Analysis - The Institute for Southern Studies

Step 6. Monetize Future Avoided Cancer Risk Benefits
Reflecting the best science available, EPA used a point estimate of cancer cases avoided to monetize cancer risks. Appendix K4 provides
further explanation as to why the NRC science is considered more appropriate than the older skin cancer research that the current IRIS value
was derived from. Because EPA has greater confidence in the NRC estimates, it chose to use the 2,509 cancers calculated above as the best
estimate. EPA also used the NRC ratio of 23 male bladder cancers to 14 male lung cancers to estimate how many of each type were likely to
occur in each year. That is, 62%, or 1,556 cancers, are assumed to be bladder cancers and 38% or 953 are assumed to be lung cancers.
Appendix K7 shows the best estimate number of lung and bladder cancers in each year that was used in the remaining portions of this analysis.
Since cancers are not all fatal, the next step was to estimate the number of cancers that are fatal and non-fatal. This was done separately for
each type of cancer using 5-year survival rates from the EPA-ORCR 2009 CCR risk report. The 5-year survival rate used for bladder cancer is
82% and the 5-year survival rate used for lung cancer is 14%. Thus, 1,276 (82%) of bladder cancers are non-fatal and 280 (18%) are fatal. For
lung cancer, 133 (14%) are non-fatal and 820 (86%) are fatal. Again, these cancers are spread over the 75 years of the analysis. In order to
monetize avoided cancer risks, this RIA applied the value of a statistical life (VSL) plus the cost of terminal cancer treatments displayed in
Exhibit 5A-8 below. To monetize avoided non-fatal cancer risks, this RIA used an estimate from Magat et al. (1996). 123 This study shows that
a typical individual’s assessment of a non-fatal lymphoma risk reduction was the equivalent of 58.3% of a fatal lymphoma risk reduction. 124
Therefore, this RIA assumed individuals value non-fatal bladder and lung cancer risk reduction in a similar manner.
Exhibit 5A-8
Unitized Monetary Values for Human Cancer Risks Applied in this RIA
Monetized Value 2008$
Fatal cancers: value of statistical life (VSL)* $8,800,000
Non-fatal cancers: 58.3% of VSL* $5,130,400
Medical costs associated with fatal bladder cancer** $149,863
Medical costs associated with fatal lung cancer** $87,703
Notes:
*Median VSL of $4.65 million (1997$) from Exhibit 7-3 (page 89) of EPA “Guidelines for Preparing Economic Analyses,” EPA 240-
R-00-003, Sept 2000; converted for this RIA to 2008 dollars using the Consumer Price Index. In addition, projections of benefits in
future years are subject to income elasticity adjustments. These represent changes in valuation in relation to changes in real income.
For example, if, for every 1% increase in real income, a particular consumer’s willingness-to-pay for a particular item increases by 1%,
this would be represented by an income elasticity of 1.0. For most items, income elasticity values are actually less than 1, indicating
that valuation of most items does not increase as fast as real income levels. To do so, applied the change in Gross Domestic Product
per-capita between the original dollar year of the estimates and 2008, and an income elasticity of 0.5 based on estimates from Viscusi,
W. K. and Aldy, J. E. “The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World,” Journal of Risk
and Uncertainty, Vol.27, 2003, pp. 15–76.
** These costs reflect the inpatient hospital stays, skilled nursing facility stays, home health agency charges, physicians' services, and
outpatient and other medical services - in other words the treatment and maintenance costs. Costs are assumed to occur during initial
123 Magat, Wesley A., V. Kip Viscusi and Joel Huber "A Reference Lottery Metric for Valuing Health," Management Science, Vol.42, Issue 8, 1996, pp.1118 - 1130.
124 EPA acknowledges that alternative approaches to valuing non-fatal cancers are available. One such alternative is presented in Appendix K5 of this RIA.
121