Estimating the cost of new public health legislation
Nick Wilson a, Nhung Nghiem a, Rachel Foster a, Linda Cobiac b & Tony Blakely a
a. Department of Public Health, University of Otago, PO Box 7343, Wellington South, New Zealand.
b. School of Population Health, University of Queensland, Herston, Australia.
Correspondence to Nick Wilson (e-mail: firstname.lastname@example.org).
(Submitted: 14 October 2011 – Revised version received: 05 February 2012 – Accepted: 08 February 2012 – Published online: 08 May 2012.)
Bulletin of the World Health Organization 2012;90:532-539. doi: 10.2471/BLT.11.097584
There is strong scientific evidence that the law can help improve public health. A recent publication identified 65 systematic reviews of studies on the effectiveness of a total of 52 public health laws:1 27 of the 52 (52%) were found to be effective in achieving their health objectives, whereas there was insufficient evidence to judge the effectiveness of 23 (44%) and 2 were judged not to be effective. These laws encompassed areas such as injury prevention, housing, tobacco use, vaccination, violence and food safety. Furthermore, an examination of the “ten great public health achievements” made in the United States of America (USA) between 1900 and 1999 showed that all 10 were supported by laws at all levels of government.2 Indeed, the United States Centers for Disease Control and Prevention “increasingly envisions public health law as an integral element in the armamentarium of each of its programs … ”.2 In addition, a recent article highlighted the key role of the law in addressing the global problem of noncommunicable diseases.3
As well as knowing how effective a law is as a public health intervention, policy-makers should also have some understanding of its cost-effectiveness. Cost-effectiveness analyses can guide decisions on how scarce resources can best be allocated to maximize gains, such as improvements in the present or future health of the population. In particular, given that many regulatory interventions are effective in improving public health, it would be valuable to be able to compare the cost-effectiveness of different regulatory interventions with each other and with other public health interventions. For example, a health policy-maker may want to compare the cost-effectiveness of a regulatory intervention, such as a new law to increase the tax on tobacco, with a nonregulatory intervention, such as a government-funded social marketing campaign aimed at reducing smoking or the provision of funding for smoking cessation therapies.
Comparisons of the cost-effectiveness of different interventions must take account of all relevant costs, including the cost of making new laws and regulations. These costs must then be weighed against the public health benefits and possible cost savings resulting from the legislation. From one point of view, the “cost” is largely a “political cost” or a “political benefit”, depending on whether society as a whole disapproves or approves of the new law. One potential consequence is that the politicians responsible for the new legislation may be voted out of office. In economic terms, however, there is also an opportunity cost because the machinery of government (e.g. policy advisors and parliamentarians) can be applied to alternative activities. In addition, running a parliament and government agencies entails costs to society, all of which are paid for through taxation.
The World Health Organization (WHO) has developed a useful method, called the WHO-CHOICE model, for costing the implementation of new laws in the health sector.4 The model adopts a bottom-up approach that considers various cost inputs, such as the cost of the staff and resources required to implement a new programme at a national or local level. It has been used, for example, in costing the implementation of mandatory legal interventions for reducing the level of salt in food.5,6 However, at present there is no specific method for estimating the cost of the law-making component of a new public health law and too little information is available to determine whether law-making costs are relatively small or large.
Consequently, the aims of this study were to develop a method for calculating the cost of creating new legislation and to apply this method in New Zealand. Our objective was to provide researchers with a means of calculating the cost of a new law that could be used in future cost-effectiveness analyses to compare different regulatory interventions or to compare a regulatory and a nonregulatory approach to a public health problem.
We were interested in the opportunity cost of making a new law, where the opportunity cost is the cost related to the value of the best alternative use of parliamentary and government resources. For example, the best alternative use of these resources may be to improve the oversight and quality of delivery of existing government services or to ensure better implementation and enforcement of existing laws. However, the complex nature of parliamentary and government activity makes such an analysis difficult. Therefore, we took the simplistic approach that the “next best use” of law-making resources would be to pass no new law, with the consequence that the funds saved would remain with taxpayers (i.e. the size of parliament and policy advice agencies could be conceptualized as shrinking accordingly).
