CLEAN AIR WILL CUT HEALTH CARE COSTS

The Impact of Air Quality on Hospital Spending
John A. Romley, Andrew Hackbarth, Dana P. Goldman, March 2, 2010 (Rand Corporation)
and
Dirty Air in California Caused $193 Million in Hospital-Based Medical Costs During 2005 to 2007
March 2, 2010 (RAND Corporation)

SUMMARY
Want to take a handsome chunk out of U.S. health care costs? Pass a climate change bill.

The cost of the spew coming from the engines and motors that burn fossil fuels, from giant coal plants to individual passenger vehicles, can be calculated in more than one way. Britain’s landmark Stern Review characterized the costs of global climate change. The National Institutes for Health recently teamed with Lancet, a prominent UK medical journal, to expand in detail on the potentially devastating health impacts of the world’s spew. (See CLIMATE CHANGE & PUBLIC HEALTH)

Though it is widely acknowledged that increased levels of pollution cause increased levels of things like asthma and pneumonia, The Impact of Air Quality on Hospital Spending, from the RAND Corporation think tank, is the first comprehensive look at the costs of spew in the hospital system. It concludes the nation could have taken almost $200 million dollars off just one state’s spending on hospital-based medical care over 3 years if that state had simply met Clean Air Act standards.

Not meeting the requirements for particulate matter (PM2.5) and ozone spew caused almost 30,000 health “events” (leading to emergency room visits and hospital admissions) in California in the 2005-to-2007 period. It cost public purchasers of health care such as Medicare and Medi-Cal over $130 million for hospital expenses alone. Private health insurance (including managed-care and fee-for-service insurance plans) paid over $55 million because of dirty air.

If that doesn’t make the issue of air quality seem urgent, maybe this will: The most common hospital-based medical care required due to elevated air pollution levels in the study period was 12,000+ emergency room visits by children 17 and under suffering asthma attacks.

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Almost a third of the costs of air pollution-related hospital admissions went for acute bronchitis, pneumonia and chronic obstructive pulmonary disease.

The money spent could have paid for flu vaccine for 85% of California’s under-15-year-old children.

What is clear from the Rand study: There is something to be gained for a whole system of stakeholders (private insurers, employers and public insurance programs) in stopping the spew and, coincidentally, stopping the spew would help bring back the U.S. economy, add a whole category of new jobs for the workforce to fill, shift the nation away from investing in foreign oil and toward the building of a domestic, emissions-free energy infrastructure, and turn back global climate change and all the harms that would follow from it.

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COMMENTARY
It is clearly established that air pollution is detrimental to human health and leads to everything from restrictions in physical activity to emergency room (ER) visits for asthma and hospitalizations and premature death from respiratory and cardiovascular disease.

Far more people in California live in “nonattainment” areas that fail to meet federal Clean Air Act standards than in any other state. Many of these areas have “serious” or “severe” pollution (as classified by the EPA. Most of the affected population is in the South Coast Air Basin (parts of Los Angeles, Orange, Riverside, and San Bernardino counties) or in the San Joaquin Valley, the San Francisco Bay area, the Sacramento Metro area or San Diego.

A 2002 study showed that, after allowing for factors like smoking, a 10 microgram per cubic meter reduction in average annual levels of particulate matter with an aerodynamic diameter of less than or equal to 10 micrometers reduces Medicare’s average per-outpatient healthcare spending by $100 and average hospital per-inpatient spending by $77.

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Economic costs for air pollution above federal standards approached $200 million in the 2005-thru-2007 period in California (without factoring in the inadequately-reported costs of outpatient care provided in clinics or medical offices). If private insurance companies and employers could see they were paying that kind of money, they would inevitably see something for themselves in cleaning up the air. Cutting those costs would also reduce Medicare and Medicaid spending.

U.S. health spending totaled $2,241 billion in 2007. Medicare accounted for $431 billion, or 19.2% of it. Medicaid, the state and federal program for low-income persons, accounted for another $329 billion. Private health insurance spent $775 billion, or 34.6% and $269 billion was spent out of pocket.

The RAND study focused exclusively on hospital spending on effects associated with ozone and particulate matter (PM2.5). It was facilitated by the fact that the state of California collects and discloses clinical and financial data on hospital care and, in particular, spending for pollution-related admissions for cardiovascular and respiratory causes, and ER visits for asthma.

