OBJECTIVE

This study updates previous estimates of the economic burden of diagnosed diabetes and quantifies the increased health resource use and lost productivity associated with diabetes in 2012.

RESEARCH DESIGN AND METHODS

The study uses a prevalence-based approach that combines the demographics of the U.S. population in 2012 with diabetes prevalence, epidemiological data, health care cost, and economic data into a Cost of Diabetes Model. Health resource use and associated medical costs are analyzed by age, sex, race/ethnicity, insurance coverage, medical condition, and health service category. Data sources include national surveys, Medicare standard analytical files, and one of the largest claims databases for the commercially insured population in the U.S.

RESULTS

The total estimated cost of diagnosed diabetes in 2012 is $245 billion, including$176 billion in direct medical costs and $69 billion in reduced productivity. The largest components of medical expenditures are hospital inpatient care (43% of the total medical cost), prescription medications to treat the complications of diabetes (18%), antidiabetic agents and diabetes supplies (12%), physician office visits (9%), and nursing/residential facility stays (8%). People with diagnosed diabetes incur average medical expenditures of about$13,700 per year, of which about $7,900 is attributed to diabetes. People with diagnosed diabetes, on average, have medical expenditures approximately 2.3 times higher than what expenditures would be in the absence of diabetes. For the cost categories analyzed, care for people with diagnosed diabetes accounts for more than 1 in 5 health care dollars in the U.S., and more than half of that expenditure is directly attributable to diabetes. Indirect costs include increased absenteeism ($5 billion) and reduced productivity while at work ($20.8 billion) for the employed population, reduced productivity for those not in the labor force ($2.7 billion), inability to work as a result of disease-related disability ($21.6 billion), and lost productive capacity due to early mortality ($18.5 billion).

CONCLUSIONS

The estimated total economic cost of diagnosed diabetes in 2012 is $245 billion, a 41% increase from our previous estimate of$174 billion (in 2007 dollars). This estimate highlights the substantial burden that diabetes imposes on society. Additional components of societal burden omitted from our study include intangibles from pain and suffering, resources from care provided by nonpaid caregivers, and the burden associated with undiagnosed diabetes.

Diabetes imposes a substantial burden on the economy of the U.S. in the form of increased medical costs and indirect costs from work-related absenteeism, reduced productivity at work and at home, reduced labor force participation from chronic disability, and premature mortality (1,2). In addition to the economic burden that has been quantified, diabetes imposes high intangible costs on society in terms of reduced quality of life and pain and suffering of people with diabetes, their families, and friends.

### Health resource use attributed to diabetes

Table 1 shows estimates of health resource utilization attributed to diabetes and incurred by people with diabetes as a percentage of total national utilization. For example, of the projected 168 million hospital inpatient days in the U.S. in 2012, an estimated 43.1 million days (25.7%) are incurred by people with diabetes of which 26.4 million days are attributed to diabetes. About one-third of all nursing/residential facility days are incurred by people with diabetes, and over half of those are attributed to diabetes. About half of all physician office visits, emergency department visits, hospital outpatient visits, and medication prescriptions (excluding insulin and other antidiabetic agents) incurred by people with diabetes are attributed to their diabetes.

Table 1

Health resource use in the U.S. by diabetes status and cost component, 2012 (in millions of units)

Table 2 shows that the population aged 65 years and older uses a substantially larger portion of services, especially hospital inpatient days, nursing/residential facility days, and hospice, compared with those under age 65 years. The significant increase in nursing/residential days attributed to diabetes from the 2007 study reflects both the increasing cost and the increased prevalence of diabetes (32.8%) in general, and among the elderly in particular. Total utilization of prescription medications attributed to diabetes has more than doubled from the estimate in the 2007 study, reflecting a dramatic increase in the use of medications treating general conditions and diabetes comorbidities among people with diabetes. Supplementary Table 5 shows the per capita health resource use by demographic.

