primarily on individual responsibility and self-reliance in funding treatment for alcohol dependence and abuse. Encouraging more business to provide alcohol treatment benefits and developing matching grant programs with not-for profit treatment and other organizations are other ways. Lower productivity, absenteeism, and higher medical and insurance costs resulting from alcohol abuse mean that the NH economy and its business bear an especially large percentage of the costs associated with alcohol dependence and abuse. A better understanding of the impacts of alcohol on the New Hampshire economy should encourage the private sector to incorporate alcohol prevention and treatment issues and services in their human resources policies. Including and encouraging substance abuse treatment in benefit plans, if broadly incorporated throughout the private sector, would allow expansion of alcohol treatment in the state and assure that the state’s portion of increased costs for expanding alcohol treatment remains at levels that maximize the net

33


Figure 8

When Net Benefits on the NH Economy (Not Just Government Costs) are Considered, The Case for Increasing Treatment Rates is More Compelling, Even if Only One-Half (or less) of Treatments are Effective Net Cost to State & Local Gov. of Increasing % Receiving Treatment by % of Treatment Cost Paid by Government & Treatment Efficacy

$200,000,000

$150,000,000

$100,000,000

% of Treatment Costs Paid for by State Government & Efficacy of Treatment

50% 100% 50% & 50% Efficacy 100% & 50% Efficacy

$50,000,000

$0

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

($50,000,000)

% “In Need” Receiving Treatment ($100,000,000)

fiscal benefits to state and local government. At the same time business participation in treatment expansion efforts offers the greatest potential to significantly and quickly reduce the number of residents in the state in need of alcohol treatment services. The net benefits to NH’s productivity and the NH economy that accrue from increased treatment rates make a strong benefit-to-cost rationale for expanding alcohol treatment programs and increasing NH’s very low treatment rates. When the larger benefits to NH’s economy are considered in the benefit-to-cost calculations, benefits dramatically exceed costs regardless of the percentage of cost to increase treatment rates borne by state government. Figure 8 shows the net benefits to the NH economy of increasing alcohol treatment rates when state government assumes 50 and 100 percent of the increased costs. In addition, the chart shows the net benefits with those same percentage of costs paid by state government under a scenario where alcohol treatment is only 50 percent effective (meaning benefits are only realized in one-half of alcohol treatments). When increases in earnings and productivity and reductions in private sector costs are included in the net benefits of increasing alcohol treatments, along with reductions in public sector costs, the economic and fiscal benefits of increasing alcohol treatment rates becomes even more compelling. The benefits to productivity and the overall NH economy from alcohol treatment do not all occur immediately. Such things as reductions in medical costs for chronic diseases and conditions affected by alcohol abuse would decline gradually, as would mortality and police, crime and corrections costs related to alcohol. But other benefits would be realized quickly. Labor force participation, impaired productivity of workers, absenteeism, and motor vehicle crashes would begin responding immediately and produce some benefits quickly. Regardless, however, alcohol treatment and prevention is likely to have a greater long-term economic impact than nearly all other strategies to improve the performance of the NH economy.

34


Impacts of Medicaid Expansion The purpose of this report is not to argue the merits of the complex issue surrounding the Medicaid expansion provision of the Affordable Care Act (ACA). However, an expansion of Medicaid to non-disabled adults without children, with incomes at or below 133 percent of the federal poverty guidelines, could have large implications for the demand for alcohol treatment services in New Hampshire, as well as increase the demand for health care services attributable to alcohol. On the service supply side, Medicaid expansion may also offer NH the opportunity to increase alcohol treatment rates in the state at little or no cost to state government. Some Key Considerations:   

An estimated 58,247 NH adults may become eligible for Medicaid under the ACA if the state approves the Medicaid expansion. (Figure 9) A high percentage of these adults are in age groups with high rates of alcohol abuse. Studies by The Center for Health Care Strategies (CHCS) and Mathematica Policy Research argue that new Medicaid enrollees are likely to have levels of chronic disease and behavioral health problems (including excessive alcohol; use) that are significantly greater than those experienced in the current non-disabled Medicaid population.21 Studies indicate that individuals with alcohol and substance abuse problems have higher health care costs on average than do non-abusers.22

