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The Financial Impact of Fetal Alcohol Syndrome

By Chuck Lupton
SAMHSA FASD Center for Excellence, 2003
(A related slide showPDF icon on this topic is also available.)

Introduction

Every year, about 40,000 babies are born with symptoms of prenatal alcohol exposure. These symptoms vary in severity and may include physical defects, cognitive deficits, and behavior problems. Many children with prenatal alcohol exposure need special education services, and few are able to live independently as adults. Some become involved in criminal activity and are incarcerated.

These myriad difficulties make prenatal alcohol exposure extremely expensive to treat and address. Diagnosis can be difficult, and finding effective medications and therapies is a challenge. In the three decades since fetal alcohol syndrome (FAS) was first identified, billions of dollars have been spent caring for those affected.

Even before FAS was identified, billions were spent treating birth defects and other symptoms that were probably related to prenatal alcohol exposure but were not directly attributed to it. Today, services are provided to individuals with disabilities related to prenatal alcohol exposure even though they might not have a formal diagnosis.

In addition to full FAS, prenatal alcohol exposure can cause differing degrees or patterns of problems, known as fetal alcohol effects (FAE), alcohol-related birth defects (ARBD), and alcohol-related neurodevelopmental disorders (ARND). Although not as severe as full FAS, these conditions are also expensive to treat. The entire group of disorders related to prenatal alcohol exposure is known as fetal alcohol spectrum disorders (FASD), because they fall into a spectrum of disability ranging from mild or moderate to severe.

About the Cost of FAS

Very little data are available on the cost of FAS, and none were found for FAE, ARBD, or ARND. Many sources discuss the cost of substance abuse, but few specifically address FASD. The information found to date was developed from the 1980s to the mid-1990s. A search for more recent data primarily yields references or updates to earlier work. Over 30 reports, articles, and other publications include references to the cost of FAS. More than 80 Internet sites also discuss the issue. Most cost information falls into two categories:

  1. Total annual cost of FAS to the Nation
  2. Lifetime cost of each child born with FAS

Some of the estimates use well-documented approaches that clearly describe the cost components and formulas used. Others provide no documentation at all. A limited amount of other national, State, and local cost information is available.

The Issues in Estimating the Cost of FAS?

When doing cost estimates of an illness or condition, a number of issues can arise. Some examples pertinent to the estimation of the cost of FAS are:

  • Incidence or prevalence rate to use. Retrospective estimates can produce higher estimates than prospective ones.
  • Health impacts and associated care/services to include. For instance, what medical conditions are to be treated and what percentage of affected persons have each particular condition? Is lost productivity to be estimated? Are indirect costs such as administrative, policy, and research costs to be included? Are non-workforce morbidity costs to be included?
  • Adjustments for the difference in the value of current dollars versus dollars that will be needed years in the future. Most economists agree on when it should or should not be done.

In addition, when examining the cost of an illness or condition, it is important to understand the limitations of the estimates. These estimates do not:

  • Estimate the amount of money or years of life that can be saved by effective social policies and programs, since estimates include both avoidable and unavoidable costs.
  • Show the budgetary impact of the illness or condition on governments, but rather on all of society.
  • Seek to consider the economic benefits of prevention, and thus should not be confused with cost-benefit or cost-effectiveness studies.

In addition, when doing cost estimates, several theoretical issues arise. Based on guidelines for estimating the cost of substance abuse, Appendix A1 identifies some theoretical issues relevant to estimating FAS costs. It also describes how well-documented cost studies have addressed these issues.

How Much Does FAS Cost Each Year?

Well-Documented National Estimates
Over the past eighteen years, four sets of investigators have done well-documented studies to estimate the annual cost of FAS in the United States. These studies have detailed and rigorous approaches to cost estimation. They identify costs by category, such as health care costs, residential and support services, and productivity losses. Estimated annual costs vary greatly because varying prevalence rates and cost components were used, the knowledge base for developing estimates rapidly increased over time, and a major amount of inflation has occurred.

All three of the lower cost estimates were done by Abel and Sokol. The lowest estimate by Abel and Sokol2 was $75 million for 1984. This was based on the lowest prevalence rate of all the studies, 0.33 babies per 1,000 live births. This estimate included medical treatment for children with FAS up to age 21 and residential care due to mental retardation up to age 21. Residential care accounted for 77 percent of the total cost.