Table 2

Health resource use attributed to diabetes in the U.S. by age-group and type of service, 2012 (in thousands of units)

Analysis of health resource use attributed to diabetes by medical condition (Table 3), including diabetes, chronic complications of diabetes, and general medical conditions, shows that a large portion of health resource use attributed to diabetes—particularly hospital inpatient and emergency department visits—is for general medical conditions that are not chronic complications of diabetes. As discussed in the 2007 cost of diabetes study, diabetes contributes to longer hospital length of stay regardless of the reason for admission (and controlling for other factors that affect hospital length of stay) (2). In addition to general medical conditions, a substantial amount of attributed health resource use is for chronic complications of diabetes, particularly cardiovascular diseases and renal complications. Finally, more than one-third of physician office visits and nearly 40% of hospital outpatient visits have diabetes listed as the primary reason for the visit. Supplementary Table 8 shows the proportion of total health resource use attributed to diabetes for each medical condition.

Table 3

Health resource use attributed to diabetes in the U.S. by medical condition and type of service, 2012 (in thousands of units)

### Health care expenditures attributed to diabetes

Health care expenditures attributed to diabetes reflect the additional expenditures the nation incurs because of diabetes. This equates to the total health care expenditures for people with diabetes minus the projected level of expenditures that would have occurred for those people in the absence of diabetes. Table 4 summarizes the national expenditure for the cost components analyzed, accounting for over $1.3 trillion in projected expenditure for 2012. Approximately$306 billion of the total is incurred by people with diabetes, reflecting 23% of the total health care dollars. Costs attributed to diabetes total $176 billion, or 57% of the total medical costs incurred by people with diabetes. For the cost components analyzed, more than 1 in every 10 health care dollars is attributed to diabetes. Table 4 Health care expenditures in the U.S. by diabetes status and type of service, 2012 (in millions of dollars) National health-related expenditures are projected to exceed$2.8 trillion in 2012, but slightly less than half of these expenditures are included in our analysis (27,28). These cost estimates omit national expenditures (and any portion of such expenditures that might be attributable to diabetes) for administering government health and private insurance programs, investment in research and infrastructure, over-the-counter medications, disease management and wellness programs, and office visits to nonphysician providers other than podiatrists (e.g., dentists and optometrists). Expenditures for health resources such as care in residential mental retardation facilities are likewise excluded from the analysis.

More than 40% of all health care expenditures attributed to diabetes come from higher rates of hospital admission and longer average lengths of stay per admission, constituting the single largest contributor to the attributed medical cost of diabetes. Of the projected $475 billion in national expenditures for hospital inpatient care (including both facility and professional services costs), approximately$124 billion (or 26%) is incurred by people who have diabetes, of which $76 billion is directly attributed to their diabetes. Medications as a whole (prescription medications, insulin, and other antidiabetic agents) represent over one-quarter (28%) of all health expenditures attributed to diabetes. Of the projected$286 billion in national cost for medications, $77 billion (27%) is incurred by people with diabetes, of which$50 billion is attributed to their diabetes.

