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«THE ECONOMIC IMPACT AND COST OF HEARING LOSS IN AUSTRALIA A report by Access Economics Pty Ltd February 2006 Listen Hear! The economic impact and ...»

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Expenditure on GPs ($3.5 million) and aged care homes ($2.7 million) were relatively low – each just over 1% of the total.

The remaining 0.1% of expenditure ($0.4 million) was for diagnostic imaging and pathology. There were no allocated hearing-related expenditures for optometry or dental services.

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Figure 4-2 shows health expenditure by age and gender.

61% of total health spending ($151.3 million) is on males and 39% ($96.1 million) is on females, reflecting prevalence proportions.

While the greater prevalence of OHL in working age men and the greater longevity in women in later life explains most of the differences in expenditure patterns, it is not apparent why boys aged less than 14 years would require higher levels of hearing health expenditure than girls.

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50 40 30 20 10 14 0-4 15–24 25–34 35–44 45–54 55–64 65–74 75-84 <

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Most notably, 27% of health expenditure is associated with children up to the age of 14 years, although this cohort constitutes less than 1% of people with hearing loss. These figures equate to an annual expenditure of $6,511 per child.

At issue here is not that these children do not need such services (the evidence below in fact supports the opposite view) but rather that the remainder of people with hearing loss access relatively little rehabilitative treatment or care within the health system.

Further, those services are generally not available more broadly within the community.

People aged over 65 years constitute half of people with hearing loss but receive less than one third (29%) of the health system expenditure ($40 per person per annum).

There is a case for further research regarding this seeming inequity of allocation, as well as for other fields of research into hearing loss and its impacts. Dillon (2001:368observes: “(T)here is a need for well-controlled research studies that enable us to better identify and quantify all the effects of hearing loss on general wellbeing”.

Research is required that can make the connections between hearing loss and its personal consequences (where they exist) and in turn, to link this information back into the prevention cycle. There are a variety of possible causal mechanisms that could be examined such as stigma and poor health outcomes (ie, the stress effects of hearing loss), lower socio-economic factors, pessimism, severity of perceived disability, social isolation, and negative emotion just to name a few. Hearing health requires an allocation of health research funding that can explore and prospectively examine these issues. Without a program of properly funded research and a suitably structured institute to focus and drive the research agenda, the costs and consequences of hearing loss are likely to remain hidden, with the connections between factors, consequences, costs and expenditure allocations simply not being made.

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Figure 4-3 compares allocated health expenditure for hearing health with the national health priority areas. The year 2000-01 was used as the year of comparison as this provides the most recent data available for all disease areas.

Comparatively, health expenditure on hearing loss is less than 1% (0.9%) of the total expenditure on the national health priority areas, and only 0.35% 8 of total allocated recurrent health expenditure in Australia.

Using the prevalence of diseases reported in AIHW (2004:389) for 2001 and allocated recurrent health expenditures from AIHW (2005b) for 2000-01 it can be seen that,

compared to the then expenditure of $62 per person with hearing loss per annum:

an average of $10,904 is spent per person with cancer and an average of $2,064 is spent per person with a mental illness; and this implies that less than 5% of the average per capita expenditure on the national health priorities is spent on hearing loss.

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Adjusting the health expenditure data for expenditures not allocated by AIHW (recall Section 4.1) brings the total cost of health expenditure on hearing to $287.8 million for 2005, or an estimated 0.034% of GDP.

8 $201m /$58,078m in 2000-01 as per AIHW (2005a: 93) Table A1: Total health expenditure, current price, Australia, by area of expenditure and source of funds, 2000-01.

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Hearing aids and cochlear implants are hearing prostheses used by people with hearing loss to aid communication. These costs are documented as additional health system expenditure. Their estimated cost is, in fact, the largest element of health system expenditure at $376.7 million in 2005, as calculated in the sections below.


Audiological interventions include hearing tests and the supply of ear moulds and hearing aids. These services are supplied to children and young people aged to 21 years by Australian Hearing via funding from the Office of Hearing Services. The Office of Hearing Services also provides a voucher-based hearing aid service to eligible adults in Australia. Eligibility is determined by possession of a pensioner concession or similar government card (e.g. Department of Veterans Affairs Gold Card, Health Card). These services are provided by accredited audiologists and hearing aid audiometrists from the private sector as well as Australian Hearing. For the year 2004the Office of Hearing Services provided a hearing service voucher to 192,149 people, the majority of whom were aged 65 years or over. Those aged less than 65 years who received a hearing aid under this program are assumed not to be double counted since they were excluded from the calculation of aids provided for the younger cohort below. The voucher entitles the individual to hearing tests and the provision of devices. Most people receiving a voucher proceed to take up hearing aids (161,849 people)9 The annual cost for the provision of hearing services to eligible adults and related services in Australia under the Office of Hearing Services Program is $243 million10 for 2004-2005 as per their annual report.

In contrast, services for adults of working age with hearing loss are predominantly provided by the free market. There is an absence of active hearing screening programs to identify hearing loss. Further, adults with hearing loss have been reported to be reluctant to accept hearing aids (Kochkin, 1999). Local studies (Wilson, 1997;

Hogan et al, 2001) report that approximately 15% of older people with acknowledged hearing loss use hearing aids. Reviewing the prevalence data (better ear, ie bilateral loss) for adults aged 22–64 years, this suggests that at best, 151,693 people would have hearing aids. This figure is further revised downwards by 1,000 people11 to 150,693 to allow for people in this age group receiving a free government aid as a result of being unemployed. Assuming too, that on the open market people only renew their hearing aids every five years, and that 50% have two aids (Harvey Dillon, NAL, personal communication), an estimated price of $2,500 per device (Harvey Dillon, NAL, personal communication), with batteries and device maintenance estimated to be $137 per person per year (as per costs provided by the Office of Hearing Services). The total cost of hearing aids in the private market is then estimated as $133.7 million in 2005.

