Tag Archives: us healthcare

What Is a Year of Life Worth? (Part 1)

Most conservatives and liberals agree that we should not consider cost in deciding whether people should undergo medical procedures that have the potential to save lives and cure diseases. Unfortunately, most conservatives and liberals are wrong.

Declaring the idea of cost-effectiveness a “forbidden topic in the health care debate,” Aaron Carroll shows just how averse we are to the idea of comparing money cost with health outcomes. It’s even written into the Affordable Care Act:

“… We in the U.S. are so averse to the idea of cost-effectiveness that when the Patient Centered Outcomes Research Institute, the body specifically set up to do comparative effectiveness research, was founded, the law explicitly prohibited it from funding any cost-effectiveness research at all. As it says on its website, ‘We don’t consider cost-effectiveness to be an outcome of direct importance to patients.’”

He gives another example:

“Take the U.S. Preventive Services Task Force, which was set up by the federal government to rate the effectiveness of preventive health services on a scale of A to D. When it issues a rating, it almost always explicitly states that it does not consider the costs of providing a service in its assessment.

“And because the Affordable Care Act mandates that all insurance must cover, without any cost-sharing, all services that the task force has rated A or B, that means that we are all paying for these therapies, even if they are incredibly inefficient.”

Here is the brutal reality: We don’t have an unlimited pile of money to spend on anything. And if we don’t pay attention to what we get for the money we spend (which has historically been the case for government regulatory agencies), we will end up spending money in ways that actually reduce life expectancy for the average American. In a 1996 study for the National Center for Policy Analysis, Tammy Tengs found that:

  • By spending $182,000 every year for sickle cell screening and treatment for black newborns, we add 769 years collectively to their lives at a cost of only $236 for each year of life saved.
  • By spending about $253 million a year on heart transplants, we add about 1,600 years to the lives of heart patients at a cost of $158,000 per year of life saved.
  • Equipping 3% of school buses with seat belts costs about $1.6 million a year, but this effort will save less than one life-year, so the cost is about $2.8 million per year of life saved.
  • We spend $2.8 million every year on radionuclide emission control at elemental phosphorus plants (which refine mined phosphorus before it goes to other uses), but this effort will save at most one life every decade, so the cost is $5.4 million per year of life saved.

Tengs, along with Professor John Graham and a team of researchers at the Harvard Center for Risk Analysis, systematically gleaned from the literature annual cost and lifesaving effectiveness information for 185 interventions. Some of these interventions had been fully implemented, some partially implemented and some not implemented all. The researchers then asked: What if we reallocated funds from regulations and procedures that give us a low rate of return to those procedures that give us a high one?

  • The 185 interventions cost about $21.4 billion a year and saved about 592,000 years of life.
  • If that same money had been spent on the most cost-effective interventions, however, more than 1.2 million years of life could have been saved — about 638,000 more years of life than under the status quo.
  • Implementing the more cost-effective policies, therefore, could save twice as many years of life at no additional cost.

This same principle applies to health insurance. Unless you want your premium to go through the roof, you should choose an insurer that follows a reasonable standard for what care is covered. But that brings us back to Carroll’s point. How are you to know what standard your insurer is using if the whole subject is a “forbidden topic”?

A few years ago, Time Magazine reported that $50,000 for a year of life saved is

“… the international standard most private and government-run health insurance plans worldwide use to determine whether to cover a new medical procedure…. Nearly all other industrial nations — including Canada, Britain and the Netherlands — ration healthcare based on cost-effectiveness and the $50,000 threshold.”

But a Stanford University economist calculated that the threshold for kidney dialysis for Medicare enrollees should be $129,000. Mark Pauly and his colleagues suggested a standard of $100,000 in Health Affairs. Economists generally believe that such standards should be based on the implicit values people reveal when they make choices between money and risk in the job market and make choices as consumers. Studies show that the implicit “value of a statistical life year,” to use a term of art, ranges from $50,000 to $150,000. As Pam Villarreal, Biff Jones and I explained in Health Affairs:

“This is not the amount of money that people would accept to give up their lives. It is instead the implicit value that people place on their lives when making choices between additional risk and money, when the risks involved and the amount of compensation needed to induce people to accept those risks are both small.”

For the many problems involved in arriving at a figure, see a review by Ike Brannon. For an extension of the idea to “quality adjusted life years,” or QALYs, see Aaron Carroll’s discussion and links to the literature. The main point there is that a year spent on a respirator shouldn’t count anywhere near as much as a year doing normal activities.

There remains the question of “rationing” and “death panels.” I’ll address that in a future post.

This article first appeared on Forbes.com.

The Myth of Lousy Healthcare in the U.S.

