Economic Burden of Illness in Canada, 1993

Summary of Results

The total cost of illness in Canada in 1993 was estimated at $156.9 billion: $71.7 billion (45.7%) in direct costs and $85.1 billion (54.3%) in indirect costs, using a 6% discount rate to value lost productivity due to premature mortality in 1993 (see Table 1 and Figure 1). Total costs would range from $149.9 billion, using a 10% discount rate, to $171.3 billion, using a 2% discount rate. The following pages illustrate the distinct nature of each diagnostic category and the relative impact of each cost component on the total cost of these illnesses.

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Cost of Illness by Cost Component and Diagnostic Category

The relative magnitude of the major cost components given in Table 1 is illustrated in Figure 2. Hospital care was by far the largest direct cost, with $26.1 billion (16.6%) of the total costs. This was followed by the cost of services by physicians ($10.4 billion, 6.6%), drugs ($9.9 billion, 6.3%) and other miscellaneous health expenditures ($9.3 billion, 5.9%). Health science research had the lowest direct cost, $752 million, representing only 0.5% of the total cost of illness.

The major indirect cost components were the value of time lost due to long-term disability, estimated at $38.3 billion (24.4% of the total), and the present value of future productivity lost due to premature mortality, $29.3 billion (18.7%).

Direct and indirect costs are available by diagnostic category for $129.3 billion; an additional $27.6 billion in direct costs (approximately 18% of the total) was unclassifiable by diagnostic category. Table 2 provides a detailed breakdown of costs by diagnostic category and cost component. Figure 3 compares the direct and indirect costs for all diagnostic categories.

Cardiovascular diseases, the largest diagnostic category, accounted for 15.3% of the total cost of illness classifiable by diagnostic category, $7.4 billion in direct costs and $12.4 billion in indirect costs. Musculoskeletal disorders and injuries ranked second and third with total costs of $17.8 billion and $14.3 billion, respectively. Direct costs were small ($2.5 billion, $3.1 billion) in comparison with the enormous indirect costs ($15.3 billion, $11.2 billion) of these two disorders. Cancer followed next with a total cost of $13.1 billion, comprising direct costs of $3.2 billion and indirect costs of $9.8 billion. Together these four categories accounted for half (50.2%) of the cost of illness that could be classified by diagnostic category.

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Distribution of Direct Costs by Diagnostic Category

The relative magnitude of each cost component varies substantially by type of illness. Figure 4 illustrates the distribution of direct costs for the six diagnostic categories with the highest direct costs. These categories represented over half (58.6%) of the direct costs classifiable by diagnostic category.

Hospital care alone contributed more than 70% of the total direct cost of mental disorders, cancer and injuries. Drugs accounted for more than 20% of the direct cost of cardiovascular and respiratory diseases, compared to only 5.9% for injuries. Physician care expenditures made up 27% of the direct cost of respiratory diseases.

At the same time, the research share of the direct cost of injuries, mental disorders and respiratory diseases appears almost negligible, less than 0.5%. The amount spent on research is an extremely small portion of the total cost of illness. Figures 5 and 6 show the research share of direct and total costs for each diagnostic category. Research represents less than 2% of the total cost of illness for each diagnostic category. Infectious and parasitic diseases and blood diseases had the highest proportion of research expenditure. A large portion of the former was for HIV/AIDS research.

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Distribution of Indirect Costs by Diagnostic Category

Indirect costs were highest for musculoskeletal diseases, cardiovascular diseases, injuries and cancer, respectively. These four diagnostic categories represented over half (57.3%) of the total indirect cost of illness. As Figure 7 illustrates, at least 90.1% of the indirect cost of cancer resulted from mortality costs (i.e. the present value of lost productivity due to premature mortality). However, cancer often causes considerable short-term disability, which tends to be underreported on surveys such as the Quebec Health and Social Survey, on which our short-term disability costs are based.

Mortality costs were also a considerable share of the indirect cost of cardiovascular diseases (60.2%). By contrast, 87.9% of the indirect cost of musculoskeletal diseases and 78.2% of the indirect costs of nervous and sense organ diseases were attributed to the productivity loss due to long-term disability; half (51.9%) of the indirect cost of respiratory diseases was attributed to productivity loss due to short-term disability.

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Distribution of Total Costs by Diagnostic Category

Figure 8 shows the relative magnitude of direct costs, mortality costs (i.e. the present value of future productivity lost due to premature mortality) and morbidity costs (i.e. the value of lost productivity due to long-term and short-term disability) for the six diagnostic categories with the highest total costs. These categories represent two thirds (67.1%) of the total cost of illness we are able to classify.

The relative proportion of direct costs within the total cost varied significantly between diagnostic categories. Direct costs accounted for 37.3% of the total cost of cardiovascular diseases, the most costly diagnostic category, but only 13.8% for musculoskeletal diseases, the second most costly group, and 21.8% for injuries, the third most costly category. Thus, the potential reduction in direct costs from a reduction in illness or injury would be more significant for certain diagnostic categories.

