CombinedCBAReportFinal

Mariana Navarrete M., Phillip Pless and Siyu Wang

M a y 2 0 1 5

Cost Benefit Analysis of MMR Vaccination for Children under Non-Medical Exemption in the United States

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EXECUTIVE SUMMARY ............................................................................................................ 3 INTRODUCTION .......................................................................................................................... 4

The Outbreak in Orange County ............................................................................................................... 4 The Disputes Surrounding the MMR Vaccine .......................................................................................... 6 Standing .................................................................................................................................................... 7 Assumptions .............................................................................................................................................. 8

BENEFITS CALCULATION ........................................................................................................ 8 Healthcare Benefits ................................................................................................................................... 8 Mortality Benefits ................................................................................................................................... 10 Parental and Children Productivity Benefits Calculations ...................................................................... 10 Administrative Benefits .......................................................................................................................... 12

COST CALCULATIONS ............................................................................................................. 15 Vaccine Costs .......................................................................................................................................... 15 Vaccine Wastage Costs ........................................................................................................................... 15 Administrative Costs ............................................................................................................................... 16 Adverse Reaction Costs .......................................................................................................................... 17 Parental Productivity Costs ..................................................................................................................... 18 Parental Travel Costs .............................................................................................................................. 18

BENEFIT COST RATIO .............................................................................................................. 19 SENSITIVITY ANALYSIS ......................................................................................................... 20

Costs ........................................................................................................................................................ 20 Benefits ................................................................................................................................................... 22

CONCLUSION ............................................................................................................................. 24 BIBLIOGRAPHY ......................................................................................................................... 26

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EXECUTIVE SUMMARY

Recent major measles outbreaks in California and other states have increased attention to the

risks of not vaccinating children. There has been a significant increase in the number of measles

cases in the United States in the past several years due to unvaccinated children. Children can

become exempt from the measles vaccine for medical and non-medical exemptions. Non-

medical exemptions are those for religious or philosophical reasons. As a result, this cost-benefit

analysis (CBA) estimates the costs and benefits of the measles vaccine for children exempted

from the measles vaccine for non-medical reasons. National standing is provided in this CBA to

this group of children. The number of children estimated to have non-medical exemptions is

79,749.

Benefits for the measles vaccine can be broken down into four categories: a) healthcare cost

savings; b) mortality aversion; c) parental and children productivity gains; and d) public-sector

administrative benefits. Each benefit category is discounted by 3.5%. Total discounted benefits

for each of these impact categories can be seen in Figure 1 below.

Figure 1: Discounted Benefits and Costs for the Measles Vaccine

Benefits

•  Healthcare benefits- $43.38 million•  Administrative benefits- $13.63 million•  Mortality benefits- $12.56 million•  Productivity benefits- $13.81 million•  Total Benefits: $83.38 million

Costs

•  Vaccine cost- $3.9 million•  Vaccine wastage cost- $0.19 million•  Administrative cost- $1.49 million•  Adverse reaction cost- $23.62 million•  Parental productivity cost-$0.52 million•  Parental travel cost- $1.16 million •  Total Costs: $30.88 million

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In addition to benefits, costs associated with implementing the measles program are also

calculated. Costs associated with implementing the MMR program include: a) vaccine costs; b)

vaccine wastage costs; c) administrative costs; d) adverse reaction costs; e) parental travel costs;

and f) parental productivity costs. The total estimated cost of implementing the measles program

is approximately $30.88 million. Total costs are also shown in Figure 1.

Implementing a MMR vaccination program for children with non-medical exemptions has high

positive net benefits. Benefits exceed costs by a nearly 3 to 1 ratio. Similar to other vaccination

programs, a vaccination program will be highly cost-effective. However, due to the U.S. political

system, a MMR vaccination program for children with non-medical exemptions is not likely to

be implemented in the United States.

INTRODUCTION

The Outbreak in Orange County On January 5, 2015, the California Department of Public Health (CDPH) was notified about a

suspected measles case. The patient was a hospitalized, unvaccinated child, aged 11 years with

rash onset on December 28.1The only notable travel history during the exposure period was a

visit to one of the two adjacent Disney theme parks located in Orange County, California. On the

same day, two other reports about four additional suspected measles cases of California residents

and two cases of Utah residents were filed, all of whom reported visiting one or both of the

aforementioned theme parks during December 17–20. These incidental cases led to a shocking

measles outbreak in California that infected 110 people by the end of February 2015. The

outbreak later became a multi-state one, contributing to a major part of the total number of

measles cases in 2015.

Unfortunately, the outbreak in Orange County is not anecdotal. The United States has already

experienced a record number of measles cases during 2014, with 668 cases from 27 states

reported to CDC's National Center for Immunization and Respiratory Diseases (NCIRD). This is

1 Zipprich, Jennifer, Kathleen Winter, Jill Hacker, Dongxiang Xia, James Watt, and Kathleen Harriman. 2015.

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the greatest number of cases since measles elimination was documented in the U.S. in 2000 (See

Figure 2.2

Figure 2. U.S. Measles Cases and Outbreaks by Year

Though investigation suggested that the original measles virus was likely to come from a person

who got infected overseas and brought the virus to Disneyland during a visit, the real problem

that triggered the outbreak seemed to be the lack of proper vaccination. According to CDC’s

Morbidity and Mortality Weekly Report, among the 110 cases in California, 49 (45%) were

unvaccinated while twelve of the unvaccinated patients were infants too young to be vaccinated.