Two other studies by Abel and Sokol3, 4 used a prevalence rate of 1.9 per 1,000 live births. In the first study, they estimated the total cost to the Nation to be $321 million in 1984 for medical treatment and residential care. In the second study, they estimated the total 1987 annual cost at $250 million.

Abel and Sokol's second study included "corrections" for background rates of low birthweight and costs normally incurred for housing and food, regardless of whether an individual required institutionalization. The study included additional anomalies along with hospital costs noted in diagnosis-related groups. These estimates do not include lost productivity costs, semi-independent support services (e.g., persons living in community settings with ambulatory care and special education services), or residential services due to mental retardation after age 21.

The higher set of cost estimates came from studies by Rice et al.,5 Rice,6 Harwood et al.,7 Harwood,8 and Harwood and Napolitano.9 Rice et al. estimated 1985 annual costs to be $1.6 billion, using a prevalence rate of 1.9 per 1,000 live births. This cost included neonatal intensive care services and other treatment and care services up to age 21. The estimate was based on the Abel and Sokol approach used for their $321 million estimate.

The 1985 estimate by Rice et al. also included residential care for mental retardation for persons over age 21, which accounted for 80 percent of the total annual costs. Later, Rice estimated that the total 1990 cost had risen to $2.1 billion, based on the same prevalence rate and cost components. However, costs were adjusted based on socioeconomic indexes.

Another estimate comes from a National Institute on Drug Abuse/National Institute on Alcohol Abuse and Alcoholism (NIAAA) study by Harwood et al. They estimated the 1992 annual cost to be $2.9 billion based on the approach used by Harwood and Napolitano. This was based on a prevalence rate of 2.0 per 1,000 live births. This cost estimate included several components:

  • Treatment and care services to age 21
  • Home and residential care services for moderate and severe cases of mental retardation to age 65
  • Special education services
  • Lost productivity

An extrapolation by Harwood of the 1992 NIAAA study estimated that costs had risen to $4.022 billion by 1998. This updated estimate adjusted for the change in national health care expenditures and in the consumer price index for medical services. It also adjusted for changes in the adult population in the United States and in the hourly compensation index for lost productivity. No adjustment was made for FAS-specific trends.

In 1985, Harwood and Napolitano estimated 1980 annual costs at $3.2 billion, using a prevalence rate of 1.67 per 1,000 live births. Their estimate included the cost of medical treatment, home and residential care, special education services, and lost productivity for all ages. They also estimated costs for lower and higher prevalence rates, since there was a great deal of uncertainty about prevalence at the time.

Table 1 summarizes the estimates of annual costs for the well-documented studies. The variation in estimated costs is huge. They range from $75 million at the low end to $4.022 billion at the high end. These results reflect the effect of very different assumptions about prevalence rates of FAS and appropriate cost components. Table 2 provides adjusted 2002 estimates of the annual cost based on changes in population growth and inflation. Even with these adjustments, great variation in estimates persists, ranging from $0.2 to $11.7 billion.

Reasons Annual Cost Estimates Vary
Five major factors account for the differences in annual cost estimates:

  1. Prevalence rates significantly affect overall costs. Cost estimates based on low prevalence rates, such as Abel and Sokol's 0.33 per 1,000, will be about 6 times lower than estimates based on prevalence rates of 1.9 to 2 per 1,000.
  2. Differences in medical care and residential services included, the rate of use of such services by individuals with FAS, and the cost of such services all greatly affect estimated costs.
  3. Residential and support services for affected individuals with mental retardation to age 65 add a great deal more costs than studies that estimate such costs only to age 21.
  4. Inflation accounts for differences between estimates for various years.
  5. The knowledge base for developing cost estimates has rapidly increased over time. Thus, more weight should be given to the more recent estimates, since they have learned from and built on prior estimates.
  6. Estimates that include the cost of lost productivity typically will exceed estimates that exclude it.

Table 3 shows the differences in treatment and care costs if all studies used a prevalence rate of 2 cases of full FAS per 1,000 and if residential costs for persons with mental retardation over age 21 represented 80 percent of total treatment and care costs. The updated studies by Rice and Harwood also have been excluded so that the original estimates would all be adjusted in a consistent manner.

