The Value of Medical Spending

Main question to consider

Would you rather have 1950’s medical care at 1950’s medical costs, or today’s medical care at today’s medical costs? Is the value of medical care today worth the increase in medical spending?

Infant Mortality Rate

Dropped sharply between 1950 and 2020

First Case Study

Low birthweight babies

Medical care for premature infants

1950s: Experimentation with incubators and warming

Today: Tocolytic drugs to delay labor, corticosteroid drugs to speed up infant development, neonatal intensive care units, artificial surfactant to keep lungs open, ventilators, feeding tubes (much higher cost)

Value of a Year of Life

In order to understand if increased medical spending is worth it, must determine

• Dollar value of a single extra year of life

• Dollar value of improvements in the quality of life

Monetary Value of a Year of Health

David Cutler (and many others) use $100,000 as an estimate of the value of one extra year of life in perfect health in the U.S

QALY Defined

One year of perfect health is considered to have a Quality-Adjusted Life Year (QALY) value of 1.0

Health Condition Impact

A medical condition can reduce a person’s health and quality of life, so it has a QALY value below 1.0

Medical Care Impact

Medical care can increase the QALY associated with having a particular condition by ameliorating the symptoms of that condition or shortening the duration of the episodes

Cutler’s Calculation (Baby)

Life expectancy: The average low-birthweight baby today lives about 15 years longer than the average low-birthweight baby in 1950

QOL: Quality of life each year is slightly worse due to development problems: 13 extra QALYs (rather than a full 15 life-years)

Cost < Benefits

Second Case Study

Major depression affects over 20 million adults

1950s: Lacking Treatment, mental institutions for the very ill (ECT, ICT, Lobotomy) Little treatment for others

1959: Drug approved, first tricyclic antidepressant drug approved - increases levels of neurotransmitters in brain

Severe side effects: Sedation, weight gain, sexual dysfunction, cardiovascular risk, risk of stroke, possible lethal overdose

Result: Many patients with depression never took, or stopped taking, medication

Prozac

Medical breakthrough

1987: Prozac, a selective serotonin reuptake inhibitor (SSRI) drug, was approved

SSRIs are as effective as tricyclics, but with more tolerable side effects (Nausea, diarrhea, weight loss, headache, sexual dysfunction)

Helped remove stigma associated with depression; many more people are now treated

Treatment costs have doubled

Cutler’s Calculation (SSRI)

SSRI treatment reduces the time a person spends being depressed by 10 weeks, on average, relative to no treatment

Depression Impact: Depression has a QALY of 0.60 versus 1.0 for perfect health, so a person with depression who spends 10 extra weeks in perfect health experiences an improvement of 0.08 QALYs (0.20 of a year multiplied by a 0.40 improvement in QALYs)

QALY Value: Multiply 0.08 by the $100,000 value for a year in perfect health

Productivity Impact: Depression also affects a persons’s productivity at work, so effective treatment increases the person’s income by about $600 a year

Treatment Costs < Benefits Today

Third Case Study

Cardiovascular Disease

1950: Bed rest

Today: Drugs to thin blood and reduce clotting, dissolve the clot, reduce the heart’s workload, lower cholesterol, lower blood pressure, intensive diagnostics

Medical Success Story

Huge reduction in cardiovascular mortality rate since 1963 (heart disease + cerebrovascular)

Cutler’s Calculation (Cardiovascular)

Life expectancy increase, at age 45 increased by 4.5 years since 1950, due almost entirely to reduced cardiovascular disease mortality

Three of those years attributed to medical advances in cardiovascular disease (remainder due to behavioral changes such as reduced smoking. Due to discounting because health gains occur much later than treatment costs, the benefits are $120,000 rather than $300,000

Cutler’s Conclusion

Benefits of Medical Advances > Costs

Cutler’s Updated Analysis

Focuses on people 65 years or older in the US

Measures changes from 1999 to 2012 in the net value of medical spending = Value of health gains in dollars - increased medical spending

Health gains are a combination of increased life expectancy due to reduced mortality rates and improved quality of life

Quality of life measured with functional measures, activities of daily life

Performs analysis separately by medical condition, and overall for all medical conditions