Friday, June 10, 2011

When cost-benefit analysis can show that financial investment is worthwhile
Cost-benefit analysis is becoming a popular topic among policy makers trying to make decisions about how to make investments in services at a time of tough economic situations. However, cost-benefit analysis is not yet widely used in the field of prevention.

Three speakers, at the 2011 annual conference of the Society for Prevention Research in Washington DC, presented work showing that cost-benefit analysis can be applied in different ways to assess efforts to improve outcomes for children. They described their work to assess the cost-benefit of individual programs, community-wide practices, and statewide policies.

The three projects aimed to prevent future problems for children and young people. They provide examples of how cost-benefit analysis can be done to help policy makers make smart investment decisions while improving outcomes for children.

Arthur Reynolds from the Institute of Child Development, University of Minnesota, looked at the cost-benefit of the Child-Parent Center, an early education program. He described a study that was unusual in that it followed 989 children from preschool up to 26 years of age. In addition, adult outcomes were directly measured using both administrative records and adult interviews. This allowed for direct measurement of cost-benefit, rather than estimates based on likely long-term outcome trajectories.

The Child-Parent Center education program was implemented widely in the Chicago area in actual settings. The program includes classroom, parent, health services, and community outreach components. It was offered as a pre-school program, a program for grades 1-3 (ages six to eight), and a kindergarten – grade 3 program.

The researchers found that the program had early effects on children’s standardized test scores. By the age of 24 to 26, they found further effects on earnings, education, reduced arrests, reduced child maltreatment, and reduced substance use.

These outcomes yielded economic returns, with most benefits stemming from reductions in crime and increases in earnings in adulthood. The cost-benefit ratio for the pre-school program was highest, at $10.83 for every $1 spent on the program. When looking at the benefits to the taxpayer alone, the ratio was $7.21 for every $1 spent. Estimates of the riskiness of the investment showed very low risk, with a 100 per cent likelihood of a net benefit for the pre-school program.

Margaret Kuklinski, from the Social Development Research Group, described a system of practice that can be implemented in communities. Communities That Care provides communities with guidance in evaluating the needs of local children, identifying evidence-based programs to target the specific needs prioritized in the community, and monitoring implementation and outcomes.

As Communities That Care allows communities to select their own evidence-based programs depending on need and priorities, this evaluation did not assess the cost-benefit of specific programs. Instead, it assessed the cost-benefit of a public health approach for implementing evidence-based programs on a large scale.

This evaluation spanned 24 towns in 7 US states. Those towns were randomly assigned to Communities That Care or usual services. The students who were followed from age 10 to age 13 showed significantly lower rates of starting smoking and delinquency if they were in a Communities That Care town, compared to those who were not.

The researchers looked at whether that impact was worth the investment from a financial point of view by considering evidence for the long-term impacts of delaying smoking and delinquency in children. After subtracting the costs to deliver Communities that Care, the authors found that for every $1 spent on the approach, $5.30 is saved on average. The savings are likely to be higher in larger towns and cities, as it was found to be much more expensive to implement the approach in small towns. These savings came from estimates of higher earnings, lower medical costs, and reduced crime.

Steve Aos, from the Washington State Institute for Public Policy presented the latest version of the institute’s cost-benefit model, which is used to perform cost-benefit analyses to advise policy makers directly in their investment decisions.

The model has a three-step approach to producing benefit-cost estimates. It estimates effect sizes of programs and policies using meta-analysis of high-quality studies, reducing effect estimates if the original findings are unlikely to be replicated exactly in actual situations.

Those effect sizes are then converted into money. This involves determining the running costs to implement the program or policy. The benefits are then calculated by estimating the impact of the program or policy effects on outcomes such as crime, education, health care use, and so on. The changes in these outcomes can be converted into money saved for taxpayers, program participants, and others in society. The risk of investment options is estimated using a procedure called Monte Carlo simulation.

Investment portfolios can also be created for policy makers so that they can determine the benefits of investing in a range of programs and policies to achieve particular policy goals. These portfolios are important because they allow policy makers to spread out the risk of investment, rather than “putting all of their eggs in one basket”.

Steve Aos presented some preliminary results from his model, using two programs as examples. The final results will be available in a report published by the WSIPP at the end of June.

Together, these three presentations showed different approaches to estimating the cost-benefit of intervening with children to promote better outcomes in the long term. They indicated that this can be achieved through primary research as well as detailed analysis of previous studies. This type of work will most likely be in greater demand as national and local governments strive to invest wisely in programs, practices, and policies that will have positive impacts on society.

J. David Hawkins, Sabrina Oesterle, Eric C. Brown, Michael W. Arthur, Robert D. Abbott, Abigail A. Fagan, and Richard F. Catalano. Results of a type 2 translational research trial to prevent adolescent drug use and delinquency: a test of Communities That Care. Archives of Pediatrics and Adolescent Medicine 163 (2009): 789-98.
Arthur J. Reynolds, Judy A. Temple, Barry A.B. White, Suh-Ruu Ou, and Dylan L. Robertson. Age 26 Cost–Benefit Analysis of the Child-Parent Center Early Education Program. Child Development 82 (2011): 379-404.

Prevention Action www.preventionaction.orgSPR 2011; June 8, 2011

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