Approximately 59% of all health care expenditures attributed to diabetes are for health resources used by the population aged 65 years and older, much of which is borne by the Medicare program (Table 5). The population 45–64 years of age incurs 33% of diabetes-attributed costs, with the remaining 8% incurred by the population under 45 years of age. The annual attributed health care cost per person with diabetes (Table 6) increases with age, primarily as a result of increased use of hospital inpatient and nursing facility resources, physician office visits, and prescription medications. Dividing the total attributed health care expenditures by the number of people with diabetes, we estimate the average annual excess expenditures for the population aged under 45 years, 45–64 years, and 65 years and above, respectively, at $4,394,$5,611, and $11,825. Total health care expenditures are attributed to diabetes by sex and race/ethnicity (Supplementary Table 6), insurance status (Supplementary Table 9 and 10), and state (Supplementary Table 11). Table 5 Health care expenditures attributed to diabetes in the U.S. by age-group and type of service, 2012 (in millions of dollars) Table 6 Annual per capita health care expenditures attributed to diabetes in the U.S. by age-group and type of service, 2012 (in actual dollars) Table 7 summarizes diabetes-attributed health care expenditures for those cost components modeled by medical condition. Hospital inpatient is the largest component of attributed costs followed by physician office visit. Across different health care delivery settings, general medical conditions and cardiovascular disease categories are the two largest contributors of total health care expenditures attributed to diabetes in addition to diabetes itself. Together, the general medical conditions and cardiovascular disease categories are responsible for 78% of hospital inpatient costs attributed to diabetes, 47% of the cost for physician office visits, 82% of the cost for emergency department visits, and 52% of the cost for hospital outpatient. Table 7 Health care expenditures attributed to diabetes in the U.S. by medical condition and type of service, 2012 (in millions of dollars) Figure 1 summarizes the proportion of medical expenditures attributed to diabetes for each chronic complication over the total U.S. health care expenditure combining expenditures for hospital inpatient, hospital outpatient, emergency department visits, physician office visits, and prescription medications. Over a quarter of expenditures, in five out of the eight conditions shown in the chart, are attributed to diabetes. In addition, 7, 11, and 21% of national medical expenditures treating general conditions, endocrine/metabolic complications, and ophthalmic complications are attributable to diabetes. Figure 1 Percent of medical condition–specific expenditures associated with diabetes. Data sources: NIS (2010), NAMCS (2008–2010), NHAMCS (2007–2009), and MEPS (2006–2010 or 2008–2010). Note: See Supplementary Table 2 for diagnosis codes for each category of medical condition. Figure 1 Percent of medical condition–specific expenditures associated with diabetes. Data sources: NIS (2010), NAMCS (2008–2010), NHAMCS (2007–2009), and MEPS (2006–2010 or 2008–2010). Note: See Supplementary Table 2 for diagnosis codes for each category of medical condition. The population with diabetes is older and sicker than the population without diabetes, and consequently annual medical expenditures are much higher (on average) than for people without diabetes (Table 8). After adjusting for age-sex differences in these two populations, people with diabetes have health care expenditures that are 2.3 times higher ($13,741 vs. $5,853) than expenditures would be expected for this same population in the absence of diabetes. This suggests that diabetes is responsible for$7,888 in excess expenditures per year per person with diabetes. This 2.3 multiple is unchanged from the 2007 study.

Table 8

Annual per capita health care expenditures in the U.S. by diabetes status, 2012 (in actual dollars)

### Indirect costs attributed to diabetes

The total indirect cost of diabetes is estimated at $68.6 billion (Table 9). The majority of this burden comes from unemployment due to permanent disability ($21.6 billion), presenteeism ($20.8 billion), and premature mortality ($18.5 billion). Workdays absent ($5.0 billion) and reduced productivity for those not in the workforce ($2.7 billion) represent a relatively small portion of the total burden.

Table 9

Indirect burden of diabetes in the U.S., 2012 (in billions of dollars)

Our logistic regression analysis with NHIS data suggests that diabetes is associated with a 2.4 percentage point increase in the likelihood of leaving the workforce for disability. This equates to approximately 541,000 working-age adults leaving the workforce prematurely and 130 million lost workdays in 2012. For the population that leaves the workforce early because of diabetes-associated disability, we estimate that their average daily earnings would have been $166 per person (with the amount varying by demographic). Presenteeism accounted for 30% of the indirect cost of diabetes. The estimate of a 6.6% annual decline in productivity attributed to diabetes (in excess of the estimated decline in the absence of diabetes) equates to 113 million lost workdays per year. The average daily earnings are$185 for the employed population with diabetes, which equates to $20.8 billion in annual cost attributed to diabetes (after factoring out absenteeism to prevent double counting). The estimated number of deaths in 2012 attributable to diabetes is 246,000 (Table 10). For 73,000 deaths (30%), diabetes is listed as the primary cause. Of the 687,000 deaths where cardiovascular disease is listed as the primary cause, approximately 110,000 (16%) are attributable to diabetes. Approximately 38,000 cases where cerebrovascular disease is listed as the primary cause of death are attributable to diabetes, and 25,000 cases where renal disease is listed as the primary cause of death are attributable to diabetes. The average cost per premature death declines with age (reflecting fewer remaining expected working years), and across all premature deaths averaged approximately$75,100 per case.

