The Economic Impact of Chronic Disease in Tennessee

Courtnee Melton & Mandy Spears
November 15, 2017
Economy,Public Health
The Economic Impact of Chronic Disease in TN

Key Takeaways

  • Tennesseans’ health and well-being has a complex and mutually influential relationship with our economic prosperity. Each one affects the other.
  • Diabetes, hypertension, and cardiovascular disease affected 460,000 additional Tennesseans in 2015 due to state prevalence rates exceeding the national rates.
  • This excess burden of these 3 diseases alone cost Tennessee nearly $5.3 billion in 2015 in direct medical care, lost productivity, and premature death.

The Excess Cost of Diabetes, Hypertension, and Cardiovascular Disease to Tennessee Taxpayers and Businesses

Higher rates of chronic disease in Tennessee have a cost — including higher health care expenditures, lost productivity, decreased quality of life, and premature death. Many of these chronic diseases are considered preventable. To better understand how preventable chronic disease affects Tennessee, this study estimates the economic impact that achieving aspirational-but-realistic reductions in the prevalence of 3 chronic conditions might have on our state.

This study was commissioned by The Governor’s Foundation for Health and Wellness and conducted by The Sycamore Institute. Click the buttons below to access PDFs of the full study and this executive summary. Additional charts and graphics, including a summary infographic, are available at the bottom of this page.

Full Study (PDF)
Executive Summary (PDF)

Overview of Chronic Disease in the U.S. and Tennessee

Chronic disease is the leading cause of disability, morbidity, and mortality in the United States. (1) (2)  In 2014, chronic conditions accounted for 7 of the top 10 causes of death. (3) Many of these conditions are preventable but have become increasingly prevalent. For example, the share of American adults with hypertension rose from 29% in 2000 to 34% in 2014. The proportion with diabetes grew from 9% to 13%.i (4) Half of adults in the U.S. had at least one chronic condition in 2012, and 25% had two or more, according to one estimate. (5)

The impact of chronic disease is far-reaching. Chronic health conditions affect individuals’ quality of life and put a burden on families, businesses, communities, and our health care system. This report examines the prevalence of chronic disease in Tennessee and estimates the economic impact of the state’s higher-than-average rates of three specific chronic conditions: diabetes, hypertension, and cardiovascular disease (CVD).

Tennessee has higher rates of chronic disease and chronic disease-related mortality than the U.S. as a whole (Figure 1 and Table 1). Compared to other parts of the country, southern states tend to have higher rates of chronic disease and poorer health outcomes. (6)

Figure 1

Table 1

Cause of Death (*indicates chronic condition) Tennessee
(per 100,000)		 United States
(per 100,000)
*Heart diseases 207.3 168.5
*Cancers 180.5 158.5
*Chronic lower respiratory diseases 54.9 41.6
Accidents 56.4 43.2
*Stroke 46.0 37.6
*Alzheimer’s disease 43.4 29.4
*Diabetes 23.4 21.3
Influenza and pneumonia 23.3 15.2
*Kidney diseases and conditions 14.4 13.4
Intentional self-harm (suicide) 15.7 13.3

Note: Mortality rates are age-adjusted
Source: U.S. Centers for Disease Control and Prevention (8)

Historical Chronic Disease Trends in Tennessee

Rates of key chronic diseases and obesity (a risk factor for many chronic conditions) have risen steadily for three decades. Figure 2 and Figure 3 show the increase in diabetes and obesity rates over the last 20 years both in Tennessee and nationally. During this period, the rates of diabetes and obesity steadily increased, but those increases were more pronounced in Tennessee exacerbating differences in the rates. Between 1996 and 2015, the U.S. rate of diabetes among adults increased by 104%. During the same period, Tennessee’s rate increased by 128%. Similarly, the U.S. rate of obesity increased by 77%, while Tennessee’s increased by just over 100%.

