Cost Calculator — methodology

Background information

Information on the economic cost of chronic diseases is important for planning prevention and control efforts. Information on the direct costs of chronic illness, including the medical resources used to treat avoidable illness and productivity losses, provide information on the amount that could be saved if chronic diseases were prevented or controlled. For more information, see the Cost.

In addition to the costs associated with a condition, funders of healthcare services and interventions need to understand the health gains that are possible should their programs or interventions be enacted. There are many ways to represent the health gains from programs or interventions, but a commonly used method of valuating health outcomes is to use quality-adjusted life years (QALYs). QALYs are unique in that they take into account both the length of life and the quality of life in their measure. As such, they are commonly used around the world when prioritizing health interventions.  

The Cost Calculator is able to calculate the cost and health losses for chronic conditions by:

The Cost Calculator uses the following methodology:

• Cost per case for each Chronic Disease — Estimates from the CDC's Cost Calculator provide the additional medical expenditure (cost) associated with chronic diseases for the State of California by condition, age group, and gender. The CDC’s cost-per-case estimates were adjusted for price differences in healthcare services between counties and for inflation;
• Rates of Chronic Disease — Estimates the prevalence of chronic disease by county, age, gender, and race-ethnicity were calculated from a number of sources;
• Total cost due to Chronic Diseases (without QALYs) — The total additional cost of each chronic disease was determined by summing the number of cases x cost per case for each chronic disease by age, gender, and race-ethnicity;
• Total cost due to Chronic Diseases (without QALYs) — The total additional cost of each chronic disease was determined by summing the number of cases x cost per case for each chronic disease by age, gender, and race-ethnicity;
• QALY loss due to Chronic Diseases — The utility loss for each chronic disease by age, gender, and race-ethnicity was multiplied by the number of cases and then summed across all ages, genders, and race-ethnic groups for each chronic condition.
• Total cost due to Chronic Diseases (with QALYs) — The total additional cost of each chronic disease was determined by multiplying the QALY loss due to Chronic Disease by the monetary value per QALY and then adding this to the Total cost due to Chronic Diseases (without QALYs)

Some points to note about the estimates:

• The costs reported here are the additional or marginal costs of the condition. That is, it is not the total cost of taking care of patients with chronic conditions, but rather the cost of the chronic condition that is above and beyond the cost of healthy counterpart (controlling for age and gender);
• One way to interpret the cost is to compare the cost of chronic conditions to the cost of care for all healthcare costs. This can be done using estimates on the total healthcare cost. For instance, recent estimates put the cost of healthcare in California at $7,549 per person. This is valid for the Total costs (without utility losses) but not the Total costs (with utility losses) because the estimate of cost of healthcare in California does not include health outcomes.
• Another way to use the results is to see the cost as the amount of funds that could saved if the chronic diseases could be prevented. Thus, the total cost of the chronic diseases represents the total amount that could be saved (in theory), and thus any amount that is spent on the program that is less than the amount saved represents a positive Return on Investment. This is the basis of the approach that is used in the ROI analysis included as an option in the Return on Investment Tool.  

The information that you will receive will be (see Table xxx):

• County or region of your program — You can choose a single county, a region, or the entire State of California
• Chronic disease or diseases — You can choose one program or multiple chronic conditions
• Age — You can choose one age or enter an age range.
• Ethnicities — You can choose one or more ethnicities or all the ethnicities  Gender – You can specify male, female, or both Value of a QALY – If you want to enter your own value for a QALY, you can. The default will be $50,000 per QALY
• Gender — You can specify male, female, or both
• Value of a QALY — If you want to enter your own value for a QALY, you can. The default will be $50,000 per QALY