Table 3 shows a much smaller range of treatment and care estimates, from $2.3 billion for Abel and Sokol (1987) to $11.1 billion for Harwood and Napolitano (1980). Other than the Harwood and Napolitano estimate, the range is $2.3 billion to $4.7 billion, with a median value of $3.6 billion. This analysis supports the finding that the fundamental cost estimation approaches being used by all these authors are fairly similar (e.g., types of health conditions included utilization and service rates). The major difference is that Harwood and Napolitano had much higher estimates of treatment costs and included additional components such as home care and special education. Their estimate was the first study and used a different knowledge base than subsequent studies.

Other National Estimates
Five other estimates of the annual cost of FAS in the United States were found. However, none document how they were developed. These estimates range from $0.5 billion to $6 billion, as shown below:

Cost Estimates for Other Countries
The professional literature did not include annual cost estimates for other countries. However, FAS cost estimates for other countries would probably yield very different results because of differences in health care system structures, reimbursement approaches, and public policy priorities.

What Is the Total Lifetime Cost of FAS?

Well-Documented Estimates of Lifetime Cost
The literature contains two well-documented estimates of the total lifetime cost for a person with FAS (see Table 4). Harwood and Napolitano9 estimated lifetime cost at $596,000 in 1980. If this estimate is adjusted for the change in the cost of medical care services, lost productivity, and inflation, the adjusted 2002 cost becomes $2.0 million for each individual with FAS. This figure is made up of $1.6 million for medical treatment, special education, and residential care for persons with mental retardation, and $0.4 million for productivity losses.

In February 1989, the Senate Advisory Council of the Alaska State Legislature10 estimated the 1988 lifetime cost of each baby born with FAS at $1.4 million. This estimate, which adapted the approach used by Harwood and Napolitano is considered conservative because of excluded costs. The estimate included costs for:

  • Medical treatment for pre- and postnatal growth retardation, heart defects requiring surgery, cleft palate, and surgery and treatment for audiologic deficits. The prevalence of these conditions was based on studies by Abel and Sokol, and Harwood and Napolitano.
  • Services for infant learning, handicapped children, youth initiative, and developmentally disabled children.
  • Special education services.
  • Social service costs, such as training and supervised work services.
  • Institutional care for mental retardation to age 65.

This estimate did not include costs for:

  • Medical services for physical anomalies, such as visual problems, kidney and genital tract problems, dental and skeletal defects, anesthesiology services, and some physician costs during the first year of hospitalization.
  • Welfare payments to the family.
  • Mental health services.
  • Criminal justice (e.g., trial and incarceration, which can cost about $20,000 per year).
  • Services for mild physical problems and learning disabilities.
  • Lost productivity of caregivers and persons with FASD.

This study also notes that some costs in Alaska (specifically, intensive care services and institutionalization) are much greater than costs used by Harwood and Napolitano, even when inflation is considered. Therefore, the Alaska estimate may not be the most appropriate one to use as a national figure.

When the Alaska estimate is adjusted for changes in the medical services price index, the adjusted 2002 total cost per individual is $2.95 million. This figure is higher than the 2002 inflation-adjusted Harwood and Napolitano estimate. It includes additional service categories (e.g., special education and child and youth services) and higher costs for some medical care services.

Other Lifetime Cost Estimates
Ten other estimates of lifetime costs either do not document how they were developed, or represent an estimate for a specific individual:

  • Streissguth (1980, unpublished data): over $500,000
  • Center for Science in the Public Interest Exit Disclaimer Graphic (1990): $750,000 to age 18
  • Center on Human Development and Disability, University of Washington, which operates the FAS Diagnostic and Prevention Network (2002): $1 million11
  • Fetal Alcohol Syndrome and Fetal Alcohol Effect Prevention and Services Act, University of Washington Fetal Alcohol and Drug Unit Exit Disclaimer Graphic Web site (1995): $1.4 million
  • Health Professions Education Partnership Act of 1998 PDF icon (U.S. Senate Bill 1754): $1.4 million
  • State of Alaska: $1.5 million (inflation-adjusted figure adapted from Federal Health Professions Education Partnership Act of 1998 to estimate the annual cost of FAS to the State)12
  • FASWorld Exit Disclaimer Graphic Web site (undated): $2 million
  • Family Ecology Center (1994): $2.4 million
  • Crime Times Web site (1995): $ 4 million
  • FAS Community Resource Center Exit Disclaimer Graphic PDF icon: $5 million estimated expected lifetime costs for one child with FAS, as shown below. This figure may not be representative of other children with FAS because treatment costs are higher than generally incurred, and some costs are projections that may not actually be incurred. Costs do not include the caregiver's lost wages or the costs of incarceration for the person living with FAS, if it were to occur:
    • $1,508,000 for medical and dental care
    • $1,376,000 for residential placement
    • $624,000 for supported employment
    • $530,000 for psychiatric care
    • $360,000 for foster care and respite care
    • $360,000 for Supplemental Security Income
    • $240,000 for special education