Among the 37 remaining vaccine-eligible patients, 28 (67%) were intentionally unvaccinated

because of personal beliefs, either philosophical or religious. 3 Further investigation led to a

national debate on the utilization of the Measles, Mumps, and Rubella (MMR) vaccine-a vaccine

that has proven to be useful for preventing measles, mumps, and rubella for decades.

2 Measles cases and outbreaks. in Centers for Disease Control and Prevention [database online]. 2015 [cited April 20 2015]. Available from http://www.cdc.gov/measles/cases-outbreaks.html. 3 Zipprich, Jennifer, Kathleen Winter, Jill Hacker, Dongxiang Xia, James Watt, and Kathleen Harriman. 2015. Measles outbreak—California, december 2014-february 2015. MMWR Morb Mortal Wkly Rep 64 (6): 153-4.

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The Disputes Surrounding the MMR Vaccine Since being introduced in the 1960s, the MMR vaccine was considered a big breakthrough in

inhibiting both epidemics and the severe side effects caused by the three deadly diseases-

measles, mumps and rubella. It is proven to be specifically useful in the prevention of measles,

which has a transmission rate of 90% for a person who is not immunized to it. At the beginning

of 1990, most Western countries have reached a MMR vaccine coverage rate of over 95%,

lowering measles contraction to less than a hundred cases per year. However, a study that was

published in 1998 triggered mistrust on the side effects of MMR vaccination and thus began the

long disputes surround measles vaccination.

In 1998, a study by a British research group, led by principal author Andrew Wakefield, was

published in The Lancet. In this article a possible link between the MMR vaccine and autism was

suggested.4 The research documented 12 cases, in which previously normally developing

children suddenly lost their language and social skills and developed autistic symptoms together

with a bowel disease. Though the article did not suggest a causal relationship between the

vaccine and autism, it almost immediately became a strong reason for parents to not vaccinate

their children, as they viewed autism to be a terrifying diagnosis in a society rewarding social

and communicative skills. Wakefield’s research was criticized harshly by other medical

professionals, as almost no other medical research had suggested any connections between the

vaccine and autism. Nevertheless, the damage caused by the study seemed to be long-lasting.

Many parents have since then developed a suspicion to the side effects of vaccination and have

stopped vaccinating their children completely. This trust dilemma caused MMR vaccination

coverage in 2002 to be even lower than 1990. More than a decade of immunization work had

vanished.5

At the beginning of the 21st century, even though the MMR vaccine level has slowly recovered

to its pre-Wakefield levels, there are clear regional differences, and many regions are still under

the 90% coverage rate that are critical to achieve herd immunity--the reductions in unvaccinated 4 Wakefield, Andrew J., Simon H. Murch, Andrew Anthony, John Linnell, DM Casson, Mohsin Malik, Mark Berelowitz, Amar P. Dhillon, Michael A. Thomson, and Peter Harvey. 1998. RETRACTED: Ileal-lymphoid-nodular hyperplasia, non-specific colitis, and pervasive developmental disorder in children. The Lancet 351 (9103): 637-41. 5 Bragesjö, Fredrik, and Margareta Hallberg. 2011. Dilemmas of a vitalizing vaccine market: Lessons from the MMR vaccine/autism debate. Science in Context 24 (01): 107-25.

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persons’ risk of contracting a disease due to the vaccination of others. For the United States in

particular, although the national vaccine coverage rate is over 95%, the 2014 CDC report shows

the discrepancies among states in vaccination coverage rates (See Figure 3).

Figure 3. MMR Coverage Rate for Kindergarten Children in the 2013-14 School Year

Standing This report assesses the costs and benefits of eliminating philosophical and religious exemptions

of the MMR vaccine for kindergarten children. Standing is provided to children that are currently

not vaccinated due to these non-medical exemptions across the United States. More specifically,

this cost-benefit analysis (CBA) analyzes the costs and benefits associated to kindergarten-aged

children that currently qualify for non-medical exemptions across the United States. Children

currently exempted due to medical reasons are excluded from this CBA due to potential health

complications contracted from getting the MMR vaccination. National standing is provided for

this CBA as it updates prior estimates of costs and benefits of national vaccination programs and

are estimated to illustrate the costs and benefits associated with this policy implementation.6

6 Zhou, F., S. Reef, M. Massoudi, M. J. Papania, H. R. Yusuf, B. Bardenheier, L. Zimmerman, and M. M. McCauley. "An Economic Analysis of the Current Universal 2-Dose Measles-Mumps-Rubella Vaccination Program in the United States." The Journal of Infectious Diseases 189 Suppl 1, (May 1, 2004): S131-45. and Whitney,

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Costs, benefits, and net benefit calculations are presented for the estimated 79,749 kindergarten-

aged children who are unvaccinated due to philosophical and non-medical exemptions.

Assumptions All impact categories for this CBA are undergirded by several assumptions. First of all, it is

assumed that vaccine prices remain constant over time. Secondly, all impact categories are

monetized using 2013 Consumer Price Index (CPI) information from the Bureau of Labor

Statistics. For many of the benefit categories, it is assumed that benefits accrue over a 40-year

time period and are discounted with a 3.5% discount rate. Finally, we assume that benefit accrual

begins at age 5 as we assume that all kindergarteners start at age 5 and benefits accrue until 45.

