LIMITS OF COST-BENEFIT ANALYSIS AS A GUIDE TO PRIORITY-SETTING IN REHABILITATION

• NCJ Number: 56270
• Journal: EVALUATION QUARTERLY Volume: 1 Issue: 3 Dated: (AUGUST 1977) Pages: 347-380
• Author(s): J H NOBLE
• Date Published: 1977
• Length: 34 pages
• Corporate Author: Sage Publications, Inc
• Publication Format: Article
• Publication Type: Program/Project Evaluation
• Language: English
• Country: United States of America

Annotation

THE VALIDITY OF USING MATHEMATICALLY-BASED COST-BENEFIT ANALYSIS FOR SETTING PRIORITIES FOR REHABILITATION PROGRAMS IS EXAMINED USING 18 COST-BENEFIT STUDIES.

Abstract

THE FEDERAL-STATE REHABILITATION PROGRAM OFFERS GRANTS-IN-AID TO STATES ON AN 80-PERCENT MATCHING BASIS TO HELP STATES MEET THE COST OF PROVIDING REHABILITATION SERVICES TO PERSONS WITH PHYSICAL OR MENTAL IMPAIRMENTS PRESENTING A SUBSTANTIAL HANDICAP TO GAINFUL EMPLOYMENT. COSTS OF REHABILITATION INCLUDE NOT ONLY PROGRAM COSTS (CASE SERVICE EXPENDITURES, ADMINISTRATIVE COSTS, AND OVERHEAD COSTS) BUT ALSO SOCIAL OR OPPORTUNITY COSTS OF REHABILITATION. AGGREGATE BENEFITS OF REHABILITATION ARE EVALUATED USING A MATHEMATICAL MODEL THAT EMBODIES SUCH VARIABLES AS EXPECTED EARNINGS, SURVIVAL, EMPLOYMENT, SEX, RACE, EDUCATION, TYPE OF IMPAIRMENT, RECURRING DISABILITY, AND AVERAGE GROWTH IN THE ECONOMY DUE TO INCREASED PRODUCTIVITY. THE SENSITIVITY OF THE MODEL IS DISCUSSED, PARTICULARLY IN LIGHT OF NUMEROUS COST-BENEFIT STUDIES. THE STUDIES ACTUALLY EMPLOY FORMULAS THAT VARY WITH THE NUMBER AND THE COMPLEXITY OF THE FACTORS AND ASSUMPTIONS THEY ATTEMPT TO ENCOMPASS. TYPICALLY, 5 PRINCIPAL ASSUMPTIONS ARE COMBINED WITH EARNINGS BEFORE AND AFTER REHABILITATION TO FORECAST THE FUTURE EARNINGS OF REHABILITANTS; PRODUCTIVITY INCREASES ARE OFTEN IGNORED OR CONSIDERED A FIXED OR VARIABLE FACTOR REPRESENTING SIMPLE RATES; BENEFIT AND COST CONCEPTS VARY CONSIDERABLY IN SCOPE AND OPERATIONAL DEFINITIONS; AND ALL STUDIES, EXCEPT 1 OF THE 18 EXAMINED, DISCOUNT THE FUTURE BENEFITS EXPECTED TO RESULT FROM INVESTMENTS IN REHABILITATION TO THEIR PRESENT VALUE IN ORDER TO SHOW THE OPPORTUNITY COSTS OF MAKING THE INVESTMENT. IT IS CONCLUDED THAT THE COST-BENEFIT STUDIES HAVE NOT BEEN PROVEN ADEQUATE FOR ASSESSING REHABILITATION PRIORITIES, ARE STILL IN THE DEVELOPMENTAL STAGE, AND ARE CRUDE DUE TO OVERLY SIMPLISTIC FORECASTING OF FUTURE EARNINGS OF REHABILITANTS, THE INSUFFICIENCIES OF DATA CONCERNING THE BENEFITS AND COSTS OF REHABILITATION, AND THE EXTREME SENSITIVITY OF THE RESULTS OF THE MODEL TO ITS UNTESTED UNDERLYING ASSUMPTIONS. RECOMMENDATIONS ARE MADE TO ENHANCE THE EMPIRICAL KNOWLEDGE BASE UPON WHICH COST-BENEFIT ANALYSIS DEPENDS FOR VALIDITY. TABULAR DATA AND NOTES ARE PROVIDED.