Figure 2

Figure 3

Risk Factors for Chronic Health Conditions

Like all health outcomes, chronic diseases are influenced by the drivers of health (see Page 5). Three factors are primarily responsible for the elevated chronic disease burden in the United States (9):

  1. Health Behaviors Poor nutrition, a lack of physical activity, tobacco consumption, and excessive alcohol intake increase a person’s risk of developing a chronic disease and related morbidity and mortality.(1)
  2. Social and Economic Factors Populations and individuals with lower incomes, lower levels of education, and higher rates of poverty are at increased risk of developing a chronic disease and related morbidity and mortality. (10)
  3. Aging of the Population The number of Americans ages 65 years and over is expected to double by 2050.  As people age, they are more likely to develop a chronic health condition. (11) (12)  In 2015, 70% of Medicare beneficiaries ages 65 and over in Tennessee had two or more chronic health conditions. (13)

Many of the risk factors for chronic health conditions can be modified and influenced. As a result, many chronic conditions are considered preventable. (9)

In Tennessee, rates of key health behaviors and the social and economic characteristics that contribute to chronic health conditions are higher than the national rates (Figure 4). For example, Tennessee has higher rates of smoking, obesity, and poverty and lower rates of exercise and educational attainment than the nation as a whole. In some areas, however, Tennessee performs better  including higher rates of fruit and vegetable consumption and lower rates of binge drinking.

Figure 4

What Influences Health?

Health means more than just health care. While access to clinical care is a contributing factor, health behaviors and the physical, social, and economic environments in which people live, work, and play are also major drivers of health (Figure 5). Relative to other drivers of health, the social and economic environment have the largest effect on individual and population health. (48)

Figure 5

The factors that influence health are complex and interconnected. For example, individuals’ health behaviors are a personal choice, but a person’s environment can encourage or discourage certain behaviors. In the context of chronic conditions, healthy eating and exercise are two examples of how other drivers of health can influence health behaviors.

Unhealthy eating patterns and a lack of physical activity can both contribute to obesity. Environmental factors also influence risks for obesity — including access to healthy and affordable food, neighborhood exposure to fast food restaurants, access to recreational facilities and parks, and the relative costs of foods with greater nutritional value and fewer calories. (49) At the same time, transportation and infrastructure systems can impact the amount of time and the types of opportunities people have to engage in physical activity. (54)

See the Sycamore Institute’s Tennessee Health & Well-Being Index for more information about the drivers of health in our state.

The Economic Burden of Chronic Health Conditions

Chronic health conditions affect our economy in a number of ways ranging from increased medical spending by employers to harder-to-quantify impacts from premature death.

Health expenditures represent a growing share of the U.S. economy, and chronic health conditions account for the majority of this spending. In 2015, national health expenditures were $3.2 trillion, which was 18% of all U.S. spending. (15) Chronic diseases accounted for the majority of this spending. In 2010, for example, 86% of all health care spending was for individuals with one or more chronic health conditions. (16)

The health and well-being of individuals and populations has an economic and financial impact on governments, businesses, and individual households. The federal government, households, state and local governments, and private businesses all pay a portion of Americans’ health care costs (Figure 6). As a result, many stakeholders share the economic burden of chronic health conditions.

Figure 6

The costs of chronic disease also include significant costs associated with lost productivity. Chronic conditions can cause people to miss work (i.e. absenteeism), be less productive while at work (i.e. presenteeism), or be unable to work entirely. (18) (19) (20) (21) (22)

In addition to medical costs and lost productivity, chronic conditions often cause premature death, which has harder-to-quantify impacts on society. People make a range of contributions to society everything from spending time with their families to paying taxes. When individuals die prematurely, these contributions are cut short.

Figure 7 displays national estimates of the annual direct medical costs and costs associated with lost productivity for select chronic conditions in the United States.

The Health and Economic Impact of Smoking

According to the most recent data available, smoking cost Tennessee an estimated $2.7 billion in health care spending in 2009 because of its link to a number of chronic conditions and premature death (Figure 8). Nationally, smoking accounts for as much as 14% of all health care expenditures and costs more than $300 billion a year in direct medical costs ($170 billion) and lost productivity ($156 billion). (56) (58)

Smoking is the country’s leading cause of preventable death. It is linked to poorer overall health and a number of chronic conditions  including cancer, stroke, cardiovascular disease (CVD), diabetes, and chronic obstructive pulmonary disease (COPD). (56)

Smoking is responsible for an estimated 480,000 deaths per year nationwide. (56) Smoking is linked to a 10-year shorter life expectancy. (57)

Tennessee has the 8th highest rate of smoking in the United States. In 2016, 22% of adult Tennesseans were current smokers compared to 17% of adults nationally (Figure 9).

Figure 8

Figure 9

 

Figure 7

Our Findings

Tennessee’s high rates of chronic disease have a significant economic impact on health care spending and worker productivity as well as the costs that come with premature death.