Few complaints about the U.S. healthcare system are as common as the claim that we spend too much on healthcare and get too little in return, especially compared with other industrialized nations.

A new Commonwealth Fund report is the latest to indict U.S. healthcare. It pegs the American system dead last in a survey of 11 developed countries.

But, like virtually every other study that trashes the U.S. healthcare system, Commonwealth’s rankings rely on questionable assumptions, like giving weight to those systems that treat people equally rather than well. At the same time, Commonwealth ignores the problems that countries with socialized healthcare systems have with treating people once they’re sick.

And on that metric — that is, actually delivering care to those who need it — the U.S. is without peer.

The Commonwealth Fund report begins by asserting that the U.S. healthcare system “is the most expensive in the world.”

It’s true that the U.S. spends a larger share of its gross domestic product — 18%, or almost $3 trillion  on healthcare than other countries do. But by itself that statistic means nothing.

The U.S. also happens to be one of the richest countries in the world. Once basic needs are taken care of, an increasing share of each extra dollar will go to what were once considered luxuries. You can only spend so much on food, after all.

That assertion is borne out by national spending data. Between 1990 and 2012, for example, spending on healthcare climbed 290%, significantly faster than GDP growth of 171%. But household spending on pets climbed 353% over those same years; on live entertainment, it went up more than 500%. Americans spend 639% more on telephones and 900% more on computers.

By the Commonwealth Fund’s logic, America also faces a pet-care spending crisis.

In contrast, spending on staples like food, clothing, housing and furnishings all climbed more slowly than GDP.

The Commonwealth Fund concludes that the U.S. “underperforms relative to most other countries on most other dimensions of performance” despite having the most expensive healthcare system in the world. But a closer look at those “dimensions” calls that claim into question.

Take infant mortality rates, where the U.S. typically places far down the list behind France, Greece, Italy, Hungary, even Cuba. This comparison is notoriously unreliable because countries either use different definitions of a live birth — or fudge their numbers.

The U.S. counts every live birth in its infant mortality statistics. But France only includes babies born after 22 weeks of gestation. In Poland, a baby has to weigh more than 1 pound, 2 ounces to count as a live birth. The World Health Organization notes that it’s common practice in several countries, including Belgium, France and Spain, “to register as live births only those infants who survived for a specified period beyond birth.”

What’s more, the U.S. has significantly more pre-term births than other countries. That fact alone accounts for “much of the high infant mortality rate in the U.S.,” according to a report from the Centers for Disease Control and Prevention (CDC). The CDC found that if the U.S. had the same pre-term birth rate as Sweden, our infant mortality rate would be cut nearly in half.

What about life expectancy, where the U.S. ranks below its peers, as well?

International measures of longevity typically fail to account for differences in obesity, accidental deaths, car accidents, murders and the like, all of which shorten lives no matter how good a nation’s healthcare system is.

The U.S. murder rate, for example, is more than four times the United Kingdom’s — and far higher than all the other countries in the Commonwealth Fund study. The U.S. has a worse highway death rate than all but one of them. And U.S. obesity rates are more than double Canada’s and more than four times Switzerland’s.

A far more meaningful comparison of international health systems would take stock of how people afflicted with diseases such as cancer fare in different countries. And on this measure, there’s no question the U.S. stands above the rest.

Five-year survival rates for breast cancer are higher in the U.S. than in England, Denmark, Germany and Spain, according to the American Cancer Society. In the U.S., the survival rate for prostate cancer is 99%. In Denmark, it’s 48%. For kidney cancer patients, the survival rate here is 68%. It’s just 46% in England — which the Commonwealth Fund ranked as the No. 1 healthcare system in the world.

Finally, the Commonwealth Fund study also ignores massive problems with actual access to care in the countries it heralds. Every citizen of a country with socialized medicine may have insurance. But that doesn’t mean they can get the care they need.

Treatment delays were so chronic in the United Kingdom, for example, that the government had to issue a formal requirement that patients shouldn’t have to wait more than four months for treatments authorized by their general practitioner. The Royal College of Physicians found that poor care — including doctors trying to keep costs down — caused nearly two-thirds of asthma deaths in the U.K. in 2012.

In Canada, the average patient seeking an elective medical service has to wait four-and-a-half months between being recommended for treatment by their primary care physician and actually receiving it. Waiting for care is the norm in Canada, even though Madam Chief Justice Beverley McLachlin of the Canadian Supreme Court declared nine years ago, in a ruling holding a ban on private health insurance in Quebec illegal, “Access to a waiting list is not access to healthcare.”

The Commonwealth Fund is right about one thing — the U.S. healthcare system is too expensive. But rationing care — as Commonwealth’s favored systems do — is not the answer.