REPORT BY ACCESS ECONOMICS PTY LIMITED

FOR ARTHRITIS AUSTRALIA 31 JULY 2007

The economic impact of arthritis in Australia in 2007

2.1 Arthritis: a snapshot 13

2.1.1 Osteoarthritis (OA) 13

2.1.2 Rheumatoid arthritis (RA) 14

2.1.3 Gout 14

2.1.4 Systemic lupus erythematosus (SLE or lupus) 14

2.1.5 Ross River virus 14

2.1.6 Other forms of arthritis and related musculoskeletal disorders 14

2.2 Treatment and management 15

2.2.1 Drugs 15

2.2.2 Surgery 15

2.2.3 Physiotherapy and exercise 15

2.2.4 Alternative and adjunctive therapies 16

2.2.5 Diet 16

2.2.6 Aids and modifications 16

2.2.7 Psychological support and occupational therapy 16

2.3 Prevalence of arthritis in Australia 17

2.3.1 Data sources 17

2.3.2 NHS prevalence trends 17

2.3.3 Prevalence among the Australian population 18

2.3.4 Prevalence projections to 2050 21

3.1 Risk factors for different types of arthritis 26

3.1.1 Osteoarthritis 26

3.1.2 Rheumatoid arthritis 26

3.1.3 Gout 27

3.1.4 Systemic lupus erythematosus (SLE or lupus) 27

3.2 Obesity as a risk factor for osteoarthritis 27

3.2.1 Osteoarthritis projections for different obesity scenarios 28

4.1 Health system expenditure 32

4.1.1 Methodology 32

4.1.2 Health system expenditure in 2007 33

4.1.3 Expenditure by state 36

4.2 Other financial costs 37

4.2.1 Productivity losses 38

4.2.2 Carers 41

4.2.3 Funeral costs 42

4.2.4 Welfare payments 42

4.2.5 Costs of aids and home modifications 42

4.2.6 Travel costs 45

4.2.7 Costs of programs 45

4.2.8 Deadweight loss 46

4.2.9 Summary of other (non-health) financial costs 47

5.1 Valuing life and health 48

5.1.1 DALYs and QALYs 49

5.1.2 Discount rates 51

5.2 Estimating the burden of disease from arthritis 52

5.2.1 Disability weights 52

5.2.2 Years of life lost due to disability 52

5.2.3 Years of life lost due to premature death 53

5.2.4 Total DALYs due to arthritis 53

5.2.5 Net value of a healthy life lost 54

6.1 Economic impacts in 2007 55

6.2 Economic impacts by state and territory 57

7.1 Comparisons 59

7.1.1 Prevalence 59

7.1.2 Health expenditure 59

7.1.3 Burden of disease 60

7.1.4 Total cost comparisons 61

7.2 Cost effective interventions 62

7.2.1 Summary of arthritis interventions 63

7.2.2 Lifestyle interventions 66

7.2.3 Pharmacotherapy interventions 69

7.2.4 Surgical interventions 71

ii Painful realities: The economic impact of arthritis in Australia 2007

Figure 2.1: Prevalence of arthritis in Australia by age, 2007 19

Figure 2.2: Prevalence of arthritis in the states and territories, 2007 21

Figure 2.3: Arthritis prevalence to 2050 by gender 22

Figure 2.4: Arthritis prevalence to 2050 by condition 23

Figure 2.5: Prevalence of arthritis in the states and territories, 2050 24

Figure 3.1: Self-reported obesity prevalence (% population), 1995 to 2004-05 29

Figure 3.2: Osteoarthritis prevalence under different obesity scenarios, 2005-2050 31

Figure 4.1: Arthritis, allocated health expenditure, 2007 34

Figure 4.2: Arthritis, allocated health expenditure by age and gender, 2007 ($m) 35

Figure 4.3: Arthritis health cost per case & cost per capita, states/territories, 2004 36

Figure 4.4: Arthritis, allocated health expenditure by state/territory, 2007 37

Figure 4.5: Deadweight loss of taxation 46

Figure 5.1: Loss of wellbeing due to arthritis (DALYs), by age and gender, 2007 53

Figure 6.1: Costs of arthritis, by cost type, 2007 ($ total) 56

Figure 6.2: Costs of arthritis, by cost bearer, 2007 (% total) 56

Figure 6.3: Jurisdictional shares of total arthritis costs, 2007 58

Figure 7.1: Prevalence comparisons – arthritis and selected conditions, 2005 59

Figure 7.2: Health expenditure comparisons, arthritis and other

National Health Priority Areas, 2000-01 60

Figure 7.3: Burden of disease in Australia in 2003, by broad disease group 61

Figure 7.4: Visual analogue pain score (intervention phase) 68

Figure 7.5: Public hospital median waiting time by speciality of surgeon,

Australia, 2004-05 72

Table 2.1: Arthritis prevalence rates 1995-2007 18

Table 2.2: Prevalence of arthritis, by age, gender and condition, 2007 20

Table 2.3: Projected prevalence of arthritis in the states and territories, 2007-2050 25

Table 3.1: Impacts of changing obesity rates on osteoarthritis prevalence 31

Table 4.1: Arthritis, allocated health expenditure, 2000-2007, $m (current prices) 33

Table 4.2: Arthritis, allocated health expenditure, by type, 2007 34

Table 4.3: Arthritis, total health expenditure, 2007, $m 35

Table 4.4: Arthritis, total health expenditure by age, 2007, $/capita 36

Table 4.5: Lost earnings and taxation revenue due to arthritis, 2007 41

Table 4.6: Arthritis, aids and equipment prices, estimated product life

and total costs, 2007 44

Table 4.7: Arthritis-related program costs, 2007 46

Table 4.8: Summary of other (non-health) financial costs of arthritis, 2007 47

Table 5.1: International estimates of Value of a Statistical Life (VSL), various years 51

Table 5.2: Disability weights for arthritis 52

Table 5.3: Estimated Years of Health Life Lost due to Disability (YLD)

for arthritis, 2007-08-06 52

Table 5.4: Years of Life Lost due to Premature Death (YLL)

associated with arthritis, 2007 53

Table 5.5: Net cost of lost wellbeing due to arthrits, $m, 2007 54

Table 6.1: Total costs of arthritis in 2007 ($ million) 55

Table 6.2: Allocation of arthritis costs by jurisdiction, 2007 ($ million) 57

Table 7.1: Total cost comparisons ($ billion) 62

Table 7.2: Cost effectiveness of selected interventions for arthritis 64

iv Painful realities: The economic impact of arthritis in Australia 2007

This report was prepared by Access Economics Pty Limited for Arthritis Australia, funded by an

unrestricted grant from The Medicines Australia Community Chest to Arthritis Australia. The

Community Chest supporters are Abbott Australasia Pty Ltd, Boehringer-Ingelheim Pty Ltd, Novartis

Pharmaceuticals Australia Pty Ltd, Pfizer Australia, Roche Products Pty Ltd, Schering-Plough Pty Ltd

and Wyeth Australia Pty Limited.

Access Economics acknowledges with appreciation the comments, prior research and expert input

from:

Professor Graeme Jones

Ainslie Cahill

Jean McQuade

Sophie Coleman

Jenny Bennett

While every effort has been made to ensure the accuracy of this document, the uncertain nature of

economic data, forecasting and analysis means that Access Economics Pty Limited is unable to make

any warranties in relation to the information contained herein. Access Economics Pty Limited, its

employees and agents disclaim liability for any loss or damage which may arise as a consequence of

any person relying on the information contained in this document.

ABS Australian Bureau of Statistics

AF attributable fraction

AIHW Australian Institute of Health and Welfare

AR-DRG Australian Refined Diagnosis Related Groups

ASH arthritis self help

ATO Australian Tax Office

AWE average weekly earnings

BoD burden of disease

BMI body mass index

BRM biological response modifier

BTRE Bureau of Transport and Regional Economics (formerly BTE)

BTE Bureau of Transport Economics

CACP Community Aged Care Packages

CDSMP Chronic Disease Self Management Program

CEA cost effectiveness analysis

CPI Consumer Price Index

DALY Disability Adjusted Life Year

DMARD Disease-Modifying Anti-Rheumatic Drugs

DSP Disability Support Pension

DWL deadweight loss

EACH Extended Aged Care at Home

EQ-5D EuroQol 5 dimension (a measure of quality of life) – based on mobility, self-care,

usual activity, pain/discomfort, and anxiety/depression

FACSiA Department of Families, Community Services and Indigenous Affairs

GDP gross domestic product

HACC Home and Community Care Program

ICD International Classification of Diseases

ICER incremental cost effectiveness ratio

NHPA National Health Priority Area

NHS National Health Survey

NPV net present value

NSA Newstart Allowance

NSAIDS Non-Steroidal Anti-Inflammatory Drugs

OA osteoarthritis

OAK Osteoarthritis of the Knee (Program)

OECD Organisation for Economic Cooperation and Development

QALY Quality Adjusted Life Year

vi Painful realities: The economic impact of arthritis in Australia 2007

RA rheumatoid arthritis

RCT randomised controlled trial

SDAC Survey of Disability, Ageing and Carers (ABS)

SF-36 Short-Form 36 Health Survey

SKA Sickness Allowance

SLE Systemic lupus erythematosus

TGA Therapeutic Goods Administration

THA total hip arthropathy

VLY Value of a Life Year

VSL Value of a Statistical Life

WAVES Warm water exercise programs

WOMAC Western Ontario and McMaster Universities Arthritis index

YLD Years of Healthy Life Lost due to Disability

YLL Years of Life Lost due to Premature Death

This report, prepared for Arthritis Australia, assesses the economic costs to Australia of one of the

country’s most prevalent diseases, arthritis. There are more than 100 known types of arthritis, the

most common being osteoarthritis (OA), rheumatoid arthritis (RA), systemic lupus erythematosus (SLE

or lupus), gout and spondyloarthropathies.

databases of the Australian Institute of Health and Welfare. Additional sources included the

Commonwealth Department of Health and Ageing and the Department of Community Services and

Indigenous Affairs. In areas where insufficient data were available, literature, including both local and

overseas, was sourced to facilitate robust estimations.

Nearly one in five Australians has arthritis; indeed more Australians have arthritis than any other

national health priority condition. In 2007, there are an estimated 3.85 million Australians with

arthritis, including 2.4 million in the working age population (15-64 years). Arthritic conditions are

more prevalent among females, with over 2 million females (19.9% of Australian females) and 1.8

million males (17.1% of Australian males) estimated to have arthritis in 2007. Rates of arthritis

prevalence increase with age to the point where half of all Australians aged over 80 have some form

of arthritis.

It is estimated that 78% of people with arthritis reside in New South Wales, Victoria and Queensland,

indicative of the concentration of Australia’s population on the eastern sea board. Given the higher

prevalence of arthritis among the elderly, the states with the older populations, such as South

Australia and Tasmania have higher ‘raw’ prevalence rates, both around 20%. Conversely, ACT and

the Northern Territory, the jurisdictions with the youngest populations, have the lowest prevalence

rates with 16.9 and 13.3% respectively.

By 2050, it is projected there will be 7 million Australians with arthritis - 23.9% of the projected

population of 29.4 million. This is forecast to include 3.3 million males (22.5% of males) and 3.7

million females (25.2% of females). OA is projected to remain the most prevalent arthritic condition,

affecting 3.1 million Australians, while the prevalence of RA is projected to be 0.9 million in 2050. In

keeping with demographic trends for Australia, the number of people with arthritis is projected to

grow most rapidly in the Northern Territory and Queensland, increasing by 140% and 136%

respectively in these jurisdictions relative to 2007.

In 2007, the total cost of arthritis to the Australian economy is estimated to be $23.9 billion, an

increase of more than $4 billion on the cost calculated by Access Economics in 2004. Almost half of

this is due to the non-financial (burden of disease) costs, while health system costs including

hospitals, pharmaceuticals and aged care account for 20%. A further 17% of total costs are

productivity costs, reflecting the impact of arthritis on employment and workforce participation in

Australia.

viii Painful realities: The economic impact of arthritis in Australia 2007

Note: BoD = burden of disease; DWL = deadweight loss.

The main bearers of arthritis costs in Australia are the individuals with the condition themselves who,

it is estimated, shoulder 61% of the total cost – largely as a result of being the bearer of the burden

of disease. The Federal Government is the second biggest cost bearer, a consequence of funding the

lion’s share of the large health system expenditures on arthritis and also bearing the lost taxation

revenues associated with the considerable productivity losses arising from the condition.

Health System Costs 20%

Carer costs 4%

Productivity

Family/Friends 3%

State Government 5%

Federal

Access Economics estimates that in 2007, the allocated1 health system expenditure associated with

arthritis is $4.2 billion - $1,100 per person with arthritis. $2 billion of this is estimated to have been

allocated to OA, while health expenditure on RA was estimated at $422 million. The largest

component of health system cost was hospitals, which accounted for 44% of total allocated

expenditure. Aged care homes and pharmaceuticals were also significant components, representing

23% and 14% of allocated expenditure respectively. Health expenditure on arthritis exceeded that

on coronary heart disease, depression, stroke, diabetes and asthma.

Other financial costs resulting from arthritis are estimated to be $7.6 billion in 2007. Over half of this

was productivity costs, reflecting the reduced employment rates and increased absenteeism that

results from arthritic conditions. The costs of informal care were estimated to be over $1 billion in

2007, indicative of arthritis’ degenerative nature, and the need for individuals with the condition to

be assisted and supported. People with arthritis may also require aids or devices to assist them in

carrying out their daily activities, or make additions or modifications to their home to ensure safety

and mobility. The cost of these is estimated to be $211 million in 2007.

The financial costs of arthritis are only one aspect of the total economic costs of arthritic conditions,

the other, the non-financial component, is the burden of disease. The pain and suffering that arthritis

patients endure as a result of their condition can decrease their quality of life, and while mortality

rates for arthritis are low, there is also a cost in terms of years of life lost. In 2007 the years of life lost

due to disease is an estimated 91,479 while the years of life lost due to premature death is estimated

to be 2,376. Consequently, the total disability adjusted life years (DALYs) due to arthritis is estimated

to be 93,855, or in dollar terms, the net cost of loss of wellbeing is $11.7 billion in 2007.

While the cost of health care delivery (per case) does vary to some degree between jurisdictions, the

main driver of cost shares is prevalence, which in turn reflects Australia’s demography. As such, New

South Wales bears the greatest share of arthritis costs, 33%. Victoria (25%) and Queensland (19%)

are the second and third largest bearers and, naturally, the ACT and NT bear only small fractions of

total arthritis costs (less than 1% each).

Obesity is one of the most preventable risk factors for OA; in fact, obese people are 2.4 times more

likely to have OA than people of normal weight (Access Economics, 2006c). Access Economics

undertook to model the impact of obesity on OA under three obesity scenarios, capturing what may

be considered the upper and lower bounds for obesity prevalence in Australia to 2050. The findings

of the analysis revealed that if obesity remains stable at current levels (around 16% of the

population), projected prevalence of OA is 10.7% of the population in 2050 (baseline scenario).

However, if obesity continues to grow at the rate witnessed over the last decade, such that around

47% of men and 35% of women are obese in 2050, OA is projected to increase in prevalence to

11.2% of males and 14.5% of females, affecting nearly 3.8 million Australians. Finally, if obesity were

eliminated by 2050, OA would be reduced by 425,000 persons, relative to the baseline scenario in

2050.

x Painful realities: The economic impact of arthritis in Australia 2007

1 Allocated health expenditure is that proportion of health expenditure that is able to be allocated by disease.

There is a range of treatment and management options available for arthritis and naturally the cost

effectiveness (measured in dollars spent per Quality Adjusted Life Year gained) of these varies

considerably. Overall, the evidence available suggests that surgical interventions appear to be very

cost effective treatment for some forms of arthritis, and in fact there is evidence to suggest that some

surgical interventions are even cost-saving (reducing overall financial costs and gains QALYs),

suggesting priority be given to reducing waiting lists for orthopaedic surgery. The cost effectiveness

of pharmacotherapy and lifestyle interventions varies significantly depending on the intervention and

there is a need to evaluate the efficacy of such interventions, in light of the alternatives, to help

facilitate the most efficient allocation of resources. The use of pharmacotherapy is the usual first line

treatment for OA, while newer treatments for RA such as anti-TNF-alpha agents and other biologic

response modifiers may also be cost effective, in particular for some target populations. In Australia,

lifestyle interventions have been widely implemented, with a range of programs in place across the

nation. In Western Australia, the Osteoarthritis of the Knee (OAK) Program appears, prima facie, to

be relatively successful. The program is low cost in nature, and there are indications that it may

facilitate both cost savings in the formal health care sector and improvements in the health and

wellbeing of its participants. A full cost effectiveness analysis of the program would appear a

worthwhile exercise on which to base decision-making regarding the future of the program.

Access Economics

31 July 2007

Access Economics was commissioned by Arthritis Australia to conduct an economic analysis of

arthritis in Australia in 2007 covering:

for Australia and each of the eight State/Territory jurisdictions;

its impact on osteoarthritis prevalence projections;

losses, informal care, equipment and devices) and the burden of disease for Australia and the

jurisdictions; and

pharmacotherapies, self-management programs and orthopaedic surgery (and the associated cost

of waiting in queues).

This report presents the methods and findings of this analysis.

Chapter 2 provides a snapshot overview of arthritis, its causes, disease progression, morbidity,

mortality, impacts and treatment options. The focus of the chapter is on estimating the prevalence of

the main forms of arthritis in Australia – osteoarthritis (OA), rheumatoid arthritis (RA) and other

arthritis, based on National Health Survey data. Age-gender prevalence rates are calculated and

applied to demographic data for Australia and its States and Territories, for the year 2007 and with

projections to 2050.

Chapter 3 outlines the main risk factors for different types of arthritis, with a particular focus on

obesity as a risk factor for OA. Projections of OA are calculated under different scenarios for future

obesity prevalence and trends.

Chapter 4 investigates the economic impact of arthritis in 2007, including health system expenditure

in Australia and estimates for the States and Territories. Other financial impacts are also estimated,

including productivity losses, the opportunity cost of the provision of informal care for people with

arthritis, out of pocket expenses for aids, home modifications and the bring-forward of funerals, and

the deadweight losses associated with transfer payments (taxation revenue forgone and welfare

payments).