Table 10

Mortality costs attributed to diabetes, 2012

Figure 2 summarizes estimates of PVFP if a person dies at that age. PVFP is the value in 2012 of expected future lifetime earnings if the person had lived to the average age as the cohort born in the same year. The differences in PVFP by demographic reflect the differences in average earnings, the propensity to be in the workforce, and the number of years expected to remain in the workforce.

Figure 2

Net present value of future lost earnings from premature death. Data sources: analysis of the NHIS (2009–2011), CPS (2011), and CDC mortality data.

Figure 2

Net present value of future lost earnings from premature death. Data sources: analysis of the NHIS (2009–2011), CPS (2011), and CDC mortality data.

The cost of missed workdays due to absenteeism is estimated at $5.0 billion, representing 25 million days. If people not in the workforce have similar rates of days where they are unable to work due to poor health as their employed peers, this would equate to 20 million excess sick days with the estimated productivity loss valued at$2.7 billion. We do not count productivity loss for the population under age 18 years. While children constitute a small proportion of the population with diabetes, omitting productivity loss associated with diabetes among children will tend to bias low the cost estimates. For example, the economic cost associated with parents who take time off from work to take their children to the doctor for diabetes-related visits is omitted from these cost estimates.

The average annual productivity loss per person aged 18 years or older with diabetes is $3,100. Table 11 shows that per capita estimates range from a high of$6,844 for men aged 45–54 years to a low of $647 for women aged 70 years and older—reflecting differences by demographic in propensity to be in the workforce, average earnings, and mortality risk. Supplementary Table 7 shows the annual productivity loss per person with diabetes by cause and race/ethnicity. Table 11 Annual productivity loss per person with diabetes in the U.S. by age, sex, and cause, 2012 (in actual dollars) This study found that there were more than 22.3 million people (about 7% of the U.S. population) with diagnosed diabetes in the U.S. in 2012. This is substantially higher than the 2007 estimate of 17.5 million people, reflecting changing demographics, increase in the prevalence of risk factors including obesity, decreasing mortality, and improvements in the detection of diabetes (2932). Diabetes costs the nation a total of$245 billion, which includes $176 billion in direct medical cost and$69 billion in lost productivity. While the majority (59%) of direct medical cost is for the population aged 65 years and over, about 88% of indirect cost is borne by the population under 65 years of age. We also found that after adjusting for age and sex, annual per capita health care expenditure is 2.3 times higher for people with diabetes than for those without diabetes. Diabetes is especially costly when it is associated with complications. While we were unable to calculate diabetes-attributed cost by complication groups for every cost component across the major health care delivery settings (hospital inpatient and outpatient, physician office, and emergency department), from 25% (emergency department) to 45% (hospital inpatient) of the diabetes-attributed medical expenditures were spent treating complications of diabetes. Other studies found that people with uncontrolled diabetes or with diabetes complications incur diabetes costs two to eight times more than people with controlled or nonadvanced diabetes (33,34).

For comparison, the $174 billion estimate of the total burden for 2007 published previously is equivalent to$202 billion when inflated to 2012 dollars using the average general inflation rate of 3%. The increase of $43 billion from the 2007 estimate in 2012 dollars to the new estimate of$245 billion reflects 1) a 27% growth in diabetes prevalence, 2) changing demographics of people with diabetes, 3) growth in the utilization of certain types of health care services for treating diabetes and its comorbidities such as increased use of prescription medications and advanced treatment for cardiovascular disease, 4) rising prices for medical goods and services above the general rate of inflation, and 5) refinements to the data and methods used to calculate the cost of diabetes.

