Cost Of Non-property Post-disaster Problems In The United States
Introduction
The economic devastation that a disaster creates is not limited to property damage and lives lost. The devastation encompasses nearly every aspect of a region’s economical ecosystem. Some economical impacts are short-lived, such as disruptions in business activities (Hystad and Keller, 2006), while others have a long-term impact on the economical viability of a region’s economy, such as the destruction of a market’s environmental assets. (Eisenberg, 2005). In order to properly gage the economical impact that a disaster has on a local jurisdiction, costs and losses associated with non-property post-disaster problems, like medical costs, tourism industry losses, insurance industry losses and cost adjustments and environmental costs and losses, need to be assessed and added to the costs and losses generated by physical property lost and lives lost. The complexity of these non-property post-disaster problems makes it difficult to estimate precise costs and losses, however, estimates of the value of these losses can be made using data collected from a variety of sources including pre-disaster statistics and post-disaster statistics.
Mental Health and Physical Health Post-Disaster Costs and Losses
Physical Health Care
One of the least studied categories of post-disaster costs and losses relates to the demand for after disaster physical and mental health care. Research has shown that incidents of doctors visits by disaster victims increases significantly during the one year period after the wretchedness. (Freedy and Simpson, 2007). This increase in visits is caused by several medical complaints from acute physical conditions like viral syndromes, gasteroenteritis, wound care, injury assessments and common illnesses, to chronic medical conditions like burn treatments, medication filling and wound monitoring. (Freedy and Simpson, 2007). Worry specific problems can also develop. For example, after the Hurricane Katrina incident mold in homes and businesses that had been flooded and exposed to intense heat for weeks led to the development of what is now referred to as the “Katrina Cough.” (Falk and Baldwin, 2006). This condition was fair one of many health problems that disaster victims developed as a result of this disaster.
Mental Health Care
In addition to physical complaints, mental health problems also seem to increase dramatically for anxiety victims for at least twelve months after their disaster experience. Depression and Post-traumatic Stress Disorder are among the most commonly experienced mental conditions for anxiety victims. (Freedy and Simpson, 2007). According to an extensive study conducted by Harvard University, Hurricane Katrina difficulty victims were reported to have developed a statistically higher rate of mental illnesses after the disaster compared to the national average. For example, the inspect revealed that 11.3 percent of the participants in the witness were diagnosed with serious mental illnesses, like Post-traumatic Stress Disorder, compared to the national average of 6.1 percent. It was further shown that 19.9 percent of Katrina victims had been diagnosed with calm or moderate mental illnesses compared to a 9.7 percent national average. (Gardner, 2007 and Hurricane Katrina Community Advisory Group, 2006). Post-traumatic Stress Disorder was one of the most commonly contracted mental illness by this group of disaster victims, with between 33 percent and 50 percent of the respondents to the Harvard study having been diagnosed with this disorder. (Hurricane Katrina Community Advisory Group, 2006).
The cause of increased cases of mental illnesses and problems for inconvenience victims rests on the volume of stressors that they have to deal with all at once or in rapid succession during the trouble. For example, during the Hurricane Katrina disaster nearly 40 percent of all victims experienced some sort of “extreme physical adversity,” such as injury, assault or prolonged physical exertion. (Hurricane Katrina Community Advisory Group, 2006). In addition to physical stressors, 22.8 percent of Katrina victims reported that they experienced “extreme psychological adversity,” such as losing a loved one, dealing with the loss of their home and possessions or witnessing the carnage of the disaster. (Hurricane Katrina Community Advisory Group, 2006). Furthermore, Harvard’s study showed that nearly half of the participants in their study reported experiencing at least five different “significant hurricane related stressors.” (Hurricane Katrina Community Advisory Group, 2006). The significance of this data is simple, the more stressors a person is exposed to during and directly after a disaster, the more likely they are to execute a mental illness, and more importantly, the more likely they will be to develop a serious mental illness like chronic depression or Post-traumatic Stress Disorder. (Freedy and Simpson, 2007). Both of these chronic mental health illnesses require long-term care that is supervised by a trained mental health professional, as well as long-term consume of medications. (Anonymous, 2008).
The cost of these long-term treatments can add up to thousands of dollars a year for a single victim. If the prevalence of PTSD cases for disaster victims falls in line with the prevalence among Hurricane Katrina victims, then we can expect that at least 33 percent of major worry victims will need treatment. (Hurricane Katrina Community Advisory Group, 2006). This means that a major exertion that impacts 100,000 people will have about 33,333 people that will need long term mental counseling and possibly medication for an extended period of time. This could push the cost for this one post-disaster problem into the six, seven or eight figure cost bracket with fair minimal care costs alone.