More precisely, we adopted the counterfactual of an “abridged non-law-making parliament” that would cost the same amount to operate as parliament minus the cost of the law-making component. Similarly, this counterfactual assumed smaller government agencies that would cost the usual amount to operate minus the cost of the policy advice component relating to new law-making. We then estimated the average cost of a law and assumed that in the long-run the average cost would tend to equate to the optimal metric for this type of analysis: the long-run marginal cost of a new law.
Our conceptual framework requires a long-run perspective with which there is sufficient time for the resources (e.g. the size and budget of parliament and the government agencies) to be changed in response to the change in the required output (e.g. the legislative workload). If this approach were not adopted, it would be difficult to estimate the marginal cost of a new law in any meaningful way. Indeed, in the short run the marginal cost of a new law approaches zero since the size and budget of a parliament and the government agencies are largely predetermined for several years. However, there is historical evidence of legislatures being curtailed. Some states in the United States have restricted the functioning of the state legislature: in Oregon, sessions are limited to 35 days in even-numbered years.7
Our method is congruent with the adoption of a central government perspective on costs. However, the direct government costs of an intervention can reasonably be included in a health system perspective in cost-effectiveness evaluations of health interventions since the government apparatus is a necessary component of the health system.8,9 While a case could be made for including the costs of nongovernmental organizations or of industries (e.g. the tobacco, alcohol or food industry) in, for example, lobbying government, we considered these costs to lie outside our perspective.
For this analysis, we defined a law as an act of parliament (i.e. a statute) or a statutory regulation enacted by a central government. In New Zealand and similar English-speaking jurisdictions, an act is a law made by parliament whereas a regulation is a law made by an authorized body under powers conferred by an act of parliament. Regulations generally deal with matters of detail or administration or matters that are subject to frequent change.10 Since we adopted a central government perspective, we ignored bylaws produced by local government. We also ignored other “softer” aspects of the law that are typically used by countries in the Commonwealth of Nations: for example, Orders in Council, rules, guidelines and codes of practice. Nevertheless, these items may be covered to some extent by central government acts and regulations.
To gain a better understanding of how politicians spend their time and the extent to which government agencies provide policy advice on law-making, we undertook a literature search of PubMed and Google Scholar in May 2011 to identify studies on the cost of new laws. The search terms used included combinations of: “cost”, “law”, “legislation”, “sitting days/legislative session”, “legislature/parliament” and “policy advice”. We carried out additional searches using information obtained by examining the bibliographies of the articles identified and using the names of authors who had published related work.
We regarded the following factors as important for estimating the cost of a law in New Zealand:
- the cost of running the New Zealand Parliament, a proportion of which relates to law-making;
- the cost of policy advice provided by government agencies, a proportion of which contributes to law-making;
- the average annual number of acts and regulations passed by parliament in an electoral cycle.
Although our major interest was in health-related laws, we decided not to restrict our analysis to these laws but instead estimated the cost of making a law in general. We did this because the boundaries between health-related laws and other laws are often unclear. For example, an alcohol-control law that benefits health may also help to reduce crime and may result in economic benefits following from reduced work absenteeism.11
Moreover, in this study we considered the cost of making a new law but not the cost of its subsequent enforcement. The cost of enforcement is best estimated for each intervention individually since it is highly dependent on the type of law and on the approach taken to enforcement.
Data on the number of laws (i.e. acts and regulations) enacted over a 12-year period, which corresponded to four electoral cycles in New Zealand, were obtained from official government web sites. The number of pages in each act was also extracted from the web sites. However, because there were so many regulations, the average number of pages in each regulation was estimated by random sampling.
