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Poor Air Quality Leads to More Hospital Costs, Says RAND

Cheryl Clark, for HealthLeaders Media, March 11, 2010

California's long-standing and severe smog problems cause many avoidable hospitalizations that added $193 million in hospital costs between 2005 and 2007, according to a RAND Corp. report.

The report singled out California because the Environmental Protection Agency says California has more people living in areas that don't meet air quality standards than any other state.

The researchers broke the cost of that dirty air down by the number of patients treated at sample hospitals in certain high air pollution counties in the state, and analyzed avoidable spending for treatment of pollution-related illnesses for each county.

Similar to tobacco litigation settlements that brings millions of subsidies to states and counties, the authors suggest that polluters rather than health plans, employers, patients, and government health payers, might be asked to pay to treat patients harmed by those air contaminants.

"From an economic point of view, when people impose harm on others and don't account for that in their behavior, markets don't work perfectly," says John Romley, the report's lead author and economist. "One potential remedy—one can debate how effective it would be if put into practice—would be to make [polluters] pay for harms they impose on others."

"Medicare or Medi-Cal might send the bill [for hospital care for pollution related illnesses] on to polluters, factories, or drivers who drive longer distances, instead," he adds. "I'm not advocating this, but it's not an unreasonable idea."

According to the RAND report, "improved air quality would have reduced total spending on hospital care by $193,100,184 in total." Medicare and Medi-Cal [Medicaid in California] would avoid paying $103.6 million and $27.3 million, because 9,247 Medicare and 8,982 Medi-Cal patient visits would be avoided.

"The sponsors of this work are interested in trying to show that more people have a stake in lowering air pollution levels," he says of the report that was financed by the William and Flora Hewlett Foundation.

Mary Nichols, chairman of the California State Air Resources Board, which monitors pollutants statewide, says the report "sheds some light on another aspect of air pollution by focusing on the healthcare costs we all pay for dirty air.

"Not surprisingly, in a state where three out of every four people still breathe air that fails to meet federal health standards, this study shows that Californians are paying with both their wallets and their lungs," Nichols says.

According to the report, health insurers and other private payers would avoid spending $55.8 million, because 9,029 patient visits would not have been necessary.

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