BENEFITS CALCULATION

Healthcare Benefits The MMR vaccine has proven effective in preventing measles contraction. Thus, the healthcare-

related expenditures to treat measles and its complications are included as a benefit category in

our calculation. The benefit is comprised of two parts: 1) savings from treatment of measles; 2)

savings from treatment of four kinds of complications: minor complications, such as diarrhea,

otitis media (middle ear) infections, pneumonia and encephalitis.

We obtained the per-case treatment cost of measles from a 2008 study on the measles outbreak in

San Diego, which estimated the total treatment cost per measles case to be $1,3477 or $1,457.45

in 2013 dollars. The study did not break down the cost into outpatient visit and hospitalization,

thus we only use the per-case treatment cost as the total cost of healthcare for measles

contraction. The treatment cost per case for the four complications were obtained from a 2004

cost-benefit analysis on the MMR vaccination program in the U.S., converted to 2013 dollars.8

Cynthia G., Fangjun Zhou, James Singleton, and Anne Schuchat. "Benefits from Immunization during the Vaccines for Children Program era—United States, 1994–2013." Mmwr 63, (2014): 352-355. 7 Sugerman, D. E., A. E. Barskey, M. G. Delea, I. R. Ortega-Sanchez, D. Bi, K. J. Ralston, P. A. Rota, K. Waters-Montijo, and C. W. Lebaron. 2010. Measles outbreak in a highly vaccinated population, san diego, 2008: Role of the intentionally undervaccinated. Pediatrics 125 (4) (Apr): 747-55. 8 Zhou, F., S. Reef, M. Massoudi, M. J. Papania, H. R. Yusuf, B. Bardenheier, L. Zimmerman, and M. M. McCauley. "An Economic Analysis of the Current Universal 2-Dose Measles-Mumps-Rubella Vaccination Program in the United States." The Journal of Infectious Diseases 189 Suppl 1, (May 1, 2004): S131-45. and Whitney, Cynthia G., Fangjun Zhou, James Singleton, and Anne Schuchat. "Benefits from Immunization during the Vaccines for Children Program era—United States, 1994–2013." Mmwr 63, (2014): 352-355.

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The study also provided the probability of occurrence and probability of hospitalization for

measles and the four complications, divided by two age groups due to the difference in the

likelihood of occurrence in different ages as well as the total hospitalization cost. Table 1 shows

the probability of occurrence and hospitalization while Table 2 shows the total costs of treatment

of measles and related conditions.

Table 1. Probability of Occurrence and Hospitalization for Measles and Its Complications, in %

Age Measles Minor

Complications

MC

Hos.

Otitis

Media

OM

Hos.

Pneumonia P

Hos.

Encephalitis E

Hos.

5-19 2.54 96.12 4.57 2.23 10.56 1.61 54.86 0.05 100

20-45 0.02 93.80 12.76 1.37 21.83 4.67 74.18 0.16 100 Hos.: hospitalization

Table 2. Per-case Treatment and Hospitalization Expenditures (USD$)

Measles Minor

Complications

Otitis Media Pneumonia Encephalitis

Treatment $1,457.45 $46.29 $74.35 $254.58 $1,556.39

Hospitalization N/A $3,384.71 $4,267.08 $18,139.02 $38,669.72

Healthcare savings from treating measles itself:

79,949× Pr 𝑀𝑒𝑎𝑠𝑙𝑒𝑠𝑂𝑐𝑐𝑢𝑟𝑟𝑒𝑛𝑐𝑒 ×𝑇𝑟𝑒𝑎𝑡𝑚𝑒𝑛𝑡𝐶𝑜𝑠𝑡

We calculated the savings for each age group and the total savings from treating measles is

estimated to be approximately $44.89 million.

Healthcare savings from treating complications is estimated by the following equation:

79,949× Pr 𝑀𝑒𝑎𝑠𝑙𝑒𝑠𝑂𝑐𝑐𝑢𝑟. × Pr 𝐶𝑜𝑚𝑝.𝑂𝑐𝑐𝑢𝑟. ×{Pr (𝐻𝑜𝑠. )×𝐻𝑜𝑠.𝐶𝑜𝑠𝑡 + (1

− Pr 𝐻𝑜𝑠. )×𝑇𝑟𝑒𝑎𝑡.𝐶𝑜𝑠𝑡}

We calculated the savings for each complication and within each age group. The total savings

from treating measles complications is estimated to be approximately $12.15 million. The total

undiscounted healthcare savings are estimated to be approximately $57.03 million. After

applying a discount rate of 3.5%, the total estimated healthcare benefits are approximately

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$43.38 million. Note that we did not calculate the healthcare benefits from avoided hearing

impairment for certain measles triggered complications, as well as the long-term savings in

special education for the hearing impaired children due to lack of data availability. Thus, the

estimated healthcare benefits are likely to be underestimated.

Mortality Benefits Studies have shown that measles contraction may lead to death. Thus, by getting vaccinated, we

expected to see a significant decrease in the probability of catching measles and subsequent

death. We used the 0.08% probability of death due to measles contraction based on the 2004

CDC cost-benefit study.9 Since our program is aimed at getting the cohort of kindergarten

children the MMR vaccine at age 5 and since cost and benefit estimates are projected over a 40-

year period, we calculated the value of statistical life based on $5 million over 40 years and

applied a 3.5% discount rate, which yields an annual value of life that is $234,100 per person.