To account for uncertainty in our results, we applied gamma or beta distributions around uncertain input parameters, in accordance with the recommendations of Briggs et al.12 To generate 95% uncertainty intervals (UIs) for the results, we then performed a probabilistic sensitivity analysis using @Risk for Excel version 5.7 (Palisade Corporation, Ithaca, USA).
Our literature search identified only one publication on the cost of laws; it came from the United States.13 The analysis used in that study adopted a fairly simple bottom-up approach to estimating the cost of running legislative sessions: it considered the number of days of legislative sessions and the salaries associated with them. Consequently, the full cost is likely to have been underestimated since the cost of government agencies and other costs directly associated with the operation of a legislature were not taken into account.13
We also found work in the political science literature that categorized the activities of United States politicians.14,15 However, we found it difficult to relate this information to law-making activity and, moreover, its relevance outside the United States was questionable. For example, politics in the United States is particularly partisan and political activity is often “purely symbolic”.16
Resources used for law-making
To estimate the parliamentary resources used for law-making, we investigated the time devoted to legislative sessions.13 Specifically, we regarded the proportion of time that the New Zealand Parliament devoted to “sitting days” as a proxy for the proportion of parliamentary resources devoted to law-making (Table 1). This approach provided a plausible estimate of 26.7% (standard deviation, SD: 4.1).
To estimate the policy advice resources used for law-making, we used a 2010 New Zealand publication on the cost of the policy advice provided by government agencies to parliament.17 However, this publication did not report the proportion of policy advice related to law-making. Consequently, we analysed the contents of a list of “significant policy issues” reported by New Zealand government agencies included in the publication.17 Of the 126 policy issues listed, 21 (16.7%; SD: 3.3) concerned activities that were related to a new piece of legislation (i.e. an act or regulation) or to a review of existing legislation or of a regulatory framework, either of which might have resulted in a change in legislation. Since the list of policy issues did not include keywords or terms directly related to legislation, some policy issues that might have resulted in legislative changes may have been missed and the analysis may have produced a conservative estimate of the proportion of policy advice related to law-making.
Cost of new legislation
The number of acts and regulations that were passed in New Zealand each year between 1999 and 2010 is shown in Table 2. The mean page length of the acts and regulations passed in each year was used as a crude proxy for the time required to develop and debate them and, hence, for the resources used to produce them. The page lengths reported in Table 2 vary considerably between different pieces of legislation. In particular, some regulations have more pages than some acts because an act may be an amendment act, which contains relatively little detail.
Details of the variables and methods used in our analysis and the results of a worked example, without an uncertainty analysis, are shown in Table 3. In brief, the analysis involved three steps. First, the annual cost of inputs to law-making (i.e. parliamentary activity and policy advice from government agencies) was derived using data available from the New Zealand Treasury and other government bodies. Second, the proportion of the cost that was attributable to producing all acts or all regulations was determined separately using the mean page length of an act or regulation. Third, the annual cost of all acts or of all regulations was divided by the annual number of acts or regulations, respectively, to derive the average cost of a new act or regulation.
The results of the probabilistic sensitivity analysis are shown in Table 4. The estimated mean cost of an act was approximately 2.6 million United States dollars (US$), with a large 95% UI: 1.5 to 4.4 million. The mean cost of a regulation was US$ 382 000 (95% UI: 221 000 to 665 000). The main factor responsible for the uncertainty was the number of acts and regulations passed per year. Considering both acts and regulations together, the average cost per page of legislation was US$ 32 434 (Table 3).
Cost comparison with the United States
To provide a comparison with the estimates produced for New Zealand, we also calculated the cost of enacting a government bill, which is the main legislative output at the state level, in the United States (Table 5). In 2008 and 2009, the average cost of a bill was approximately US$ 980 000, or only one third the average cost of an act in New Zealand and just over twice the average cost of a regulation. However, it is likely that our analysis of United States bills substantially underestimated their true cost since it did not include a proportion of the cost of maintaining state government buildings or a proportion of the cost of the financial administration of the state government, both of which were included in the New Zealand analysis.