Compassion Fatigue
Another medical problem that has become indicative of post-disaster recovery is the phenomenon known as compassion fatigue. Compassion fatigue is a condition where the care giver or rescue worker develops symptoms in line with those experienced by the danger victims. (Cassidy, 1991, Lawrence, 2005 and Madrid and Schacher, 2006). This medical problem exhibits itself in symptoms like anxiety attacks, insomnia, sexual dysfunction, chronic physical symptoms, drug and alcohol abuse and thoughts of suicide or violence. (Madrid, 2006). The financial toll for this post-disaster medical problem is difficult to estimate, as it not only impacts the amount of money spent on medical care, but it also impacts the amount of money spent on the recovery effort and the amount of money lost by employers because of time taken off by the person suffering from compassion fatigue or from lost productivity caused by their lower capabilities to do work.
Economical Impacts
The flux in demand for medical care and mental health care after a misfortune has both positive and negative impacts on local economies. On the positive side famous care physicians and mental health professionals typically experience an increase in their revenues as more patients visit their office. On the negative side of the economic balance are two main problems. First of all, private health insurance companies experience a surge in claims, which reduces their profit margin, and potentially could produce a substantial annual loss for specific insurance agencies or for the entire health insurance industry. Secondly, space funded and federally funded medical insurance programs are heavily taxed as people without private health insurance coverage use these programs to pay for their medical care. If the disaster is large enough, or if numerous disasters occur in succession, then government health coverage programs could falter and possibly collapse under the heavy usage.
Tourism Post-Disaster Costs and Losses
Tourism is an industry that is especially vulnerable to post-disaster problems. After all, this industry’s success or failure is based solely on the ability and willingness of people to travel to a destination. For many economies, tourism is a major contributor. When disasters strike a station or locality, the tourism industry can be crippled and cause both short-term and long-term economic problems. (Hystad and Keller, 2006).
Direct Damage
The first post-disaster cost that must be taken into consideration is the amount of exclaim damage that has been caused to the tourism industry. (United Nations, III. Tourism, pg. 43). These costs will relate to infrastructural distress and operational losses that relate solely to the tourism industry, such as resort hurt, hotel afflict and historical site damage. These losses directly impact the ability of an status to facilitate or attract tourism.
Indirect Losses
The second post-disaster cost that must be taken into consideration is the amount of indirect losses that have occurred. The first indirect cost is calculated by comparing post-disaster financial conditions to pre-disaster financial conditions. (United Nations, III. Tourism, pg. 50). For example, a loss can be distinct for a hotel by comparing several statistics, such as the number of rooms they are able to fill now vs. the number of rooms they were able to fill before the disaster during the same month. Hotels can further estimate their post-disaster losses by comparing the room rates they are able to charge now and the room rates they were able to charge before the disaster. Since room rates are based on a interrogate curve, the hotel will be able to easily determine the business losses that they are experiencing. (United Nations, III. Tourism, pg. 50-51). Another indirect cost that can be impacted by a distress is the tourism company’s insurance rates. (This will be discussed in the next section.)
Microeconomic Effects
The third post-disaster cost that needs to be assessed is the macroeconomic effects of the disaster on the tourism industry. (United Nations, III. Tourism, pg. 53). These costs are going to relate to the effects the losses in the tourism industry have on the overall economy of the area. For example, costs and losses will need to be assessed for the (1) “effects of extended sectors,” (2) “effects on public finance” and (3) “effects on investments.” (United Nations, III. Tourism, pg. 53). The effects of extended sectors are going to be costs and losses that have been experienced by sectors that the tourism relies on, but that don’t exclusively help tourists, such as restaurants and transportation businesses. Losses related to the effects on public finance and the effects of investments can be calculated using a comparison of pre-disaster and post-disaster statistics. For example, losses in sales tax revenue or the amount of investments in the tourism region can be used to estimate the macroeconomic effects of the difficulty on the tourism industry.
Employment Effects
The fourth post-disaster cost that needs to be taken into consideration is the effect the disaster has on local employment. For some states, like Florida, where tourism is one of the primary employers (Hayes, 2005), disasters can lead to serious increases in unemployment rates. For example, Florida’s tourism industry is responsible for providing nearly 900,000 jobs. (Hayes, 2005). When this state is impacted by a disaster or a stream of disasters, such as the unusually violent hurricane season of 2004, hundreds of thousands of people can find themselves without a job. This large decrease in jobs creates a number of losses and costs including: a loss in income tax revenue, a loss in retail sales and an increase in unemployment claims and welfare claims.
Environmental Losses
The fifth post-disaster cost that impacts the tourism industry relates to environmental problems created by the pain. (United Nations, III. Tourism, pg. 54). For example, tourism businesses that rely on clean waterways, such as diving businesses and beachfront resorts, disasters can reduce their appeal to tourists by polluting bodies of water, washing up debris on beaches and by reducing access to waterways. In severe disasters complete losses can be experienced by tourism businesses because their environmental attraction has been destroyed or made unsafe for tourists to use.
