POLICY/THE INDUSTRY: Cutler used as propaganda–is that how he likes it?

So David Cutler’s piece which I mentioned in passing because I was asked about it yesterday is now out. (Abstract is here). And although I don’t have access to the whole thing (being a mere blogger and too damn cheap to pay the NEJM’s freight), the results are what you’d expect:

From 1960 through 2000, the life expectancy for newborns increased by 6.97 years, lifetime medical spending adjusted for inflation increased by approximately $69,000, and the cost per year of life gained was $19,900. The cost increased from $7,400 per year of life gained in the 1970s to $36,300 in the 1990s. The average cost per year of life gained in 1960–2000 was approximately $31,600 at 15 years of age, $53,700 at 45 years of age, and $84,700 at 65 years of age. At 65 years of age, costs rose more rapidly than did life expectancy: the cost per year of life gained was $121,000 between 1980 and 1990 and $145,000 between 1990 and 2000.

And course so are the conclusions.

On average, the increases in medical spending since 1960 have provided reasonable value. However, the spending increases in medical care for the elderly since 1980 are associated with a high cost per year of life gained. The national focus on the rise in medical spending should be balanced by attention to the health benefits of this increased spending.

How anybody without the benefit of a tenured Harvard professorship can possibly describe spending $145,000 to gain one extra year of life expectancy from somebody who is over 65 as “reasonable value” boggles the mind. But I guess he’s not actually quite doing that. But he does say that the five fold increase in the cost of gaining an extra year of life over the period is reasonable value. But that of course is the money quote that will be picked up (see below for more).

Briefly, as I tried to explain to the Scientific American journalist, there are three main ways that economists try to ascribe value to life. (I hope I’ve got this right it was a long time ago when I looked at it!) Those are roughly what somebody spends, what somebody makes, and how much they would spend to avoid death.  In a long article about him in the New York Times Magazine last year, Cutler estimated that it cost more than $100,000 to save a life by installing airbags in cars, and therefore that is a reasonable number. (I guess we should be thankful he didn’t base it on the cost of extending Terry Schiavo’s life, including whatever it cost to fly air force one from Crawford to D.C.!)

But of course no one sat down and prospectively calculated out the value of lives that would be saved by introducing airbags.  Most safety innovations were forced on the automobile industry by people like Ralph Nader who couldn’t give a rat’s arse about cost effectiveness. And after that auto industry marketing people began to realize that safety was a feature not a bug and therefore used the power of commercials to explain to American housewives than you needed airbags and SUVs (even though it turned out that SUVs make driving less safe!).

In reality, the average American working income is just above $40,000 a year.  That would suggest that the average working American’s life is worth somewhere below $50,000 a year.  According to Cutler’s calculations, it has cost some $36,000 to gain an extra year of life.  But of course all those years of life that are being gained are at the end of life, when incomes are considerably lower, so it’s hard to tell why that $36,000 number is a reasonable value, when it exceeds the total value that the economy as a whole places on an average retired individual (ignoring of course what the health care system makes off that average retired individual!).

But then again this is just a wonky economic argument, right?  We all know that nobody sits down to figure out what the value of life is or what they’re adding to the general good when they implement a new healthcare technology.  Instead the industry tries to figure out what they can get away with charging Medicare and other payers.  No one makes the calculation about the value of a year of life, let alone whether that money would be better off being spent on something else entirely, like education, protecting the environment, handbags for Paris Hilton, or more frappuchinos.

But the industry is totally happy to use Cutler’s arguments — very much out of context — to praise ex-post all manner of technologies, procedures and services that they’ve foisted on the American patient and taxpayer. The ink was barely dry on the editions of the New England Journal, when Advamed, an umbrella group for all kinds of medical technology companies, was out with its press release. Its chief lackey, one  Stephen J. Ubi, was certainly not looking this gift horse in the mouth:

"When health care dollars go toward procedures and products that make a difference, that’s when our health care system is at its most effective," Ubl said. "Medical device and diagnostic interventions have played and will continue to play an essential role in providing this value to the health care system and society through faster recoveries, improved treatments, and more precise diagnoses."

Ubl was commenting on the August 31 article by David M. Cutler, Allison B. Rosen and Sandeep Vijan. Studying health and spending trends from 1960 to 2000, they found that despite dramatic increases in health expenses since 1960, the return on medical spending is high.

It is by no means the first time the Advamed has come out with similar tosh — in cooperation with some other healthcare industry front groups they published something like this back in 2004. That was mostly remarkable for the fact that the instant video fake news clip that was distributed with it included “reporting” from one Karen Ryan who’s voice also showed up in a instant use fake news clip about the Medicare bill distributed by the Bush administration,much  to the amusement of the leftie blogosphere. While rational academics like the Wennberg crowd, Enthoven, Fuchs, Steffi and David, et al will tell you that we are wasting huge amounts of money in the way we finance and deliver healthcare, as noted at length on THCB last week the loonies out in left or is it right field seem to have grabbed hold of the megaphone. Cutler is doubtlessly doing good work in terms of calculations of cost per increased year of life expectancy. But given that he won’t call a spade a spade, on the “value” issue, the overall ramification of the work he is doing — and the crazy statements made by a row Robert Fogel the noble laureate from Chicago which Gina Kolata wrote about last week — is that the real debate about how to fix our financing system and deliver some type of cost-effective medical care in this country is getting pushed to the sidelines. That of course is just how the industry wants it.Which of course makes me very suspicious about why the not exactly purer than pure New England Journal is one publishing this somewhat obscure economic analysis in its limited policy section, as opposed to some real debate about how to fix the healthcare system’s problems. Is it possible that they too are bending before their advertisers? Perhaps Roy Poses will find out for me!