This work details a new method for estimating the cost to government of developing new legislation. It captures components of the law-making process that were not included in previous methods13 but is still reasonably practical, since the data required are available in most developed countries. Therefore, we think our general method could be employed by researchers in other jurisdictions to perform cost-effectiveness analyses of the use of new laws as public health interventions, thereby enabling comparisons to be made with other types of intervention. However, researchers must make their own estimates of input parameters, such as the percentage of time that policy agencies and parliament spend on legislation, the average page length of an act or regulation and total parliamentary and public agency costs.
The perspective on costs used in this analysis, which was the cost to government, is likely to have produced a reasonable estimate of the cost of developing a new law. Nevertheless, the estimate would probably have been substantially greater if a full societal perspective had been adopted. For example, some industries run multimillion dollar campaigns opposing proposed new laws (e.g. laws relating to tobacco control or greenhouse gas pricing schemes). In addition, the development of a new law may also involve substantial inputs from individual citizens and community groups.
The use of parliamentary sitting days to estimate the proportion of parliamentary activity devoted to law-making has not been validated. However, this approach appears reasonable because sitting days are mainly used to debate new laws. On the one hand, our approach may underestimate the time devoted to law-making since, on days other than sitting days, politicians spend time drafting and revising laws. For example, they may participate in select committees considering new bills. In particular, such committees often involve Ministers of the Crown, who are the key law-makers in New Zealand. They are also the politicians who have the largest salaries and the greatest influence on how other parliamentary staff and resources are used. Activity may also be underestimated because, occasionally, parliament carries out additional law-making work as a matter of “urgency” and this work may be particularly expensive and disruptive to other parliamentary activities. On the other hand, our approach might produce an overestimate for three reasons. First, some politicians do not attend the debating chamber during parliamentary sitting days because they can vote by proxy. Second, some time during sitting days is spent on activities that do not involve law-making (e.g. “question time” often deals with other issues). Third, some ostensibly law-related activity concerns bills from opposition Members of Parliament that appear to be largely symbolic in nature and have little chance of progressing beyond a first reading. Nevertheless, in some cases, this activity is considered a practice run for similar legislation that may be introduced by future parliaments.
In addition, our use of the page length of an act or regulation as a proxy for its complexity has not been validated, though it is reasonable to assume that a longer piece of legislation will take longer to draft and debate. Furthermore, page lengths are used only to compare the times devoted to acts and regulations. Their use does not alter the total cost of legislation (i.e. of all acts and regulations combined).
Although the results of our analysis may be generalizable to other developed countries, comparability may be limited by peculiarities of the New Zealand political system. For example, the mixed-member proportional voting system in the country leads to a relatively large number of political parties – there were eight in early 2012 – and prolonged interparty negotiations are often required before laws can be passed. In addition, the relatively short 3-year electoral cycle can lead politicians to spend a disproportionate amount of time in electioneering rather than law-making.
On the other hand, the New Zealand political system is particularly efficient because parliament is small – there were only 121 Members of Parliament in early 2012 – and there is little corruption: New Zealand was ranked lowest in the world for corruption in 2009.22
Applying our approach to other countries may involve taking into account two further considerations: (i) the law-making costs associated with an upper house or senate (New Zealand has neither); and (ii) whether or not legislation is divided into acts and regulations.
In summary, our results suggest that the cost of law-making is worthy of consideration and that it should ideally be included in economic evaluations of public health interventions that require a new law. Although our method for estimating the cost of law-making has limitations, it appears to capture the main government costs of developing a new law and to be generally applicable to other developed countries.
We thank Louise Delany, David Hadorn, Giorgi Kvizhinadze, Des O’Dea, Jo Peace and George Thomson.
This work was funded by the Health Research Council of New Zealand as part of the BODE3 programme (project number 10/248).
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