Failing to build adequate alcohol treatment capacity for the Medicaid expansion population could have a significant impact on state general fund expenditures for the Medicaid program long into the future. Although the expanded Medicaid population may contain higher incidence of alcohol abuse, and have higher overall health care costs than the current Medicaid population, expanding treatment for alcohol disorders to the newly eligible Medicaid population could result in significant savings to state government and the larger NH economy. NH and its Figure 9

An Estimated 58,247 Non-Disabled Adults, Without Children, Would Become Newly Eligible For Medicaid Under the ACA Estimated # of Adults Newly Eligible for Medicaid 55-64

11,211

45-54

14,295

35-44

6,564

9,365

25-34

14,081

20-24

18-19

2,731

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Source: Author’s calculation using data from the 2010 and 2011 March Supplement of the “Current Population Survey”

35


economy will incur direct and indirect public and private costs of the newly eligible individuals in need of treatment regardless of whether they are on Medicaid or not. The difference is that under the new ACA Medicaid provisions, treatment costs for these individuals can be borne primarily by the federal government if NH has the capacity to serve them. Recovery of Alcohol-Attributable Costs Taxes and fees on products sold at retail have traditionally been an anathema in New Hampshire. New Hampshire’s system of control over sales and distribution of spirits, and its more limited control over wine sales, have allowed the state to obtain revenue from alcohol sales with limited taxation of alcohol. At some point the recognition of the broader public and private costs associated with excessive alcohol use may lead lawmakers to consider policies that would look to recover some or all of those public costs. One argument for such an approach is that because so much of NH’s alcohol sales are to out-of-state residents, it is consistent with the state’s tendency to export a large percentage of the cost of government to non-residents. One disadvantage is that price increases associated with cost recovery charges would erode some alcohol sales to out-of-state residents and thus will have some impact on state revenues from alcohol sales. Sales to NH residents would also be reduced, and depending on the size of the recovery charge, some alcohol-attributable costs to the state may be reduced as a result. Estimating the sales and alcohol-attributable cost impacts of an alcohol cost recovery charge is beyond the scope of this report. However, this report does make some estimates of the charge that would be required to recover some or all of the direct government costs attributable to alcohol. Data on alcohol sales in the state of New Hampshire were obtained from the National Institute on Alcohol Abuse and Alcoholism (NIAAA). The NIAAA data are considered the most reliable source of alcohol consumption data and are widely used by researchers and policy analysts. The data are derived from shipments of data provided to the NIAAA’s Alcohol Epidemiologic Data System (AEDS) by beverage industry sources. Using the NIAAA’s estimates for alcohol consumption (sales) in New Hampshire, we are able to estimate the number of alcoholic drinks sold annually in New Hampshire (either on premise at bars and restaurants, or in pre-packaged form at retail outlets and state-owned stores). We convert gallons of alcohol (beer, wine, spirits) sold into their fluid ounce equivalent and the fluid ounce equivalent into an estimated number of single serving drinks (even if alcohol was sold in a pre-packaged container). While actual serving sizes may vary, particularly in settings where alcohol is poured rather than pre-packaged, standard serving sizes of 12 fl oz for beer, 5 fl oz for wine and 1.5 fl oz for distilled spirits were used to convert total ounces into an estimated number of drinks sold in NH (Table 13). We conservatively, estimate the direct costs to government in NH of excessive alcohol consumption to be $251.09 million in 2011. This amount includes medical expenditures paid for by government, policing, judicial and correctional costs, as well

Table 13 Estimated Number of Alcoholic Drinks Sold in New Hampshire (2011) Est. # of Gallons Ounces Oz/Drink Drinks 41,670,000 5,333,760,000 12 444,480,000 Beer 6,912,318 884,776,704 5 176,955,341 Wine Spirits