How Do FAS Annual and Lifetime Cost Compare?

In discussing the costs of FAS, Harwood and Napolitano9 note that estimation of lifetime costs is central to the evaluation of the benefits of prevention programs to society. Bloss13 argues that annual costs are helpful to describe the extent of the problem. However, lifetime costs are more useful from a public policy perspective. Further, both Harwood and Napolititano and Bloss note that it is important to calculate the present discounted value (PDV) of the stream of lifetime costs in order to have an appropriate dollar figure when making public policy decisions about whether to expand prevention services.

The present discounted value can be viewed as the amount of funds that need to be deposited today at a given interest rate (exactly equal to the discount rate) so that principal and interest will cover the expected stream of costs over time. A higher discount rate produces a lower PDV and vice versa. Thus, a PDV calculation converts estimated lifetime cost into a present dollar amount needed at the time of the child's birth.

Using the 1980 figure of $596,000 per child with FAS and applying a discount rate of 6 percent, Harwood and Napolitano9determined that the PDV lifetime cost of FAS is $163,000. Bloss notes that if the cost to prevent a birth with FAS is less than the PDV lifetime cost for that birth, then expanding prevention services yields a net economic gain.

Bloss concludes that given the magnitude of PDV lifetime costs for each child with FAS, major prevention efforts may well be justified. However, the most widely used and recommended discount rate is now 3 percent.14 Based on a 3 percent discount rate, the PDV lifetime cost of FAS is $269,000, meaning that even greater prevention costs are justified to prevent births of children with FAS.

Is There State or Local Cost Information?

Very little information is available at the State and local levels. The South Dakota Department of Health estimated in 1983 that the yearly cost of caring for an individual with FAS ranged from $10,000 to $30,000.15 Using incidence rates of 1 and 2 cases of FAS per 1,000 live births and 12,839 births per year, the annual cost was estimated to range from $120,000 to $360,000 (at 1 case per 1,000) to $240,000 to $720,000 (at 2 cases per 1,000). These costs do not include expenses for children born with fetal alcohol effects. With a 60-year life expectancy, estimated FAS costs range from $7.2 million to $43.2 million.

Alaska estimated the cost of FAS in 1999. The research team started with a 1995 estimate of $1.4 million lifetime cost per child with FAS, from the Federal Health Professions Education Partnership Act of 1998. They then adjusted it for inflation and determined that the undiscounted 1999 lifetime cost was $1.5 million.12

Based on the lifetime cost of $1.5 million, the expected lifetime costs of 1999 births with FAS in Alaska are estimated to be $21 million to $42 million, based on prevalence rates of 1.4 to 2.8 per 1,000 live births. These cost estimates include medical costs, behavior management, and residential services. Residential services include special education, home care, speech therapy, and institutional care.

Minnesota presented information about a variety of costs associated with FAS in its 1998 report titled Suffer the Children: The Preventable Tragedy of Fetal Alcohol Syndrome Exit Disclaimer Graphic PDF icon.16 This report identifies the types of State costs associated with FAS: special education, juvenile and criminal justice, out-of-home placement services (e.g., foster care and adoption), chemical dependency, and services for persons with mental retardation.

The cost of FAS in Minnesota was estimated by taking the State's proportion of 1985 national costs ($1.6 billion) as estimated by Rice et al., and then adjusting it for inflation to 1991. Population data were used to prorate costs. The overall annual cost of treating persons with full FAS in Minnesota was estimated to be $45 million in 1991.17 This cost estimate includes medical treatment and residential services for persons with mental retardation. It does not include social support and education, foster care, nonsurgical and non-intensive medical care, juvenile and criminal justice, lost productivity, or caregiver costs.