9 http://www.health.gov.au/internet/wcms/publishing.nsf/Content/health-hear-voucher-voucher4.htm 10 Adjusted for 6 months health inflation.

11 The estimate of 1,000 people is based on the finding from Table 5-13 that 969 people in employment services receive the Disability Support Pension (DSP), and there is a linkage between receipt of the DSP and eligibility for publicly provided hearing aids.

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Cochlear Ltd advises that approximately 400 Australians receive an implant each year, and that 33% of implantees are aged 18 years or less. As at October 2005, the cost of the Nucleus® Freedom™ cochlear implant system was $25,070. This equates to approximately $10 million per annum on implantable devices for hearing loss.

Cochlear Ltd estimate that in Australia presently, less than 10% of people likely to benefit from the technology have accessed it.

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Apart from the devices themselves, all other costs associated with cochlear implantation (pre-operative, surgical and post-operative procedures) are covered under allocated recurrent health expenditures noted above.

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Although not a focus of this study, when evaluating the efficacy of interventions it is important that the health related quality of life and cost utility instruments used are sensitive to the condition of interest. Instruments such as the SF 36 (Ware and Sherbourne, 1992) do not have hearing specific questions in them, while the Health Utilities Index (Feeny et al, 1996) does. In situations where less sensitive instruments are used, utility results may be less than optimal. That said, the literature shows that devices such as hearing aids and cochlear implants yield significant benefits for relatively low investments, particularly for hearing aids. By way of comparison, the World Health Organization defines cost-effective and very cost-effective interventions


cost-effective: one to three times GDP per capita to avert one lost DALY; for Australia in 2004, A$41,000 (US$30,000) to A$124,000 (US$90,000); and very cost-effective: less than GDP per capita to avert one lost DALY; for Australia in 2004, less than A$41,000 (US$30,000).

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5. OTHER FINANCIAL COSTS Other financial costs are all those that are not direct health system costs (Chapter 4) nor intangible costs – the loss of health and wellbeing detailed in Chapter 6. It is also important to make the economic distinction between real and transfer costs.

Real costs use up real resources, such as capital or labour, or reduce the economy’s overall capacity to produce goods and services.

Transfer payments involve payments from one economic agent to another that do not use up real resources, for example, a disability support pension, or taxation revenue.

Transfer costs are important when adopting a whole-of-government approach to policy formulation and budgeting.

5.1 PRODUCTIVITY LOSSES People with hearing loss are 25% less likely to be earning higher incomes than people without hearing loss (OR 1.26 CI 95% 1.105 – 1.44) (South Australian Health Omnibus Data, 1994). Of the people in paid work, 72.1% of people with hearing loss reported incomes greater than $40,000 per annum compared with 77.9% of people without hearing problems, a net difference of 5.8%. In the Beaver Dam study, people with hearing loss were also reported to be twice as likely to earn less than $30,000 (Cruickshanks et al, 1998).

Table 5-1 examines the likelihood of people with hearing loss being in the high rather than the low income group compared with a sample of people with no hearing loss (age and gender adjusted). In all cases, people with hearing loss are less likely to earn a high income than people without hearing loss.




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Hearing loss can have an impact on a person’s capacity to work. If employment rates are lower for people with hearing loss, this loss in productivity represents a real cost to the economy.

Access Economics measures the lost earnings and production due to health conditions using a ‘human capital’ approach. The lower end of such estimates includes only the ‘friction’ period until the worker can be replaced, which would be highly dependent on labour market conditions and un(der)employment levels. In an economy operating at

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near full capacity, as Australia is at present, a better estimate includes costs of temporary work absences plus the discounted stream of lifetime earnings lost due to early retirement from the workforce, reduced working hours (part-time rather than fulltime) and premature mortality, if any. In this case, it is likely that, in the absence of impairment, people with hearing loss would participate in the labour force and obtain employment at the same rate as other Australians, and earn the same average weekly earnings. The implicit and probable economic assumption is that the numbers of such people would not be of sufficient magnitude to substantially influence the overall clearing of the labour market.

Table 5-2 reports on employment outcomes for people with hearing loss, with data drawn from the South Australia Health Omnibus Study (1994). Respondents within the Omnibus sample were identified for hearing loss by their response to the question ‘Do you have trouble hearing conversation in a quiet room (even when wearing a hearing aid) when: i) people speak very loudly, ii) when they speak normally, iii) when they whisper iv) have no problems at all. Respondents to items i), ii), iii) and iv) were coded as severe, moderate, borderline and no hearing problem respectively (Hogan et al, 1999). 12 Of people with hearing problems aged 15–64 years, 55.6% ((130+53)/329 from Table 5-2 below) reported being in paid work compared with 62.4% of people without hearing problems, a net difference of 6.8% (OR 1.12 CI 95% 1.06–1. 19; South Australian Health Omnibus data, 1994). Notably 5.3% (133/2,502) of respondents reported their employment status as retired (early) but for people with hearing problems aged 15–64 years, 12.1% (40/329) reported being retired versus 4.3% (93/2173) of people without hearing problems.


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