Mortality Risk Analysis for the Occupational Safety and Health Administration’s Occupational Exposure to COVID-19 Emergency Temporary Standard
For economically significant regulations (those with annual costs, benefits, or both exceeding $100 million) executive branch agencies produce regulatory impact analyses (RIAs). RIAs should include information about the problem an agency is trying to solve, various alternative ways of addressing that problem to achieve a desired outcome, and an assessment of the costs and benefits of each policy option to identify the alternative with the most net societal benefits.
Though RIAs can in theory be helpful for decision-making, in practice, RIAs are rarely comprehensive. For example, agencies often overlook long-term impacts and opportunity costs, most notably in the cost-benefit analysis portion of RIAs. “Opportunity cost” refers to the benefit society gives up when resources are used in an alternative way, such as occurs when governments regulate. This forgone benefit includes risk prevention efforts that regulations displace when they direct resources toward other purposes.
A form of economic analysis known as “mortality risk analysis” identifies the degree to which regulatory costs generate opportunity costs that offset their lifesaving benefits. A mortality risk analysis calculates a regulation’s cost-effectiveness (i.e., the cost per life saved) and tracks this cost-effectiveness over time. If the cost per life saved of a regulation exceeds a particular threshold, then the regulation can be expected to raise societal mortality (i.e., the regulation can be expected to induce more deaths than it prevents as it displaces risk prevention spending). Though mortality risk analysis is useful for determining when regulations increase mortality, it can also assist regulators who want to make their RIAs more comprehensive because it can cast light on long-term effects and opportunity costs that often go overlooked.
Summary of Findings
On June 21, 2021, the Occupational Safety and Health Administration (OSHA) published an interim final rule that requires certain healthcare employers to develop and implement a plan to identify and control COVID-19 hazards in the workplace. The regulation requires employers in settings that provide healthcare services or healthcare support services (with some exceptions) to implement requirements for patient screening and management, personal protective equipment, building ventilation, face masks, physical distancing, record keeping and reporting requirements, and other provisions and precautions. According to OSHA, the rule is expected to cost approximately $4 billion, prevent 776 people from dying, and prevent roughly 295,000 people from becoming infected.
Relying on data available in OSHA’s RIA, we conduct an original mortality risk analysis of the rule. We estimate that the rule will reduce mortality risk in the short term but increase it in the long term. Although the rule is predicted initially to save 735 lives—the net number of expected lives saved in the first period after accounting for the mortality cost of regulatory expenditures—we expect the rule to increase mortality risk after 69 years. After a century has elapsed, the rule is expected to induce 2,134 more deaths than it prevents, and the figures grow less favorable for the rule in the years thereafter.
The results of this mortality risk analysis allow one to make inferences about the overall efficiency of the rule. If one assumes that OSHA’s core analysis is correct, the rule likely passes a short-term cost-benefit test. However, if one uses OSHA’s own estimates of monetized benefits, the rule still fails a long-term cost-benefit test (40 years and thereafter).
The results of our mortality risk analysis differ from the conclusions in OSHA’s RIA primarily because our analysis accounts for the opportunity cost of displaced (and induced) capital investments in the market, whereas OSHA’s analysis takes a short-term perspective that neglects long-term opportunity costs. Although some may find it surprising that a regulation issued on a temporary basis can have effects over such a prolonged period, the new investment, new technology, or business formation that a regulation displaces would have produced benefits on a schedule that may not have any relation to the schedule of benefits created by the regulation.
Given the emphasis that President Biden has placed on considering impacts of public policies on future generations, agencies should include a mortality risk analysis as a routine part of RIA because doing so would help ensure that regulations do not increase mortality in both the short and long terms.