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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