I think we're all bozos on this bus

Health Affairs has a special web issue on the future of Medicare and the health of American elders. And, mirabile dictu, it's open access!

Much of the material centers on a computer simulation by Dana Goldman and colleagues at the RAND Corporation (the folks who brought you the Vietnam counter-insurgency tactics, but we're over that, right?) which with the help of a lot of sometimes dubious assumptions projects the health, longevity and health care costs of the elderly population out to the year 2030. Then they try adding various prospective new medical technologies to the stew to see how it comes out.

The first thing you need to know is that, even as the health of the elderly in the U.S. has been improving in recent decades, the health of younger people has been getting worse, for exactly one reason: the epidemic of obesity and Type 2 diabetes. You can worry about terrorism or bird flu all you want, but this is for real, it's here, it's now, and it's threatening to undo the progress we made throughout the 20th Century in population health and longevity.

Anyhow, for present purposes, the assumptions we make about where the obesity problem is going affect the health status of people turning age 65 and entering the simulation. Less healthy people cost more per year, but they don't live as long. The consequences for Medicare spending tend to cancel each other out, since longer-lived people are still around to spend money on. Eventually they will get sick and die. About 30% of all Medicare expenditures are on people in the last year of life, from which you can run, but you can't hide. As a result, for budgetary purposes, it doesn't much matter how healthy people are when they enter the program. Without assuming any major technological breakthroughs, total Medicare spending increases from about $300 billion today, to $600 billion (in 1999 dollars) in 2030.

But won't those medical breakthroughs reduce the burden of disease and end up saving money? Sadly, no, as the cool kids say. For example, we already have implantable defibrillators. These may be used in increasing numbers of people. They cost about $40,000 to implant. That saves no money to speak of because it stops people from dropping dead suddenly, which is a relatively inexpensive event. At the same time, it causes people to live longer, get other diseases, and cost Medicare more money. Other potential advances may cost less (others cost more), and even reduce the burden of disease and disability, but in the simulation, none of them ends up saving Medicare money in the long run -- even though most of them are cost-effective from the point of view of the individual.

The most cost-effective intervention is a magic pill that extends life by 10 years. If it costs as much as other pills like statins, that you have to take every day, it only costs $8,790 per year of additional life, assuming that those extra years are healthy years. But by 2030, it adds 13.8% to overall health spending, because presumably everyone would take it, and that is the greatest increase in cost of any of the hypothetical new technologies. (If those extra years are unhealthy years, the cost effectiveness is far worse.) Anti-angiogenesis compounds -- drugs that stop cancers from growing by cutting off their blood supply -- cost half a million dollars per year of life added. But they would add only about 8% to total annual costs because fewer people would receive them, and for only a short time, since many of them would soon die anyway.

Advances in medical technology make health care more expensive. That isn't always the case, but it's true in the aggregate. As Goldman and the gang put it, "Many of the new treatments will be expensive and hence will raise the cost of health insurance for the non-elderly, and fewer people will be able to afford comprehensive coverage. In fragmented health insurance markets and incomplete health insurance coverage, the fruits of medical progress will be distributed unevenly. Furthermore . . . if we design cures for the diseases of "rich people" -- as cardiovascular disease once was -- then gradients in health are likely to widen." Indeed. This is already happening. Fundamental reform is unavoidable -- and we will either have rationing by ability to pay, as we do now; or rationing by transparent social choice, as sanely governed countries do.