We found that the proportions of total national health services use attributed to diabetes and incurred by people with diabetes both increased from the estimates in the 2007 study, including utilization of nursing/residential facility days, physician office visits, emergency department visits, hospital outpatient visits, and prescription medications. The number of hospital inpatient days incurred by people with diabetes and those that are attributable to their diabetes have both increased from the 2007 level by about 6 and 9%, respectively, although the national utilization of hospital inpatient care has decreased by about 10% from 186 million days in 2007 to 168 million days in 2012 based on the analysis of NIS data.

Additionally, even when using MEPS data that have been shown to underestimate costs when compared with claims data, especially for the privately insured (35), we found that the price of medical services per event (visit or day) has increased by 5–17% over the rate of general inflation from the 2007 level for hospital inpatient, hospital outpatient, emergency department, insulin, and other prescription medications. Due to the increase in diabetes prevalence, health resource utilization, and average per event cost of services, the $176 billion direct medical cost attributed to diabetes in 2012 is 30% higher than the general inflation-adjusted 2007 direct medical cost of$135 billion.

The indirect cost estimate of $69 billion for 2012 includes increased absenteeism ($5 billion) and reduced productivity while at work ($20.8 billion) for the employed population, reduced productivity for those not in the labor force ($2.7 billion), unemployment as a result of disease-related disability ($21.6 billion), and lost productive capacity due to early mortality ($18.5 billion). The $69 billion is only 3% higher than the inflation-adjusted 2007 estimate of$67 billion, despite the 27% growth in diabetes prevalence. Factors depressing the 2012 estimate include the decline in the number of people participating in the workforce in 2012 and the lower diabetes-attributed mortality estimates for 2012. Including race/ethnicity as a study dimension also depressed the national indirect burden estimate relative to 2007, as Hispanics and non-Hispanic blacks have higher diabetes prevalence rates but lower labor force participation rates and lower average earnings. Since the 2007 study, the economic downturn has decreased overall rates of employment across all demographic groups regardless of diabetes status. A declining proportion of the adult population in the workforce depresses the estimates of absenteeism and presenteeism, while increasing the estimates of diabetes-related productivity losses for the population not in the workforce.

Our estimate of $245 billion only represents the economic cost of diagnosed diabetes. An earlier study found that 6.3 million U.S. adults have undiagnosed diabetes with an associated cost of$18 billion in 2007 (36). Furthermore, nearly 57 million adults in that study were estimated to have prediabetes, a precursor to diabetes, costing an additional $25 billion in higher medical spending (37,38). On the surface it appears that the financial burden of diabetes falls primarily on insurers who pay a substantial portion of medical costs, employers who experience productivity loss, and the people with diabetes and their families who incur higher out-of-pocket medical costs and reduced earnings potential or employment opportunities. Ultimately, though, the burden is passed along to all of society in the form of higher insurance premiums and taxes, reduced earnings, and reduced standard of living. The cost estimates presented might be conservative for several reasons: • Due to data limitations, we omitted from this analysis the potential increase in the use of over-the-counter medications and optometry and dental services. Diabetes increases the risk of periodontal disease, so one would expect dental costs to be higher for people with diabetes. We explored the MEPS data for the feasibility of capturing optometry and dental costs, but the small sample sizes prevented meaningful analyses. Also omitted from the cost estimates are expenditures for the prevention programs targeted to people with diabetes (e.g., disease management programs), research activities (e.g., to develop new drugs), and administration costs (e.g., to administer the Medicare and Medicaid programs, to process insurance claims). Administration costs for government health programs and private insurers are ∼$150 billion per year. Public and private expenditures for medical research and health infrastructure total over \$130 billion per year (39). If a portion of these costs were attributed to diabetes, the national cost of diabetes would be billions of dollars higher than our estimate suggests.

• Also omitted from the cost estimates are the intangible costs of diabetes such as pain, suffering, and reduced quality of life, as well as some of the nonmedical costs attributed to diabetes. Specifically, diabetic patients with advanced diabetic retinopathy, late-stage renal complications, or lower-extremity amputations often require their homes and/or motor vehicles to be modified to accommodate their daily activity needs. Diabetes is the leading cause of new cases of blindness among adults aged 20–74 years (23), and the CDC estimates that roughly 65,700 lower-limb amputations are performed each year on people with diabetes (23). The nonmedical cost associated with these disabilities could further increase the total burden of diabetes.