The benefit of avoided mortality is then calculated as follows:

During age 5 to 19, we assume measles contraction and death occur at age 12 without the

vaccine, thus: Gain in life expectancy with vaccine=

79,949×2.54%×0.08%× 45 − 12 ×234,100 = $12,518,846.18 ($12.52 𝑚𝑖𝑙𝑙𝑖𝑜𝑛)

During age 20 to 45, we assume measles contraction and death occur at age 32 without the

vaccine, thus: Gain in life expectancy with vaccine=

7,949×0.02%×0.08%× 45 − 32 ×234,100 = $38,832.02 ($0.04𝑚𝑖𝑙𝑖𝑜𝑛)

The total benefit from extended life expectancy is estimated to be $12,557,678.2 ($12.56

million)

Parental and Children Productivity Benefits Calculations Previous CBAs of the 2-dose MMR vaccination program have estimated parental and child

productivity gains associated with parents taking care of sick children. In order to estimate the

parental productivity gains associated with eliminating non-medical vaccination exemptions for

children, it is assumed that parents would take care of ill children with four common medical

conditions associated with measles contraction: a) minor complications such as diarrhea; b) otitis 9 Supra note 9

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media (middle ear) infections; c) pneumonia; and d) encephalitis. Productivity benefit

estimations are calculated assuming a two-parent/guardian household in which both parents

work. Benefit calculations assume that one parent will stay home to take care of a sick child.

Benefit calculations assume a two-parent household because approximately 61 percent of

children live in two-parent households as of 2013 while the share of two-parent households with

parents working is 59.1 percent.10 It is assumed that productivity gains are realized for parents

from ages 5-19.

Productivity gains for children are calculated separately from parental productivity gains.

Children’s productivity gains are calculated separately from parental productivity gains for two

reasons: a) the measles contraction rate decreases at age 20; and b) our cohort of children remain

unvaccinated for the duration of the time period covered for this CBA. Children are assumed to

start working at age 20 for reasons of time contiguity, although it is likely that some

unvaccinated children may not enter the labor market until a later age. Children’s productivity

gains are calculated for the same conditions as parental productivity gains.

In order to obtain the total productivity gains experienced by parents and children, probability

rates for measles, minor complications, otitis media infections, pneumonia, and encephalitis

contraction rates for unvaccinated children are gathered from the Centers for Disease Control

and Prevention (CDC).11 The probability rates of hospitalization and home care for each of these

conditions is also gathered in order to accurately reflect lost productivity time for parents. The

number of hospitalization and home care days for each associated condition is gathered and the

average daily wage rate is calculated from recent Bureau of Labor Statistics wage data. 12

To estimate the productivity gains for each associated medical condition, the averted

productivity benefits for persons requiring hospitalization and non-hospitalization for a particular

medical condition are calculated. For example, productivity benefits for averted pneumonia 10 Gretchen Livingston, “Less than Half of U.S. Kids Live in a “Traditional” Family”, Pew Research Center, last modified December 22, 2014, http://www.pewresearch.org/fact-‐tank/2014/12/22/less-‐than-‐half-‐of-‐u-‐s-‐kids-‐today-‐live-‐in-‐a-‐traditional-‐family/.; U.S. Department of Labor, “Employment Characteristics of Families Summary, U.S. Department of Labor, Bureau of Labor Statistics, last modified April 23, 2015, http://www.bls.gov/news.release/famee.nr0.htm . 11 Supra note 9 12 “Databases, Tables, and Calculators by Subject”, US Department of Labor, Bureau of Labor Statistics, accessed May 2, 2015, http://data.bls.gov/cgi-‐bin/dsrv.

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contraction for each year would be modeled by the following equation for both parents and

children: Pneumonia productivity benefits=

79,749× Pr(𝑀𝑒𝑎𝑠𝑙𝑒𝑠𝑂𝑐𝑐𝑢𝑟. )× Pr 𝑃𝑛𝑒𝑢𝑚𝑜𝑛𝑖𝑎𝑂𝑐𝑐𝑢𝑟. × Pr 𝑃𝑛𝑒𝑢𝑚𝑜𝑛𝑖𝑎𝐻𝑜𝑠. ×𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑦 𝑑𝑎𝑦𝑠×

𝑑𝑎𝑖𝑙𝑦 𝑤𝑎𝑔𝑒𝑠 + 79,749× Pr 𝑀𝑒𝑎𝑠𝑙𝑒𝑠𝑂𝑐𝑐𝑢𝑟. × Pr 𝑃𝑛𝑒𝑢𝑚𝑜𝑛𝑖𝑎𝑂𝑐𝑐𝑢𝑟. ×[1 −

Pr 𝑃𝑛𝑒𝑢𝑚𝑜𝑛𝑖𝑎𝐻𝑜𝑠. ]×𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑦 𝑑𝑎𝑦𝑠×𝑑𝑎𝑖𝑙𝑦 𝑤𝑎𝑔𝑒𝑠

Productivity benefits are calculated for other conditions the same way from ages 5 to 45 and total

benefits are calculated by adding the productivity benefits from all conditions. Productivity

benefits are discounted at 3.5% annually for the duration of the time period.

Table 3 shows discounted annual productivity benefits for a portion of the program. The total

discounted estimated productivity benefits for parents and children is estimated to be

approximately $13.81 million in 2013 dollars. Productivity benefits are largest for parents due to

discounting of future benefits and because children have a larger chance of contracting measles

between the ages of 5-19.