Tennessee’s Excess Chronic Disease Burden

In 2015, the difference between Tennessee’s rates of diabetes, hypertension, and cardiovascular disease (CVD) and the U.S. rates meant these three chronic conditions alone affected 460,000 additional Tennesseans.

  • The difference between Tennessee’s 13% prevalence of diabetes and the national rate of 10% amounts to about 114,000 Tennesseans.
  • The difference between Tennessee’s 39% prevalence of hypertension and the national rate of 31% amounts to about 310,000 Tennesseans.
  • The difference between Tennessee’s 9% prevalence of CVD and the national rate of 6% amounts to about 37,000 Tennesseans with cardiovascular disease.

Why “Excess” Disease Burdens and Costs?

We opted to examine the costs associated with Tennessee’s excess disease burden in order to produce estimates that are aspirational but realistic. Many of the existing studies in this area estimate the costs associated with a population’s entire disease burden (e.g. Figure 6). While these estimates are informative, eliminating any of the three conditions is not realistic  what may be, however, is bringing the state’s chronic disease prevalence rates more in line with the national rate. Our estimates reflect the economic impact that accomplishing these aspirational-but-realistic reductions might have on our state.

Figure 10

Our Approach

Read more about the analytic approach used in this study including limitations, assumptions, and technical definitions as well as additional high and low estimates beginning on page 16.

Overview of Excess Cost Estimates

In 2015, the prevalence of diabetes, hypertension, and cardiovascular disease (CVD) in Tennessee in excess of the national rates cost Tennessee nearly $5.3 billion in excess costs. Broken down by chronic condition, excess rates of diabetes cost $1.0 billion, hypertension $336 million, and CVD $3.9 billion (Figure 11). By cost domain, direct medical costs were $1.3 billion, lost productivity $283 million, and premature death $3.7 billion (Figure 12). The full results of our analysis (including our high and low estimates) can be found in the Appendix.

Figure 11

Figure 12

EXCESS DIRECT MEDICAL COSTS

In 2015, the estimated direct medical costs for Tennessee’s excess prevalence of diabetes, hypertension, and cardiovascular disease (CVD) was roughly $1.3 billion (Figure 13).

Excess Direct Medical Costs by Chronic Condition

  • Diabetes: $714 million, or 54% of the total
  • Hypertension: $213 million, or 16% of the total
  • CVD: $398 million, or 30% of the total

Excess Direct Medical Costs by Coverage Type

  • Data for 2015 indicated that an estimated 2.4 million Tennesseans ages 18-64 received coverage through their employer, 558,000 were enrolled in TennCare, and 601,000 were uninsured. (14)
  • Employer-Sponsored Insurance: $922 million, or 70% of the total
  • TennCare: $242 million, or 18% of the total
  • Uninsured: $161 million, or 12% of the total

The full results of our analysis, including the range of estimates by disease and type of health insurance coverage, can be found in the Appendix.

 Figure 13

EXCESS LOST PRODUCTIVITY COSTS

In 2015, the estimated lost productivity cost to Tennessee employers and workers for Tennessee’s excess prevalence of diabetes, hypertension, and cardiovascular disease (CVD) was roughly $283 million (Figure 14). An estimated 2.5 million Tennesseans were employed full-time that year. (27)

Excess Lost Productivity Costs by Chronic Condition

  • Diabetes: $85 million, or 30% of the total
  • Hypertension: $99 million, or 35% of the total
  • CVD: $99 million, or 35% of the total

Excess Lost Productivity Costs by Component of Lost Productivity

  • Absenteeism (i.e. missing work due to illness): $151 million, or 53% of the total
  • Presenteeism (i.e. lower on-the-job productivity due to illness): $132 million, or 47% of the total
  • For diabetes and hypertension, presenteeism was a more costly component of lost productivity. Absenteeism was a more costly component for cardiovascular disease.

The full results of our analysis, including the range of estimates by disease, can be found in the Appendix.

Figure 14

EXCESS SOCIETAL COSTS FROM PREMATURE DEATH

In 2015, the estimated societal costs for Tennessee’s excess premature mortality attributable to diabetes, hypertension, and cardiovascular disease (CVD) was roughly $3.7 billion (Figure 15).

Excess Societal Costs by Chronic Condition

  • Diabetes: $237 million, or 6% of the total
  • Hypertension: $25 million, or 1% of the total
  • CVD: $3.4 billion, or 93% of the total

Placing a monetary value on lost life is a difficult and inherently incomplete consideration of individual worth. These estimates, however limited, help quantify the loss society incurs due to premature death.