In Chapter 5, the burden of disease (loss of wellbeing) from arthritis is calculated, comprising the

years of healthy life lost due to premature mortality and, most importantly, due to disability –

measured in Disability Adjusted Life Years (DALYs). Using a willingness to pay methodology for

estimating the value of life and health, the net value of healthy life lost is then estimated.

Chapter 6 provides a summary of the economic impacts for Australia and the jurisdictions, including

by type of cost and by who bears the cost.

Finally, in Chapter 7 comparisons are made between arthritis and other national health priority and

disease areas, in terms of prevalence, health expenditure and burden of disease. The report

concludes with a brief presentation of some appropriate interventions to help prevent and ameliorate

the symptoms of arthritis – including lifestyle interventions, pharmacotherapy and orthopaedic surgery

– with a focus on their cost-effectiveness.

12 Painful realities: The economic impact of arthritis in Australia 2007

Musculoskeletal disease is the major cause of disability and handicap in Australia, and arthritis is the

most prevalent form of musculoskeletal disease, accounting for over half of all musculoskeletal

conditions. ‘Arthritis’ is a general term that refers to disorder of one or more joints. There are more

than 100 known types of arthritis, of which five account for a large majority of cases—osteoarthritis

(OA), rheumatoid arthritis (RA), systemic lupus erythematosus (SLE or lupus), gout and

spondyloarthropathies (including ankylosing spondylitis, psoriatic arthritis, Reiters Syndrome, reactive

arthritis, enteropathic arthritis, isolated acute anterior uveitis and undifferentiated

spondyloarthropathy).

Osteoarthritis is the most common form of arthritis. It develops when articular cartilage (the smooth

covering over bones in the joints) starts to break down, usually as a result of trauma, ageing or failure

of joint repair and maintenance mechanisms. Degradation of the cartilage can be associated with

underlying bone damage, thickening and bone-on-bone friction. Symptoms include stiffness, pain

and tenderness in the joints and surrounding muscles and ligaments, possibly with fatigue, reduction

in motor skills and deformities. The most common pattern of joint involvement in OA involves the

major weight-bearing joints such as the hips, knees or lower spine, with neck and hands also being

frequently affected sites. There is no single cause for OA, with identified risk factors including: being

overweight, advancing age, hereditary factors, joint trauma (such as in sports injuries) and other

metabolic or inflammatory disorders. Because it is more common in women, hormones (especially

oestrogen) are suspected to have a relationship to OA; however, risk factors for arthritis are discussed

in more detail in Section 3 of this report.

Painful realities: The economic impact of arthritis in Australia 2007 13

2 Access Economics gratefully acknowledges the previous contributions of Professor Les Cleland of the University of

Adelaide whose assistance with the description of arthritis, and its treatment and management have made

significant contributions to this report.

3 OA of the hands is a distinct sub-type of OA and very common in women. Unlike the gradual onset of other

types of OA, this type can begin suddenly and painfully. It is progressive and causes classic deformities of the

fingers with enlarged joints.

Rheumatoid arthritis is the second most common form of arthritis and the most common

autoimmune disease in Australia (AIHW, 2005). More prevalent among women, RA is a progressive

disease with onset most likely between 25-50 years, at a time when people are active in the

workplace or family care roles. RA is characterised by inflammation within joints that serves no

evidently useful purpose and which damages joint structures.

The synovial membrane that lines joints is thickened and an

over-production of synovial (joint) fluid occurs. The joints

become painful, swollen, stiff and, as the process continues,

deformed from damage to the cartilage and other soft

tissue.4 Other symptoms include fatigue, interrupted sleep,

weight loss, anaemia, nodules (in 30% of people), ulcers,

atrophic skin, muscle weakness, impaired joint function and

inflammation of the heart, lungs, eyes, nerves, blood vessels

and lymph glands. There is significant morbidity and

mortality (over half of patients will have to reduce

significantly or stop work after ten years of the disease).

Gout is caused by the reaction of defence cells in joints to the presence of uric acid crystals. Uric acid

(or urate) is a by-product of the breakdown of purines in the body. (Purines are components of the

genetic template (DNA) and of certain messenger substances within cells.) Gout is characterised by

severe acute attacks of joint pain and swelling, which typically affect joints such as the big toe, the

ankle, knee and elbow. An excess of urates can also cause kidney damage, including the formation

of stones.

SLE or lupus is a chronic inflammatory autoimmune disease of the connective tissues. It affects the

skin—especially in sun exposed areas such as the cheeks, which become red and scaly—and various

internal organs (kidneys, heart, lungs and brain can all be affected by inflammation and subsequent

scar tissue). Lupus often causes general fatigue, tiredness, loss of concentration and memory.

Internal organ involvement can lead to organ failure and death.

The mosquito-transmitted Ross River virus and the similar Barmah Forest virus cause epidemic

polyarthritis—ie, acute arthritis in many joints causing severe aches and pain. Viral arthritis does not

usually damage the joints like RA, but the arthritis and fatigue can sometimes last for years before the

joint returns to normal. Symptoms include chronic fatigue, rashes, severe headaches, impaired

concentration and memory as well as depression. There is no specific treatment or vaccination,

although scientists are working to develop a vaccine.

Other types of arthritis include juvenile idiopathic arthritis, ankylosing spondylitis (which mainly affects

young men), spondyloarthritis, psoriatic arthritis, scleroderma, bursitis, tendonitis, carpal tunnel

syndrome, polymyalgia rheumatica, dermatomyositis, and Reiter’s Syndrome.

14 Painful realities: The economic impact of arthritis in Australia 2007

4 Queensland Arthritis Foundation, www.arthritis.org.au/rheuarth.html, also for RA diagram.

There are many different types of medicines available to treat the different forms of arthritis, with the

aim of reducing pain, increasing mobility, slowing the progression of inflammation and reducing the

rate of joint damage.

Medicines that reduce the symptoms and inflammation include over-the-counter analgesics and

NSAIDs (non-steroidal anti-inflammatory drugs). Prescription medicines include COX-2 inhibitors, a

class of medicines including celecoxib (Celebrex), meloxicam (Mobic) and lumiracoxib (Prexige)*, and

disease-modifying anti-rheumatic drugs (DMARDs) that can also retard the progression of the disease.

For RA, methotrexate is the mainstay of treatment with concurrent use of other DMARDs, such as

hydroxychloroquine sulphate (Plaquenil), sulphasalazine (Pyralin or Salazopyrin) and leflunomide

(Arava) providing additional benefit. Older DMARDs such as gold injections (Myocrisin) and

penicillamine (D-Penamine) may still be used in some cases.

More recently, the development of biologic response modifiers has provided physicians with another

alternative for treatment. Some of these biologics are known as anti-TNF-alpha agents (TNF is

Tumour Necrosis Factor, referring to specific chemicals made in the body that are thought to cause

inflammation and damage). Examples are infliximab (Remicade), adalimumab (Humira) and

etanercept (Enbrel). TNFs are better than existing treatments but cost much more, so they may be

best suited (including for public financing) to particular target populations where they are most cost

effective. Other biologic response modifiers that work by different mechanisms include rituximab

(Mabthera) and anakinra (Kineret). These medicines are administered by injection or intravenously

and are currently only subsidised through the PBS for patients fulfilling certain specified criteria.

Corticosteroids are potent drugs that are invaluable in the management of inflammatory joint disease.

Patients vary in their responsiveness and tolerance to drugs and treatment and will often need to be

individualised.

There is increasing evidence that early, aggressive treatment of rheumatoid disease can significantly

slow the progression of joint damage.

Orthopaedic surgery can help many patients with some forms of arthritis to increase mobility and

joint function, and decrease pain. Procedures include joint replacement, arthroscopy and carpal tunnel

release. Problems following joint replacement surgery can include infection (early or late) and a late

inflammatory reaction to ‘wear particles’ (shed by implanted components) that leads to loosening of

the implant and secondary joint failure. While surgical revision of failed artificial joints is possible, the

procedure is more difficult than primary joint replacement.

These therapies can be used to strengthen muscles, maintain joint mobility and position, improve

heart and lung fitness, reduce stress, control weight, improve sleep and contribute to overall wellness

and coping strategies. Exercise programs include hydrotherapy, walking, aerobics, dancing, as well as

more specifically localised exercises.

Painful realities: The economic impact of arthritis in Australia 2007 15

* lumiracoxib (Prexige) withdrawn from Australian market 11 August 2007

2001 report, Access Economics estimated that there were 3.1 million Australians living with arthritis,

approximately 16.5% of the population. In the 2005 report, this figure was estimated to have grown

to 3.4 million, or approximately 16.7% of the population, demonstrating an increase in both the

absolute number of people with arthritis as well as an increase in the overall prevalence rate.

As in Access Economics (2001 and 2005), age-gender prevalence rates have been based on evidence

from the Australian Bureau of Statistics (ABS) National Health Survey (NHS). While the 2001 report

relied on data from the 1995 NHS and the 2005 report relied on data from the 2001 NHS, the more

recent 2004-05 NHS provides more up-to-date data from which prevalence rates in 2007 and future

prevalence projections can be estimated. Based on the findings of past expert consultation by Access

Economics, arthritis is defined to include the NHS categories ‘osteoarthritis’, ‘rheumatoid arthritis’,

‘other arthritis’ and ‘other arthropathies’. While there may potentially be conditions residing in ‘other

arthropathies’ not strictly attributable to arthritis, the estimates calculated here remain conservative as

other cases of arthritis, which cannot be disentangled from categories such as ‘other musculoskeletal

conditions’ or ‘back pain’, for example, are not captured in the present definition. The official release

of findings from the NHS reports prevalence rates and provides an overall gender breakdown and age

distribution. However, in order to ensure most robust prevalence estimates, a specific data request

was submitted to the ABS to ascertain the precise age-gender breakdown of arthritis from the survey.

Based on these data and Australian demographic data also from the ABS, Access Economics has

estimated the prevalence of arthritis in Australia and the results of this analysis are presented below.

The findings of the 2004-05 NHS suggest that there were nearly 6.1 million Australians with a

musculoskeletal disorder in that year, 30% of the population. Of this, 3.7 million people reported

having arthritis including ‘other arthropathies’ (18.1% of the population).5 Based on these data, and

prevalence of arthritis in 2007 to be 3.85 million Australians, or 18.5% of the population.

The increasing prevalence of arthritis in Australia can be observed in Table 2—1, which shows that,

between 1995 and 2007, the prevalence of arthritis has increased from 55% (14.7/26.5) to 61%

(18.5/30.4) of musculoskeletal disorders. There have been some minor changes to the methods used

in the NHS and it is possible that some portion of the increase in the prevalence of arthritis between

2001 and 2004-05 results from these changes. Better diagnosis may also account for some of the

increase, as well as ‘real’ increases from an ageing population and the rising prevalence of risk factors

(eg, numbers of obese people).

Painful realities: The economic impact of arthritis in Australia 2007 17

5 ‘Other arthropathies’ comprise ABS NHS CURF code 23139 that, in turn, comprises input from codes 139

(shoulder symptom/complaint), 141 (arm symptom/complaint), 142 (wrist symptom/complaint), 143 (hand/finger

symptom/complaint), 144 (hip symptom/complaint), 158 (leg/thigh symptom/complaint), 159 (knee

symptom/complaint), 160 (ankle symptom/complaint), 161 (foot/toe symptom/complaint), 412 (joint

symptom/complaint not otherwise specified), 458 (acquired deformity of the limb) and 485 (other endocrine,

metabolic or nutritional disease).

While there are inconsistencies in the data in Table 2.1 due to revisions, it seems that the fairly large

and growing proportion of arthritis prevalence is due to conditions other than OA and RA. ‘Other

arthropathies’ increased substantially between the 2001 NHS and 2004-05 NHS, now higher than the

prevalence of RA in the Australian population.

In 2007, Access Economics estimates that there are 3.85 million Australians with arthritis, including

1.62 million with OA and 0.51 million with RA.

some form of arthritis in 2007 compared to 17.1% of men.

women over 75 – this may reflect lower reporting and sample size issues in the oldest populations

(eg, from nursing home settings) since the impact of mortality seems unlikely to account for such a

sharp decline.

18 Painful realities: The economic impact of arthritis in Australia 2007

Prevalence Rates 1995(a) 2001(b) 2004-05(c) 2007(d)

Source: (a) 1995 NHS, (b) 2001 NHS, (c) 2004-05 NHS, (d) Access Economics calculations. The estimates for 1995

and 2001 differ slightly from those reported in previous Access Economics reports due to revisions to demographic

data in the meantime.

Table 2.2 on page 20 shows a detailed breakdown of arthritis prevalence in the Australian population

in 2007. It depicts the greater prevalence in women, except in the case of ‘other arthritis’ where the

predominance of men afflicted by ‘other arthropathies’ shifts the gender balance. The low prevalence

of arthritis among younger Australians can also be observed, with only around 1.4% of people under

the age of 25 reporting the condition. While all types of arthritis are more prevalent in older age

cohorts, this is clearly most evident in osteoarthritis.

Painful realities: The economic impact of arthritis in Australia 2007 19

0

50

100

150

200

250

300

0 -4 5-9 1 0 -

14

1 5 -

19

2 0 -

24

2 5 -

29

3 0 -

34

3 5 -

39

4 0 -

44

4 5 -

49

5 0 -

54

55-

59

6 0 -

64

65 -

69

7 0 -

74

75-

79

8 0 -

84

85 -

8 9

90+

Age (y e a rs )

0%

10%

20%

30%

40%

50%

60%

70%

8 0%

Ma le s F ema le s Ma le s F ema le s

Persons (thousands)

Rate

Source: Access Economics estimates based on ABS National Health Survey 2004-05.

Source: Access Economics based on ABS NHS 2004-05 special data request.

Note: Other arthritis includes other arthropathies.

Totals may not sum due to rounding and ‘all arthritis’ is less than the sum because individuals may have

multiple conditions.

Males % Females % Persons %

Osteoarthritis

0-24 717 0.0% 6,560 0.2% 7,277 0.1%

25-34 19,609 1.4% 19,942 1.4% 39,552 1.4%

35-44 51,476 3.4% 63,856 4.2% 115,332 3.9%

45-54 106,457 7.4% 162,012 11.1% 268,470 9.3%

55-64 190,501 16.2% 283,636 24.2% 474,137 20.2%

65-74 134,219 18.7% 237,469 31.9% 371,688 25.4%

75+ 125,797 23.0% 220,700 28.2% 346,496 26.0%

Total 628,776 6.1% 994,175 9.5% 1,622,951 7.8%

Rheumatoid Arthritis

0-24 1,944 0.1% 7,277 0.2% 9,221 0.1%

25-34 7,304 0.5% 8,433 0.6% 15,737 0.6%

35-44 24,676 1.6% 39,974 2.6% 64,649 2.2%

45-54 32,796 2.3% 62,614 4.3% 95,410 3.3%

55-64 74,195 6.3% 63,935 5.5% 138,130 5.9%

65-74 47,811 6.7% 72,770 9.8% 120,581 8.2%

75+ 31,985 5.8% 37,546 4.8% 69,532 5.2%

Total 220,711 2.1% 292,550 2.8% 513,261 2.5%

Other Arthritis

0-24 44,600 1.3% 36,395 1.1% 80,994 1.2%

25-34 95,446 6.6% 49,508 3.5% 144,954 5.1%

35-44 129,852 8.6% 116,581 7.6% 246,433 8.1%

45-54 178,153 12.4% 169,865 11.7% 348,018 12.0%

55-64 243,182 20.7% 226,419 19.3% 469,601 20.0%

65-74 179,898 25.1% 178,349 23.9% 358,247 24.5%

75+ 117,279 21.4% 160,984 20.6% 278,262 20.9%

Total 988,410 9.6% 938,100 9.0% 1,926,510 9.3%

All Arthritis

0-24 46,648 1.3% 49,652 1.5% 96,300 1.4%

25-34 121,359 8.4% 76,792 5.4% 198,150 6.9%

35-44 197,711 13.1% 209,077 13.7% 406,788 13.9%

45-54 310,165 21.6% 370,727 25.5% 680,892 23.6%

55-64 478,873 40.8% 534,294 45.6% 1,013,167 43.2%

65-74 347,877 48.5% 456,173 61.2% 804,050 55.0%

75+ 263,197 48.1% 385,759 49.3% 648,956 48.8%

Total 1,765,830 17.1% 2,082,474 19.9% 3,848,304 18.5%

Data on the prevalence of arthritis available from the NHS are not disaggregated to jurisdictional level.

Access Economics has thus applied the national age-gender rates for each type of arthritis from the

2004-05 NHS to demographic data for each State and Territory to estimate OA, RA and other arthritis

in each jurisdiction. Consequently, differences in prevalence primarily reflect demographic differences

between the six states and two territories.

Painful realities: The economic impact of arthritis in Australia 2007 21

0

100

200

300

400

500

600

700

800

N S W V IC Q L D S A W A T AS N T AC T *

0%

5%

10%

15%

20%

25%

Ma le s F ema le Ma le s F ema le

Rate

Persons (thousands)

Source: Access Economics based on ABS National Health Survey 2004-05.

Prevalence of arthritis in the states and territories is illustrated in Figure 2 2.

prevalence rates, with 19.9% and 19.8% respectively.

prevalence rates with 16.9% and 13.3% respectively.

Prevalence rates from the 2004-05 NHS were combined with demographic projections of Australia’s

population based on Access Economics’ demographic model to estimate the likely prevalence of

arthritis in Australia to 2050. While these estimates incorporate likely demographic changes over this

period such as fertility, mortality and migration trends, they do not include any interventions that may

delay or reduce the onset of arthritis nor any other factors that may increase the age-gender

prevalence rates of arthritis. Notably, obesity is an important risk factor for osteoarthritis, and the

potential impact of possible changes in obesity rates on these baseline projections is considered in

more detail in section 3.2.1.3.

Figure 2.3 above shows the projected prevalence of arthritis by gender from 2007 to 2050. It depicts

a narrowing of the gap between arthritis prevalence among males and females, reflecting prevalence

growth of 97% and 85% for males and females respectively over this period.

3.3 million males (22.6% of males) and 3.7 million females (25.2% of females).

0

500

1 ,000

1 ,500

2 ,000

2 ,500

3 ,000

3 ,500

4 ,000

2007 2010 2015 2020 2025 2030 2035 2040 2045 2050

M ales F emales

Persons (thousands)

Source: Access Economics projections.