It is important to note that this estimation of productivity benefits likely underestimates the true

productivity benefits of implementing a MMR vaccine for children with non-medical

exemptions. First of all, the number of home and healthcare days needed for productivity gain

calculations were not available from the CDC or other reliable sources. Thus, the actual

productivity gains from averting measles itself are not available. Second of all, this CBA does

not consider potential wage differentials that may exist between adults who contract measles and

those who do not. It is possible that future adults who have been adversely affected by measles

may have lower productivity potential than adults without measles. Prior studies have estimated

the benefits from this wage differential—however, the number of assumptions that would have to

be made about future productivity would likely result in unreliable estimates.

Administrative Benefits In addition to direct healthcare and productivity costs averted by a MMR vaccination program,

the opportunity cost of public health officials’ time is also averted with the elimination of non-

medical exemptions for the MMR vaccine. A large measles outbreak in 2008 in San Diego

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caused a substantial outlay of public resources need to investigate and contain the measles

outbreak there. A 2008 study that investigated this measles outbreak estimated the administrative

costs to include: a) the wages and salaries of public health officials; 2) administrative overhead;

3) laboratory testing costs; 4) MMR vaccinations used during the outbreak; and 5) travel costs of

public health officials investigating the outbreak. The San Diego County Health and Human

Services and California Department of Health estimated that it took 1,745 hours to investigate

and contain the outbreak for a public-sector cost of $10,376 per measles case.13

It is likely that eliminating the non-medical exemptions for the MMR vaccine will reduce the

number of measles outbreaks in the United States. Because public officials’ time will not be

spent investigating measles outbreaks, officials’ time can be used to investigate other pressing

public health concerns.

In order to estimate the public-sector benefits associated with fewer measles outbreaks, the

estimate of the administrative benefits from California is used. This is the only estimate of

administrative benefits that is found in the literature. In addition to the administrative costs data,

the median annual number of measles cases reported is used. The CDC, based upon measles

outbreaks from 2001-2012, estimates that the median number of measles cases per annum is 60.14

Thus, estimated administrative benefits are calculated by multiplying the annual cases rate by the

administrative costs per case. The estimated undiscounted administrative benefits for one year

are approximately $724,000. Similarly to productivity benefits estimates, administrative benefit

calculations are discounted at 3.5% annually. Total discounted administrative benefits are

estimated to be approximately $13.63 million. Table 5 below provides a breakdown of

administrative benefits.

13 David E. Sugarman, Albert E. Barskey, Maryann G Delea, Ismael R. Ortega-Sanchez, Daoling Bi, Kimberly J. Ralston, Paul A. Rota, Karen Waters-Montijo, and Charles W. Lebaron, “Measles Outbreak in a Highly Vaccinated Population, San Diego, 2008: Role of the Intentionally Vaccinated”, Pediatrics 125, no. 4 (2010) : 747-755. DOI: 10.1542/peds.2009-1653. 14 Gregory Wallace, Susan Redd, Jennifer Rota, Paul Rota, William Bellini, and Emmaculate Lebo, “Measles-United States, January 1-August 24, 2013”, Centers for Disease Control and Prevention, last modified September 13, 2013, http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6236a2.htm .

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This estimate of administrative benefits is likely to be an upper bound estimate for several

reasons. First of all, San Diego and California specifically have higher costs of living than

outbreaks in other states. San Diego is the 4th most expensive housing market in the United States

in 2014.15 Because employers have to compensate workers for higher living costs, average wages

paid to public health officials in San Diego and California are higher than those paid to workers

in other parts of the United States. Thus, administrative benefits are likely to be on the higher

end than for other benefits calculated in this CBA.

Table 3: Parental and Children Productivity Gains from the MMR Vaccination

Age Measles Contraction Rate Undiscounted Benefits

5-19 2.54% $1,366,390.52

20-45 0.02% $10,962.17

Table 4: Home Care and Hospitalization Days and Wage

Minor Complications Otitis Media Pneumonia Encephalitis

Hospitalization Days 2.33 3.4 9 15.7

Home Care Days 3.5 4 4.5 N/A

Table 5: Administrative Benefits of the MMR Vaccination

Age Median Measles Outbreak Rate Undiscounted Benefits

5-45 60 cases per year $723,920.40

15 Andie Adams, “San Diego is 4th Most Expensive U.S. City”, last modified October 14, 2014, http://www.nbcsandiego.com/news/local/San-‐Diego-‐Is-‐4th-‐Most-‐Expensive-‐US-‐City-‐-‐279089321.html

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COST CALCULATIONS

Vaccine Costs We considered three kinds of costs for this program: costs associated with the purchase and

distribution of MMR vaccines, the costs of adverse reactions once the vaccine is administered

and related social costs. The costs of vaccines seem to be the most important category of all.

We take the number of kindergarten children under non-medical exemption in the 2013-14

school year from the Center of Disease Control and Prevention and break it down by the

proportion of vaccines administered by public and private providers, then we multiply it by the

market price of MMR vaccine, which results in $3.9 million dollars.16 It should be noted the

difference in vaccine price by type of provider as purchasing the MMR vaccine with a private

provider almost triples the cost of obtaining it in the public sector. We further discuss in the

sensitivity analysis the importance of the differences in proportion and in price for the overall

program. Moreover, the burden to the public sector for acquiring the vaccines for this program is

$315 thousand dollars (figure is rounded up on the table).