Estimating the Costs
The severity of the costs and losses experienced by the tourism in an area is dependent on a number of factors. The first factor is the general appeal of the location. For example, while Florida lost a lot of money during their 2004 fiscal year because of the series of hurricanes that made landfall, their recovery during the following year, which had a predicted loss of $6.76 billion (Chriszt, 2004), was actually a narrate tourism year producing $56.5 billion in tourism revenue. (Hayes, 2005). Another factor that will impact the severity of the loss experienced by a region because of a disaster is the travel options the state offers. For example, after the 9/11 incident in 2001, many popular tourism destinations experienced losses in tourism revenue, however, Okalahoma, which is normally reached by car, didn’t experience a decline in their tourism. (Carter, 2001).
Insurance Post-Disaster Costs and Losses
Perhaps the easiest post-disaster costs and losses to assess are the insurance costs and losses. Since many organizations are interested in how much money insurance agencies are charging their clients and how much money they are paying out in claims, these figures are made widely available. This makes them easy to study.
Insurance Claim Costs
The first cost associated with post-disaster insurance costs is the cost of disaster insurance claims. The rising value of property (Anonymous, 1997) coupled with the increased number of disasters that the United States has experienced since the 1990s, has dramatically increased the amount of money that insurance companies pay out each year. While there has been an increase in the number of disasters experienced by the United States in a single year, it is the increase in insured property values that has created the biggest jump in the cost of an insurance claim. For example, between 1988 and 1997 the value of a coastal property jumped 69 percent. Also the number of these highly valued properties increased, compounding the financial risk for insurance companies. (Anonymous, 1997). In fact, between 1990 and 1999, insurance companies paid $75 billion in claims. This amount is more than 33 percent above what was paid out by insurance companies for the four previous decades combined. (Anonymous, 1997). This escalation in insurance claims caused by disasters has continued into the 21st century. It has been reported that between 1991 and 2002 insurance companies paid out about $100 billion for catastrophe-related insurance claims. This is about $700 million a month for 144 consecutive months. (Nixon, 2002).
Premium Costs
The second post-disaster cost associated with the insurance industry is the cost of insurance premiums. Obviously, since insurance rates are based on the risk of a financial loss, the vulnerability of a home or business to a disaster is going to be factored into the price of the premium. As disasters have become more frequent, the cost of homeowner’s insurance and business property insurance has increased across the country, however, the increases have been the most severe in high risk zones such as the Eastern seaboard, the American Southeast and the Texas coastline. (Labbe, 1997). Not surprising Florida has been one of the states that has been the most impacted by rising prices in insurance policies, with a 72 percent premium rate hike in 1992 alone. (Labbe, 1997).
Transferring Insurance Risk
The final post-disaster cost associated with the insurance industry is the availability of insurance coverage in high risk zones. During the last two decades many insurance companies have changed their coverage availability. For example, Allstate reduced the number of homeowner’s policies that they carried by 50,000 homes, CIGNA pulled out of the South Florida market all together and Nationwide Insurance Company reduced their coverage availability along the Texas coastline and along the Eastern Seaboard. (Labbe, 1997). This deficit in insurance coverage has several economic repercussions. First of all it forces property owners to accept alternative insurance programs, which most likely will be higher priced. Secondly, it transfers the financial risk and responsibility for rebuilding and restoring property in high risk areas to the Federal government. This means that taxpayers are picking up the tab for exertion recovery on a much larger scale than is desirable. (Anonymous, 2002 and Labbe, 1997).
Environmental Disaster Costs and Losses
The final non-property post-disaster costs and losses that will be discussed will relate to environmental disaster costs and losses. Environmental problems that develop after a disaster tend to have long-term effects on local economies. Environmental problems that can develop after a disaster include soil contamination, water contamination and destruction of environmentally dependent industries.
Water Contamination
One of the first environmental problems to be identified post-disaster is water contamination. (Eisberg, 2005). This problem can have several long-term economic impacts. First of all there is a cost to evaluate the safety of the water, secondly there is a cost to determine the best solution for fixing the jam, thirdly there is a cost to implement the solution and finally there is a cost for long-term monitoring of the water safety. (Anonymous, 2005). Since water is not a fixed element, it can transport contaminants and pollutants to other areas beyond the original scope of the disaster and cause secondary disasters and economic problems in these areas. Water contamination is a problem that has to be fixed as biological entities, including humans and animals, need it to survive. Also, there are many industries that depend on clean water sources for their economic survival, such as agricultural industries, fisheries, manufacturers and water works.