Painful realities: The economic impact of arthritis in Australia 2007 23

Source: Access Economics projections. Sum of arthritic conditions greater than arthritis total as some individuals

have multiple arthritic conditions.

18.5% to 23.9% of the population by 2050, an increase of nearly 30%.

population; increasing both absolutely and as a proportion of total arthritis.

Figure 2.5 on page 24 depicts the projected prevalence of arthritis in the states and territories in 2050.

As with the 2007 jurisdictional estimates, the results primarily reflect demographic differences. The

most notable difference between the 2007 distribution and the 2050 projection is the rising share of

Australia’s arthritis population in Western Australia (WA) and Queensland (QLD) – reflecting migration

and ageing patterns, with QLD surpassing Victoria to become the state with second highest

prevalence of arthritis. It is projected that in 2050, the prevalence of arthritis will be 23.4% and

23.2% in QLD and WA respectively.

The collective share of Australia’s arthritis in the three most populous states, NSW, VIC and QLD, is

projected to remain relatively stable at around 78% of the national total. As in 2007, arthritis is

expected to be least prevalent in the Northern Territory and the ACT, where prevalence is projected

to be 18.4% and 22.8% respectively, in 2050.

0

1 ,000

2 ,000

3 ,000

4 ,000

5 ,000

6 ,000

7 ,000

8 ,0 00

2007 2010 2015 2020 2025 2030 2035 2040 2045 2050

0%

5%

10%

15%

20%

25%

30%

O steoa rth ritis R heuma to id A rth ritis O th e r A rth ritis P re va le n c e R a te

Rate

Persons (thousands)

0

200

400

600

800

1 ,000

1 ,200

N S W V IC Q LD S A W A T AS N T AC T *

0%

5%

10%

15%

20%

25%

30%

35%

Ma le s F ema le Ma le s F ema le

Rate

Persons (thousands)

Arthritis prevalence projections for Australia and its states and territories to 2050 are presented in

Table 2.3. Between 2007 and 2050, the number of people in Australia with arthritis is projected to

increase by 83%. There is considerable variation between the jurisdictions, reflecting forecast

differences in demographic factors across the nation. The number of people with arthritis is projected

to grow most rapidly in the NT and QLD, where the increase is estimated to be 140% and 136%

respectively. South Australia and Tasmania are projected to experience the lowest growth in

the number of people with arthritis – 34% and 39% respectively.

Arthritis prevalence rates are projected to increase by around 29% between 2007 and 2050, again

with considerable variation across jurisdictions. In Tasmania, with the smallest population in Australia,

arthritis prevalence rates are forecast to increase by 40% - the highest of any state, due to its older

population. The rate in NT is projected to grow by around 38%, while WA and NSW are projected

to experience the lowest increase in the rate of arthritis, indicative of demographic projections for

these states.

Source: Access Economics projections.

Painful realities: The economic impact of arthritis in Australia 2007 25

ACT 57 16.9% 97 22.8% 72.4% 34.9%

NSW 1,288 18.7% 2,130 23.8% 65.4% 27.5%

NT 28 13.3% 67 18.4% 140.3% 38.2%

QLD 744 18.1% 1,755 23.4% 135.8% 29.7%

SA 309 19.9% 415 26.2% 34.4% 31.5%

TAS 98 19.8% 136 27.8% 39.1% 39.9%

VIC 953 18.6% 1,630 24.4% 70.9% 31.2%

WA 372 17.9% 799 23.2% 114.7% 29.8%

Total 3848 18.5% 7029 23.9% 82.7% 28.9%

Totals may not sum due to rounding.

People with

arthritis

(‘000)

% of

population

% of

population

%

increase

(persons)

%

increase

(rates)

People with

arthritis

(‘000)

2007 2050 2007- 2050

The pathogenesis (development) of arthritis is multifactorial, bridging biomechanics and biochemistry

and incorporating genetic and environmental factors. The precise nature of its origins remains

somewhat uncertain, although as research continues, the picture becomes clearer. Numerous risk

factors contribute to the development of the various arthritic conditions and this section provides a

brief outline of these.

In their 2005 report, Arthritis and musculoskeletal conditions in Australia (AIHW, 2005b), the

Australian Institute of Health and Welfare (AIHW) noted that in addition to predisposing factors such

as age, sex and genetics, biomedical factors such as obesity, body misalignment, meniscus (cartilage)

tears and injury contribute to the underlying cause of OA.

While osteoarthritis may begin at any age, it usually affects older people, with the average age of

onset around 45 years (AIHW, 2005b). Two thirds of Australians with arthritis are aged 55 and over

and 40% are over 65. This appears to be explained by the fact that as a person ages, the water

content of the cartilage decreases due to reduced proteoglycan content, causing cartilage to be less

resilient and hence more prone to OA.

Females are at higher risk of developing OA than males, suggesting the involvement of sexual

hormones in the pathogenesis of the disease. Reflecting this, prevalence rates among women in

Australia are around 9.3%, while prevalence rates among men are estimated to be only 5.9%.

Genetics are also an important risk factor; with defects of a structural protein such as collagen, or

modification of the metabolism of bone and cartilage thought to be involved in the genetic basis of

OA (Cimmino and Parodi, 2005). Genetic factors account for at least 50% of the cases of hand and

hip OA (Wright et al, 1996), and an even greater proportion of knee OA. Genetic abnormalities could

also act indirectly on well known risk factors for OA such as obesity.

OA also appears linked to the level of physical activity, particularly that which demands high intensity

acute, direct joint impact with other participants, playing surfaces or equipment (Sarzi-Puttini et al

2005). Supporting this hypothesis, a US study found that patients in the highest quartile of physical

activity at the baseline examination had 3.3 times the odds of developing OA (95% CI 1.4-7.5)

compared with those in the lowest quartile of physical activity (Felson et al, 1997:731).

Obesity is a significant risk factor for osteoarthritis and a detailed analysis of its implications is

provided in Section 3.2.

Like other forms of arthritis, the pathogenesis of RA is multi-faceted, encompassing both genetic and

environmental factors.

From a genetic perspective, the inheritability of RA appears to be high, with the genetic contribution

to susceptibility estimated to be around 60% (MacGregor et al, 2000). Further evidence of a genetic

element can be found in the fact that if one member of a pair of identical twins has RA then the

other member has a 15% chance of developing the disease – considerably higher than the risk in the

general population (Silman et al, 1993). The genetic link is not a straightforward one though, as no

single gene is identifiable as the cause of RA. People with a specific group of genes called HLA-DRB1

are known to have an increased risk of developing RA and a 2005 study published in the American

Journal of Human Genetics revealed that carrying a gene called PTPN22 also increases the risk of

developing RA (Plenge et al, 2005)

26 Painful realities: The economic impact of arthritis in Australia 2007

Although genetic factors are an important contributor in developing RA, the presence of high-risk

genes alone is insufficient for development of the disease and environmental factors appear to play a

pivotal, but uncertain role. A number of studies have shown that the risk of developing RA,

particularly among seropositive men, is higher among smokers (Albano et al, 2001) with a 2006 study

in the US finding that smokers had 6.0 times the odds of developing RA compared to non-smokers

(Criswell et al, 2006).

RA is more prevalent among women than men – 57% of Australians with RA are women. This

suggests that, as with OA, hormonal factors may play a role in the development of the disease.

Gout is a condition in which uric acid in the blood rises above normal levels (hyperuricaemia) which

can result in the formation of microscopic crystals in the joint and the development of gout. There are

indications that some medications, especially fluid tablets, may prevent uric acid from leaving the

body, initiating this rise. Genetic factors appear to be implicated and many people who develop gout

also have other family members with the disease. As with other forms of arthritis, environmental

factors are also pathogenically implicated, with excessive alcohol consumption and obesity important

factors in this regard. Gout is also significantly more prevalent among men than women.

The precise reason for the abnormal autoimmunity that causes SLE or lupus is not known. Inherited

genes, viruses, ultraviolet light and drugs may all play some role. A number of medications have been

reported to trigger SLE, although drug-induced SLE is infrequent (accounting for less than 5% of SLE

among all patients with SLE) and usually resolves when the medications are discontinued. Some

women with SLE experience worsening of symptoms prior to menstrual periods which, together with

the female predominance of SLE, suggest that female hormones play an important role in the

expression of SLE, and the hormonal relationship is an active area of ongoing study by scientists.

Recent research also provides evidence that the failure of the enzyme DNase1 to dispose of dying cells

contributes to SLE. Thus, a genetic mutation that disrupts the body's cellular waste disposal may be

involved in the beginning of SLE.

Obesity is one of the most preventable risk factors for OA due to extra weight placing pressure on

joints, particularly knee and hip joints, which increases the stress on the cartilage and hence the

chances of developing OA. In addition, obese patients have a higher bone mass, which may increase

stiffness in the subchondral bone and facilitate cartilage breakdown (Cimmino and Parodi, 2005:29).

Factors other than mechanical stress may also be at play as indicated by correlation between obesity

and arthritis of the hand.

Obesity refers to the accumulation of excessive fat in the body, defined here in terms of Body Mass

Index (BMI) - the ratio of weight in kilograms to the square of height in metres. In these terms,

obesity is defined as BMI over 30 for adults although these weight classifications are not necessarily

suitable for all ethnic groups. For children and adolescents aged 2 to 18 years, a set of age-gender

specific BMI-thresholds are used (see appendix A). ‘Overweight’ is generally defined as BMI between

25 and 30.

Access Economics has undertaken previous modelling in this area, including two public reports

showing the impacts:

Economics, 2006c); and

Arthritis New Zealand (Access Economics, 2005b).

The first report showed that not only are obese people around 2.4 times as likely to have OA as

people of normal weight (an odds ratio of 2.4) but that overweight people are 35% more likely to

have osteoarthritis (an odds ratio of 1.35). A reduction in adiposity rates could therefore potentially

greatly reduce the prevalence of OA and hence reduce associated health impacts and costs of OA in

Australia relative to the baseline projections. Conversely, if the prevalence of obesity continues to

increase, the prevalence and costs of OA would be likely to increase even more than on the basis of

demographic ageing alone.

The baseline prevalence projections estimated in Section 2.3.4 show that the number of Australians

with OA is projected to increase to 3.1 million or 10.7% of the population by 2050. These projections

assume that prevalence rates remain constant for each age-gender cohort and, as noted previously,

they do not include any interventions that may delay or reduce the onset of OA nor any other factors

that may increase the prevalence rates of OA. As outlined above, obesity is known to be a significant

and preventable risk factor for OA and in this section the implications of different obesity scenarios

for the future prevalence of OA among the Australian population are modelled.

Access Economics (2006c) found that in 2005, 3.24 million Australians were estimated to be obese –

1.52 million or 15.1 % of males, and 1.72 million or 16.8% of females. It also reported that, like

those in many developing countries, prevalence rates in Australia appear to be increasing for both

adults and children, although it is unclear at exactly what rate.

The NHS collects self-reported anthropomorphic data including height and weight for adults aged 18

years and above, and reported BMI category (underweight, normal range, overweight, obese) by ten

year age groups. The NHS data provide the most recent indicator of trends in adult obesity prevalence

and data from the surveys conducted in 1995, 2001 and 2004-05 are presented in Figure 3 1.

The trend in the prevalence rate for self-reported obesity over the period 1995 to 2001 was for an

annual increase in prevalence rates of 0.6% for males and 0.7% for females. For men, these figures

contradict those found in the data for measured obesity over a similar period6 (+0.6% per annum

compared to -0.1% per annum measured). For women the figures are consistent (0.7% per annum

compared to 0.6% per annum measured). Over the 9.5 years between the 1995 and 2004-05 NHS,

self-reported obesity prevalence rates increased by 6.7% for males (from 11% to nearly 18%) and

rates was 0.7% for men and 0.4% for women.

28 Painful realities: The economic impact of arthritis in Australia 2007

6 1995-2000 vs 1995-2001.

Painful realities: The economic impact of arthritis in Australia 2007 29

While self-reported data for BMI have been consistently shown to under-estimate BMI (because

individuals tend to over-estimate their height and under-estimate their weight), this is unlikely to

substantially affect the trend in the data as the surveys use consistent methodology.7

NHS data provide only three data points, from which it is difficult to be confident of trends. While

obesity in males accelerated considerably over the period 2001 to 2004 relative to 1995 to 2001,

growth in obesity rates among women appear to have been negative between 2001 and 2004-05 – a

stark contrast to the period 1995-2001 when obesity among women grew by around 40%.

10%

11%

12%

13%

14%

15%

16%

17%

18%

19%

Males Females

1995

2001

2004/05

7 It is noted that there are a number of characteristics of self-reported BMI data that could influence the trend.

For example in the ABS 1998 How Australians Measure Up, (a document comparing differences in findings of the

National Nutrition Survey and NHS in relation to BMI measures), it was found that heavier people generally underreport

their weight more than lighter people – suggesting that as the population gets heavier, self-report data may

get even less accurate.

Source: NHS data.

In The Economic Costs of Obesity, Access Economics estimated a baseline prevalence projection (ie,

with no change in age-gender prevalence rates, such that all further increases in obesity were due to

demographic ageing alone), forecasting that by 2025, a total of 4.2 million Australians (16.7% of the

population) may be obese. This was caveated, however, with the observation that if prevalence

continues to increase at historical rates, there could be as many as 7.2 million obese Australians by

2025 (28.9% of the population).

Such uncertainty pervades forecasting of social issues such as future obesity levels, and the impact of

obesity on osteoarthritis is thus also uncertain, depending in large part on policy and other measures

introduced over coming years. To account for this uncertainty, Access Economics has modelled a

number of possible scenarios which present the range of possible outcomes depending on the

success of public health interventions.

Access Economics modelled three potential obesity scenarios, capturing what may be considered the

upper and lower bounds for obesity prevalence in Australia to 2050. Scenarios for prevalence

projections are not intended to indicate what is considered likely to happen but rather a range of

what could happen. The three scenarios modelled were as follows.

for men and around 0.4 percentage points per year for women, so that around 47% of men and

35% of women are obese in 2050.

by 0.34 percentage points for females and 0.37 percentage points for males until then. While

this scenario is unlikely, it does provide a useful lower bound.

Access Economics (2006c) found that the odds ratio of OA associated with obesity is around 2.4,

which implies that 13.4% of OA in males and 13.6% of OA in females is attributable to obesity.

These percentages are known as the “attributable fraction” for males and females.

This section presents projections of OA prevalence to 2050 under the three obesity scenarios

modelled, as outlined above. Table 3.1 depicts the impact of changing obesity rates on arthritis

prevalence, based on the attributable fraction calculated above.

prevalence to 11.2% of males and 14.5% of females, affecting nearly 3.8 million

• Eliminating obesity by 2050 is projected to reduce OA by 425,000 persons, relative to the

prevalence of OA would be 2.7 million Australians in 2050, and prevalence rates would be 7.6%

and 10.9% for males and females respectively. Relative to the growth scenario, there would be

over 1 million fewer Australians with OA, if obesity were eliminated by 2050.

30 Painful realities: The economic impact of arthritis in Australia 2007

Painful realities: The economic impact of arthritis in Australia 2007 31

Source: NHS (various), Access Economics analysis.

The impact of the different obesity scenarios on OA prevalence rates (expressed as a percent of the

Australian population) is presented in Figure 3.2. The baseline scenario, as detailed above, captures

demographic changes over the period and the influence of these on OA prevalence among the

Australian population, assuming fixed prevalence rates for each age-gender cohort. The concave

shape of this curve, and indeed all three scenarios, captures fundamental trends forecast to prevail in

the Australian population over the model period – namely that, once the current period of ‘babyboomer’-

driven population ageing peaks, expected around 2025, the ageing of the population and

also overall population growth rates, will slow. The growth and elimination scenarios reflect these

demographic trends as well as the influence of continued obesity growth and obesity elimination

respectively. OA prevalence in 2050, relative to the baseline scenario, is around 13.5% lower under

the elimination scenario and around 20% higher under the growth scenario.

Scenario OA prevelance OA prevelance Prevalence of

% obese 2005 % obese 2050 rate 2005 rate 2050 OA 2050 ('000)

M F M F M F M F M F

3. Obesity

0%

2%

4%

6%

8%

10%

12%

14%

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

B AS E L IN E S C E N AR IO G R O W T H S C E N AR IO E L IM IN AT I O N S C E N AR IO

Particularly in view of the prevalence of arthritis, its economic impact is of considerable magnitude

and this section estimates the extent and nature of these impacts. Health system expenditure, other

financial costs and the ‘burden of disease’ (the loss of wellbeing) are quantified, with cost allocations

jurisdictionally and by bearer.

Health system expenditure associated with arthritis was calculated based on data contained in the

AIHW’s revised edition of Health System Expenditure by Disease and Injury 2000-01, released April

2005 (AIHW 2005a). Figures in this report were extrapolated to 2007 on the basis of the most recent

health cost inflation data from Health Expenditure Australia (AIHW, 2006c), and taking into account

demographic changes that have occurred over this period.

As noted previously by Access Economics in Arthritis costs states and territories, a report for Arthritis

Australia released November 2005, definitive classification of arthritis is a complex task as there are

over 100 known forms of arthritis, bridging up to 43 individual ICD-10 codes. Few reported

classifications of arthritis truly capture the complexity of the disease, often leaving vast proportions in

broad categories such as ‘other musculoskeletal diseases’, hence underreporting the true figures. To

overcome this, Access Economics consulted with a panel of specialist rheumatologists (two from New

Zealand, one from Australia), to devise a list of agreed conditions deemed to be arthritis from ICD-10

codes. In some cases, proportions of each category were allocated as arthritic, in accordance with the

clinical experience of the experts (Access Economics, 2005b).

In Arthritis – the bottom line, a specific data request was placed with the AIHW for disaggregated

data from their publication Health system expenditure on disease and injury. Coupled with the agreed

definitions from the consultation process, this comprehensive data set enabled allocated expenditure

for arthritis to be estimated at $2,986 million in 2004. This represented 54% of the total expenditure

allocated to all musculoskeletal conditions

With the release of the revised edition of Health system expenditure by disease and injury in April

2005, total expenditure allocated to all musculoskeletal conditions was revised down slightly from

$4,684 million to $4,634 million.

