Graham Advises Agencies on Valuing Lives of Seniors

In a Washington Post op-ed on June 1, Robert Hahn and Scott Wallsten of the American Enterprise Institute pose a fantastic scenario: There are two simultaneous fires, one at a nursing home and one at a nursery. The problem is that the fire chief has only one pump, and must choose whether to save 11 seniors or 10 toddlers. Obviously, the chief should choose the toddlers, they write. Fortunately, in the real world, there is no reason to make such a choice. The fire chief would have enough pumps to rescue both the seniors and the toddlers. And if he didn’t, you can bet that the town would be outraged, and the authors’ fictional mayor would soon be out of a job. The expectation is that we should be able to protect both young and old. Hahn and Wallsten, however, would like to make the real world more like their fantasy world, forcing us to choose. Specifically, they are defending what’s been called the “senior death discount” in regulatory analysis, in which the lives of seniors are assigned less monetary value than the rest of the population. For example, in evaluating its flagship environmental proposal, the Clear Skies Initiative, EPA determined that those over 70 were worth $2.3 million per life compared to $3.7 million for those younger. This approach was reportedly urged by John Graham, administrator of OMB’s Office of Information and Regulatory Affairs (OIRA), which acts as a clearinghouse for new agency rules. Yet following a firestorm of protests by seniors and public health advocates, including the AARP, EPA Administrator Christie Whitman withdrew her support, saying, “EPA will not, I repeat, not, use the age-adjusted analysis in decision making.” Graham, who enjoys close ties with AEI, soon followed suit in an agency-wide memo on May 30, acknowledging that the practice was not supported by recent data. In fact, EPA’s senior discount derived from a 1982 British survey by Michael Jones-Lee, which suggested that the elderly were less willing to pay for regulatory benefits. Yet in a study released in April of 2002, Resources for the Future could not replicate Jones-Lee’s results in the United States, finding no meaningful variation in an individual’s willingness to pay based on age. Indeed, Jones-Lee himself recently told the Miami Herald, “I certainly wouldn’t argue for my 1982 figure.” “In light of these developments, I advised EPA to discontinue use of this factor as an adjustment to the economic value of a statistical life (VSL),” Graham wrote in his memo. “The VSL would thus be the same for people of all ages. I am also advising analysts at other agencies that such a factor should not be used in VSL analysis.” Graham also slightly backed off his previous promotion of “life years” in calculating regulatory benefits, which naturally skews decision-making against protections for the elderly, who have fewer life years remaining. “OMB is concerned that a simple [value of a statistical life year] VSLY approach could underestimate benefits significantly when applied to rules that primarily or significantly benefit senior citizens,” Graham wrote. “Consequently, OMB recommends that agency analysts, when performing benefit-cost analysis, present results using both the VSL and VSLY methods [instead of just VSLY, as some agencies have done]. When benefit estimates based on the VSLY method are presented, as OMB has encouraged since 1996, I recommend that agencies present analyses with larger VSLY estimates for senior citizens.” Unfortunately, this will not solve the inherent problem. Seniors have fewer life years remaining. Even if those life years are given added value, this doesn’t change the fact that when life years are totaled, the lives of seniors are ultimately given less value. This result is built into the method. Indeed, the exercise would be meaningless if life years for the elderly were inflated to a point where it wouldn’t matter if intended beneficiaries had 10 life years remaining or 50. The effect is just as Hahn and Wallsten advise, setting up a system in which regulatory protections are rationed based on age. If polluted air is primarily killing our elderly, does that mean we should care any less? Does it mean we should be less willing to act? Hahn and Wallsten say yes. Graham is still clinging to this belief, despite his tactical retreat.
back to Blog