The Economic Impact of Diabetes in Kentucky

The Kentucky Department of Public Health is responsible for improving the health and safety of Kentucky’s residents by preventing disease and injuries and encouraging healthy lifestyles. The department administers nearly 150 programs that address critical health issues affecting Kentuckians. These programs screen newborns for health problems, prevent the spread of infectious diseases, promote oral health, and provide numerous other services. Diabetes represents a growing health concern for the nation and Kentucky. It is a chronic condition that causes blood sugar levels to rise and contributes to other serious health conditions such as heart and kidney disease. The U.S. Centers for Disease Control and Prevention lists diabetes as the 7th leading cause of death in the nation. The disease imposes significant costs on the country’s economy. The American Diabetes Association estimates that the U.S. spends $237 billion annually on diabetes-related health care. In addition, diabetes also adversely affects the nation’s workforce. As the disease progresses, individuals may find it more difficult to work. This can reduce employment, productivity, wages, and tax revenue. To better understand how diabetes affects Kentucky residents, the Kentucky Department of Public Health contracted with the University of Kentucky’s Center for Business and Economic Research to study the economic impacts of the disease. This study has three main goals: 1. estimate the effect diabetes has on Kentucky’s workforce; 2. estimate the short-run and long-run effects diabetes has on state tax revenues; and 3. examine how prevention and education programs could affect the health of those with diabetes and how they could potentially affect the state’s workforce and tax revenues. Nationally, 10.9 percent of adults have been diagnosed with diabetes, but the incidence rate for the disease in Kentucky is higher. The percentage of Kentucky adults diagnosed with diabetes has increased from 9.9 percent in 2007 to 12.8 percent in 2017. Currently, approximately 441,000 Kentucky adults have diabetes. The disease is more common among older adults, African Americans, and individuals with less education. Past research shows that diabetes is associated with lower employment and earnings. In Kentucky, diabetes reduces employment by approximately 15,700 workers. This represents a loss of $551.3 million in earnings and $33.1 million in state tax revenue annually. Diabetes contributed to 473 deaths of Kentucky residents between the ages of 35 and 64 in 2016. In the absence of the disease, many of these individuals would have worked and earned wages. These deaths represent lost earnings of $12 million and lost state tax revenue of $710,000 during the first year after death. Note that this estimate only represents the losses for deaths that occurred in a single year, 2016. The total earnings and tax revenues lost to diabetes in any given calendar year would actually be larger than the result of a single-year’s deaths, once the cumulative effects of losses associated with those who have died over the preceding years are also factored in. The present value of lifetime lost earnings and revenues for the 473 Kentucky residents who died due to diabetes in 2016 total $100.4 million and $6.02 million, respectively. The American Diabetes Association estimates that those with diabetes incur $5,000 to $12,300 in additional health care costs relative to those without diabetes per year. These estimates suggest that diabetes contributes to an additional $3.9 billion in health care costs in Kentucky annually. Lifestyle intervention programs help individuals who have a high risk of developing diabetes lose weight through healthier lifestyles. Evaluations of these programs show that they can reduce the long-term incidence of diabetes. Although these programs do not appear to reduce total health care costs relative to typical treatment for diabetes, research shows that lifestyle interventions can be cost-effective ways to improve the quality of life for participants. Lifestyle intervention programs may also improve employment and earnings. Because lifestyle interventions reduce the incidence of developing diabetes, they might also increase the percentage of people who are able to work and earn a living. However, it is unlikely that lifestyle interventions would increase tax revenues by enough to cover the costs of the program. For example, an average 45-year-old male who participates in the program could expect to earn approximately $12,600 in additional income and generate $756 in additional state tax revenue over his lifetime, when compared to a male of the same age with diabetes who does not participate in an intervention program. While this amount would not cover the cost of the program, it would help offset a portion of these costs. Diabetes education programs are designed to help those with diabetes manage their disease. Past research has shown that these programs can provide meaningful improvements in weight, blood sugar levels, and blood pressure. Researchers have generally found that they appear to be cost-effective, but estimates vary. There appears to be little meaningful research on whether education programs improve labor market outcomes.