rPart 5 in a continuing series on CBA -- Second half of CBA chapter in study

This continues the  "Placing SDWA Costs In Context" chapter of the CBO study.  
The next post after this one will have my comments.
----------------------------------------------------------------------------

"     Unfortunately, CBO does not have sufficient information to provide
ranges -- which would account for the uncertaincy -- around most of the
estimates of costs per cancer case provided." [Footnote: "The one exception
to this rule is radon," EPA, _Report to the U.S. Congress on Radon in
Drinking Water_ (Feb 1994), p. 7-14.  The range of 37 to 243 cases produces
a range of costs per case avoided of $7.6 million to $1.1 million.]  
"However, unless the uncertaincy is great enough to reduce the cost per
cancer case avoided by a factor of 10 or more, the cost per cancer case
avoided for some contaminants -- or for some categories of system sizes --
will be greater than the amount that is generally thougt of as reasonable.
For example, two reviews of studies that measure the value that individuals
place on an avoided statistical death found that the values ranged between
$0.6 million and $10.9 million in 1992 dollars." [Footnote: Ann Fisher,
Loraine G. Chestnut, and Daniel M. Violette, _The Value of Reducing Risks
of Death: A Note on New Evidence_, Journal of Policy Analysis and Management,
vol. 8, no. 1 (Winter 1989), pp. 88-100; and W. Kip Viscusi, _Mortality
Effects of Regulatory Costs and Policy Evaluation Criteria_, Rand Journal
of Economics, vol. 25, no. 1 (Spring 1994), pp. 94-109.  Quote in footnote
follows: "In addition, recent research has examined whether regulations
that reduce risks directly (for example, by decreasing the level of
contaminants in drinking water) can cause offsetting increases in risk
by lowering the income that individuals have to spend on health.  This
research indicates that regulation that costs more than $50 million per
life saved can have an adverse effect on mortality because of the offsetting
effect." [credited to Viscusi above.]

"     Extremely large costs per cancer case avoided, however, would not
necessarily result in extremely large cost savings if the standard was
eliminated.  For example, although the cost per cancer case avoided for
the standard for atrazine and alachlor is estimated at more than $4 billion,
the total cost of meeting that standard (for all systems) is estimated at
$10.2 million.  The high cost per cancer case avoided in this case is the
result of the extremely small number of cases avoided (0.0024 per year)
rather than a very high level of expenditures.

      Noncarcinogens can be grouped into two types of health effects -- 
acute and chronic sublethal.  Acute adverse health effects addressed by
drinking water regulations fall into two major categories: those from
exposure to microbial contaminants, such as giardia and cryptosporidium,
and those from exposure to chemical substances." [Footnote: EPA, _Total
Benefits and Costs Associated with Implementation of the 1986 Amendments
to the SDWA (March 1990), p. 2-8.]  "One of the main acute health effects
of concern from exposure to microbial contaminants is gastrointestinal
disorders, such as gastroenteritis. (Gastroenteritis is an inflammation
of the stomach and intestine.  It can result in loss of appetite, nausea,
vomiting, cramps, and diarrhea.)  The symptoms may range from mild to severe
and incapacitating and generally last from one to four weeks.  In some 
cases, gastrointestinal disorders caused by microbial exposure may result
in death, particularly for individuals with weakened immune systems.
The Surface Water Treatment Rule is aimed at avoiding exposure to microbial
contaminants in surface water systems.

      As is the case with carcinogens, the cost per avoided health effect
varies by system size under the Surface Water Treatment Rule (SWTR), with the
largest costs incurred by the smallest systems (see Table 4).  Unlike the
carcinogens that were examined, the lowest cost per case avoided occurs in
medium-sized systems.  In the original analysis of the SWTR, the estimated
economic cost associated with waterborne giardiasis was based on a study
of costs incurred during an outbreak of waterborne giardiasis in 1983 that
occured in Scranton, Pennslyvania.  That study estimated that the medical
cost and the cost of time lost from work were in the range of $1,678 to
$2,532 per case (measured in 1992 dollars)." [Footnote: EPA, _Regulatory
Impact Analysis for ... Regulations: Interim Enhanced Surface Water
Treatment Rule_ (May 25, 1994), p. 1-7. ]  "If those medical costs and
lost wages are used as a measure of the benefits of avoided incidences
of gastroenteritis obtained by waterborne giardia, the cost per case
avoided exceeds the benefits in all categories of system sizes.