Over the same period (2001 to 2005), arthritis prevalence, as reported in the NHS, increased as a

share of total musculoskeletal conditions from 48.6% to 60.5 %. While prima facie this would seem

to suggest a genuine increase in arthritis relative to other musculoskeletal conditions, changes to

survey methodology cannot be ruled out as the cause. For example, in the 2001 NHS, inadequately

specified back disorders such as ‘bad back’ were classified together as a single category. In the 2004-

05 NHS, respondents who reported such conditions were asked to provide further information where

possible and, as a result, some of these cases were able to be classified to other condition categories

(ABS, 2006). The net result was a reduction in cases classified as ‘back pain/problems neck, disc

disorders’ of over 900,000 persons between 2001 and 2004-05. While it is likely that some such

conditions were reclassified as arthritic, sufficient data are unavailable. Consequently, the approach

taken here has once again been a conservative one, assuming the share of musculoskeletal

expenditure allocated to arthritis remained stable at 54%.

32 Painful realities: The economic impact of arthritis in Australia 2007

Incorporating health cost inflation over the period from 2001 to 20078 and demographic changes

system expenditure associated with arthritis is $4.2 billion - $1,100 per person with arthritis.

Access Economics (2001) reported that allocated health expenditure on arthritis in 2000 was $2.24

billion; by 2004, this figure had increased to an estimated $2.99 billion (Access Economics, 2005)

(Table 4.1).

Over the period 2000-2004, allocated health expenditure on arthritis grew by 33% or 7.4% per year,

while over the period 2004-2007, it grew by 42% or 12.4% per year, reflecting faster growth in

prevalence over this period.

Painful realities: The economic impact of arthritis in Australia 2007 33

2000(a) 2004(b) 2007(c)

Rheumatoid arthritis 172.8 297.1 405.5

Osteoarthritis 837.9 1,426.7 1,948.0

Other arthritis 1,230.0 1,262.3 1,886.1

Total arthritis 2,240.7 2,986.1 4,239.6

(a) Access Economics (2001). (b) Access Economics (2005). (c) Access Economic current estimates.

Table 4.2 on page 34 shows the distribution of this expenditure across different types of arthritis in

2007. OA is the leading source of health expenditure on arthritis, accounting for $2.03 billion or just

under half of total allocated expenditure on arthritis in 2007. RA accounts for a further 10% of

allocated arthritis expenditure with $422 million. The expenditure shares closely reflect relative

prevalence, although there are variations reflecting treatment pathways.

but indicative of the greater impact it has on older Australians.

8 The most recent health cost inflation release is 2005, consequently, 2005-06, and 2006-07 figures have been

estimated based on the 2000-01 to 2004-05 average

RA 53.9 55.0 161.6 41.5 36.1 78.7 5.0 431.7

OA 978.1 100.4 727.0 134.1 70.4 248.2 24.1 2,282.3

Other* 513.6 182.8 75.6 298.8 181.2 251.7 21.3 1,525.0

Total 1,545.7 338.2 964.2 474.7 287.8 578.5 50.4 4,239.6

$/person^

RA 101 103 302 78 67 147 9 807

OA 578 59 430 79 42 147 14 1,350

Other* 256 91 38 149 90 125 11 760

Total 385 84 240 118 72 144 13 1,057

$ million Inpatients

Outpatients

Aged

Care

Out-of hosp.

medical

services

OPS# Pharmaceuticals

Research Total

Source: Access Economics based on AIHW 2005a, totals may not sum due to rounding.

*Includes all other forms of arthritis. # Other professional services. ^ Per person with the condition (adjusted to

take account of co-morbidity of different types of arthritis).

As captured in Table 4.2 and represented graphically in Figure 4.1 below, hospital services account for

the lion’s share of health expenditure allocated to arthritis – 44%, with inpatient services contributing

36% and outpatients 8%. Aged care is also a significant component, representing 23% or $964.2

million of allocated health expenditure. Per capita expenditure is highest for OA, reflecting greater per

capita inpatient costs.

8% Out patients

Aged care homes 23%

Out-of-hospital

medical services 11%

Other professional

services 7%

Painful realities: The economic impact of arthritis in Australia 2007 35

Figure 4.2 illustrates the age-gender distribution of allocated arthritis expenditure in 2007. Reflecting

the greater prevalence in women, health expenditure for all age cohorts except age 20-40 years is

greater in total dollar terms for women than men. Similarly, the distribution of expenditure across agegroups

reflects the combined pattern in prevalence and demography, with the middle-aged cohorts

accounting for a large proportion of overall expenditure.

0

100

200

300

400

500

600

0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80-89 90+

Males F emales

Source: Access Economics based on ABS National Health Survey 2004-05.

Only 87.5% of total recurrent health expenditure is able to be allocated to particular disease and

injury groups by the AIHW. The ‘unallocated’ remainder includes capital expenditures, expenditure on

community health (excluding mental health), public health programs (except cancer screening), health

administration and health aids and appliances (Table 4.3).

Allocated Unallocated Total health

expenditure expenditure expenditure

Rheumatoid Arthritis 421.7 60.2 481.9

Osteoarthritis 2025.6 289.4 2315.0

Other Arthritis 1792.1 256.0 2048.1

Total Arthritis 4239.6 605.7 4845.3

Total expenditure per capita by age (including unallocated expenditures) is shown in Table 4.4.

Expenditures are higher for younger people, with per capita expenditure slightly higher on younger

males than on younger females, but slightly higher in older females than in older males. This evens

out over all age groups, however.

Males Females Persons

0-4 7,288 7,098 7,178

5–14 7,288 7,098 7,178

15–24 3,115 1,868 2,335

25–34 1,950 1,338 1,655

35–44 1,334 1,355 1,344

45–54 1,188 1,195 1,192

55–64 1,123 1,158 1,141

65–74 1,128 1,160 1,146

75-84 1,062 1,191 1,137

85+ 1,102 1,141 1,124

Average all ages 1,208 1,208 1,208

Access Economics (2005c) undertook rigorous analysis to model jurisdictional differences in health

system costs in Australia. The average cost per person with arthritis, and the cost per capita, derived

from that report for each state/territory is presented in Figure 4.3. Again the demographic drivers are

evident, eg, for the NT, as well as individual differentials in health system costs.

300

1,300

2,300

3,300

4,300

5,300

6,300

7,300

NSW VIC QLD S A WA TAS NT ACT

0

200

400

600

800

1,000

1,200

$ per arthritis case Cost per arthritis case Cost per capita $ per capita

Given the comprehensiveness of these calculations, coupled with the absence of more recent

jurisdictional data (the states/territories no longer undertake to provide such data), expenditure shares

derived from this analysis have been used to apportion the 2007 cost estimates by state/territory

(Figure 4.4). Reflecting the relatively higher cost per case in South Australia, Western Australia and

particularly the ACT, these states/territories represent a greater share of expenditure than prevalence.

Painful realities: The economic impact of arthritis in Australia 2007 37

0

200

400

600

800

1,0 00

1,2 00

1,4 00

1,6 00

N S W V IC Q L D S A W A T AS N T AC T

H os p itals A g ed c a re O th er h ealth c o s ts

Expenditure ($m)

Other financial costs are all those that are not direct health system costs (Section 4.1) nor intangible

costs – the loss of health and wellbeing (detailed in Section 5). These include productivity losses

resulting from absenteeism and reduced labour force participation, carer costs, out of pocket

expenses, the deadweight efficiency losses from transfers and funeral costs.

It is important to make the economic distinction between real and transfer costs.

capacity to produce goods and services.

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. Measurement of indirect costs remains a matter of some debate and controversy.

associated deadweight taxation losses, and other financial costs eg, carers, aids and home

modifications for those disabled.

loss of life quality that result from arthritis. These are more difficult to measure, but can be

analysed in terms of the years of healthy life lost, both quantitatively and qualitatively, known as

the ‘burden of disease’, with an imputed value of a ‘statistical’ life so as to compare these costs

with financial costs of arthritis.

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 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 full-time) and premature mortality, if any. In this case, it is likely that, in the absence of the

disease, people with arthritis 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.

Arthritis can have an impact on a person’s capacity to work. If employment rates are lower for

people with arthritis, this loss in productivity represents a real cost to the economy.

The NHS provides data on self-reported labour force status and the 2004-05 survey provides the most

recent data on the impact of arthritis on employment in Australia. In order to ensure the most robust

estimates, a special data request was placed with the ABS for data pertaining to the labour force

status of individuals with RA, OA and other arthritis, by age and gender. Analysis of these data

enabled comprehensive estimation of the impact of arthritis on individual’s workforce participation,

and accurate extrapolation of these findings to 2007.

Unemployment rates for people with arthritis do not appear to differ considerably from those of the

overall population. In fact, if anything, unemployment rates are marginally lower among those with

arthritis compared to the overall Australian population. This pattern is common among people with

chronic disease, who tend to participate less in the workforce, resulting in lower unemployment rates.

Consistent with this, the rate of labour force participation for people with arthritis is considerably

lower than that of the total population. Of the 1.8 million Australians in the working age population

(15-64) as of June 2005, only 62.7% were actively participating in the labour force (employed or

unemployed looking for work). The comparable figure for the overall population was 75.4%.

However, the arthritis group has an older age distribution.

38 Painful realities: The economic impact of arthritis in Australia 2007

Productivity losses, however, are based on differences in the employment rate, calculated as the

proportion of the working age population (15-64) who are employed. In 2005, the employment rate

gender, the difference between employment rates for those with arthritis and the overall

population was estimated to be 5.5% for men and 3.75% for women.

Painful realities: The economic impact of arthritis in Australia 2007 39

due to workplace separation and early retirement due to arthritis is estimated as $3.7

billion in 2007.

For people age 15-64 with arthritis, the estimated annual cost due to lost productivity

from premature death is $7.5 million in 2007.

Based on self-reported data from the 2004-05 NHS, it is estimated that 224,000 Australians aged

between 15 and 64 take time off work each year due to arthritis including 125,000 males and 99,000

females. Given this, it is estimated that of those with arthritis who are in the working age population

and currently employed, 16% will take time off work due to their condition. No data are available in

Australia in relation to the average number of days of work missed by people with arthritis, so

findings from the literature form the basis of these estimates. A recent study conducted in the United

States and published in the Journal of the American Medical Association investigated lost productive

time due to common pain conditions, including arthritis (Stewart et al, 2003). 28,902 working age

adults were surveyed about their health status, health-related causes of work absence and reduced

performance at work. Using statistical analysis, the research found that, on average, of those with

arthritis who were absent from work, the average hours of absence per worker per week was 0.7.

Assuming an 8-hour day and a 48 week working year, this equates to 4.2 working days per worker

per year.

In the absence of recent Australian data and given the demographic similarities between Australia and

the United States, Access Economics has adopted this estimate for calculating the costs of

absenteeism resulting from arthritis in Australia.

Based on these parameters and the average weekly earnings (AWE) of each age-gender group,

Access Economics estimates that in 2007, the total cost of absenteeism due to arthritis is $304

productivity at home.

OA is a disease of low mortality and most deaths, of the few that do occur, result from complications

and co-morbidities. Similarly, RA is seldom an underlying cause of death, but may be an associated

cause of death for conditions such as cardiovascular disorders, respiratory disorders and cancer. Based

on the AIHW’s national mortality data, Access Economics has calculated case mortality rates for

arthritis in Australia. Based on these calculations, and incorporating employment rates and estimates

of average lifetime earnings for different age groups, the present value of lost earnings due to

mortality among those whom would otherwise have been employed has been estimated.

Premature death also leads to additional search and hiring costs for replacement workers. These are

estimated as the number of people who die prematurely (by age and gender) multiplied by their

chance of being employed multiplied by the search and hiring cost brought forward three years (the

search and hiring cost is estimated as 26 weeks at AWE and the 3 year bring forward reflects average

turnover rates).

40 Painful realities: The economic impact of arthritis in Australia 2007

In 2007, additional search and hiring costs are estimated as $18,400 for people with

turnover (26 weeks at AWE).

lost due to the reduced participation of people with arthritis in the paid workforce.

Reduced earnings due to reduced workforce participation, absenteeism and premature death will also

have an effect on taxation revenue collected by the Government. As well as forgone income (personal)

taxation, there will also be a fall in indirect (consumption) tax, as those with lower incomes spend less

on the consumption of goods and services.

Personal income tax forgone is a product of the average personal income tax rate and the forgone

income. With arthritis and lower income, there will be less consumption of goods and services,

estimated up to the level of the disability pension. Without arthritis, it is assumed that consumption

would comprise 90% of income. This is a conservative estimate and, in fact, the savings rate may well

be lower. The indirect tax forgone is estimated as a product of the forgone consumption and the

average indirect tax rate, derived from the Access Economics macroeconomic model.

Lost taxation revenue is considered a transfer payment, rather than an economic cost per se. However,

raising additional taxation revenues does impose real efficiency costs on the Australian economy,

known as deadweight losses (DWL). Administration of the taxation system costs around 1.25% of

revenue raised (derived from total amounts spent and revenue raised in 2000-01, relative to

Commonwealth department running costs). Even larger deadweight losses arise from the distortionary

impact of taxes on workers’ work and consumption choices. These distortionary impacts are estimated

to be 27.5% of each tax dollar collected (Lattimore, 1997 and used in Productivity Commission,

2003:6.15-6.16, with rationale).

due to the additional taxation required to replace that forgone due to lost productivity of people with

arthritis.

Welfare payments made to people who are no longer working must, in a budget-neutral setting, also

be funded by additional taxation. The DWLs associated with welfare transfers are calculated in Section

4.2.8.

Painful realities: The economic impact of arthritis in Australia 2007 41

Potential earnings lost $billion

Average personal income tax rate* 18.4%

Potential personal income tax lost $0.74

Average indirect tax rate* 14.1%

Potential indirect tax lost $0.57

Total potential tax revenue lost $1.31

Deadweight loss from additional taxation $0.36

* Source: Access Economics macroeconomic model (2007).

Carers are people who provide informal care to others in need of assistance or support. For example,

carers may take time off work to accompany people with arthritis to medical appointments, stay with

them in hospital, or care for them at home. Carers may also take time off work to undertake many

of the unpaid tasks that the person with arthritis would do if they did not have arthritis and were able

to do these tasks.

Informal care is distinguished from services provided by people employed in the health and

community sectors (formal care) because the care is generally provided free of charge to the recipient

and is not regulated by the government. Most informal carers are family or friends of the person

receiving care.

While informal care is provided free of charge, it is not free in an economic sense, as time spent

caring is time that cannot be directed to other activities such as paid work, unpaid work (such as

housework or yard work) or leisure. As such, informal care is a use of economic resources.

There are three potential methodologies which can be used to place a dollar value on the level of

informal care:

sector; and

Access Economics has adopted the opportunity cost method in this report as it provides the most

accurate estimate of carer costs and sufficient demographic data on providers of care for people with

arthritis are available.

Data from the 2003 ABS Survey of Disability, Ageing and Carers (SDAC) sourced specifically for this

report identified 55,200 carers who reported themselves as the primary carer of a person whose main

condition was arthritis. Of these, 39% were providing less than 20 hours of care per week on

average, 24% between 20 and 40 hours and 37% more than 40 hours. In addition, there were

164,200 carers who identified themselves as the non-primary carer of a person with arthritis. Based

on previous work by Access Economics (Access Economics 2005c), it is assumed that on average, nonprimary

carers spend five hours per week caring for people with arthritis. While there were also

estimates of care and carers for people who reported arthritis, but not as their main condition, and

since it is not known whether any of that care would have been required in the absence of the

arthritis (they still may have required some or all of the care for their main condition), the costs of

care provide to these individuals has been conservatively excluded.

42 Painful realities: The economic impact of arthritis in Australia 2007

Based on these findings and incorporating age-gender average weekly earnings in Australia,

Access Economics estimates that in 2007 the total cost of informal care for people with

In 2007, total funeral costs associated with premature death due to arthritis are

estimated at $1.24 million.

The ‘additional’ cost of funerals borne by family and friends of patients is based on the likelihood of

death in the “x” years due to arthritis. However, some patients (particularly older patients) would

have died during this time anyway. Eventually everyone must die and thus incur funeral expenses –

so the true cost is the cost brought forward (adjusted for the likelihood of dying anyway in a given

year). The BTRE (2000) calculated a weighted average cost of a funeral across all States and

per person in 2007.

Transfer payments represent a shift of resources from one economic entity to another. The act of

taxation and redistribution creates distortions and inefficiencies in the economy, so transfers also

involve real net costs to the economy.

Data regarding the number of people on employment support benefits was sourced from Centrelink

Australia, specifically for this report. For people who reported having arthritis, the most commonly

received Centrelink work related benefit was the Disability Support Pension (DSP), which Access

Economics estimates 113,523 people living with arthritis were receiving in February 2007. There were

also 6,401 people with arthritis receiving Newstart Allowance (NA), including nearly 4,000 with OA

and 400 with RA, and 163 people receiving Sickness Allowance (SA).

The value of these payments in 2007 is estimated to be $1.37 billion9. However, some of these people

would have ordinarily received welfare payments which must be netted out to estimate the additional

welfare payments due to arthritis, using a Melbourne University study (Tseng and Wilkins, 2002) about

the ‘reliance’ of the general population (aged 15-64 years) on income support of 12%. Factoring

arthritis of $1.20 billion per annum in 2007.

Arthritis can impede an individual’s ability to conduct their daily activities and this may result in the

need to acquire aids and devices to assist them in carrying out these tasks. People with arthritis may

also need to make modifications to their homes, such as adding handrails and ramps in order to

ensure they can safely conduct their lives.

9 Based on a payment rate of $438.50 per fortnight for DSP, and $424.30 for SA and NSA.

Results from the Survey of Disability, Ageing and Carers reveal that of those who reported arthritis as

their main condition, 561,300 had some level of disability in 2003 – 17% of those with arthritis.

Applying this proportion to the prevalence of arthritis in 2007, Access Economics estimates that

around 656,000 of those with arthritis in 2007 have some level of disability.