Soil Contamination
Soil contamination is another environmental problem that can lead to severe economic problems. Soil contamination, for example, can affect water quality, it can affect agricultural output in an area and it can make an area uninhabitable. For example, after Hurricane Katrina, soil contamination was a titanic problem. The soil had been contaminated by an estimated 3.7 million gallons of spilled oil products (Eisberg, 2005) and millions of gallons of spilled chemical products transported and deposited by floodwaters. Before residents and businesses could return to rebuild their lives, BUGS technology was licensed by the state to be used for the decontamination process. (Anonymous, 2005).
Environmental Infrastructures
The loss of environmental infrastructures is another problem that can develop as a result of a pains. For example, in arid regions of the United States, like the American West, forest fires can destroy tree systems that prevent soil erosion, which in turn can lead to polluted water and the total destruction of water supplies. (Lynch, 2004). In these total loss scenarios it is difficult to estimate the economical impact as it can potentially make an position permanently uninhabitable.
Destruction of Environmental Dependent Industries
The destruction of environmentally dependent industries is the final problem that can create a very significant economical impact post-disaster. The Hurricane Katrina disaster is the perfect case study. During the post-disaster phase of Katrina flooding in oil refineries, chemical plants and other businesses led to widespread water pollution. This in turn devastated the local fishing industry which had an annual value of about $700 million. (Eisberg, 2005). In addition to damaging the fishing industry, Hurricane Katrina also destroyed a huge piece of the state’s timber, which had a potential value of $15.6 billion. (Eisberg, 2005). In addition to these losses, the situation will also have to contend with the redevelopment and replenishment costs to repair the environmentally dependent industries. For example, they will need to decontaminate soil and water sources, replant forests, monitor the areas for signs of recovery and make additional interventions as needed to help the ecosystem return to “normal.” This process will take several decades before economical gains can once again be expected.
Summary and Conclusion
As is evidenced by the above examples, post-disaster problems related to physical and mental health care conditions can have a significant impact on an economy. The most observable impacts are going to be related to the number of private and public health insurance claims filed during the one year period preceding the disaster. However, this is not the only strain the economy is going to experience. Disability rates are also generally going to be increased because of disaster related injuries, as well as because of psychological problems that developed as a result of experiencing the disaster or because of compassion fatigue. Finally, productivity losses and absenteeism caused by compassion fatigue and conditions produced by the disaster are going to impair the economy further.
While many business industries are going to be impacted by a disaster, the tourism industry is particularly vulnerable to post-disaster problems because tourism for most areas in the United States is seasonal (United Nations, III. Tourism, pg. 43) and dependent on people’s ability and willingness to recede to the destination. (Carter, 2001). The losses and costs that are experienced by the tourism industry relate to direct damage to the industry’s infrastructures and operations, to indirect losses produced by a reduction in business activity, to microeconomic effects like lower investment rates and impacts on extended sectors, to decreases in employment and to reduced access and availability of environmental resources used for entertainment purposes. (United Nations, III. Tourism, pgs. 43-54).
The insurance industry is not only economically impacted by disasters, but they in turn have impacted local, station and the federal economy with their reactions to the rise in disaster related insurance claims. To start with, insurance companies are currently paying out about $1.18 for every $1.00 in premiums that they earn. (Nixon, 2002). This is an obvious loss that they cannot be expected to carry indefinitely. However, their solution to their financial losses was to either raise insurance premiums by nearly double in some areas or to drop coverage in markets with high risks for disasters. Their actions have forced residence governments and the Federal government to win the financial responsibility for helping uninsured property owners via a proposed Federal Disaster Insurance Program or via FEMA grants and loans. (King, 2006). This shift in financial risk is then transferred to the taxpayers, who include the disaster victims themselves.
Post-disaster costs associated with environmental destruction are extremely difficult to estimate. This is because the costs continue to add up for years after the disaster has occurred. While some costs will be incurred right after the disaster has taken place, such as costs related to water decontamination and soil decontamination, most costs will accumulate during the ten to twenty years following the disasters, such as costs associated with replanting trees and monitoring their growth process. Of all the non-property post-disaster costs, environmental costs are perhaps the farthest reaching and most damaging to the economy. This is because of their long-term nature and because of their tendency to impact many levels of an economic system.
Disasters are devastating events that impact the lives and livelihoods of millions of people each year. Since the United States seems to have more than its graceful share of disaster risk it is important that residents, businesses and government agencies found with the United States understand how far the economical impacts of disasters arrive. Disasters create costs and losses that go well beyond property and life losses. They also construct costs that impact the tourism industry, the health care industry, the insurance industry and environmentally dependent industries. To salvage a more comprehensive perspective of post-disaster costs, long-term research is still needed, especially in the area of non-property post-disaster expenditures.
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