The full results of our analysis, including a display of mortality rates by age range in Tennessee and the U.S. and the range of estimates by disease, can be found in the Appendix.

Figure 15

DISCUSSION

Tennesseans’ health and our state’s economy have a complex and mutually influential relationship. Economic growth and prosperity are among the many factors that influence Tennesseans’ health and well-being. The estimates produced in this study begin to quantify and shed light on one important way that Tennesseans’ health and well-being also affect our economy.

IMPLICATIONS FOR TAXPAYERS IN TENNESSEE

Tennessee’s increased burden of chronic disease results in higher health care costs in taxpayer-funded programs like TennCare, our state’s Medicaid program. Health care costs are rising faster than inflation and state revenues. As health care costs increase, states are spending an increasing share of their budgets on health care. (28)  TennCare has constrained its per-enrollee cost growth better than most other states’ Medicaid programs. (29) However, the state’s higher rates of chronic disease necessarily mean that Tennessee is spending more on treating chronic conditions than it would if disease rates were lower.

Improving the health of Tennesseans could free up limited state taxpayer resources for other policy priorities like increased spending in other areas or state tax reductions. Based on this study’s estimates, if Tennessee’s rates of diabetes, hypertension, and CVD were more in line with the national rate, total state and federal funding for TennCare could be reduced by $240 million annually. (The estimated cost savings do not account for the cost of any state-funded programs and interventions aimed at reducing chronic disease rates.) For context, $240 million is roughly equivalent to the combined annual budgets for the Department of Economic and Community Development and the Legislature. In addition, the impact on the uninsured could potentially reduce taxpayer spending for uncompensated care.

IMPLICATIONS FOR TENNESSEE’S BUSINESSES AND WORKFORCE

Tennessee’s higher-than-average burden of chronic disease raises employers’ costs for health care and productivity loss. Based on this study’s estimates, if Tennessee’s rates of diabetes, hypertension, and CVD were more in line with the national rate, employers in the state could reduce their health care costs by $920 million annually and increase their full-time employees’ productivity by over $280 million annually.

Improving Tennesseans’ health could save employers money and increase their productivity, which could lead to higher wages and greater economic output for the state. The key components of these improvements are slowing the growth of health care costs and increasing worker productivity  both of which may have positive spillover effects for businesses and workers.

Evidence suggests that the rising cost of employer-sponsored health insurance has slowed wage growth and increased employees’ out-of-pocket health spending. Increasing rates of chronic disease have contributed to the growth in health care costs over the last several decades. (1) As employers spend an increasing amount on health insurance for their employees, many look for strategies to help control these costs. For example, businesses may limit wage increases, offer less comprehensive health benefits, and increase premiums and/or cost-sharing requirements. (30) (31) Available data show that Tennessee workers’ wages have increased at a much slower rate than deductibles and health care costs. (32)

The connection between peoples’ health and their productivity is well established. Healthier people are more likely to work or actively seek work than people in poor health. (18) (19) (20) At the same time, healthier workers are more productive and miss fewer days of work for health reasons. (21) (22) This means that Tennessee’s relatively higher rates of chronic disease may diminish our workforce’s productivity compared to other states.

Research suggests that improving the health of Tennessee’s workers could also increase the productivity of their fellow co-workers, generating even larger economic gains. The effects of lost productivity are not limited to the specific job that an employee performs. Absenteeism among employees with chronic health conditions can negatively impact their co-workers. When co-workers are absent, other employees may be more stressed or overwhelmed due to an increased workload. (33) Employers may also use time and resources to hire temporary workers or train another worker to complete new tasks. With many jobs, employees are not interchangeable. Employees often possess job-specific knowledge and other intangible qualities that have been developed over time and are not easily transferrable. (35) Our estimates of excess lost productivity costs do not include these spillover effects and may underestimate the costs of loss productivity.

PARTING WORDS

This study serves as a starting point for quantifying the economic impact of Tennessee’s high rates of chronic disease  many of which are preventable. Because of the complex set of factors that influence health, our state’s recent economic growth has the potential to improve the health of Tennesseans. At the same time, this study shows that the health and well-being of Tennesseans can impact our ability to make continued strides in growing our economy and increasing prosperity.

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Authors: Courtnee Melton Mandy Spears
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