SDAC also reveals that of those who reported arthritis as their main condition:

Cost estimates for various products are based on prices provided by the Independent Living Centre

NSW, the Victorian Aids and Equipment Program and previous studies undertaken by Access

Economics. While some equipment and modifications require large outlays but are amortised over a

number of years, other devices need to be replaced more regularly. It was assumed that devices in

heavy use (eating, dressing and continence aids and batteries) need to be replaced on an annual

basis, while most other devices – with a cost range of between $30 and $200 (showering and

toileting aids and most mobility aids such as canes, crutches, walking sticks and frames) – have a

lifespan of three years, and larger expenses such as wheelchairs ($5,000) and hearing aids ($2,500)

were depreciated over five years. Home modifications ($7,500) tend to be one-off investments, so

their lifespan was assumed to be 20 years (Table 4.6).

Painful realities: The economic impact of arthritis in Australia 2007 43

million in 2007 – $57 per person with arthritis.

As it is not known how much of this cost is subsidised by governments, paid for by the person with

arthritis or their family and friends, or paid for through community programs, the amount is allocated

to the individual with arthritis.

Sources: ABS (2003);1 Victorian Aids and Equipment Program; 2 Independent Living Centre NSW; 3 Access Economics

(2006a); 4 average of mobility aids; 5 Access Economics (2006b); 6 average. Note: People may use multiple devices.

Device Base price

($)

Product

life

(years)

Unit cost

($ per annum)

Number of

devices

Total cost

($ per annum)

Self care

Eating aids1 $107 1 $107 7,479 $797,340

Showering or

bathing aids2 $91 3 $30 83,675 $2,527,403

Dressing aids1 $21 1 $21 18,815 $401,162

Toileting aids2 $85 3 $28 51,537 $1,465,113

Managing

incontinence1 $1,279 1 $1,279 30,735 $39,318,845

Total Self care6 $401 107,048 $44,509,863

Mobility aids

Canes2 $32 3 $11 15,426 $164,451

Walking stick2 $32 3 $11 69,301 $738,786

Crutches $53 3 $18 9,115 $161,960

Walking frame1 $320 3 $107 46,980 $5,008,294

Wheelchair or

scooter1 $5,330 5 $1,066 25,009 $26,661,067

Other mobility aids4 --- 3 $201 24,542 $5,247,081

Total Mobility aids6 $327 122,942 $37,981,639

Communication aids

Communication aids

(electronic, non-electronic

and other hearing and

communication aids)3 $2,665 5 $533 147,250 $78,488,188

Batteries3 $146 1 $146 147,250 $21,505,764

Total Communication aids $679 147,250 $99,993,952

Home modifications

Home modifications

(incl structural changes,

ramps, bath modifications,

doors widened, handrails, etc)5 $7,995 20 $400 94,076 $37,608,924

Total Home modifications $400 $37,608,924

People using Aids and Equipment $661 340,037 $220,094,377

People not using Aids and Equipment 315,926

People with disability 655,962

Arthritis may result in individuals and their families incurring additional travel expenses as a result of

their condition. These costs are particularly burdensome for regional and remote patients travelling to

metropolitan areas for treatment. However, even if the medical treatment is available locally, travel

costs can still be substantial in terms of both distance and time. Potential costs include petrol, road

tolls, additional car maintenance, taxi, train, bus and air fares, accommodation costs for both the

patient and/or family at hotels/hostels near the treatment facility (although some out-of-town patients

may be able to stay with friend/family), additional meal costs; and item duplication10 , luggage and

clothing.

In 1999, Walsh and Chappell (1999) conducted a study on behalf of the Department of Family and

Community Services, surveying 409 recipients of Disability Support Pension who had musculoskeletal

impairment. Based on these findings, Access Economics (2005a) estimated that in 2004, the cost of

travel associated with their condition for people with arthritis in Australia was $88.1 million or around

$26 for every person with arthritis.

In the absence of more recent analysis of the transport costs incurred by those with arthritis as a

result of their condition, Access Economics has estimated the 2007 costs based on Walsh and

Chappell’s unit costs, allowing for inflation.

The Australian Bureau of Statistics (ABS) publishes official CPI data, with specific values reported for

numerous sectors including transportation. Based on this data, it is estimated that transport-related

inflation, over the period 2004 to the present, has been 12.48% or around 4% per annum on

average.

cost incurred by people with arthritis as a result of travel associated with their condition

is $113 million in 2007.

A number of community care programs are conducted in Australia to support the elderly and disabled

in conducting their daily lives. Examples include the Extended Aged Care at Home (EACH) packages,

the Home and Community Care Program (HACC) and Community Aged Care Packages (CACP).

While published data pertaining to these programs do not detail the primary condition of program

participants, it is possible to estimate the proportion of these programs that is relevant to arthritis.

The results of the 2003 Survey of Disability Ageing and Carers reveal that of those who reported

having some level of disability, 14% reported their main condition as arthritis or related disorders. This

has been taken as a proxy for use of disability and aged care programs to estimate the proportion of

the costs associated with programs for the disabled and elderly which is likely be attributable to

arthritis. Table 4.7 summarises these findings.

Painful realities: The economic impact of arthritis in Australia 2007 45

10 Some people who need to travel frequently to health services may find it more efficient to keep a set of toiletries

or other products in the second location, rather than transporting, packing and unpacking them frequently.

EACH 3,368 $65.3 $9.1

CACP 355,574 $356.6 $49.9

HACC 750,000* $1,409.0 $197.3

TOTAL 1,108,942 $1,830.9 $256.3

Source: Department of Health and Ageing (2006).

*DoHA estimate http://www.health.gov.au/internet/wcms/publishing.nsf/Content/hacc-index.htm

Access Economics estimates that in 2007, the cost of government programs attributable to

arthritis is estimated as $256 million.

PROGRAM Number of

recipients (2006)

Total Program

Expenditure

(2005-06) $m

Estimated arthritis

share of total

program costs ($m)

As discussed earlier, transfer payments (Government payments/services and taxes) are not a net cost to

society, as they represent a shift of consumption power from one group of individuals to another in

the community. If the act of taxation did not create distortions and inefficiencies in the economy, then

transfers could be made without a net cost to the community. However, through these distortions

taxation does impose a deadweight loss (DWL) on the economy.

distortion to the equilibrium (society preferred) level of output and prices. Taxes alter the price and

quantity of goods sold compared to what they would be if the market were not distorted, and thus

lead to some diminution in the value of trade between buyers and sellers that would otherwise be

enjoyed. The principal mechanism by which a deadweight loss occurs is the price induced reduction in

output, removing potential trades that would benefit both buyers and sellers. In a practical sense, this

distortion reveals itself as a loss of efficiency in the economy, which means that raising $100 of

revenue requires consumers and producers to give up more than $100 of value.

Supply

Demand

Potential Quantity

Supplied

Actual Quantity

Supplied

Price

Price plus tax

Taxation Revenue

Price ($)

Deadweight Loss

(cost of raising taxation revenue)

Output

The rate of deadweight loss used in this report is 0.275 per $1 of tax revenue raised, based on

Productivity Commission (2003), plus 0.0125 per $1 of tax revenue raised for Australian Taxation

Office (ATO) administration (Access Economics 2004: Part II, 66).

The total extra tax dollars required to be collected include:

Painful realities: The economic impact of arthritis in Australia 2007 47

Thus for people with arthritis in 2007, the expected total DWL is $1.68 billion.

In 2007, other (non-health) financial costs for people with arthritis are estimated to be

$7.37 billion.

$million

Employment impacts $3,764.6

Absenteeism $304.4

Premature death $7.5

Hiring costs $0.02

Total productivity costs $4,076.5

Carer costs $1,014.8

Funeral costs $1.2

Aids and modifications $220.1

Travel costs $113.3

Program costs $256.3

Deadweight loss $1,684.9

Total other financial costs $7,367.1

To those experiencing arthritis, less tangible costs such as loss of quality of life, loss of leisure, physical

pain and disability are often as or more important than the health system costs or other financial

losses. This chapter measures the burden of suffering and premature death from arthritis.

Since Schelling’s (1968) discussion of the economics of life saving, the economic literature has

properly focused on willingness to pay (willingness to accept) measures of mortality and morbidity

risk. Using evidence of market trade-offs between risk and money, including numerous labour market

and other studies (such as installing smoke detectors, wearing seatbelts or bike helmets etc),

The willingness to pay approach estimates the value of life in terms of the amounts that individuals

are prepared to pay to reduce risks to their lives. It uses stated or revealed preferences to ascertain

the value people place on reducing risk to life and reflects the value of intangible elements such as

quality of life, health and leisure. While it overcomes the theoretical difficulties of the human capital

approach, it involves more empirical difficulties in measurement (BTE, 2000:20-1).

Viscusi and Aldy (2002) summarise the extensive literature in this field, most of which has used

econometric analysis to value mortality risk and the ‘hedonic wage’ by estimating compensating

differentials for on-the-job risk exposure in labour markets, in other words, determining what dollar

amount would be accepted by an individual to induce him/her to increase the possibility of death or

morbidity by x%. They find the VSL ranges between US$4 million and US$9 million with a median of

US$7 million (in year 2000 US dollars), similar but marginally higher than the VSL derived from US

product and housing markets, and also marginally higher than non-US studies, although all in the

same order of magnitude. They also review a parallel literature on the implicit value of the risk of

non-fatal injuries.

A particular life may be regarded as priceless, yet relatively low implicit values may be assigned to life

because of the distinction between identified and anonymous (or ‘statistical’) lives. When a ‘value of

life’ estimate is derived, it is not any particular person’s life that is valued, but that of an unknown or

statistical individual (Bureau of Transport and Regional Economics, 2002:19).

Weaknesses in this approach, as with human capital, are that there can be substantial variation

between individuals. Extraneous influences in labour markets such as imperfect information,

income/wealth or power asymmetries can cause difficulty in correctly perceiving the risk or in

negotiating an acceptably higher wage.

Viscusi and Aldy (2002) include some Australian studies in their meta-analysis, notably Kniesner and

Leeth (1991) of the Australian Bureau of Statistics (ABS) with VSL of US2000 $4.2 million and Miller

et al (1997) of the National Occupational Health and Safety Commission (NOHSC) with quite a high

VSL of US2000$11.3m-19.1 million (Viscusi and Aldy, 2002:92-93, Table 4). Since there are relatively

few Australian studies, there is also the issue of converting foreign (US) data to Australian dollars

using either exchange rates or purchasing power parity and choosing a period.

Access Economics (2003) presents outcomes of studies from Yale University (Nordhaus, 1999) – where

VSL is estimated as $US2.66m; University of Chicago (Murphy and Topel, 1999) – US$5m; Cutler and

Richardson (1998) – who model a common range from US$3m to US$7m, noting a literature range

of $US0.6m to $US13.5m per fatality prevented (1998 US dollars). These eminent researchers apply

discount rates of 0% and 3% (favouring 3%) to the common range to derive an equivalent of $US

75,000 to $US 150,000 for a year of life gained.

48 Painful realities: The economic impact of arthritis in Australia 2007

In an attempt to overcome some of the issues in relation to placing a dollar value on a human life, in

the last decade an alternative approach to valuing human life has been derived. The approach is

non-financial, where pain, suffering and premature mortality are measured in terms of Disability

Adjusted Life Years (DALYs), with 0 representing a year of perfect health and 1 representing death

(the converse of a QALY or “quality-adjusted life year” where 1 represents perfect health). This

approach was developed by the World Health Organization, the World Bank and Harvard University

and provides a comprehensive assessment of mortality and disability from diseases, injuries and risk

factors in 1990, projected to 2020 (Murray and Lopez, 1996). Methods and data sources are detailed

further in Murray et al (2001).

The DALY approach has been adopted and applied in Australia by the Australian Institute for Health

and Welfare (AIHW) with a separate comprehensive application in Victoria. Mathers et al (1999) from

the AIHW estimate the burden of disease and injury in 1996, including separate identification of

premature mortality (YLL) and morbidity (YLD) components. In any year, the disability weight of a

disease (for example, 0.18 for a broken wrist) reflects a relative health state. In this example, 0.18

would represent losing 18% of a year of healthy life because of the inflicted injury.

The DALY approach has been successful in avoiding the subjectivity of individual valuation and is

capable of overcoming the problem of comparability between individuals and between nations,

although nations have subsequently adopted variations in weighting systems. For example, in some

countries DALYs are age-weighted for older people although in Australia the minority approach is

adopted – valuing a DALY equally for people of all ages.

The main problem with the DALY approach is that it is not financial and is thus not directly

comparable with most other cost measures. In public policy making, therefore, there is always the

temptation to re-apply a financial measure conversion to ascertain the cost of an injury or fatality or

the value of a preventive health intervention. Such financial conversions tend to utilise “willingness

to pay” or risk-based labour market studies described above.

The Department of Health and Ageing (based on work by Applied Economics) adopted a very

conservative approach to this issue, placing the value of a human life year at around A$60,000 per

annum, which is lower than most international lower bounds on the estimate.

Painful realities: The economic impact of arthritis in Australia 2007 49

11 In round numbers, $2,000,000 = $118,000/1.05 + $118,000/(1.05)2 + … + $118,000/(1.05).40 [Access

Economics comment: The actual value should be $116,556, not $118,000 even in round numbers.]

As the citation concludes, the estimate of $60,000 per DALY is very low. The Viscusi (1993) metaanalysis

referred to reviewed 24 studies with values of a human life ranging between $US 0.5 million

and $US 16m, all in pre-1993 US dollars. Even the lowest of these converted to 2003 Australian

dollars at current exchange rates, exceeds the estimate adopted ($1m) by nearly 25%. The BTE study

tends to disregard the literature at the higher end and also adopts a range (A$1-$1.4m) below the

lower bound of the international range that it identifies (A$1.8-$4.3m).

The rationale for adopting these very low estimates is not provided explicitly. Certainly it is in the

interests of fiscal restraint to present as low an estimate as possible.

In contrast, the majority of the literature as detailed above appears to support a higher estimate for

VSL, as presented in Table 5.1, which Access Economics believes is important to consider in disease

costing applications and decisions. The US dollar values of the lower bound, midrange and upper

bound are shown; the ‘average’ estimate is the average of the range excluding the high NOHSC

outlier. Equal weightings are used for each study as the:

conducting literature analysis.

Where there is no low or high US dollar estimate for a study, the midrange estimate is used to

calculate the average. The midrange estimates are converted to Australian dollars at purchasing

power parity (as this is less volatile than exchange rates) of USD=0.7281AUD for 2003 as estimated

by the OECD.

Access Economics concludes the VSL range in Australia lies between $3.7m and $9.6m 14, with a

mid-range estimate of $6.5m. These estimates have conservatively not been inflated to 2004 prices,

given the uncertainty levels.

50 Painful realities: The economic impact of arthritis in Australia 2007

12 The equivalent value of $60,000 assumes, in broad terms, 40 years of lost life and a discount rate of 5 per cent.

[Access Economics comment: More accurately the figure should be $58,278.]

13 In addition to the cited references in the text, see for example Murphy and Topel’s study (1999) on the economic

value of medical research. [Access Economics comment. Identical reference to our Murphy and Topel (1999).]

14 Calculated from the non-indexed studies themselves. Converting the Access Economics average estimates from

USD to AUD at PPP would provide slightly higher estimates - $3.9 million and $10.2m, with the same midrange

estimate.

Painful realities: The economic impact of arthritis in Australia 2007 51

US$m A$m

Lower Midrange Upper 0.7281

Australian: ABS 1991 4.2 5.8

NOHSC 1997 11.3 19.1

Harvard (Cutler and Richardson) 1998 0.6 5 13.7 6.9

* Average of range excluding high NOHSC outlier, using midrange if no data; conservatively not inflated.

A$m conversions are at the OECD 2003 PPP rate.

Choosing an appropriate discount rate for present valuations in cost analysis is a subject of some

debate, and can vary depending on which future income or cost stream is being considered. There

is a substantial body of literature, which often provides conflicting advice, on the appropriate

mechanism by which costs should be discounted over time, properly taking into account risks,

inflation, positive time preference and expected productivity gains.

The absolute minimum option that one can adopt in discounting future income and costs is to set

future values in current day dollar terms on the basis of a risk free assessment about the future (that

is, assume the future flows are similar to the certain flows attaching to a long term Government

bond).

Wages should be assumed to grow in dollar terms according to best estimates for inflation and

productivity growth. In selecting discount rates for this project, we have thus settled upon the

following as the preferred approach.

history) as the parameter for this aspect of the discount rate. (If there were no positive time

preference, people would be indifferent between having something now or a long way off in the

future, so this applies to all flows of goods and services.)

3% inflation over the course of the economic cycle. This is a realistic longer run goal and we

therefore endorse the assumption of 2.5% pa for this variable. (It is important to allow for

inflation in order to derive a real (rather than nominal) rate.)

productivity growth of 1.7% in the decade to 2010 and 1.75% thereafter. We suggest 1.75%

for the purposes of this analysis.

There are then two different discount rates that should be applied:

5.8 - 2.5 - 1.75 = 1.55%.

and so on) the discount rate is:

5.8 – 2.5 = 3.3%

While there may be sensible debate about whether health services (or other costs with a high labour

component in their costs) should also deduct productivity growth from their discount rate, we argue

that these costs grow significantly in real terms over time as a result of other factors such as new

technologies and improved quality, and we could reasonably expect this to continue in the future.

Discounting the VSL of $3.7m from Table 5.1 by the discount rate of 3.3% over an average 40 years

expected life span (the average from the meta-analysis of wage-risk studies) provides an estimate of

the value of a life year of $162,561.

The years of life lost due to disability (YLD) is estimated based on an ‘implicit disability weight’ of

0.024 derived from the YLD divided by the prevalence of arthritis calculated by the AIHW (Mathers et

al, 1999). The AIHW disability weights are presented in Table 5.2, suggesting that a large proportion

of arthritis is mild (or adjusted for co-morbidities in older people).

Mild Moderate Severe

* Average based on disability weight for chronic back pain and ‘other musculoskeletal disorders’, since there is no

distinction in the prevalence data between the severity stages of ‘other arthritis’.

Based on the implicit disability weight outlined above and the total number of people experiencing

loss of wellbeing due to disability from arthritis, the YLD for arthritis has been calculated by gender

(Table 5.3).