4,770,275

610,595,200

2

407,063,467

Total

1,028,498,807

36


as lost state and local tax revenue, minus the revenue received from alcohol sales, licenses, and fees. Dividing this amount by the estimated number of drinks sold in NH (Table 14) yields a per drink alcohol cost mitigation fee charge of $.15 per drink. However, because the NH Liquor Commission produces revenues from the sale of alcohol that can be used to offset alcohol’s cost to government, we subtract Liquor Commission revenues returned to the general fund from the amount of alcohol-related costs for government to recover. The result is an estimated $31.7 million in recovery charges. Dividing this cost by the estimated number of drinks consumed in the state in 2009 yields a per drink fee of $.03 per drink. Table 13 presents our estimates of the impacts of a $.03 per drink charge. The effective tax rate on a package of alcohol with a $.03 per drink charge would range from 1.3 percent for wine, to 3.5 percent for spirits. Because prices will rise, the effective rate would decline over time, as is the case with all excise taxes not adjusted for price increases. Table 14 Alcohol Cost Recovery Charge Alcohol Cost Recovery Amount Less Liquor Commission Revenue Net Amount to Recover

$157,350,000 $125,700,000 $31,650,000

Per Drink Charge $0.15 $0.03

Impact on Cost of Alcohol

Beer Wine (.75ml Bottle) Spirits (Blended Avg.)

Drinks Per Package 6 5 26

Recovery Charge/Package $0.18 $0.15 $0.80

Avg. Cost per Package $5.90 $11.63 $22.56

Effective Tax Rate Per Package 3.1% 1.3% 3.5%

VIII. Conclusions This study has attempted a comprehensive evaluation of the costs borne by individuals, businesses and governments in New Hampshire as a result of the undesirable side effects of excessive alcohol consumption. This report attempts to quantify the negative impacts of excessive alcohol consumption to bring the magnitude of the problem into clearer focus when compared to other demands on scarce public funds. Second, the report seeks to identify the many ways in which the simple act of consuming alcohol can produce outcomes that make New Hampshire collectively poorer. Our research clearly indicates that alcohol imposes a significant cost on the citizens of the State of New Hampshire. Collectively the costs are over $1.15 billion annually and amount equal to almost 2.0 percent of the total personal income in the state. Moreover, there are a number of costs inflicted by alcohol that the available data did not allow us to estimate and include in the total reported above. These include: Fire. Each year, fires are started by those who have been drinking, causing property losses, injuries and possibly loss of life. They also are reflected in higher insurance premiums paid by drinkers and non-drinkers alike. Loss of function from alcohol-related injuries. We were unable to obtain good estimates on the degree to which the

37


productive abilities of those who have been injured because of alcohol-related accidents – either on the highways or elsewhere – have been affected as a result. Victim costs resulting from crimes. The losses to those affected by alcohol-induced criminal activity – both the crime victims as well as the families and children of the criminals – are not reflected in this report. The exclusion of these items makes it likely that the true cost of alcohol abuse is higher than the $1.15 billion reported. Finally, the cost the state’s economy of excessive alcohol use continues year after year. Without private and public efforts to bring these costs under control, New Hampshire can expect to pay a tax – in the form of a smaller economic pie than we would otherwise enjoy – of more than $1 billion dollars each year that our collective drinking behaviors produce outcomes like those reported in this study.