Table 6. Cost of Vaccines (USD$)

Number of Non Medical

Exemptions

Vaccines per type of

provider

Price of MMR

Vaccine (2013)

Total

(USD$ million)

79,749 80% private healthcare $56.14 $3.58

20% public healthcare $19.76 $0.32

$3.90

Vaccine Wastage Costs We found in the literature some examples that included the cost of vaccine wastage. We

acknowledge that budgeting for a contingency is consistent with good practices in project

16 Seither, R., S. Masalovich, C. L. Knighton, J. Mellerson, J. A. Singleton, S. M. Greby, and Centers for Disease Control and Prevention (CDC). "Vaccination Coverage among Children in Kindergarten - United States, 2013-14 School Year." MMWR.Morbidity and Mortality Weekly Report 63, no. 41 (Oct 17, 2014): 913-920. See Supra note 6 for the proportion by type for provider.

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management and with the fragile nature of vaccines. We use 5 percent of the total cost of

vaccines in order to calculate the cost of vaccine wastage.17 Then, 80 percent is assigned to the

private sector and the remaining 20 percent to the public sector, following the pattern of

consumption of vaccines we mentioned above. The cost of vaccine wastage is estimated to be

approximately $194 thousand dollars.

Table 7. Cost of vaccine wastage (USD$ million)

Vaccines per type of

provider

Total Vaccine

Cost

Vaccine Wastage

Average Rate

Total

80% private $0.32 5%

$0.18

20% public $3.58 $0.02

$3.90 $0.19

Administrative Costs

Table 8. Administrative Cost (USD$)


Exemptions Type of provider

Average

Fees

Vaccines per

type of provider

Total(USD$

million)

79,749 Private provider $18.05 80% $1.31

Medicaid $10.26 20% $0.19

$14.16 $1.49

Administrative costs include several activities from maintaining a vaccine inventory, paying

nurses that administer the vaccines, and the personnel running a clinic. This cost may be

transferred entirely or partially to the customer, and as we see the private fee associated with

getting a vaccine is 1.75 times the Medicaid fee. This is important, because administrative costs

as calculated below will add an additional 38.36 percent to the price of the MMR vaccine.

Although we do not have information on price elasticity for the MMR vaccine, the added

administrative cost should be taken into account by policymakers in order to assess the impact of

the quantity demanded and the overall success of the program.

17 Supra note 6.

17

Adverse Reaction Costs

Table 9. Probability and cost associated with adverse reaction (USD$)

Disease

Probability

of

occurrence

Probability of

hospitalization

Nº of

hospitalization

days

Nº of

outpatient

visit

Cost of

hospitalization

Cost per

outpatient

visit

Minor reactions 0.1 0 0 0.02 - $79.54

Parotitis 0.016 1 3 0.1 $10,971.23 $153.27

Arthralgia/Arthritis 0.01 1 2 0.5 $11,596.37 $172.71

Febrile seizures 0.00033 10 2 1 $6,714.92 $517.69

Thrombocytopecnic

purpura 0.00003 40 4.8 5.91 $28,082.81 $515.21

Anaphylaxis 0.000001 100 2.89 2.06 $19,841.44 $188.96

Aseptic meningitis 0.000001 25 3 1.3 $23,406.04 $177.16

Encephalitis 0.000001 100 8.7 3.52 $36,442.55 $416.69

Thrombocytopenia

case fatality case 0.0000046 0 0 0 - -

Encephalitis case

fatality rate 0.00005 0 0 0 - -

Table 10. Cost of adverse reaction (USD$ million)


Exemptions All diseases

79,749 $23.62

Like any other medical treatment, vaccines may cause adverse reactions. We use the probability

of occurrence for ten diseases associated with the MMR vaccine, their probability of

hospitalization and the cost of hospitalization, we also use the average number of outpatient

visits and the cost of an outpatient visit in order to calculate the total cost of adverse reactions

expected for the kindergarten children under non-medical exemptions. Despite the minuscule

probabilities of the listed diseases, this cost is the largest category in this CBA, accounting for 80

percent of the total costs under the direct cost method, and for 76 percent under the indirect cost

method.

18

Parental Productivity Costs Under the indirect cost method, societal costs are taken into account. We decided to include the

cost associated to the parents of taking a child to get the MMR vaccine. We are assuming a

parent or guardian accompanies a child to get the vaccine, we also assume two hours on average

are sufficient to get the vaccine, and finally we equate the opportunity cost of the parent or

guardian as the average hourly wage. We use the average weekly wage from the Quarterly

Census of Employment and Wages published by the Bureau of Labor Statistics to calculate the

average hourly wage by assuming an average workweek of 40 hours. We multiply the dollar

amount by 2 hours in order to get the individual parental productivity cost (per vaccine). This

category represents 1.69 percent of the total indirect costs.

Table 11. Parental productivity cost (USD$)

Number of children under

Non Medical Exemption

Average

weekly wage

Average

hour wage*

Individual parental

productivity cost** Total

79,749 $958 $23.95 $47.90 $521,822.60 *Assuming average week 40 hours **Assuming 2 hours average

Parental Travel Costs We calculate the parental travel costs in an effort to capture more accurately the costs the parents

or guardians will face when taking their children to get their MMR vaccine. We proxy the

average travel time to a health provider facility with the average travel time to work for families

with children under 6 years published by the US Census (2009), then we multiply the miles by

the Private Own Vehicle (POV) mileage rates published by the US General Services

Administration (GSA) in January 2013. We would like to highlight that parental travel costs are

more than double the parental productivity costs, and as a result, the indirect costs increases.