Implicit disability weight Prevalence YLD

Total 0.024 3,848,545 91,479

52 Painful realities: The economic impact of arthritis in Australia 2007

Based on the AIHW’s national mortality database, it is estimated that there are around 620 deaths a

year from arthritis. The years of life lost due to premature death (YLL) have been estimated from the

age-gender distribution of deaths by the corresponding YLL for the age of death in the Standard Life

Expectancy Table (West Level 26) with a discount rate of 3.3% and no age weighting. For the agegender

distribution of deaths, the total YLL in 2007 was estimated as 2,376 DALYs for arthritis

(Table 5.4).

0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80-89 Total

Males 0.1 0.4 3.5 1.9 17.3 74.2 159.0 230.9 267.5 755.0

Females 0.0 0.5 5.2 14.7 33.1 124.5 295.2 517.9 629.8 1620.9

Persons 0.1 1.0 8.7 16.6 50.3 198.7 454.2 748.8 897.3 2375.8

Figure 5.1 illustrates YLD and YLL due to arthritis totalling 93,855 DALYs. The greatest impact of

arthritis is in the 60-69 age group, reflecting the higher YLD due to the large number of Australians

with arthritis in this cohort. Indicative of the greater prevalence and hence greater YLD, it can also be

seen that the greatest loss of wellbeing due to arthritis in Australia is among women.

Painful realities: The economic impact of arthritis in Australia 2007 53

0

5000

10 0 00

15 0 00

20 0 00

25 0 00

0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80+

Age (years )

F emale s

Males

DALYs

Multiplying the number of DALYs by the VLY ($162,561) provides an estimate of the gross dollar value

of the loss of wellbeing due to arthritis.

The estimated 2007 gross cost of lost wellbeing from arthritis is $15.3 billion.

Bearing in mind that the wage-risk studies underlying the calculation of the VSL take into account all

known personal impacts – suffering and premature death, lost wages/income, out-of-pocket personal

health costs and so on – the estimate of $2.4 billion should be treated as a ‘gross’ figure. However,

costs specific to arthritis that are unlikely to have entered into the thinking of people in the source

wage/risk studies should not be netted out (eg, publicly financed health spending, care provided

voluntarily). The results after netting out are presented in Table 5.5.

54 Painful realities: The economic impact of arthritis in Australia 2007

Gross cost of lost wellbeing 15,257

Minus production losses net of tax 2,619

Minus health costs borne out-of-pocket 908

Net cost of lost wellbeing 11,729

The estimated total cost of arthritis in 2007 is $24 billion (Table 6.1). This equates to $6,200 per

person with arthritis in 2007 and is an increase of around $4.6 billion on the estimated total cost

of arthritis in 2004 (Access Economics 2005).

Painful realities: The economic impact of arthritis in Australia 2007 55

Cost Category $million % total

Health costs

Hospitals 1,181.8 4.9%

Aged care 927.3 3.9%

Other health costs 2,130.5 8.9%

Total allocated health costs 4,239.6 17.7%

Unallocated health costs 605.7 2.5%

Sub-total health costs 4,845.3 20.2%

Other financial costs

Productivity costs 4,076.5 17.0%

DWL from raising additional taxation 1,684.9 7.0%

Informal care 1,014.8 4.2%

Other indirect costs 590.9 2.5%

Sub-total other financial costs 7,367.1 30.8%

Total financial costs 12,212.4 51.0%

Net cost of suffering 11,729.0 49.0%

Total cost of arthritis 23,941.4 100.0%

Note: Other health costs refer to out of hospital medical costs, other professional services, pharmaceuticals and

research.

As Figure 6.1 depicts, the burden of disease accounts for the largest share of arthritis costs in

Australia, nearly half of total costs. Health costs (20%) are the second largest component, capturing

the considerable hospital, aged care and pharmaceutical costs resulting from the condition, as well

as smaller costs such as out of hospital medical costs, other professional services and research.

Productivity costs represent a further 17% of total arthritis costs, reflecting the effects of arthritis

on individuals’ employment outcomes.

The greatest share of arthritis costs in Australia is borne by the individuals with arthritis themselves

who, principally due to the large burden of disease costs, bear 61% of total costs. 21% of total costs

are borne by the Federal Government due to the high health system and productivity costs, while a

further 9% are borne by society.

Health System

Costs 20%

Productivity

costs 17%

Family/Friends 3%

Federal

Government 21%

The total costs of arthritis in 2007 for each state and territory in Australia has been calculated on the

basis of prevalence share (Table 6.2). While the allocation of health costs reflects fundamental

differences in the cost of delivery between jurisdictions (relatively higher cost per case in NT and ACT

for example), the implicit assumption underlying the allocation of indirect costs and the burden of

disease is that costs per person do not vary between states/territories.

Painful realities: The economic impact of arthritis in Australia 2007 57

NSW VIC QLD SA WA TAS NT ACT Total

Health costs

Other financial costs

DWL from raising

Sub-total other

Total cost of arthritis 7993.5 5929.1 4530.5 1996.9 2343.7 597.1 162.8 387.7 23,941.4

Consistent with the method adopted for allocating total costs to the states and territories, total costs

shares reflect the demographic prevalence of arthritis in Australia (Figure 6.3). New South Wales bears

nearly a third of the total cost of arthritis in Australia, reflecting the fact that more people with

arthritis reside there than any other state. Victoria (25%) bears the second largest share of arthritis

costs and Queensland a further 19%. Despite the relatively high health system costs in the NT and

ACT, these jurisdictions bear only 1% of total costs respectively, indicative of the relatively small

number of people with arthritis residing in these territories.

1% ACT

QLD 19%

WA 10%

NT 1%

2005 is the most recent year for which comparable prevalence data on all diseases are available and

Figure 7.1 below depicts the prevalence of arthritis relative to selected other conditions. In 2005,

musculoskeletal diseases were the second most common group of conditions in Australia and the

most prevalent National Health Priority Area (NHPA). Arthritis (defined here to include other

arthropathies), with prevalence of over 3.5 million in 2005, comprised over half of this, making it

alone more common than all other NHPAs.

Painful realities: The economic impact of arthritis in Australia 2007 59

1 7 0

3 2 7

3 8 9

6 4 2

7 0 0

7 5 4

1 5 8 1

2 0 1 4

2 1 0 8

2 4 8 6

3 5 3 7

3 6 8 5

6 0 9 2

1 0 2 0 6

0 2000 4000 6000 8000 10000 12000

* National Health Priorities ^ Includes Arthritis Prevalence (’000)

Visual disorders

Total Musculoskeletal*^

Arthritis*

Cardiovascular*

Hearing loss

Mental and behavioural problems*

Asthma*

Diseases of the nervous system

Skin & subcutaneous tissue

Diabetes melitus*

Genito-urinary system

Neoplasms*

Blood & blood forming organs

Infectious & parasitic diseases

The most recent comparable data across diseases for health expenditure in Australia are for the year

2000-01, contained in the AIHW publication Expenditure on Disease and Injury in Australia (AIHW

2005a) (Figure 7.2)

Source: Access Economics based on NHS 2004-05.

Allocated health expenditure on musculoskeletal conditions was around $4.5 billion in 2000-01,

second only to cardiovascular diseases among the NHPAs. Expenditure on arthritis, around $2.5 billion

in 2001, ranked above most individual NHPAs, consistent with it being the most prevalent. In 2001,

expenditure on arthritis was 11% of total recurrent health expenditure allocated to NHPAs.

The most recent data available comparing the burden of diseases in Australia is that contained in the

AIHW publication The burden of disease and injury in Australia in 2003 (Begg et al, 2007). According

to the findings of this report, musculoskeletal diseases were the eighth greatest cause of burden of

disease and injury in Australia in 2003, responsible for 4.0% of the total disease and injury burden

(Figure 7.3). Collectively, OA, back pain and RA represented over three quarters of this, accounting for

33%, 28% and 16% respectively. OA ranked seventeenth in the twenty leading causes of burden of

disease for males, while for females OA ranked twelfth and RA twentieth.

692

812

894

1 ,107

1 ,46 5

2 ,502

2 ,918

3 ,741

4 ,013

4 ,634

5 ,479

0 1,000 2 ,000 3,000 4 ,000 5,000 6 ,00 0

($m )

All cardiovascular diseases

All musculoskeletal conditions^

Injuries

All mental disorders

Cancer

Arthritis*

Ischaemic heart disease

Depression

Stroke

Diabetes mellitus

Asthma

Source: Access Economics based on AIHW (2005a). ^ Includes arthritis. *Access Economics’ estimate is greater

than the AIHW published estimate of $1,429 million due to definitional differences.

Painful realities: The economic impact of arthritis in Australia 2007 61

Neoplasms

Cardiovascular disease

Mental disorders

Neurological & sense disorders

Respiratory disease

Injuries

Diabetes mellitus

Musculoskeletal diseases

Genitourinary diseases

Diseases of the digestive system

Infections & parasitic disease

Neonatal causes

Congenital anomalies

Endocrine & metabolic disorders

Oral conditions

Skin diseases

Other

Maternal conditions

DALYs (’000)

0 100 200 300 400 500 600

Comparing the total costs of arthritis with other conditions is hampered by the fact that there are few

disease cost burden analyses published in Australia. Presented in Table 7.1 on page 62 is a comparison

of the total costs of a number of conditions, as estimated by Access Economics in recent studies.

While direct comparison between studies is not possible due to the different base years used, Table

7.1 does provide an insight into the enormity of the costs associated with arthritis in Australia.

Source: Begg et al (2007).

Year of study Condition Financial costs $BoD Total cost

(current $)

2007 Arthritis 12.2 11.7 23.9

2007 GORD & PUD^ 9.7 7.2 16.9

2005 Hearing loss 11.7 11.3 23.0

2005 Cancer 11.2 83.4 94.6

2004 Arthritis 11.2 8.0 19.3

2004 Cardiovascular disease 14.2 93.9 109.1

2004 Vision loss 5.0 4.8 9.9

2004 Restless legs syndrome 1.4 9.7 11.1

2004 Sleep disorders* 6.2 4.1 10.3

2003 Bipolar disorder 1.6 n/a n/a

2002 Dementia 6.6 n/a n/a

2002 Schizophrenia 1.8 n/a n/a

2001 Osteoporosis 7.5 n/a n/a

2000 Arthritis 9.0 n/a n/a

Source: Past Access Economics reports.

^Gastro-oesophageal reflux disease and peptic ulcer disease. * Obstructive sleep apnoea, insomnia, periodic limb

movement disorder and narcolepsy.

62 Painful realities: The economic impact of arthritis in Australia 2007

Expenditure on arthritis in Australia is growing rapidly. Over the last three years, Access Economics

estimates that allocated arthritis health expenditure has grown by around 42%. Such growth is

indicative of the increase in overall health and welfare spending in Australia. In 2004-05 it reached

$87.3 billion, 10% above the previous year’s level and more than double that of 1994-95 in nominal

terms. It is also growing as a proportion of GDP, with the 2004-05 share reaching 9.8%. One dollar in

every ten in the Australian economy is now produced and consumed within the health sector.

As medical technology advances, patient care and treatment is changing in many ways. However,

unlike technological change in other industries, which is often cost-reducing, many technological

advances in health result in increased costs. Demographic ageing is another cost driver, with health

costs per person much higher in older age. Finally, health is an income-elastic good, which means

that as the standard of living increases over time, Australians spend a higher proportion of household

income on health.

Expenditure on health, like any form of expenditure, is subject to a binding budget constraint and this

inextricably limits both the quality and the quantity of health services that can be provided. In this

context, evaluating and comparing health interventions in terms of their ability to achieve their

ultimate goal – effective, efficient improvements in quality of life – is vital to ensuring efficient

allocation of these scarce resources.

Cost effectiveness analysis is used to assess and compare the value of interventions in terms of their

ability to provide health and other benefits, relative to the cost of the intervention. The most common

type of cost effectiveness analysis in health is cost utility analysis, which compares the net financial

cost of the intervention with the wellbeing benefit, measured in dollars spent per Quality Adjusted

Life Year (QALY) gained (ie, $/QALY).

Expensive treatments can be cost effective if they confer significant value to a person in terms of

longevity and quality of life. Conversely, expensive treatments are not cost effective if they offer only

small wellbeing gains relative to their costs. If an intervention reduces overall financial costs and

gains QALYs, it is called cost saving – for example, an intervention that enhanced activities of daily

living to such an extent that entry to nursing home care is delayed or averted. Dominated

interventions, on the other hand, are both more costly and less effective than the comparator (the

alternative being analysed). There is a variety of opinion on where bounds for cost effective

interventions lie and, furthermore, no common thinking has emerged on thresholds for incremental

cost effectiveness ratios (ICERs) that might be used in public reimbursement decision-making processes.

In Australia, Segal et al (2004) found that total hip replacement and total knee replacement surgery

were highly cost-effective at A$7,500/QALY and A$10,000/QALY respectively and that other

apparently highly cost-effective interventions were exercise and strength training for knee OA

(<A$5,000/QALY), knee bracing, and use of capsaicin or glucosamine sulfate (<$10,000/QALY).

Andrews et al (2006) found that current treatment for OA and RA averted 27% and 26% respectively

of the burden of disease, with ICERs of $25,000 and $19,000 per YLD averted; however, optimal

evidence-based treatment would avert 39% and 48% of the burden, with ICERs of $25,000

(unchanged) and $12,000 per YLD averted. They concluded that closing the gap between evidence

and practice would be more efficient overall.

The Cost Effectiveness Analysis (CEA) Registry, maintained by the New England Medical Center’s

Institute for Clinical Research and Health Policy Studies provides a comprehensive database of ICERs in

the published literature using standardising cost-utility ratios. Analysis of the Registry revealed

numerous studies that have investigated the cost effectiveness of a variety of interventions for arthritis

including surgical, pharmaceutical and lifestyle. Table 7.2 on page 64 summarises the results of

recent studies of the cost effectiveness of possible interventions for arthritis based on the CEA

Registry, followed by a discussion of three types of interventions in subsequent sections. (For definitions

of terms in the table such as ‘cost saving’ and ‘dominated’, please see the paragraph above.)

Year of study Intervention Quality score

of analysis*

$/QALY in

2002 US$

LIFESTYLE INTERVENTIONS

2001 4.5 $180,000

2002 4.5 $11,000

Aquatic exercise class at least twice a week vs

no exercise/ usual care (less than 1 hour of

exercise per week) in patients with

osteoarthritis aged 55-75

Combined spa therapy and exercise therapy (3

weeks) in addition to standard treatment (37

weeks) vs standard treatment of antiinflammatory

drugs and weekly group physical

therapy (40 weeks) in Dutch outpatients with

active ankylosing spondylitis who have had the

disease for < 20 years and who follow weekly

group physical therapy

Treatment with leflunomide vs treatment with

methotrexate in patients in Nth America with

recently diagnosed definite rheumatoid arthritis

Treatment with leflunomide vs treatment with

sulfasalazine in patients in the UK with recently

diagnosed definite rheumatoid arthritis

Treatment with leflunomide vs treatment with

methotrexate in patients in the UK with recently

diagnosed definite rheumatoid arthritis

Leflunomide added to conventional sequence of

DMARDs vs conventional sequence of DMARDS in

RA patients with symptoms severe enough to

require treatment with methotrexate

Methotrexate and infliximab vs methotrexate and

placebo in patients with active, refractory

rheumatoid arthritis

Appropriate care and hylan G-F 20 vs appropriate

care with no hylan G-F 20 in patients in Canada

with osteoarthritis of the knee – age 40+

Diclofenac vs Ibuprofen in patients with osteo- or

rheumatoid arthritis with average upper

gastrointestinal risk who do not need aspirin

therapy for cardiovascular disease

PHARMACOTHERAPY INTERVENTIONS

2002 4 Cost-saving

2002 4 Cost-saving

2002 4 Dominated

2002 5.5 $79,000

2002 5 $10,000

2002 5 $ 7,300

2003 5.5 $91,000

LIFESTYLE INTERVENTIONS

2003 5.5 $200,000

2003 6 $15,000

2003 6 $ 3,100

2003 6 Cost-saving

Painful realities: The economic impact of arthritis in Australia 2007 65

Year of study Intervention Quality score

of analysis*

$/QALY in

2002 US$

Diclofenac with Proton Pump Inhibitor vs Celecoxib

in patients with osteo- or rheumatoid arthritis with

high upper gastrointestinal risk who do not need

aspirin therapy for cardiovascular disease

Treatment with infliximab plus methotrexate for

two years vs treatment with methotrexate alone for

two years in patients in Sweden with advanced

rheumatoid arthritis.

Treatment with infliximab plus methotrexate for

one year vs treatment with methotrexate alone for

one year in patients in Sweden with advanced RA

Any DMARD plus corticosteriods vs any DMARD

plus NSAIDS in hypothetical cohort of patients with

rheumatoid arthritis – age 50

SURGICAL INTERVENTIONS

2002 2 $1,500

2002 2 $1,200

2002 2 $2,500

2002 2 $2,000

2002 5 Cost-saving

2003 5 Cost-saving

2003 5 Dominated

Total hip replacement surgery vs no total hip

replacement surgery in males undergoing hip

replacement surgery – age 60-6

Total hip replacement surgery vs no total hip

replacement surgery in females undergoing hip

replacement surgery – age 60-69

Total hip replacement surgery vs no total hip

replacement surgery in males undergoing hip

replacement surgery – age 70-79

Total hip replacement surgery vs no total hip

replacement surgery in females undergoing hip

replacement surgery – age 70-79

Early plate fixation surgery (within 12 hours of injury)

vs delayed plate fixation surgery (more than 12 hours

after injury) in patients with an isolated orthopaedic

injury (closed tibial shaft fracture) with surgical

indications – age 17 +

Metal on metal total hip replacement vs watchful

waiting followed by total hip replacement (traditional

implant) in relatively younger patients requiring hip

replacement – age 45-50

Metal on metal hip replacement vs total hip

replacement (traditional implant) in relatively younger

patients requiring hip replacement – age 45-60

In recent years there has been an increase in awareness and understanding of the contribution that

an individual can make to the management of their condition. The result of this has been an

expansion of lifestyle or psychosocial interventions such as self management courses aimed at

enhancing self-efficacy and thus health outcomes. By educating and informing the individual about

how their lifestyle choices impact on their condition, patients are increasingly taking their health

management into their own hands. As the individual’s appreciation of their condition expands and

their understanding of the impact of their everyday decisions grows, they are able to actively engage

in the self-management, with the potential for reduced reliance on formal health care.

