Upshot Extra: The Value of Life

My Upshot piece out today is about he value (price) of a year of life. Not every important angle on this issue could be included, including the following.

Whatever the value, cost-effectiveness is not an explicit criterion for health care coverage decisions in the U.S. Allowing others to decide what health care is worth paying for and what isn’t strikes many as distasteful. If insurers or public programs were to decide not to pay for a disease’s cure or care for a population (like the elderly) because it isn’t “worth it,” people identifiable in advance — those with that disease or in that population — would be harmed.

That seems more unfair and unjust than when a government agency spikes a regulation on economic grounds. Health care is deeply personal, perhaps because the care happens directly to us. Our bodies are inescapable, their most extreme degradation irreversible.

Even in the absence of cost-effectiveness, care in the U.S. is still rationed. Populations eligible for Medicaid are circumscribed precisely because it costs more money to expand the program than we are willing to spend. In this sense, the cost of what is covered by the program (including all that might be deemed not cost-effective) is borne, in part, by those who remain ineligible for it and uninsured as a consequence. Likewise, private coverage premiums are higher as more things are covered, including those of low value relative to their price. We pay for this in two ways. First, every premium dollar is one less we have for other things we value. Second, higher premiums price people out of coverage.

These opportunity costs can be quantified by cost-effective analysis and taken into consideration alongside the direct benefits and costs of a health care treatment. But those opportunity costs don’t surface in passionate appeals that health deserves boundless resources. It is easy to identify those who would be harmed by failing to cover a treatment. It is much harder to see that people are also harmed by covering it. Both are reflected in the mathematics of cost-effectiveness.

For all that, it is important to recognize the limits of cost-effectiveness analysis. To rely on it as the sole arbiter of decisions on which lives depend is akin mistaking a life insurance payout as full compensation for the loss of a loved one. Associating a dollar amount with a life does not make dollars and lives equivalent. The association is mathematically and financially convenient because money is fungible. Lives are not, but that’s true of both the lives on both sides of the equation — those that would benefit from a covered treatment and those that pay for it.

That cost effectiveness doesn’t capture everything of value underlies many its conundrums. One is whether to include productivity increases as cost offsets. A treatment for a disease that affects relatively younger people could allow them to work more than they would otherwise. That productivity gain contributes to the economy and tax collections, a cost offset. Should it be included in the accounting?

It seems reasonable to do so. But then, consider curing or alleviating some of the symptoms of a disease in populations that work less or not at all — whether due to age or severe disabilities. Though doing so would undoubtedly relieve suffering, it would yield a much smaller productivity offset. If following the math penalizes treatments for people who are older or have greater disability, is that fair? To many, the answer is “no.”

This illustrates that we value equity, which is not measurable in dollars. We also tend to value treatments that assist people close to death, spending more for them than on treatments for others that ultimately spare more lives. This too reflects values not easily translated into math.

More in my piece.


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