Medical Care Characterized as Relative Bargain

CAMBRIDGE, Mass., Aug. 30 -- Patients and third-party payers are getting a fair amount of bang for their health-care bucks, calculated a Harvard economist, and colleagues.

Matching increases in life expectancy with rising health care costs over four decades, the researchers here and the University of Michigan in Ann Arbor found that "on average, the increases in medical spending since 1960 have provided reasonable value."

While money can't buy love, it can buy life, concluded David M. Cutler, Ph.D., and colleagues, in the Aug. 31 issue of the New England Journal of Medicine.

"The rising cost of healthcare has been the source of a lot of saber-rattling in the media and the public square, without anyone seriously analyzing and discussing the benefits gained," Dr. Cutler and colleagues said "But the dramatic increase in life expectancy that we've seen over the last decades shows that rising medical costs have been largely justified."

The authors found that from 1960 to 2000, an average of slightly less than ,000 in health care outlays resulted in a year of life gained.

But care for some patients came at a higher price. To buy a year of life for 65-year-olds during the same period, payers had to shell out an average of nearly ,000, the authors determined.

Still, it's hard to put a dollar figure on life, and few would argue that, inefficiencies aside, a substantial proportion of health care dollars is money well spent, they suggested.

To get a better idea of just what consumers and insurers get for their health care dollar, the investigators compared gains in life expectancy with the increased costs of care from 1960 through 2000.

They looked at life expectancy based on U.S. actuarial tables for 1960, 1970, 1980, 1990 and 2000, focusing on four age groups during each decade studied. The age groups were newborns, 15-year-olds, 45-year-old, and 65-year-olds.

Because changes in life expectancy rates can be partly accounted for by factors other than medical care -- such as reductions in cigarette smoking and the introduction of seatbelts, airbags, and other life-saving technologies in cars -- the authors assumed for their base analysis that 50% of the gains could be attributable to medical care.

They found that the life expectancy for neonates increased by nearly seven years between 1960 and 2000, with the biggest gain (3.12 years) occurring during the 1970s.

The largest contributor to the increased life expectancy between the last year of the Eisenhower administration and the waning years of the Clinton administration was a reduction in cardiovascular disease, accounting for a 4.88 year gain in life expectancy. Other contributors included reductions in the rate of death infancy (1.35 years gained), decreases in deaths from external causes (accidents, trauma, etc., accounting for 0.36 more years), reductions in deaths from pneumonia or influenza (0.28 years gained) and a decline in cancer death rates (0.19 life-years gained).

The authors calculated that the increase in life expectancy over the 40 years studied, from 69.90 years in 1960 to 76.87 years in 2000, cost an average of ,900 per life-year gained.

Considering that insurance companies and medical decision-makers consider a year of life (known as the value of a "statistical life") to range between ,000 and ,000, medical expenses give a pretty good return.

"According to virtually any commonly cited value of a year of life, we found that if medical care accounts for about half the gains in life expectancy, then the increased spending has, on average, been worth it," they wrote.

But they also cited concern for the current trend toward expensive care for older adults. For those 65 and older, the incremental cost of an additional year of life jumped from ,800 in the '70s to ,000 in the '90s, the authors noted.

"The foremost cause of concern posed by rising medical costs is the tremendous strain coming from increased costs for the elderly," Dr. Cutler said. "The cost per year of life for seniors is three times higher today than it was in the 1970s."

But they also noted that, by contrast, persons age 65 and older have increased their longevity by just 3.5 years since 1960, with a cost of ,700 for each year of added life.

But the researchers also noted that while increases in life expectancy in the elderly have been relatively modest (a gain of 3.5 years from 1960 to 2000) there have also been substantial improvements in quality of life that were not accounted for in their study, but which could add to the value of health care expenditures.