Two studies were identified from the CEA registry that evaluated the cost effectiveness of lifestyle

interventions (see Table 7.2 above). The first, a 2001 US study (Patrick et al, 2001) calculated the cost

effectiveness of aquatic exercise compared to usual care for older patients with arthritis to be

$180,000/QALY in 2002 US dollars. The second, a 2002 European study found the cost effectiveness

of combined spa therapy and exercise therapy in addition to standard treatment compared to

standard treatment of anti-inflammatory drugs and weekly group physical therapy to be

$11,000/QALY in 2002 US dollars, considerably more cost effective than the US aquatic monotherapy.

What is evident from these two evaluations, however, is that the cost effectiveness of lifestyle

interventions can, and does, vary considerably between programs, and there is a need to carefully

evaluate their efficacy relative to cost in order to increase knowledge about what works best for

particular target populations.

Other literature in this field has also been inconclusive, with a number of studies finding little

evidence of the efficacy of general self-management programs (Chodosh et al 2005, Warsi et al 2003

and 2004). The research has revealed only relatively small reductions in pain and disability as a result

of these interventions, suggesting that the cost effectiveness of self-management programs may be

marginal.

In Australia, lifestyle interventions for arthritis have been widely adopted, with a variety of programs

currently conducted across the nation including:

Researched and designed by Arthritis WA, OAK is a disease-specific education program that uses the

principles of self management to provide strategies for individuals with osteoarthritis to effectively

manage their condition. The six week program, run for 2.5 hours a week, aims to equip participants

with the knowledge and skills necessary to achieve long-term behavioural changes, focusing on

exercise and healthy lifestyle choices. The sessions are designed and conducted by health

professionals, whose expertise and experience with arthritis and its intricacies ensures participants

receive the support and education required to actively manage their condition. Participation is free of

charge to the consumer.

66 Painful realities: The economic impact of arthritis in Australia 2007

The specific objectives of the program are to improve participants’ welfare by:

A full cost effectiveness or cost utility analysis is both beyond the scope of this report and precluded

by the lack of necessary data. Rigorously quantifying the effectiveness of such a program in terms of

$/QALY is a complex task and no attempt is made here to perform such analysis. However,

evaluations of the program conducted by Arthritis WA provide useful insights into its efficacy.

As part of independent research, a questionnaire regarding total knee replacement surgery was sent

to all Pilot participants and 192 of the 259 responded with completed surveys. Upon commencing the

OAK program, 5% of participants were on a waiting list for a knee replacement. As a result of the

course, 68% reported delaying their operation.

There were significant differences in average length of hospital stay for those who had a knee

replacement prior to the OAK program compared with those who had the operation following the

program. For the 5% of respondents who had knee replacements prior to the OAK course, the

average length of hospital stay was 12 days, while for those who had knee replacements after the

OAK course, the average length of hospital stay was only 8 days. With such a small sample, and

absence of control for factors such as age and co-morbidities, these figures should be interpreted

cautiously and are indicative only. A study controlling for these factors would be useful to ascertain to

what extent potential cost savings can be realised.

In 2005, the average cost per patient day in Australian public hospitals for knee replacement (ARDRG

V5.1 I04Z) was $1,884 (AIHW 2006b). Hence for every day that a patient’s stay in hospital for

knee replacement is reduced, a direct cost saving of around $1,884 per patient is possible. There are

also indirect cost savings such as reduced time away from work or home duties that would also

accrue. Given that there were over 10,000 knee replacements performed in Australian public

hospitals in 2004-05 and nearly 20,000 in private hospitals where the costs are even higher, there is

considerable potential for significant cost savings if hospital stays can be reduced.

Following the success of the pilot study, a six month randomised controlled trial (RCT) was initiated to

evaluate the program. 145 participants (40 males, 105 females, mean age 67 years) with clinically

confirmed OA of the knee were randomised to control or intervention groups. The control group

continued their usual management program for six months, while the intervention group undertook

the six week OAK self management in addition to usual medical management.

The trial revealed improvements among the intervention group on multiple aspects of recognised

health surveys including Visual Analogue Scale (pain), SF-36 and the osteoarthritis-specific Western

Ontario and McMaster Universities Arthritis index (WOMAC)15. However, the control group also

experienced improvements in some outcomes, and to gain further insight into the program’s efficacy,

particularly over the longer term, the trial was extended for a further 12 months.

With the extension of the study, the control group from the six month trial undertook the OAK

program and both this group and the original intervention group were followed for 12 months postintervention.

After the 12 months, Arthritis Western Australia, in conjunction with Curtin University of

Technology, evaluated the program’s effectiveness using an intention to treat analysis.

Painful realities: The economic impact of arthritis in Australia 2007 67

15 See http://www.womac.org for details

The 145 participants now continued on study for long term follow up. Assessments were undertaken

at the baseline, eight weeks, six months and 12 months post-intervention, with data analysed using

repeated measures ANOVA (Analysis of Variance). Participants once again completed health surveys

including Visual Analogue Scale, SF-36 and the WOMAC.

In response to the intervention, all subjects demonstrated clinically important improvements in all

WOMAC dimensions (p<0.001) including pain and physical function, which decreased from 6.78 and

23.86 at baseline to 5.31 and 18.62 respectively at 12 months (greater disability is awarded a higher

score). Statistically and clinically important improvements were also reported in 7 of the 8 SF 36

domains, where higher values indicate improved health status. Role physical16 increased from 38.34

at baseline to 55.08 at 12 months (p<0.0001) and general health improved from 65.9 at the baseline

to 70.54 at 12 months (p=0.002). To put this in perspective, for people with OA, an increase of 5

points in the SF-36 is considered to be clinically important (Ware and Kosinski, 2002). Furthermore,

given that the average change in this age group in people with OA is a decrease of 2.1 points over

12 months (Ware and Kosinski, 2002), this is a noteworthy outcome.

Visual Analogue Scale (VAS) for pain also improved during the 6 week intervention phase, falling

from 5.1 (± 2.5) to 3.5 (±2.4). This is captured in Figure 7.4, which also shows a deterioration in VAS

for the control group from 5.1 to 6.15.

68 Painful realities: The economic impact of arthritis in Australia 2007

Score 0-10

Source: Coleman et al (2005).

16 Role physical measures limitations in usual role activities because of a physical health problem.

While the OAK program has not reached the stage where its impact on quality of life can be

comprehensively quantified, the indications from the findings thus far are positive. The program

has demonstrated long-term, enduring improvements in health and quality of life as assessed by

numerous recognised health surveys. This is in contrast to the evaluations of general selfmanagement

programs which have shown only marginal improvements in health and wellbeing.

The OAK program is low cost in nature, and there are signs that it may facilitate both cost savings in

the formal health care sector and improvements in the health and wellbeing of its participants. A full

cost effectiveness analysis of the program, preferably with a larger sample size, would appear a

worthwhile exercise on which to base decision-making regarding expansion of the program.

With rapid technological progress, the variety of pharmacotherapy interventions available for the

treatment of arthritis has grown considerably over recent decades. Medical professionals now have

a broad range of options for treating their patients pharmacologically; widely used non-steroidal antiinflammatory

drugs (NSAIDs) and disease-modifying anti-rheumatic drugs (DMARDs) are being

replaced with newer treatments that, while possibly more efficacious, are generally more expensive.

The ability to make cross study comparisons has been limited in the past as the choice of comparator

used to assess the cost effectiveness of interventions has not always been consistent. This is

improving and, in principle, the relevant comparator is generally the next-best alternative or

alternatives to the intervention of interest (Connely et al, 2006).

Comparative difficulties can be compounded by important structural differences that exist between

economies, such as the competitiveness of markets for pharmaceuticals, which can impact on costs

and, in turn, cost effectiveness ratios. For example, in Australia the vigorous use of monopsonistic

power by Australia’s health authorities has resulted in prices for pharmaceuticals that are below the

average of other countries (Richardson and Segal, 2004). In 2006, the proportion of health

expenditure on pharmaceuticals in Australia was among the lowest in the OECD (OECD, 2006),

resulting from both lower prices and fierce PBS volume control. Idiosyncrasies between economies

can also result in differing ICERs for similar trials (eg, leflunomide vs methotrexate in North America

compared to the UK in Table 7.2), making overall evaluation of efficacy difficult.

The CEA registry offers valuable information on the cost effectiveness of this form of intervention,

reporting a multitude of recently published studies in the area. It is important to appreciate the

relative nature of cost effectiveness. As Connelly et al (2006) notes, whether a particular intervention

is considered cost effective depends on the efficiency of other interventions.

Findings from the CEA registry were analysed against those in the wider literature, providing

numerous insights into the cost-effectiveness of pharmacotherapy interventions.

methotrexate (MTX) and sulfasalazine (SLF), although findings in the UK and the US have been

inconsistent. While LEF is considerably more expensive than both MTX and SLF, the cost of the

medication itself is only one component of the total cost of an intervention. A recent study

published in the Journal of Pharmacoeconomics found that the cost of the medication itself

accounted for 17% total MTX costs, but 72% of total LEF costs, while ‘adverse drug reaction

treatment costs’ represented 13% of the total cost of LEF and 40% of total MTX costs (Schadlich

et al, 2005). There is an important distinction to be made between least costly and cost-effective,

with adverse drug reactions, and resultant complications important considerations in this regard.

to be very cost effective relative to alternatives including methotrexate alone. A recent economic

evaluation (Barbieri et al, 2005) found that although INF is considerably more expensive,

combined with MTX it is more effective and indeed more cost effective than MTX alone (for

severe, treatment-resistant RA). The study also found that when life-long INF treatment is

assumed, incremental costs per QALY are even lower, a finding confirmed by recent New Zealand

research (Lysneg-Williamson et al, 2004). Health benefits, as well as the potential economic

impact of treatments that affect the progression of chronic disease will be most evident in the

longer term, hence the cost of treatment must be analysed in relation to the long-term benefit.

effective because of the ability to defer or reverse damage. Chen et al (2006) conducted a

systematic review of the effectiveness of adalimumab, etanercept and infliximab for the treatment

of RA in adults, including submissions to the National Institute for Health and Clinical Excellence

(NICE), meta-analyses of effectiveness data were for each agent and evaluation using the

Birmingham Rheumatoid Arthritis Model (BRAM), a simulation model used to produce an ICER

analysis. Chen et al (2006:iii-iv) concluded that:

(combined with DMARDS).

in arthritic patients at high risk of serious upper gastrointestinal events (Schaefer et al, 2005;

Maetzel et al, 2003). In average risk patients, Cox 2 inhibitors may not be cost effective, as

higher costs relative to alternatives are not matched with commensurate benefits (Maetzel et al,

2003, Spiegel et al, 2003). In contrast to international cost effectiveness studies, however, in

Australia cost effectiveness may be somewhat better since prices of Cox 2 inhibitors are low

relative to other countries. For example, in a 2004 review, PBAC recommended that celecoxib

and meloxicam were cost effective compared to traditional NSAIDs because of their better safety

profile. Moreover, in Australia, the price of Celebrex has fallen a further 7% since 2004.

70 Painful realities: The economic impact of arthritis in Australia 2007

ibuprofen and relative to COX-2 NSAIDs when combined with proton pump inhibitors in patients

with high upper GI risk.

Given the degenerative nature of arthritis, surgical interventions are a common, but costly necessity.

In Australian public hospitals alone, the cost of knee replacements and hip replacements in 2004-05

was $145 million and $186 million respectively (AIHW, 2006b), over 20% of the total $1.5 billion

overall inpatient cost for arthritis in Australia (recall Section 4.1.2). With the stakes so high, evaluating

the cost effectiveness of surgical interventions is an integral part of ensuring the best outcomes for

patients while also ensuring the most efficient allocation of resources is achieved.

Surgical interventions are widely regarded as some of the most cost effective interventions available

for arthritis and the evidence in Table 7.2 supports this. The focus of CEA with regard to surgical

interventions has predominantly been on hip surgery, both relative to other interventions and

between various methods of hip replacements. The studies reviewed here, where the highest ICER is

US$2,500/QALY, are very cost effective. Thus, while surgical procedures may be costly in absolute

dollar terms, the gains in quality of life are also substantial.

Given the demonstrated cost effectiveness of surgical interventions, there is a strong case for

providing these services to meet clinical indications. Currently in Australia there are long waiting lists

for orthopaedic surgery in public hospitals. In terms of the percentage of people on waiting lists who

had waited more than a year for surgery at the time of admission, orthopaedic surgery (9.6%) was

second only to ophthalmology (9.8%, presumably largely cataract surgery) in 2004-05 (AIHW,

2006b). The median public hospital waiting times for elective surgery are shown in Figure 7.5 on

page 72. The number of days waited for orthopaedic surgery at the 50th percentile (ie the median

waiting time at point of admittance) was 48 in 2004-05, again second only to ophthalmology (66).

Canada now has a maximum waiting time of six months for joint replacement surgery, with a

discussion of the issues underlying the cap (across all types of surgeries) provided in Sanmartin (2001),

including literature evidence for an acceptable waiting time of 7.4 weeks for orthopaedic surgery

(Sanmartin, 2001:400, Table 1 based on Ramsay and Walker,1998). Also in Canada, Conner-Spady et

al (2004) found median maximum acceptable waiting times for knee and hip arthroplasty that ranged

from 4 to 24 weeks for five levels of urgency.

0

10

20

30

40

50

60

70

Median waiting time (days)

Ophthalmology

Orthopaedic surgery

Ear, nose & throat surgery

General surgery

Plastic surgery

Urology

Gynaecology

Neurosurgery

Vascular surgery

Other

Cardio-thoracic surgery

Although waiting lists may be considered a health care rationing mechanism, waiting in queues for

orthopaedic surgery increases the burden of arthritis. Long waiting periods for surgery increase the

time that individuals have to spend incurring pain, suffering and reduced quality of life. Extended

waiting periods for surgery may also impose economic costs on society as individuals in queues may

consume additional medical resources such as pharmaceuticals, specialist, outpatient and primary care

visits, allied health and possibly imaging services, as well as indirect costs like extended periods of

reduced productivity (at work and in the home) and additional need for informal care, mobility aids

and income support.

A recent study carried out by a team of New Zealand researchers aimed to prospectively describe the

economic and health costs of waiting for a total hip arthroplasty (THA) (Fielden et al, 2005). The

researchers recruited 153 patients from orthopaedic waiting lists of three metropolitan publicly owned

hospitals and one provincial publicly owned hospital across three District Health Boards in New Zealand

between April 1999 and March 2002. Participants were mailed EQ-5D (a self administered, generic

quality-of-life questionnaire) and WOMAC questionnaires as well as a cost diary to complete at

enrolment and every month before surgery and after THA for six months. Costs were recorded for the

waiting period between when a patient was wait-listed for surgery and their operation.

Mean total costs per patient incurred because of their hip condition while waiting for THA were

US$688 per month (median $449) including US$491 in ‘societal costs’ reflecting lost income and time

away from usual activities. Expectedly, longer waits led to higher cost, with patients who waited six

months or more incurring a one and a half times greater cost than those waiting less than six

months. Pre-operative and post-operative health status was compared using the WOMAC index,

revealing that while waiting for THA, scores diminished on the physical function dimension, with no

improvement in dimensions of pain and stiffness, indicating deterioration in health status while

waiting. On all measures of the EQ-5D, deterioration between the initial and final preoperative

assessments was evident, although only the ability to perform usual activities declined with statistical

significance (Fielden et al 2005:994).

While the findings of this study provide a useful starting point for analysing the economic and quality

of life impacts of waiting for orthopaedic surgery, it is acknowledged that a single study cannot

provide a definitive analysis. In Australia, with a median waiting time for orthopaedic surgery of 48

days in 2004-05, and the number of admissions from waiting lists for the same period 79,064, there

may be substantial costs from extended waits for orthopaedic surgery. There is also the scope to

reduce costs while waiting by enhancing self-efficacy through lifestyle interventions, recalling that

68% of those waiting for surgery who undertook the OAK program reported delaying their operation

(7.2.2.1).