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7 replies »

  1. The issue is not whether medical spending has extended lives. I think that we can all agree that it does. The issue is whether we could have gotten the same gains or, perhaps larger gains, if we had universal, single payer healthcare. For example, has the much maligned Canadian system also extended lives? How much did they pay for a year?
    Maybe we Americans have been cheated, and we could have each gotten 1.5 or even 2 years of life for the same money.

  2. Well Matthew, what is health insurance other than what they can rationally afford on a monthly basis? Health care is like that. Trouble is that people don’t know it.
    It seems to me the solution to this is better clarity in the contracts: For $300/month you get up to $125K/QALY after a $1K deductible, or something like this. (I think $60K is too low: if mediocre nursing home care costs $40K/year it seems to me a whole QALY is worth three times that, but this is beside the point I suppose)
    The question of universal coverage can be seperated from the question of how services are contracted.

  3. Yeah, but the Hi-Fi manufacturers haven’t taken over the government and purchasing process to force us into opening a spigot so that we’re all forced into buying the “unidirectional wires and green CD edge paint and hand-built preamplifiers.” Instead most people pay with cash or (in the realm of a igger purchase like a car or house) what they can rationally afford on a monthly basis.
    We all know that health care is not like that!

  4. It appears I have had a brain cloud on the £/QALY guidelines in the UK. Now I am wondering where I got the idea. I apologize.

    Even taking into account GDP per head differences, it’s hard to see how a year of life here is worth more than $60-70K.

    Doesn’t this assume a linear relationship between income and willingness to pay for health services? By what measure “worth”, and to whom? I cannot support Income Potential as the (or even a) metric. As for the spending of the theoretical gazillion, this is why we need better contracts: to get people to understand nobody has indeed insured them for a gazillion, that there are limits, and they have not been “denied” anything.
    We get diminishing returns in every area. Look at Hi-Fi equipment. You can today for a few hundred dollars get better gear than anyone dreamed possible in 1940; you can get for a few thousands something by today’s standards very good. But its not ten times as good. And of course, someone is always willing to take from you howsoever much you will spend on stuff like unidirectional wires and green CD edge paint and hand-built preamplifiers, all the while praising your exquisite taste and fine sense of musicality (or whatever) whilst the rest of us are wondering what the big deal is. There is nothing rational about what “we” spend on anything — its simply a consumption preference. There’s no sense asking “why?”.

  5. Rubbish, Tom. According to this article about NICE “Restrictions on the recommended use of most health technologies (for instance, in most severely ill patients) helped keep the cost per QALY below around £30 000, with only one exception—riluzole for motor neurone disease, which had a cost per QALY of £34 000 to £44 000”.
    $30,000 is about $45K at historical excahnge rates and $57K at today’s historically high rate. And that’s for a QALY, which is by definition more expensive to “buy” than just an extra year of life. Even taking into account GDP per head differences, it’s hard to see how a year of life here is worth more than $60-70K.
    And taking the value from estimates either from what people would spend, or from imputed values from the what society pays for airbags or whatever, are inherently flawed because a) I’ll theoretially spend a gazillion to save my life, but less for yours and nothing for some poor sap in China, and b) the identified versus unidentified life problem messes up the “what society pays”.
    In the end we can obviously afford to pay more and get dmiinshing returns, but a) it’s not a good use of resources, and b) no one actually can possbily pretend that this is the reason WHY we are spending the money.

  6. Looking at yearly earnings potential is one way to value a life-year I suppose, but I don’t know who besides Karl Marx and his disciples would think it is a reasonable way.
    There is a great deal of literature on how people implicitly value their lives by their behavior, not just by what they say they would do when presented with an impossible question (“How much of your current consumption would you, great-grandma, give up in order to have the health status of a 20 year old?”) or by how much they might earn. I am sure you will find some of these more humane on the one hand, and reliable on the other. Cutler came nowhere near suggesting that $145K is reasonable for a year of undifferentiated “life”. I understand however this is about the figure the UK will spend for one QALY in expectation, and their GDP per capita is much less than ours. So if the choice is between “dead” and “reasonably functional and free from pain” and if QALY is reasonable in the first place (I’m not saying it is), the always reasonable NHS will spend this much for anyone younger than about 80.
    The speculations/conclusions of academics are abused all the time, and not just by evil profiteers.

  7. Re: the last question:
    If I do see anything about the Cutler piece being connected to the journal’s advertising, you can bet I’ll write about it.
    But at the moment, I am only one guy, a part-time practicing doc, blogging about health care concentration and abuse of power on Health Care Renewal (http://hcrenewal.blogspot.com/).
    If FIRM (Foundation for Integrity and Responsibility in Medicine, http://www.firmfound.org/) had any money, maybe we could pay for researchers, investigative reporters, even private investigators to dig out stuff like this. But right now, we are brand-new and threadbare, and FIRM is basically me and my computer, working out of office space shared with my consulting gig, and a couple of voluntary trustees/officers doing the same.
    So I’m afraid I can’t do any digging on my own. But if I hear anything, you can bet I’ll write about it.
    PS – Know any rich philanthropists who might want to adopt us? 😉