     The proposed Enhanced Surface Water Treatment Rule is designed to
provide increased protection from infection resulting from microbial
contaminants.  The general public's concern about the risk from
microbial contaminants increased significantly following an outbreak
of waterborne disease in Milwaukee, Wisconsin, in 1993.  That outbreak
was caused by the presence of cryptosporidium.  As a result of the outbreak,
400,000 people suffered stomach upsets and diarrhea and 104 people died.
Although the Milwaukee incident drew public attention to the threat posed
by cryptosporidium, the EPA's analysis of the costs and benefits of the
proposed ESWT rule is based on the extent to which it will result in
the control of giardia, not cryptosporidium.

    The EPA has focused on giardia because severe deficiencies in data
(resulting, in part, from analytic problems in measuring the presence
of cryptosporidum) limit the EPA's ability to evaluate treatment techniques
that might control cryptosporidium or to predict the extent to which 
the proposed ESWT rule would decrease the presence of cryptosporidium.
In addition, it has proposed a rule on collecting information (the 
Information Collection Rule) that will provide much better data on the
presence of microbial contaminants and hence the ultimate costs and
benefits of the ESWT rule.

     Based on the limited date that are currently available, the EPA
estimates that the initial phase of the rule (which will apply only
to systems serving more than 10,000 people) will cost $391 million
per year and reduce the number of cases of giardia infection by 
400,000 to 500,000." [Footnote: Ibid, pp. 1-3 to 1-7.]  "That range
in the number of cases of giardia infections avoided results in an
average cost of between $978 and $782 per case avoided.  Based on that
information, the average cost per case avoided by the proposed rule
would be less than the measures of benefits described above.

     The proposed ESWT rule (in the initial phase) is expected to
result in a more favorable cost-to-benefit ratio than the SWTR for
two reasons.  First, given current information, the SWTR appears to
have been based on an underestimate of the extent of microbial risk.
That underestimate would, therefore, result in an overestimate of
the cost per case of waterborne disease avoided.  Second, microbial
risks may increase from treatment modifications undertaken to comply
with tighter standards for disinfection by-products." [Footnote: Ibid]
"It is important to understand that the measures of cost per case avoided
in both the SWTR and ESWT rule are based on limited data on the actual
incidence of waterborne diseases.  In both cases, incidence is predicted
using samples that were not designed to represent the nation as a whole.

     Only a few chemical contaminants are regulated based primarily on
their acute effects -- for example, nitrate, nitrite, copper, and
sulfate.  Only sulfate, however, is estimated to be present at levels
for which establishing an MCL will result in avoiding cases of acute
adverse effects.  The primary adverse effect associated with sulfate is
diarrhea.  That effect appears to be transient: exposed individuals
become acclimated to high sulfate levels over time." [Footnote: EPA,
_Total Benefits and Total Costs..._, p. 2-8.]  "The EPA does not report
the cost per avoided acute health effect expected under the proposed
regulation for sulfate because of inadequate data on the relationship 
between exposure and incidence of diarrhea.

     The EPA has been unable to develop estimates of 'cases avoided'
for contaminants regulated on the basis of chronic sublethal health
effects.  The primary reason cited for the lack of such estimates is the
'absence of accepted dose-response relationships to allow for the
determination of the number of cases of a particular adverse health 
effect caused by different exposure levels.'" [Footnote: EPA, _Total
Benefits and Total Costs..._, p. 2-5.]  "As an alternative, the EPA
has examined the number of people whose exposure will be reduced from a
level above an MCL to a level in compliance with an MCL as a result
of a regulation.  The EPA has examined the cost per reduction in
exposure to three contaminants -- cadmium, fluoride, and lead."
[Footnote: Ibid, p. 5-3.]  "That examination revealed large differences
in the cost of reductions in exposure among contaminants and among
different-sized systems.

     Evaluating the cost of reduced exposure and comparing such costs
among contaminants is difficult, however, for two reasons.  First, the
reduction in adverse health effects that will result from decreased
exposure is unknown.  Second, the types of adverse health effects from
different contaminants vary widely.  For example, the major chronic
health effect from exposure to cadmium involves the kidney, whereas
exposure to lead is particularly problematic for children and can result
in numerous effects, including delayed neurological and physical
development, impaired cognitive development, adverse reproductive effects,
and interference with vitamin D metabolism." [Footnote: Ibid, p. 2-6]
"Because of the inability to attach meaningful evaluations to costs
per reduction in exposure, those data are not presented.

     Ideally one should compare the incremental benefits of a federal
mandate with the incremental costs.  In other words, the costs associated
with each treatment that communities would not have undertaken in the
absence of federal drinking water standards would be compared with 
the benefits of that treatment.  Unfortunately, available data do not
permit CBO to make such a comparison.  Given the extremely high cost per 
cancer avoided for some contaminant and size categories, however, some
of those treatments would probably never have been undertaken without
federal requirements."

[The last paragraph in the section explains the differences in cost/benefit
ratio by summarizing how EPA sets MCLs.  I quoted most of this paragraph
in my part 3.]