While these indications suggest that the costs of waiting for orthopaedic surgery are potentially

measurable and possibly not trivial, there is a need for further larger sample size studies of the cost of

waiting in public hospital queues, including with lifestyle self management programs as a comparator.

i Source: Cole et al (2000)

Painful realities: The economic impact of arthritis in Australia 2007 75

Males % Females % Persons %

Osteoarthritis

0-24 234 0.0% 2,141 0.2% 2,375 0.1%

25-34 6,535 1.4% 6,667 1.4% 13,202 1.4%

35-44 17,043 3.4% 20,916 4.2% 37,960 3.8%

45-54 35,252 7.4% 53,131 11.1% 88,382 9.3%

55-64 62,935 16.2% 93,297 24.2% 156,232 20.2%

65-74 45,196 18.7% 80,571 31.9% 125,768 25.4%

75+ 43,561 23.0% 77,201 28.2% 120,762 26.1%

Total 210,757 6.1% 333,924 9.6% 544,681 7.9%

Rheumatoid Arthritis

0-24 636 0.1% 2,375 0.2% 3,010 0.1%

25-34 2,434 0.5% 2,819 0.6% 5,253 0.6%

35-44 8,170 1.6% 13,093 2.6% 21,264 2.1%

45-54 10,860 2.3% 20,534 4.3% 31,394 3.3%

55-64 24,520 6.3% 21,028 5.5% 45,548 5.9%

65-74 16,108 6.7% 24,650 9.8% 40,758 8.2%

75+ 11,072 5.8% 13,131 4.8% 24,204 5.2%

Total 73,799 2.1% 97,631 2.8% 171,430 2.5%

Other Arthritis

0-24 14,587 1.3% 11,897 1.1% 26,484 1.2%

25-34 31,808 6.6% 16,551 3.5% 48,359 5.1%

35-44 42,994 8.6% 38,186 7.6% 81,180 8.1%

45-54 58,992 12.4% 55,706 11.7% 114,698 12.0%

55-64 80,350 20.7% 74,344 19.3% 154,694 20.0%

65-74 60,551 25.0% 60,507 24.0% 121,059 24.5%

75+ 40,615 21.4% 56,318 20.6% 96,933 20.9%

Total 329,897 9.6% 313,511 9.1% 643,407 9.3%

All Arthritis

0-24 15,256 1.3% 16,220 1.5% 31,476 1.4%

25-34 40,444 8.4% 25,672 5.4% 66,116 6.9%

35-44 65,462 13.1% 68,484 13.7% 133,945 13.4%

45-54 102,706 21.6% 121,577 25.5% 224,283 23.6%

55-64 158,229 40.8% 175,625 45.6% 333,854 43.2%

65-74 117,141 48.4% 154,746 61.3% 271,886 55.0%

75+ 91,141 48.1% 134,942 49.2% 226,083 48.8%

Total 590,377 17.2% 697,266 20.1% 1,287,644 18.7%

Totals may not sum due to rounding

Males % Females % Persons %

Osteoarthritis

0-24 174 0.0% 1,599 0.2% 1,772 0.1%

25-34 4,925 1.4% 5,076 1.4% 10,001 1.4%

35-44 12,802 3.4% 16,132 4.2% 28,934 3.8%

45-54 25,832 7.4% 39,686 11.1% 65,518 9.3%

55-64 45,395 16.2% 69,231 24.2% 114,627 20.3%

65-74 32,989 18.7% 59,767 31.9% 92,756 25.5%

75+ 32,028 23.0% 57,178 28.2% 89,207 26.1%

Total 154,146 6.1% 248,669 9.6% 402,815 7.9%

Rheumatoid Arthritis

0-24 470 0.1% 1,774 0.2% 2,244 0.1%

25-34 1,834 0.5% 2,147 0.6% 3,981 0.6%

35-44 6,137 1.6% 10,099 2.6% 16,236 2.1%

45-54 7,958 2.3% 15,338 4.3% 23,296 3.3%

55-64 17,680 6.3% 15,606 5.5% 33,286 5.9%

65-74 11,757 6.7% 18,281 9.8% 30,038 8.3%

75+ 8,151 5.9% 9,729 4.8% 17,880 5.2%

Total 53,988 2.1% 72,972 2.8% 126,960 2.5%

Other Arthritis

0-24 10,793 1.3% 8,845 1.1% 19,638 1.2%

25-34 23,974 6.6% 12,601 3.5% 36,575 5.1%

35-44 32,295 8.6% 29,452 7.6% 61,747 8.1%

45-54 43,229 12.4% 41,609 11.7% 84,839 12.0%

55-64 57,949 20.7% 55,284 19.3% 113,233 20.0%

65-74 44,198 25.0% 44,883 24.0% 89,081 24.5%

75+ 29,832 21.4% 41,718 20.6% 71,549 20.9%

Total 242,269 9.6% 234,393 9.0% 476,662 9.3%

All Arthritis

0-24 11,289 1.3% 12,080 1.5% 23,369 1.4%

25-34 30,482 8.4% 19,546 5.4% 50,029 6.9%

35-44 49,172 13.1% 52,819 13.7% 101,991 13.4%

45-54 75,262 21.6% 90,812 25.5% 166,074 23.6%

55-64 114,113 40.8% 130,430 45.6% 244,543 43.2%

65-74 85,501 48.4% 114,785 61.3% 200,287 55.1%

75+ 66,986 48.1% 99,942 49.3% 166,929 48.8%

Total 432,805 17.1% 520,415 20.1% 953,221 18.6%

Totals may not sum due to rounding

Painful realities: The economic impact of arthritis in Australia 2007 77

Males % Females % Persons %

Osteoarthritis

0-24 146 0.0% 1,336 0.2% 1,482 0.1%

25-34 3,848 1.4% 3,913 1.4% 7,760 1.4%

35-44 10,101 3.4% 12,711 4.2% 22,812 3.8%

45-54 20,878 7.4% 31,927 11.1% 52,804 9.3%

55-64 38,407 16.2% 56,502 24.2% 94,909 20.2%

65-74 26,309 18.7% 44,591 31.8% 70,900 25.2%

75+ 22,829 23.0% 38,355 28.2% 61,184 26.0%

Total 122,517 6.0% 189,335 9.2% 311,851 7.6%

Rheumatoid Arthritis

0-24 395 0.1% 1,482 0.2% 1,877 0.1%

25-34 1,433 0.5% 1,655 0.6% 3,088 0.6%

35-44 4,842 1.6% 7,957 2.6% 12,799 2.1%

45-54 6,432 2.3% 12,339 4.3% 18,771 3.3%

55-64 14,964 6.3% 12,736 5.5% 27,700 5.9%

65-74 9,362 6.7% 13,724 9.8% 23,086 8.2%

75+ 5,785 5.8% 6,532 4.8% 12,317 5.2%

Total 43,212 2.1% 56,425 2.7% 99,637 2.4%

Other Arthritis

0-24 9,060 1.3% 7,427 1.1% 16,487 1.2%

25-34 18,728 6.6% 9,713 3.5% 28,441 5.1%

35-44 25,481 8.6% 23,206 7.6% 48,687 8.1%

45-54 34,938 12.4% 33,474 11.7% 68,412 12.0%

55-64 49,035 20.7% 45,072 19.3% 94,107 20.0%

65-74 35,293 25.1% 33,497 23.9% 68,790 24.5%

75+ 21,314 21.4% 27,951 20.6% 49,266 20.9%

Total 193,848 9.4% 180,340 8.7% 374,189 9.1%

All Arthritis

0-24 9,476 1.3% 10,124 1.5% 19,600 1.4%

25-34 23,812 8.4% 15,066 5.4% 38,878 6.9%

35-44 38,797 13.1% 41,618 13.7% 80,414 13.4%

45-54 60,827 21.6% 73,057 25.5% 133,884 23.6%

55-64 96,563 40.8% 106,405 45.6% 202,968 43.2%

65-74 68,190 48.5% 85,704 61.0% 153,894 54.8%

75+ 47,781 48.1% 67,027 49.3% 114,808 48.8%

Total 345,445 16.8% 399,001 19.3% 744,447 18.1%

Totals may not sum due to rounding

Males % Females % Persons %

Osteoarthritis

0-24 51 0.0% 467 0.2% 518 0.1%

25-34 1,347 1.4% 1,317 1.4% 2,664 1.4%

35-44 3,767 3.4% 4,566 4.2% 8,333 3.8%

45-54 8,194 7.4% 12,529 11.1% 20,723 9.3%

55-64 15,092 16.2% 23,136 24.2% 38,228 20.3%

65-74 10,838 18.7% 19,796 31.9% 30,634 25.5%

75+ 11,281 23.0% 20,330 28.1% 31,611 26.0%

Total 50,570 6.6% 82,140 10.5% 132,710 8.6%

Rheumatoid Arthritis

0-24 139 0.1% 518 0.2% 657 0.1%

25-34 502 0.5% 557 0.6% 1,059 0.5%

35-44 1,806 1.6% 2,858 2.6% 4,664 2.1%

45-54 2,524 2.3% 4,842 4.3% 7,366 3.3%

55-64 5,880 6.3% 5,214 5.5% 11,094 5.9%

65-74 3,865 6.7% 6,051 9.8% 9,916 8.3%

75+ 2,889 5.9% 3,448 4.8% 6,337 5.2%

Total 17,605 2.3% 23,489 3.0% 41,094 2.6%

Other Arthritis

0-24 3,190 1.3% 2,583 1.1% 5,773 1.2%

25-34 6,557 6.6% 3,270 3.5% 9,827 5.1%

35-44 9,502 8.6% 8,336 7.6% 17,838 8.1%

45-54 13,712 12.4% 13,136 11.7% 26,848 12.0%

55-64 19,269 20.7% 18,425 19.3% 37,693 20.0%

65-74 14,514 25.0% 14,866 24.0% 29,379 24.5%

75+ 10,459 21.4% 14,859 20.5% 25,317 20.9%

Total 77,203 10.0% 75,473 9.6% 152,676 9.8%

All Arthritis

0-24 3,337 1.3% 3,527 1.5% 6,864 1.4%

25-34 8,337 8.4% 5,071 5.4% 13,409 7.0%

35-44 14,468 13.1% 14,950 13.7% 29,418 13.4%

45-54 23,873 21.6% 28,669 25.5% 52,542 23.6%

55-64 37,944 40.8% 43,541 45.6% 81,486 43.2%

65-74 28,090 48.4% 38,016 61.3% 66,106 55.1%

75+ 23,555 48.1% 35,554 49.1% 59,108 48.7%

Total 139,605 18.2% 169,328 21.6% 308,933 19.9%

Totals may not sum due to rounding

Painful realities: The economic impact of arthritis in Australia 2007 79

Males % Females % Persons %

Osteoarthritis

0-24 75 0.0% 689 0.2% 764 0.1%

25-34 1,968 1.4% 1,979 1.4% 3,947 1.4%

35-44 5,235 3.4% 6,372 4.2% 11,607 3.8%

45-54 10,903 7.4% 16,484 11.1% 27,386 9.3%

55-64 19,141 16.2% 27,503 24.1% 46,644 20.1%

65-74 12,726 18.7% 22,235 31.8% 34,961 25.4%

75+ 11,021 22.9% 18,861 28.2% 29,882 26.0%

Total 61,069 5.9% 94,122 9.1% 155,191 7.5%

Rheumatoid Arthritis

0-24 204 0.1% 764 0.2% 968 0.1%

25-34 733 0.5% 837 0.6% 1,570 0.6%

35-44 2,509 1.6% 3,989 2.6% 6,499 2.1%

45-54 3,359 2.3% 6,371 4.3% 9,729 3.3%

55-64 7,445 6.3% 6,202 5.4% 13,647 5.9%

65-74 4,529 6.7% 6,828 9.8% 11,357 8.2%

75+ 2,796 5.8% 3,209 4.8% 6,005 5.2%

Total 21,575 2.1% 28,199 2.7% 49,774 2.4%

Other Arthritis

0-24 4,673 1.3% 3,795 1.1% 8,467 1.2%

25-34 9,580 6.6% 4,912 3.5% 14,491 5.1%

35-44 13,206 8.6% 11,634 7.6% 24,839 8.1%

45-54 18,245 12.4% 17,282 11.7% 35,528 12.0%

55-64 24,421 20.7% 22,085 19.4% 46,506 20.0%

65-74 17,070 25.1% 16,701 23.9% 33,771 24.5%

75+ 10,310 21.5% 13,746 20.6% 24,056 20.9%

Total 97,505 9.4% 90,155 8.7% 187,659 9.0%

All Arthritis

0-24 4,887 1.4% 5,192 1.5% 10,080 1.4%

25-34 12,180 8.4% 7,619 5.4% 19,799 6.9%

35-44 20,107 13.1% 20,864 13.7% 40,971 13.4%

45-54 31,765 21.6% 37,719 25.5% 69,484 23.6%

55-64 48,084 40.7% 51,927 45.5% 100,012 43.1%

65-74 32,985 48.5% 42,723 61.1% 75,708 54.9%

75+23,092 48.1% 32,964 49.3% 56,056 48.8%

Total 173,102 16.6% 199,008 19.2% 372,110 17.9%

Totals may not sum due to rounding

Males % Females % Persons %

Osteoarthritis

0-24 16 0.0% 147 0.2% 163 0.1%

25-34 380 1.4% 396 1.4% 776 1.4%

35-44 1,103 3.4% 1,437 4.2% 2,540 3.8%

45-54 2,643 7.4% 4,089 11.1% 6,732 9.3%

55-64 5,008 16.2% 7,556 24.3% 12,565 20.3%

65-74 3,666 18.7% 6,440 31.8% 10,105 25.4%

75+ 3,236 22.9% 5,736 28.2% 8,972 26.0%

Total 16,052 6.6% 25,800 10.4% 41,852 8.5%

Rheumatoid Arthritis

0-24 44 0.1% 163 0.2% 207 0.1%

25-34 142 0.5% 167 0.6% 309 0.6%

35-44 529 1.6% 899 2.6% 1,428 2.1%

45-54 814 2.3% 1,580 4.3% 2,394 3.3%

55-64 1,952 6.3% 1,703 5.5% 3,655 5.9%

65-74 1,305 6.7% 1,977 9.8% 3,282 8.2%

75+ 826 5.9% 976 4.8% 1,801 5.2%

Total 5,611 2.3% 7,465 3.0% 13,077 2.7%

Other Arthritis

0-24 1,011 1.2% 825 1.1% 1,836 1.1%

25-34 1,850 6.6% 983 3.5% 2,833 5.1%

35-44 2,783 8.6% 2,623 7.6% 5,406 8.1%

45-54 4,423 12.4% 4,287 11.7% 8,710 12.0%

55-64 6,395 20.7% 6,012 19.3% 12,406 20.0%

65-74 4,915 25.1% 4,837 23.9% 9,752 24.5%

75+ 3,022 21.4% 4,182 20.5% 7,204 20.9%

Total 24,399 10.1% 23,748 9.5% 48,147 9.8%

0-24 1,058 1.3% 1,120 1.4% 2,178 1.4%

25-34 2,352 8.4% 1,524 5.4% 3,876 6.9%

35-44 4,237 13.1% 4,704 13.7% 8,941 13.4%

45-54 7,700 21.6% 9,357 25.5% 17,057 23.6%

55-64 12,593 40.8% 14,216 45.7% 26,809 43.2%

65-74 9,501 48.5% 12,373 61.1% 21,874 54.9%

75+ 6,779 48.1% 10,025 49.3% 16,805 48.8%

Total 44,220 18.2% 53,319 21.4% 97,539 19.8%

Totals may not sum due to rounding

Painful realities: The economic impact of arthritis in Australia 2007 81

Males % Females % Persons %

Osteoarthritis

0-24 8 0.0% 74 0.2% 83 0.1%

25-34 247 1.4% 233 1.4% 480 1.4%

35-44 598 3.4% 675 4.2% 1,273 3.8%

45-54 1,081 7.4% 1,477 11.1% 2,558 9.2%

55-64 1,605 16.1% 1,930 23.7% 3,535 19.5%

65-74 791 18.8% 998 31.2% 1,789 24.2%

75+ 363 22.5% 499 29.3% 862 26.0%

Total 4,693 4.3% 5,888 5.9% 10,581 5.1%

Rheumatoid Arthritis

0-24 23 0.1% 83 0.2% 106 0.1%

25-34 92 0.5% 99 0.6% 191 0.5%

35-44 287 1.6% 423 2.6% 709 2.1%

45-54 333 2.3% 571 4.3% 904 3.2%

55-64 621 6.2% 436 5.4% 1,057 5.8%

65-74 279 6.6% 314 9.8% 594 8.0%

75+ 89 5.5% 87 5.1% 176 5.3%

Total 1,724 1.6% 2,012 2.0% 3,736 1.8%

Other Arthritis

0-24 529 1.2% 422 1.0% 951 1.1%

25-34 1,203 6.6% 579 3.5% 1,782 5.1%

35-44 1,508 8.6% 1,233 7.6% 2,741 8.1%

45-54 1,809 12.4% 1,549 11.7% 3,358 12.1%

55-64 2,043 20.5% 1,585 19.5% 3,628 20.0%

65-74 1,068 25.4% 751 23.5% 1,819 24.6%

75+ 352 21.8% 359 21.1% 711 21.4%

Total 8,513 7.8% 6,477 6.5% 14,990 7.2%

All Arthritis

0-24 554 1.3% 570 1.4% 1,124 1.3%

25-34 1,529 8.4% 898 5.4% 2,428 7.0%

35-44 2,297 13.1% 2,210 13.7% 4,507 13.4%

45-54 3,149 21.6% 3,381 25.5% 6,530 23.5%

55-64 4,022 40.4% 3,676 45.1% 7,698 42.5%

65-74 2,050 48.8% 1,924 60.1% 3,975 53.7%

75+ 772 47.8% 868 51.0% 1,641 49.4%

Total 14,373 13.1% 13,529 13.6% 27,902 13.3%

Totals may not sum due to rounding

Males % Females % Persons %

Osteoarthritis

0-24 12 0.0% 108 0.2% 120 0.1%

25-34 359 1.4% 362 1.4% 721 1.4%

35-44 826 3.4% 1,047 4.2% 1,873 3.8%

45-54 1,676 7.4% 2,690 11.1% 4,366 9.3%

55-64 2,916 16.2% 4,481 24.0% 7,397 20.2%

65-74 1,705 18.7% 3,070 31.8% 4,775 25.4%

75+ 1,478 23.0% 2,539 28.3% 4,017 26.1%

Total 8,972 5.4% 14,297 8.5% 23,269 7.0%

Rheumatoid Arthritis

0-24 33 0.1% 119 0.2% 152 0.1%

25-34 134 0.5% 153 0.6% 287 0.6%

35-44 396 1.6% 655 2.6% 1,051 2.1%

45-54 516 2.3% 1,040 4.3% 1,556 3.3%

55-64 1,134 6.3% 1,011 5.4% 2,144 5.8%

65-74 606 6.7% 945 9.8% 1,551 8.3%

75+ 377 5.9% 434 4.8% 811 5.3%

Total 3,196 1.9% 4,357 2.6% 7,552 2.3%

Other Arthritis

0-24 757 1.3% 601 1.1% 1,358 1.2%

25-34 1,747 6.6% 899 3.5% 2,646 5.1%

35-44 2,084 8.6% 1,911 7.6% 3,995 8.1%

45-54 2,804 12.4% 2,821 11.7% 5,625 12.0%

55-64 3,720 20.7% 3,613 19.4% 7,333 20.0%

65-74 2,289 25.1% 2,306 23.9% 4,596 24.5%

75+ 1,375 21.4% 1,851 20.6% 3,226 21.0%

Total 14,777 8.9% 14,003 8.3% 28,779 8.6%

All Arthritis

0-24 792 1.4% 818 1.5% 1,610 1.4%

25-34 2,222 8.4% 1,394 5.4% 3,616 6.9%

35-44 3,173 13.1% 3,427 13.7% 6,600 13.4%

45-54 4,882 21.6% 6,156 25.5% 11,039 23.6%

55-64 7,325 40.7% 8,473 45.4% 15,798 43.1%

65-74 4,419 48.5% 5,901 61.0% 10,320 55.0%

75+ 3,090 48.1% 4,436 49.5% 7,527 48.9%

Total 25,902 15.7% 30,606 18.2% 56,509 16.9%

Totals may not sum due to rounding

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Arthritis Australia is the peak arthritis organisation in Australia and is supported by affiliate offices

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Services primarily involve:

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88 Painful realities: The economic impact of arthritis in Australia 2007

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