• The lost productivity estimates are for those individuals with diagnosed diabetes and exclude lost productivity associated with the care for family members with diabetes. For example, the productivity loss associated with adults who take time off from work to care for a child or an elderly parent with diabetes is not included in the cost estimates. The value of informal caregiving is excluded from our cost estimate. Time and costs associated with traveling to doctor visits and other medical emergencies are omitted (except to the extent that such costs are partially captured under ambulance costs and the absenteeism estimate for those in the workforce).

• Our estimate of lost productivity attributed to chronic disability from diabetes is also likely to be conservative due to three factors: 1) using SSI payments to identify cases of disability likely underestimates disability cases because the criteria for SSI eligibility include requirements for documentation of disability from a health professional and apply income limits; 2) these estimates omit the value of productivity loss that results in reduced earnings potential but does not prevent working; and 3) productivity loss associated with early retirement is not included, and a longitudinal study using the Health and Retirement Survey found that people with diabetes tend to retire ∼1.2 years earlier than their peers without diabetes (40).

One challenge for this study was to control for the correlation between diabetes and the use of health resources for reasons not directly attributed to diabetes. Health behavior that affects both the presence of diabetes and the presence of other comorbidities, unless controlled for, could result in an overestimation of the link between diabetes and the use of health resources. Controlling for age, sex, and race/ethnicity helps to control for this correlation. In addition, for the top 10 cost drivers, we conducted additional analysis controlling for other important explanatory variables using the MEPS data. Based on the results, we reduced the etiological fractions for several diabetes complications and for the general medical conditions group depending on the setting of care. This potential limitation also applies to the estimates of indirect costs attributed to diabetes, especially the estimated productivity loss due to presenteeism.

Other study limitations discussed previously include small sample size for some data sources used, the use of a data source (dNHI) that overrepresents the commercially insured population for the population younger than age 65 years, and the need to use different approaches to model different cost components because of data limitations. Another limitation common to claims-based analysis is the possibility of inaccurate diagnosis codes. Claims data tend to be less accurate than medical records in identifying patients with specific conditions due to reasons such as rule-out diagnosis, coding error, etc. The direction of such bias on our risk ratio calculations is unknown, although it is anticipated to be small as there is no reason to believe that the coding of comorbidities would be significantly different for people with and without diabetes.

Using a methodology that is largely consistent with our previous cost of diabetes study in 2007 with updated national survey and claims data from previous data sources, we estimated the total burden of diabetes in 2012. The estimates presented here show that diabetes places an enormous burden on society—both in the economic terms presented here and in reduced quality of life. The overall cost of diabetes estimates are consistent with earlier estimates after adjusting for the increasing prevalence of diabetes and price increases (though estimates for some cost components and medical conditions differ from the earlier study).

A recent study estimates that prevalence of diagnosed diabetes is likely to at least double between 2010 and 2050, and the prevalence of total diabetes (diagnosed and undiagnosed) may increase from the 2010 level of about one in nine adults to between one in five and one in three adults in 2050 (3,41).

This study highlights the large economic burden of diabetes and its complications on the individual and the health care system. Cost estimates from 2002, 2007, and now 2012 show that the burden is increasing—even after controlling for population growth and inflation. Cost comparisons by age-group show that the burden of diabetes increases with age. These trends underscore the importance of prevention and the efforts to mitigate the complications of diabetes.

This report was prepared under the direction of the American Diabetes Association by Wenya Yang (The Lewin Group, Inc., Falls Church, Virginia); Timothy M. Dall (IHS Global Inc., Washington, DC); Pragna Halder (The Lewin Group, Inc.); Paul Gallo (IHS Global Inc.); Stacey L. Kowal (IHS Global Inc.); and Paul F. Hogan (The Lewin Group, Inc.).

See accompanying commentary, p. 775.

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