The RAND researchers compared epidemiological data, actual patterns of hospital care and actual spending patterns with actual pollution patterns to determine how meeting federal air quality standards affected the number of acute health events requiring hospital care.

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Nearly three-quarters of California's potentially prevented events can be attributed to ambient levels of fine particulate matter with an aerodynamic diameter of less than or equal to 2.5 micrometers (PM2.5) and ozone above federal clean air standards. The cost: $193,100,184 for hospital care alone. Medicare spent $103,600,000 and Medicaid (Medi-Cal in California) spent $27,292,199. Private health insurers spent about $55,879,780 on hospital care.

The events resulting from air pollution were concentrated in the San Joaquin Valley and South Coast air basins where PM2.5 and ozone levels substantially exceed federal standards. Ozone levels peak significantly in the summer. PM2.5 concentrations peak (though somewhat less significantly) in the winter.

15% of the California patients involved in the air pollution-related events had incomes below the federal poverty level.

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Health care payers would get the biggest savings in hospital spending from improved air quality but the specific payers who benefit the most vary substantially across hospitals and communities.

RAND looked in detail at the impact of poor air quality at 5 specific but diverse hospitals: Riverside Community Hospital, St. Agnes Medical Center, St. Francis Medical Center, Stanford University Hospital, and the University of California–Davis Medical Center.

At Riverside Community Hospital: 329 hospital admissions and ER visits would have
been prevented had federal standards for PM2.5 and ozone been met during 2005–2007. Total spending was $2,015,880. Private health coverage paid for most of the bill for almost half (149) the patients, spending a total of $708,700.

Medicare was the next biggest payer. Medicare spent about $1,140,060 (more because the Medicare patients had more and longer hospital stays).

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At St. Agnes Medical Center in Fresno, failing to meet federal air standards was more costly: 384 hospital admissions/ER visits cost $2,976,936. More than half (208), costing $1,913,116, was paid for by Medicare.

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At St. Francis Medical Center in Lynnwood (south of Los Angeles): 295 hospital admissions and ER visits. Medi-Cal was the biggest payer for more than half (156). Medicare was next, with one-third (51) of the events. Medicare spent most, $716,979, partly because Medi-Cal pays less ($9,482 on average for pneumonia versus $10,882 for Medicare). Overall cost of not meeting clean air standards was $1,220,595.

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At Stanford University Hospital: 30 hospital admissions and ER visits cost $534,855. Fewer events occurred in the San Francisco metro area than elsewhere.

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At UC Davis Medical Center in Sacramento: 182 events cost $1,882,412. Medi-Cal was responsible for the most patients (81) and Medicare paid the most, $855,499.

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QUOTES
- John Romley, economist/lead author, RAND: "California's failure to meet air pollution standards causes a large amount of expensive hospital care…The result is that insurance programs—both those run by the government and private payers—face higher costs because of California's dirty air…These costs may not be the largest problem caused by dirty air, but our study provides more evidence about the impact that air pollution has on the state's economy…"

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- From the RAND report: From the RAND report: “…improved air quality would have reduced total spending on hospital care by $193,100,184 in total…Medicare, the federal program that primarily covers the elderly, spent $103,600,000 on air pollution–related hospital care during 2005–2007. Medicaid (Medi-Cal in California), the federal-state program that covers low-income people, spent $27,292,199. Private health insurers (that is, third-party payers) spent about $55,879,780 on hospital care…These results suggest that the stakeholders of public programs stand to benefit substantially from improved air quality, and that insurance companies and employers may also have sizable stakes in air quality…It is important to recognize that reduced spending on hospital care could ultimately improve the well-being of others…Lower pollution related health spending could lead to lower insurance premiums…Many employers contribute to employee premiums, and thus might themselves benefit from improved air quality. Yet employees may ultimately be beneficiaries. Workers effectively pay for much of their employer contributions toward health insurance premiums through lower wages…thus, lower premiums translate into higher wages…”

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- From the RAND report: “…[T]here is reason to believe that private insurers and employers would ultimately enjoy some of the benefit from improved air quality…In our setting, health insurance premiums may not fall as much as medical spending does, with higher insurer profits as a result. In the workplace, employee wages sometimes do not offset employer insurance premium contributions fully, due, for example, to long-term union contracts or less formal norms…Employers thus benefit from lower insurance premiums.”