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Friction Cost Estimates of Productivity Costs in Cost-of-Illness Studies in Comparison with Human Capital Estimates: A Review

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Abstract

Cost-of-illness (COI) studies often include the ‘indirect’ cost of lost production resulting from disease, disability, and premature death, which is an important component of the economic burden of chronic conditions assessed from the societal perspective. In most COI studies, productivity costs are estimated primarily as the economic value of production forgone associated with loss of paid employment (foregone gross earnings); some studies include the imputed value of lost unpaid work as well. This approach is commonly but imprecisely referred to as the human capital approach (HCA). However, there is a lack of consensus among health economists as to how to quantify loss of economic productivity. Some experts argue that the HCA overstates productivity losses and propose use of the friction cost approach (FCA) that estimates societal productivity loss as the short-term costs incurred by employers in replacing a lost worker. This review sought to identify COI studies published during 1995–2017 that used the FCA, with or without comparison to the HCA, and to compare FCA and HCA estimates from those studies that used both approaches. We identified 80 full COI studies (of which 75% focused on chronic conditions), roughly 5–8% of all COI studies. The majority of those studies came from three countries, Canada, Germany, and the Netherlands, that have officially endorsed use of the FCA. The FCA results in smaller productivity loss estimates than the HCA, although the differential varied widely across studies. Lack of standardization of HCA and FCA methods makes productivity cost estimates difficult to compare across studies.

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Notes

  1. Personal communication, Peter Neumann, March 26, 2018.

  2. CEA studies were excluded.

  3. The review of partial COI studies was not similarly updated due to time constraints.

  4. This number excludes one study that looked at the entire European Union, and another study examining 29 countries worldwide. Both of these studies included the Netherlands and Germany.

  5. https://www.zorginstituutnederland.nl/.

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Acknowledgements

The authors thank Anirban Basu and Don Husereau along with two anonymous reviewers for comments on previous versions. The findings and conclusions in this report are those of the authors and do not necessarily represent the official position of the Centers for Disease Control and Prevention.

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  1. Centers for Disease Control and Prevention, National Center for Immunization and Respiratory Diseases, 1600 Clifton Road NE, MS A-19, Atlanta, GA, 30329-4027, USA

    Jamison Pike

  2. Centers for Disease Control and Prevention, National Center on Birth Defects and Developmental Disabilities, Atlanta, GA, USA

    Scott D. Grosse

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J. Pike conducted the literature reviews and extracted the data necessary for analysis. J. Pike wrote the initial manuscript. S. Grosse initiated the project idea. S. Grosse and J. Pike performed numerous quality assurance checks on the data extraction, researched the literature, performed analyses on the data, and edited multiple versions of the manuscript.

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Correspondence to Jamison Pike.

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J. Pike and S. Grosse declare that they have no conflicts of interest. No funding/support was used for this study. There are no financial disclosures or conflicts of interests.

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Pike, J., Grosse, S.D. Friction Cost Estimates of Productivity Costs in Cost-of-Illness Studies in Comparison with Human Capital Estimates: A Review. Appl Health Econ Health Policy 16, 765–778 (2018). https://doi.org/10.1007/s40258-018-0416-4

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