Mr. SYNAR. Thank you, Mr. Chairman. Mr. Kreidler? Mr. KREIDLER. Thank you, Mr. Chairman. I would like to commend the Chair for holding this hearing, and also the EPA for endorsing this legislation along with the administration. At the State level I was involved with legislation comparable to this. I hope we are more successful than I was at the State level in being able to bring about these changes in the workplace. I would like to go to the area that hasn't been perhaps talked about too much, and that is some of the specific health effects that happen to the nonsmoker in the workplace, the problems that are generated by asthma and other respiratory problems short of cancer, and certainly diseases that would certainly prove terminal. Is there any way of estimating what that represents of the total cost of smoking in the workplace? MS. BROWNER. The risk assessment that EPA released in January of last year looked at some specific health effects associated with exposure to secondhand smoke. They included lung cancer deaths. They included increased respiratory problems, both in adults and young children. It included a finding of over 400,000 asthma-related incidents a year in young children. There are clear health effects associated with exposure to secondhand smoke. When we look at the preliminary analysis that we have conducted in terms of H.R. 3434 and its effect, what we have found is that a significant number of lives would be saved, from about 38,000 to more than 100,000 per year as a result of a reduction of exposure to secondhand smoke by nonsmokers, and as a result of people quitting, not beginning to smoke, at reducing their consumption of cigarettes. You should know that the Centers for Disease Control estimate approximately 400,000 smoking-related deaths per year, which is a significant number. We have also looked at the reduction in medical expenses and lost earnings. The cost savings associated with medical expenses, and lost earnings from exposure to secondhand smoke, is approximately $1.5 billion to $3 billion per year, and from smokers who quit, cut back, or do not start is approximately $5 billion to $16 billion per year. Mr. KREIDLER. Smoking interests are going to come forward and say we are putting our attention on one aspect of indoor air pollution; we are not focusing on the sick building syndrome and all of those related problems, that we are just going to the smoking issue. How do you respond to that charge they will be making? Ms. BROWNER. Our indoor air program seeks to look at a variety of issues: radon, sick building syndrome. The issue we are addressing today is the smoking issue. Again, we do find that after the analysis that we have conducted, which we will submit to thorough review, but the preliminary analysis of H.R. 3434 does show a real cost savings to the American public. Mr. KREIDLER. We have always found that when you have the ability to address one area so easily and simply as to just eliminate something from the indoor air, why not do it, as opposed to some of the others that are obviously going to be much more difficult and much more amorphous to get your hands around and correct. I appreciate your testimony and your endorsement for this legis lation. Thank you, Mr. Chairman. Mr. WAXMAN. Thank you, Mr. Kreidler. Ms. Browner, I thank you very much for your presentation. I will look forward to getting the completed report, cost-benefit report, and more importantly, to working with you on this legislation. Ms. BROWNER. Likewise, Mr. Chairman, we believe this is an important piece of legislation. We support H.R. 3434. Our preliminary analysis does show that the costs are not so significant. But the costs of compliance are far less than the benefits that will be derived. And again, as a mother of a young child, I have a personal interest in this issue. This is a problem we know the solution to. And we have a responsibility to carry forward that solution. Thank you. Mr. WAXMAN. Thank you very much for that statement. [Testimony resumes on p. 130.] [The report referred to follows:] The Costs and Benefits of Smoking Restrictions An Assessment of the Smoke-Free Environment Act of 1993 Introduction In August 1993, H.R. 3434, the Smoke-Free Environment Act of 1993, was introduced in the House of Representatives by Congressman Henry Waxman (Chairman of the Subcommittee on Health and the Environment of the Committee on Energy and Commerce) with more than 40 co-sponsors. This bill would require that all nonresidential buildings regularly entered by 10 or more persons in the course of a week adopt a policy that bans smoking inside the building or restricts it to separately ventilated and exhausted smoking rooms. The bill would allow enforcement actions in the United States District Courts by an individual, government, or other aggrieved entity, with allowable fines of up to $5,000 per day. H.R. 3434 would effectively ban or restrict smoking in most indoor environments. As written, these environments would include such diverse establishments as office buildings, schools and other educational establishments, theaters, restaurants, hotels, hospitals and other health care facilities, sports arenas, retail establishments, and manufacturing plants. In a recent letter to Carol Browner, Administrator of the United States Environmental Protection Agency (EPA), Congressman Waxman requested that EPA analyze (quantitatively where possible) the compliance costs and the health and economic benefits of H.R. 3434. Specifically, he asked that EPA assess the cost of compliance including provisions for smoking lounges; the value of benefits resulting from reduced exposure to environmental tobacco smoke and changes in smoking behavior; the value of increased productivity and reduced absenteeism; savings from reduced operation and maintenance costs; and savings in fire related injuries and property damage. Role and Limits of Cost-Benefit Analysis In principle, cost-benefit analysis can be a useful tool for helping to identify those government actions which leave society as a whole better off. It can contribute to such assessments by providing a systematic framework for measuring and comparing the net economic benefits of policy alternatives. Cost-benefit analysis does not by itself, however, provide definitive answers regarding the merits of public health and environmental policy alternatives. Rather, net benefit estimates must be combined with other information, and weighed with other policy considerations, to formulate effective public policy. Pursuant to this, and consistent with Executive Order 12866, EPA routinely weighs the full range of relevant policy considerations, such as distributional effects, legal issues, and institutional issues in making regulatory decisions. In keeping with this approach, EPA presents the