Quality Outcome-Adjusted Medical Treatment Costs

By July 3, 2019 Commentary

Per capita medical spending in the United States has increased relatively rapidly over the past two decades, although slowing in recent years.  Are we getting better outcomes for this increased spending?  A new research paper attempts to evaluate this question.  (NBER Paper)  The authors looked at Type-2 diabetes treatment spending in four health systems and analyzed the change in all-cause mortality in the subsequent five-year period and calculated “value” based on what an additional year of life is worth.  The systems used were Japan, the Netherlands, Taiwan and Hong Kong.  Across the systems the study period ran from 2006 to 2014 and the researchers attempted to associate increases in diabetes-specific health spending with the primary outcome of mortality.   In all four systems, diabetes treatment costs increased over the study period, and there were reductions in mortality.  The researchers found that a net value, after medical treatment costs, of $646 in Japan, $3669 in the Netherlands, $3985 in Hong Kong and $10,717 in Taiwan was associated with gains in length of life over the study period, based on assigning a value of $100,000 to a year of life, as is commonly done in the US.  There was also some evidence that the increase in spending on diabetes may have reduced some other spending, for example for cardiovascular disease.

Assigning a dollar value to life seems weird to me.  Just living longer doesn’t necessarily do much for the individual or society.  In fact, living longer may just add more total medical expense and as far as I can tell, a lot of very old people don’t seem to enjoy their lives much, many because of functional limitations.  Some health spending may improve economic productivity, at least for those still of working age, but that doesn’t apply to most older citizens.   Another way to look at the value of medical innovation and spending is whether it lowers future medical spending, which apparently may be the case.  But just saying we are getting a return on increased medical spending because people live longer has little meaning.  Now this is a different issue from a societal preference, reflected in democratic decision-making, that we prefer to spend more of our national income on health care because we hope to live longer, regardless of quality of life, which may or may not be better after the spending.  And realistically, the spending may not be associated with better quality of life.  For example, one of the largest growing disease spending categories is Alzheimer’s and other dementias.  I don’t think most of us would say these patients have a high quality of life.   I am okay with the country deciding in an informed manner that it wants to spend more on health care, regardless of apparent value, and this seems to be where the United States has been headed.  But it is not clear whether we or any nation can afford to continue on that path indefinitely.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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