Cost information at the local level is scarce. However, the San Diego Department of Health Services once estimated that each baby with FAS cost the county $405,000 in direct special services from birth to age 65. In Minnesota, one county has a family of which 6 of 12 children were diagnosed with FAS. County officials had spent $800,000 for this family alone for such services as foster care, mental health care, social services, day treatment, and specialized care. Another $1.3 million is expected to be needed for family members still under age 18. Medical care will add to these costs.16

An FAS Prevalence and Cost Calculator can be downloaded from the Online Clinic (http://www.online-clinic.com/Disorders/fas.aspx Exit Disclaimer Graphic). This clinic is hosted by Dr. Larry Burd, Director of the Fetal Alcohol Syndrome Center at the University of North Dakota. This calculator allows States and provinces to estimate their prevalence of FAS and ARBD and associated costs.

Gaps in Knowledge About the Cost of FAS?

Much of the work to estimate the cost of FAS recognizes that individuals with full FAS are simply the extreme in the continuum of conditions caused by prenatal alcohol exposure. They represent the tip of the iceberg. Other babies born with FAE, ARBD, and ARND make up a much larger group. It is estimated that while the rate of FAS is 0.5 to 2 per 1,000 live births, FAS, ARBD, and ARND combined account for as many as 10 per 1,000 live births,18 or five times as many cases as FAS.11

Sokol et al.19 estimated that the number of births with FAE could be 15 times greater than the number of FAS births. However, costs for these individuals have not been included in most studies as they are extremely difficult to identify. Thus, a major need is to determine the costs associated with this larger group of alcohol-affected individuals.

A number of specific cost categories are generally not included in annual and lifetime costs. Inclusion of these costs would provide a more accurate picture. Examples include juvenile and criminal justice, special education, substance abuse, mental health, and vocational services.

For example, individuals with FAS often become involved with the juvenile and criminal justice systems. A recent study found that 60 percent of subjects with FAS or FAE had been in trouble with the authorities, charged with a crime, or convicted of a crime.20 However, most cost estimates do not include law enforcement costs.

Information on the costs of the juvenile and criminal justice system (including police, court, juvenile detention, prison, and parole/probation services) for individuals with FAS are not available. Costs cannot be assigned since there are no widely used screening and diagnostic tools to identify the numbers of affected persons within these systems. Yet the costs associated with law enforcement are significant. For instance, it can cost close to $30,000 per year to house an inmate in Federal prison.21 Some State prisons spend even more.22

Many individuals with FAS also have substance abuse problems of their own. Individuals with FAS or any alcohol-related birth defect need and use special education and vocational support services. Thus, future studies will show higher costs when these other cost categories are included.

Finally, annual and lifetime cost estimates are based on national statistics about the incidence and prevalence of FAS. Costs may be more concentrated in some racial and ethnic groups, such as Native American communities, where the prevalence of FAS is higher.

The difficulty in estimating the cost of services for individuals with FAS is further compounded by two situations. First, in many communities, these individuals that are inappropriate to their needs receive services and thus cycle through service systems and incur more costs than necessary. In other cases, they do not receive services at all, and therefore there are no associated costs of service provision. In either case, calculating true costs becomes difficult.

Conclusion

By any measure, the costs of FAS to society and for each alcohol-affected individual are very high. The most recent estimate from NIAAA is that FAS costs the Nation over $4 billion each year (higher when adjusting for inflation to 2002). The lifetime cost for each child with FAS is $2 million or more, depending on the costs included. These extremely high costs clearly justify major prevention efforts. When the costs associated with individuals with FAE, ARBD, and ARND are added in, the wisdom of investing in prevention efforts will be even clearer.

Future studies of the cost of FAS need to:

  • Determine the number of children born with FAE, ARBD, and ARND and calculated the ratio of this group to those born with FAS, so that the magnitude of the problem can be better understood.
  • Update or identify the cost of each service system element used by individuals with FAS and other alcohol-affected individuals, while ensuring that costs are representative of the country as a whole.
  • Determine the incidence rate by race and ethnicity so that national estimates of children born with FAS, FAE, ARBD, and ARND can be made with higher confidence.