current analysis, which the Agency believes provides useful insights regarding many of the potential costs and benefits of H.R. 3434. Summary Results This analysis indicates that passage of H.R. 3434, or similar restrictions, could achieve net benefits (i.e., benefits minus costs) ranging from $39 to $72 billion per year, excluding some potentially significant costs and benefits to smokers. For various reasons these and other potentially significant effects of H.R. 3434 could not be characterized in terms of economic value. Major costs reflected in these estimates include the costs of compliance and enforcement. Major benefits include those associated with reduced exposure to environmental tobacco smoke (ETS) and reduced operating and maintenance expenses. Benefits are also achieved from reduced absenteeism and reduced smokingrelated fires, but these are not significant relative to other benefits. The net effect is that estimated benefits exceed estimated costs by $39 billion to $72 billion. As noted above, the current analysis leaves open the question of whether smokers themselves gain or lose due to H.R. 3434. Clearly, smoking restrictions impose a burden on smokers. The losses in terms of time and inconvenience associated with forcing smokers to shift the location and/or timing of their cigarette consumption, and the potential burden associated with quitting, may be substantial. However, these losses would be offset to some unknown extent by the benefits of improved health among smokers who quit, cut back, or fail to start smoking in the first place. The net economic valuation of these and other costs and benefits of smoking to smokers themselves is beyond the scope of this analysis for reasons discussed in more detail below. Nevertheless, it is important to emphasize that this analysis found that, of those effects which could be quantified, the estimated benefits exceeded the estimated costs by $39 billion to $72 billion. In order to reach a finding that H.R. 3434 would impose a net economic loss to society, the net effect of all unquantified costs and benefits -- including some important costs and benefits to smokers themselves would have to be additional costs of at least $39 billion per year. Document Review While EPA makes no commitment to revise and reissue the present study, this document has been developed and submitted to Congress in a form intended for review by outside experts, interested parties, and the public. The principal author of the study is Dr. David H. Mudarri, an economist in the Indoor Air Division of EPA's Office of Air and Radiation. This version of the study reflects extensive review by other EPA offices, the Office of Management and Budget, the Council of Economic Advisors, and the Department of Health and Human Services. In addition, a previous version of this report was reviewed by several economists in the public and private sectors. General Methodology Assessing Annual Costs and Benefits This analysis assesses the costs and benefits that would occur each year into the future for present and future generations. All estimates are represented as annual cost or benefits. That is, all costs are converted to an annual equivalent that would occur every year into the future based on 1990 population characteristics. Varying time streams of costs or benefits are converted to equivalent annual values using a 3% social discount rate. Sensitivity analyses using 5% and 7% discount rates are also provided. Throughout this analysis it is assumed that H.R. 3434 would apply to all the previously stated buildings, at all times, without exception. It was also assumed that full compliance would be achieved within the first year of implementation. Choice of Baseline for Assessing Costs and Benefits Per capita cigarette consumption has been falling steadily over the past several years. In addition, recent survey data suggest that many establishments already have some form of smoking policy, and the percent of establishments that report having such policies has been increasing in the past few years (DHHS, 1992; BNA 1991). Therefore, it was necessary to establish a baseline from which to measure the effects of H.R. 3434 from enactment forward. This was accomplished by a three step procedure. In the first step, the net costs and benefits are computed assuming current cigarette consumption levels, and assuming that there are currently no restrictions. This is an artificial baseline used for analytic convenience, but may be interpreted as a reflection of the cost and benefit differences in a society with and without smoking restrictions comparable to H.R. 3434. Second, survey data were examined concerning the prevalence of smoking policies already in place. Using assumptions about the nature of those policies as well as policies in small establishments not covered in those surveys, an estimate was derived that 23% of the population is covered by smoking restrictions comparable to the requirements of H.R. 3434. Current cigarette consumption levels, and 23% coverage by existing policies are therefore used as the baseline for assessing the effects of H.R. 3434. As a result, this study concludes that 23% of the previously calculated cost and benefits are attributable to existing policies, and 77% are attributable to H.R. 3434, or other future restriction policies, including private initiatives.1 Finally, sensitivity analyses to the baseline assumptions are conducted by calculating the changes to the costs and benefits that would result from alternative assumptions about future trends. The specific variables tested include future trends in cigarette consumption, and future trends in the development of public and private smoking restriction policies which could take place in the absence of national legislation. These alternative scenarios of potential future trends are intended to demonstrate how the absolute levels of incremental costs and benefits attributable to H.R. 3434 are sensitive to assumptions about the future prevalence of smoking restrictions enacted by other public and private entities, and to future trends in cigarette consumption. Other Economic Impacts Economic considerations which legislators may wish to consider go beyond just costs. and benefits assessed in this analysis. Where information from this analysis sheds light on some of these considerations, they are briefly described. 1 As this report was being prepared, the President signed into law the Goals 2000: Educate America Act. This legislation restricts smoking in all federally funded primary and secondary schools and in Jay care centers. Because a sensitivity analysis is presented of the alternative baseline assumptions, no specific adjustments to account for this new law were made to the 23% baseline calculations used to assess the effect of HR. 3434. |