38


End Notes 1

A number of recognized alcohol-attributable costs included in some national estimates of costs are not included in this report because data is available only at the national level, or not available for New Hampshire, and methodological limitations make using national data to estimate New Hampshire costs problematic and not within an acceptable margin for error. In addition, some costs are not included because they are costs only borne by the federal government. 2 National Institute on Alcohol Abuse and Alcoholism. Health Risks and Benefits of Alcohol Consumption. Alcohol Research and Health: Vol. 24, No. 1 (2000). 3 The 4,000 individuals receiving treatment for alcohol includes only those individuals treated at alcohol and/or drug abuse treatment programs and facilities. Individuals may also receive treatment at hospitals in conjunction with individuals 4 Ellen E. Bouchery, et. al., “Economic Costs of Excessive Alcohol Consumption 5 The seminal reference to the neoclassical model of economic growth is Robert M. Solow, “A Contribution to the Theory of Economic Growth,” Quarterly Journal of Economics, 70(1), 65-94. 6 The Lewin Group, Inc., “Economic Costs of Excessive Alcohol Consumption in the United States, 2006,” The Centers for Disease Control and Prevention, 2010. 7 The Center for Integrated Behavioral Health Policy at George Washington University. A description of the methods they use to develop their estimates of alcohol dependency and abuse by industry sector is available online at: http://www.alcoholcostcalculator.org/alcohol/about/?page=1. 8 This number differs from our estimate of the number workers in NH’s labor force with an alcohol dependency or abuse for three reasons: 1. The definition used for excessive consumption for purposes of calculating the cost of absenteeism is a subset (binge drinking) of excessive alcohol consumption, 2. the source data are different, using a different survey was necessary to estimate binge drinking and because not all surveys contain information about the industry employment of survey respondents, 3. NH’s labor force is much larger (by approximately 100,000 individuals) than the number of employees in NH and our measure of labor force and earnings losses includes all working age individuals while our estimate of absenteeism losses includes only those workers employed in a business located in NH. There are approximately 40,000 unemployed residents and a large number of NH residents work in neighboring states. 9 The loss of industry output is estimated here using the ratio of employee compensation to industry output for each industry in New Hampshire. 10 Max, Wendy, et. al., “Valuing Human Life: Estimating the Present Value of Future Earnings, 2000”. Center for Tobacco Control and Research, University of California San Francisco, 2004. 11 Hahn, Beth, et. al., “State and Sociodemographic Variations in Substance Use Treatment Need and Receipt in the United States,” Center for Behavioral Statistics and Quality, Substance Abuse and Mental Health Services Adminstration, U.S. Department of Health and Human Services, April, 2011. 12 Accessed online at: http://apps.nccd.cdc.gov/DACH_ARDI/Default/Default.aspx 13 Data on nursing home admissions and expenditures can be found here: http://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/index.html?redirect=/NationalHealthExpendData/02_NationalHealthAccountsHi storical.asp 14 Kaiser Family Foundation. (2007). Total retail sales for prescription drugs filled at pharmacies, 2005. Available: www.statehealthfacts.org . 15 Technically, the State of NH operates a unified court system that results in all judicial costs being state-level costs. The U.S. Census Bureaus’ “Census of Government Finances” series, however, continues to report judicial expenditures in NH at the state, local, and county level because judicial activity still occurs at these levels of government (i.e. district courts, county courts). 16 The IMPLAN model of the State of NH (2010 Version) was used. Information about the IMPLAN model can be found at www.IMPLAN.com. 17 Hahn, Beth, et. al., op. cit. 18 $1.151 billion divided by 96,000 = $11,989 19 $251.09 million divided by 96,000 = $2,615 20 There is no single budget item for alcohol treatment in the state’s budget. Rather, funding is provided in a number of ways and through a number of sources, both directly and indirectly, making estimates of treatment expenditures by


state government problematic. 21 Somers, S., A. Hamblin, J. Verdier, and V. Byrd. “Covering Low Income Childless Adults in Medicaid: Experiences from Selected States.” Center for Health Care Strategies, Inc. and Mathematica Policy Research, Inc. August 2010 22 Clark, R., A., et. al., “Impact of Substance Disorders on Medical Expenditures for Medicaid Beneficiaries With Behavioral Health Disorders,” Psychiatric Services, 60 (1), January 2009, 35-42.

40

The High Cost of Excessive Alcohol Consumption  

This report documents the economic and fiscal costs of excessive alcohol consumption in New Hampshire. Lost productivity in the form of low...

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