Both parental costs represent 5.43 percent of the total costs when calculated under the indirect

method.

19

Table 12. Parental travel cost (USD$)

Number of children under

Non Medical Exemption

Average Travel Time to

Work*

POV Mileage

Rates (Jan 2013)

Total

(USD$ million)

79,749 25.65 $0.57 $1.16 * For families with own children under 6 years. Variation from national average 2.2%

We would like to address some of the omitted cost categories in this CBA. Death is not included

in adverse reaction costs because we found in the literature that the probability is so close to zero

that it would not change the cost of adverse reactions for a program of the size analyzed in this

CBA. We are not including any data regarding tax or insurance reimbursement due to the lack of

information, but we recognize they may affect the total cost of the vaccine for consumers and the

quantity demanded in consequence. Likewise, we omit the cost of launching the program or

marketing campaign promoting the MMR vaccine for children under non-medical exemptions

for two reasons: first, it is likely to be negatively perceived by some citizens and interest groups

and could even be counterproductive to the public opinion. Second, we assume that the CDC

already has an organizational structure running other vaccine programs; therefore, the cost of an

additional program or campaign could be absorbed by the organization. We do not consider the

alternative of mobilizing labor force (doctors and nurses) belonging to the public sector in order

to administer the vaccine in school or public spots. Although, many vaccination programs around

the world are conducted under these conditions, it seems unlikely to happen in the U.S. Finally,

we omitted other forms of transportation when calculating the parental travel costs because we

lack information in order to properly cross-tabulate data from different databases containing the

frequencies of other forms of transportation with the frequencies of children under non-medical

exemptions.

BENEFIT COST RATIO When we compute only the direct costs, the Benefit Cost Ratio is 2.85. Then, when considering

the social costs for the indirect cost method, the total cost raises by $1.6 million. This represents

an increase of 5.74 percent of the total direct costs. The net benefits of the MMR vaccine

program for children under non-medical exemption is $54.17 million when including only direct

costs. Despite the increase cost under the indirect cost method, the program will have a net

20

benefit of $52.49 million. When including the indirect costs, the Benefit-Cost Ratio decreases to

2.70.

Table 13: Total Benefits and Costs Benefits Costs (Direct Method) Costs (Indirect Method)

Helthcare Benefit $43.38 Vaccine Costs $3.90 Vaccine Costs $3.90

Mortality Benefit $12.56 Vaccine Wastage Costs $0.91 Vaccine Wastage Costs $0.91

Administrative Benefit $13.63 Administrative Costs $1.49 Administrative Costs $1.49

Productivity Benefit $13.81 Adverse Reaction Costs $23.62 Adverse Reaction Costs $23.62

Parental Productivity $0.52

Parental Travel $1.16

Total Benefits $83.38 Total Costs $29.21 Total Costs $30.88

SENSITIVITY ANALYSIS

Costs We conducted a univariate sensitivity analysis for most cost categories, and then we compare

them to our base case. First, we assumed our program could cover the children under medical

exemptions, which increases the total of children by 10,894 kindergartens, to a total of 90,543

recipients of MMR vaccines. When we calculate that, the total cost of our program goes up by

$532 thousand dollars and the benefit-cost ratio diminishes minimally. We would like to

highlight that children under medical exemption are more likely to have a different set of

probabilities of occurrence for adverse reactions.

If the public sector were to purchase and administer all the vaccines needed, it would result in

potential savings for the program of $2.3 million in the purchase of vaccines and $496 thousand

in administrative fees. This condition causes the benefit cost ratio to reach its maximum ratio of

3.41 when considering direct costs and 3.21 when considering indirect costs.

Likewise, when we assume a 50/50 distribution per type of provider we see the total cost

diminishes in $870 thousand due to vaccine price and $186 thousand due to administrative fees.

21

On the contrary, purchasing all the vaccines for the program in the private sector will raise the

total cost by $580 thousand due to vaccine prices and $124 thousand in administrative fees. This

assumption caused the benefit-cost ratio to reach a minimum in this sensitivity analysis.

Table 14:Changes to total costs: univariate sensitivity analysis (USD$ million)

Parameter

Direct

cost

method

Indirect

cost

method

Increase/decrease in

total cost (USD $)

Base case 3.14 2.97 -

Program cover children under medical

exemption 3.08 2.92 $532,313.52

100 percent of vaccines from public sector

Cost of vaccines 3.41 3.21 $2,321,009.08

Administrative cost 3.21 3.04 $676,442.69

50/50 percent from public sector and private sector

Cost of vaccines 3.24 3.06 $870,378.40


100 percent of vaccines from private sector

Cost of vaccines 3.08 2.91 $580,252.27


Vaccine wastage (3%) 3.15 2.98 $77,935.31

Vaccine wastage (10%) 3.12 2.95 $194,838.28

Cost of adverse reaction plus estimated US inflation*

Estimated inflation 2016: 1.48 percent 3.10 2.94 $349,568.46


Parental productivity cost plus estimated US

inflation*



Parental travel cost plus estimated US inflation*



*According to the International Monetary Fund

22

Reducing vaccine wastage to 3 percent would allow a modest saving of $77 thousand in total

cost. On the contrary, if the vaccine wastage goes up to 10 percent, the total cost will increase in

$194 thousand dollars. We used the estimated inflation for 2016 and 2017 in order to calculate

potential increments for cost of adverse reaction, parental productivity cost and parental travel

cost. We did not compute any decrease in cost for those categories because it seems unlikely to

happen. Because cost of adverse reactions is the largest cost category, even a small increment

will result in a high dollar value. In contrast, inflation will raise parental productivity cost and

parental travel cost by so little, that inflation will not have an effect on the benefit cost ratio

under the direct or the indirect method.

