Estimated Economic Impact of Illegal Opioid Use and Opioid-Related Overdose Deaths

The White House Council of Economic Advisers [CEA] released its analysis of the economic costs of illegal opioid use, related overdoses, and overdose mortality in November 2017. It reported a dramatically higher estimate than previous analyses, largely due to a change in methodology. Previous analyses had used a person's estimated lifetime earnings to place a dollar value on that person's life. According to the CEA, "We diverge from the previous literature by quantifying the costs of opioid-related overdose deaths based on economic valuations of fatality risk reduction, the “value of a statistical life” (VSL)."

The CEA noted that "According to a recent white paper prepared by the U.S. Environmental Protection Agency’s (EPA) Office of Policy for review by the EPA’s Science Advisory Board (U.S. EPA 2016), the EPA’s current guidance calls for using a VSL estimate of $10.1 million (in 2015 dollars), updated from earlier estimates based on inflation, income growth, and assumed income elasticities. Guidance from the U.S. Department of Health and Human Services (HHS) suggests using the range of estimates from Robinson and Hammitt (2016) referenced earlier, ranging from a low of $4.4 million to a high of $14.3 million with a central value of $9.4 million (in 2015 dollars). The central estimates used by these three agencies, DOT, EPA, and HHS, range from a low of $9.4 million (HHS) to a high of $10.1 million (EPA) (in 2015 dollars)."

In addition, the CEA assumed that the number of opioid-related overdoses in the US in 2015 was significantly under-reported. According to its report, "However, recent research has found that opioids are underreported on death certificates. Ruhm (2017) estimates that in 2014, opioid-involved overdose deaths were 24 percent higher than officially reported.⁴ We apply this adjustment to the 2015 data, resulting in an estimated 41,033 overdose deaths involving opioids. We apply this adjustment uniformly over the age distribution of fatalities."

The combination of that assumption with the methodology change resulted in a dramatically higher cost estimate than previous research had shows. According to the CEA, "CEA’s preferred cost estimate of $504.0 billion far exceeds estimates published elsewhere. Table 3 shows the cost estimates from several past studies of the cost of the opioid crisis, along with the ratio of the CEA estimate to each study’s estimate in 2015 dollars. Compared to the recent Florence et al. (2016) study—which estimated the cost of prescription opioid abuse in 2013—CEA’s preferred estimate is more than six times higher, reported in the table’s last column as the ratio of $504.0 billion to $79.9 billion, which is Florence et al.’s estimate adjusted to 2015 dollars. Even CEA’s low total cost estimate of $293.9 billion is 3.7 times higher than Florence et al.’s estimate."

In contrast, the CEA noted that "Among the most recent (and largest) estimates was that produced by Florence et al. (2016), who estimated that prescription opioid overdose, abuse, and dependence in the United States in 2013 cost $78.5 billion. The authors found that 73 percent of this cost was attributed to nonfatal consequences, including healthcare spending, criminal justice costs and lost productivity due to addiction and incarceration. The remaining 27 percent was attributed to fatality costs consisting almost entirely of lost potential earnings." According to the CDC, there were 25,840 deaths in 2013 related to an opioid overdose.

According to the CEA, "We also present cost estimates under three alternative VSL assumptions without age-adjustment: low ($5.4 million), middle ($9.6 million), and high ($13.4 million), values suggested by the U.S. DOT and similar to those used by HHS. For example, our low fatality cost estimate of $221.6 billion is the product of the adjusted number of fatalities, 41,033, and the VSL assumption of $5.4 million. Our fatality cost estimates thus range from a low of $221.6 billion to a high of $549.8 billion."