• Making sense of nonsense about “value” in health care

    I highly recommend you read Uwe Reinhardt’s struggles with making sense of what is frequently the nonsense about “value” in health care he’s encountered over the years. You’ll find them described on the pages marked 77-82 of this document from the Altarum Institute.

    Here’s a sample of what you’ll find:

    “Value” is now the rage on the health-care speaking circuit of the so-called “real world”—certainly in the U.S. I have heard of lectures on value-based health insurance, value purchasing, value pricing, value maximizing, innovating for value, the value-chain in health care, and many more value-blank (insert any noun). I am now working on a new health-care concept called Value Valuing.® You should wonder what is going on here. […]

    Even if we do not know what a clinical outcome is worth in dollars, we can say something about likely changes in value. We can make what economists call “ordinal” statements—for example, that a new treatment or management change is likely to improve or reduce net value added, whatever its absolute level may be.

    That is the Sovaldi question. What makes it interesting and poignant is that many who need this drug are low-income individuals on Medicaid, and many are in prison or recently released. We might not closely identify with these people or appreciate them as upstanding citizens, further magnifying the financing issue. Given what we now do, Sovaldi is certainly cost-effective. […] There are two ways to think about this innovation. First, given what we now spend, including transplants, et cetera, relative to that, Sovaldi is cost-effective, particularly since it provides a cure. The alternative way would be to ask, do we have to pay a thousand dollars to engender this innovation? They spent $11 billion to develop it, and if everyone who could benefit from it gets it, they will generate $270 billion in revenue. That is a big return on investment! Would $500 per pill have been enough of an incentive to spur its invention? That is another question. We are debating both and we are confusing both.


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