Benefits We also conducted a sensitivity analysis on certain parameters of the benefits to test how

sensitive these benefits were to our calculations. First of all, the sensitivity of the productivity

benefits was tested by adjusting the hourly wage rate from $23.95 to $19.95, which is based

upon differences in reported Bureau of Labor Statistics data. This results in a lower daily wage

rate used to calculate productivity benefits for parents and children. Thus, the daily wage rate

decreases from approximately $192 to approximately $159 per day. After recalculating the

benefits, the discounted benefits estimate drops from $13.81 million to approximately $11.48

million, a difference of approximately $2.33 million. This is approximately a 16.9% decrease in

the aggregate productivity benefits. Making assumptions about the daily wage rate does change

the productivity calculations substantially.

We also examined the sensitivity of our administrative benefits calculation. The baseline case

calculation, as previously mentioned, is an upper-bound estimate of the administrative benefits.

Thus, we wanted to examine how adjusting the cost-of-living index would change the total

administrative benefits calculation. The administrative cost per case data is an estimate from an

outbreak in San Diego. Thus, we examined the difference in the cost-of-living between San

Diego and the average U.S. city. The most recent cost-of-living index information from 2010

from the Bureau of Labor Statistics shows that San Diego’s cost-of-living is 32.3% higher than

the U.S. average. Thus, we adjusted the administrative cost per case to the U.S. average. The

average administration costs then is approximately $9,120 per case. Recalculated administrative

23

benefits fall from $13.63 million to $10.30 million, a drop of $3.33 million in administrative

benefits. This is almost a 25% drop in the net administrative benefits. Thus, cost-of-living

assumptions are important in the final administrative benefits calculation.

Moreover, we estimated the change in mortality benefits by adjusting the age of measles

contraction and death occurrence. Previously, we used the median age for both age groups, and

specifically, we assume death occurs at age 12 during ages 5-19, and at age 32 during ages 20-

45. However, based on medical evidence, measles contractions are more likely to occur at an

earlier time of life, usually before age 25. Thus, we adjusted the assumptions and recalculated the

mortality benefits. We assume that for ages 5-19, measles contraction and subsequent death

happens at age 5, and for ages 20-45, death happens at age 25. Keeping all else constant, the

recalculation shows an increase of $2.67 million in mortality benefits from $12.56 million to

$15.23 million.

Table 14 demonstrates the changes in the parameters above and their effects on total benefit

estimates. Overall total benefits decreased by $2.99 million after the sensitivity analysis.

However, the decrease in benefit does not have a large impact on the benefit-cost ratio.

Table 15:Changes to total benefits: univariate sensitivity analysis (USD$ million)

Parameter Prior

Estimate

New

Estimate

Increase/decrease

in total benefits

Change hourly wage from $23.95 to $19.95

Productivity benefit 13.81 11.48 2.33

Change investigation cost from $10,376 to $9,120 per case

Administrative benefit 13.63 10.30 3.33

Change the ages of death occurrence into age 5 and age 25

Mortality benefit 12.56 15.23 2.67

24

CONCLUSION

There are several limitations in our estimation of costs and benefits to society of the MMR

vaccination program. First of all, the administrative benefit calculations are likely an upper-

bound estimate due to cost-of-living differentials between San Diego and the average U.S. city.

Moreover, the estimated non-medical exemptions estimate may be under or over estimated due

to survey methodology variation among states. As the CDC has discussed, some states only

survey a sample of kindergarteners while other states conduct a full census to estimate the

number of children with non-medical exemptions. Earlier CBAs calculated productivity benefit

differentials between average U.S. workers and persons in special education. However, we did

not estimate the productivity benefit increase due to fewer persons in special education because

of major data problems. We also did not attempt to calculate healthcare cost savings for hearing

impairment in our CBA. Thus, our respective productivity and healthcare benefit calculations

may be substantially lower than benefit estimates if these benefits were calculated.

However, despite these limitations, eliminating the non-medical exemptions for the MMR

vaccine is extremely beneficial for society in averted healthcare, administrative, mortality, and

productivity expenses. Whether using the direct or indirect cost method, benefits outweigh the

costs of the program by nearly 3:1. This is an unsurprising finding as vaccination programs in the

U.S. tend to have large net benefits and are extremely cost-effective. Thus, from a cost-benefit

perspective, it makes sense for the United States to implement this program.

However, we also acknowledge that this program is not likely to ever be implemented in the

United States due to the foundations of the U.S. political system. Public opinion would likely be

strongly against a required vaccination program for previously exempted children due to

constitutional concerns around freedom of religion and free speech. Thus, this program is

unlikely to be implemented given these concerns.

Given the recent measles outbreaks in California and Ohio, continued and informed public

debate over the costs and benefits of the vaccination program are important for parents who are

25

considering not vaccinating their children. A famous letter circulated by the famed British author

Roald Dahl implored parents of children in the 1960’s to ensure that their children be vaccinated

for measles and the potential consequences of not doing so. Thus, it is recommended that

policymakers continue to communicate with the American people on the significant benefits that

accrue as a result of the measles vaccination program and the significant health risks that parents

face if they choose not to get their children vaccinated.

26

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