However, for the six diagnostic categories with the greatest total costs, indirect costs were greater than direct costs (see Table 2 and Figure 8), demonstrating the enormous impact that the indirect costs of illness place on society and individuals and the necessity for research, health promotion and disease prevention aimed at reducing the health burden of these illnesses.

For categories where direct costs outweighed indirect costs, the highest proportion of direct costs was for skin and related disorders (87.9%), complications of pregnancy (74.6%) and genitourinary diseases (74.1%). However, each of these categories represented less than $3.5 billion in total costs compared to $9.7-19.7 billion for the six most costly diagnostic categories.

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Distribution by Sex

Figure 9 illustrates the distribution of all direct, morbidity and mortality costs for the 82% of the cost of illness we were able to account for by sex. Costs for males and females were almost evenly distributed ($65.9 billion and $62.7 billion).

However, the distribution by sex varied considerably by type of cost as illustrated in Figure 10. Females accounted for 56% of the direct costs we could categorize by sex, although they represented only 50.4% of the population.¹ This reflects higher disease prevalence ² and greater utilization of the health care system by women. Females accounted for $14.0 billion, $6.2 billion and $4.0 billion of hospital care, physician care and drug expenditures in 1993. (Appendix 7 compares our sex distribution with other data sources.)

For both short-term and long-term disability among the household population, higher rates of disability for females were largely offset by lower labour force participation rates, earnings and value of unpaid work for women: short-term disability cost $8.7 billion for males and $8.9 billion for females; long-term disability, $17.5 billion and $17.7 billion, respectively. However, females represented 63% ($1.9 billion) of long-term disability costs in institutions, reflecting the large number of women in institutions, especially in homes for the aged.³

Mortality costs attributed to males were almost twice as high as for females-$19.3 billion compared to $10.0 billion-resulting from higher labour force participation rates, earnings, value of unpaid work (e.g. construction work) and death rates for males.

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Distribution by Age Group

We are able to account for 82% of the total cost of illness by age group. * As shown in Figure 11, the elderly (persons 65 years of age or over), who represented 11.4% of the total population in 1993, ¹accounted for 29.2% of the costs we were able to classify by age group. Distribution by age group varied by type of cost, as illustrated in Figures 12 to 14.

The prevalence of illness increases with age as does the use of medical services. Direct costs by age group are illustrated in Figure 12. The elderly population represented 40.1% ($17.5 billion) of total direct costs. This reflects the substantial cost of hospitalization ($12.2 billion, 46.7%) for this age group. Physician care and drug expenditures were highest for the population aged 35-64, amounting to almost 40% of physician care and drug expenditures ($3.8 billion; $2.9 billion). The elderly accounted for approximately 30% of these direct costs ($2.9 billion; $2.4 billion). Children (ages 0-4) were the least costly to the health care system, accounting for approximately 10% ($2.5 billion for hospitals; $1.3 billion for physicians; $526 million for drugs) of direct costs available by age group. (Appendix 7 compares our age distribution with other data sources.)

The population aged 35-64 represented almost half (49.5%, $14.5 billion) of the cost of premature mortality (Figure 13). The large share is indicative of this age group's high labour force participation rates, earnings and value of unpaid work as well as many years of life lost to premature mortality. The elderly accounted for approximately a third (31.1%, $9.1 billion) of mortality costs. Although the elderly have shorter life expectancies and lower labour force participation rates and earnings, mortality costs reflect lost unpaid productivity and high mortality rates within this age group.

Figure 14 shows that, for the household population, the 45-64 age group had the highest long-term disability costs (42.6%, $15.0 billion) in 1993, followed by the group aged 15-44 (34.6%, $12.2 billion). As with mortality costs, this is due to the high labour force participation rates, earnings and value of unpaid work for those aged 45-64. It also reflects the increased prevalence of long-term disability with age. The elderly represent just under one quarter (22.7%, $8.0 billion) of long-term disability costs among the household population, but two thirds (66.3%, $2.0 billion) of these costs among the institutionalized population. This can be explained by the large number of elderly people with chronic conditions, especially of those requiring professional health care.

In contrast, people aged 15-44 accounted for over two thirds (65.5%, $11.5 billion) of short-term disability costs. Causes of short-term disability (e.g. injuries) among this population, the most productive age group, are largely preventable. The elderly have relatively low short-term disability costs (5.7%, $902 million). This amount may be misleading because it is affected by the exclusion of short-term disability costs for people with long-term disability.

Unfortunately, the household component of the National Population Health Survey did not provide short-term and long-term disability estimates for the population aged 0-11. We anticipate that disability among this group is lower than among other age groups based on our other findings; however, the youngest age group is often undervalued in cost-of-illness studies because the value to society is based on productivity.

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* Estimates provided in Expenditures for Care in Other Institutions, the majority of which are for homes for the aged ($6.1 billion), are not included in the total cost of illness by age group.

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