Map of life expectancy at birth from Global Education Project.

Monday, March 11, 2013

Valuing health outcomes

Recent discussion here has raised one of the most contentious issues in health economics and health policy -- one that happens to be largely ignored in the political discourse. That is how we put a value on  people's states of health (once we have even figured out how to define them). That we must do so in order to make any sense out of arguments about the cost of health care and how we pay for it, to the extent that it comes up at all, is generally treated as a morally outrageous assertion.

For the present I won't even get into the valuation of other kinds of programs and policies, which may have a much greater impact on your health than whatever it is doctors do to you, but you can extrapolate some of this discussion yourself.

Some people have said that we shouldn't be so alarmed about the rising share of GDP represented by the medical industry. Medicine has much more to offer nowadays than it once did, while the cost of other necessities as a share of the economy has come way down. Since we no longer have to spend much of our income on food, and there are more effective, albeit expensive, medical treatments out there, of course we're spending more of our budget on them.

This is a perfectly reasonable point. Before automobiles existed, we didn't spend anything on them. Now buying them, maintaining, fueling and insuring them is a big chunk of our budget. But two issues remain.

1) As of now that share has long since stopped going up, in fact it's going down. Car ownership is not getting further and further out of reach for more and more people.

2) Consumers can do a reasonably good job of matching what they spend on owning and operating motor vehicles to the values they derive therefrom. Since all I want is to get from here to there reliably, I can figure out what relatively cheap car will do that for me. (Full disclosure: I just bought a slightly used Nissan Sentra.)  If I am afraid that a certain of my body parts is too small, and I think that owning an expensive motor vehicle will compensate, then my own judgment of how much to spend on a muscle car or a monster SUV may seem foolish to you, but it's my own choice.

Medical services -- or health care if you will, though I think the phrase is a misnomer -- don't work that way. As a consumer, I am inevitably very uncertain about the value I will derive from a given medical intervention. Let's leave aside for now the substantial additional complication that I may not have to pay for it, or at least not for most of what gets charged for it. Rather we'll take a social level view, as a taxpayer or insurance ratepayer. Is it worth it to get an imaging procedure, take a pill, have surgery? And let's also leave aside the fact, noted a few days ago, that the price may vary hugely depending on the vendor. Let's assume some identifiable average cost.

At this point, especially if life expectancy is at issue, a lot of people will just try to toss out the whole problem and say that you can't put a price on life or health. That is a feckless response because we in fact do. Your health insurance premium costs a finite amount, which some people can afford and others cannot. Medicaid doesn't cover most people who can't afford private insurance. Medicare covers almost everybody over age 65, but now a lot of people are saying we can't continue to pay as much for it as we are now, or at least not as much as we are likely to in the future under current policies. When you have needs your insurance won't pay for, either you pay for them yourself, or nobody does, in which case you suffer or die.

So, we have finite resources that we probably ought to allocate on some rational basis. But this is very difficult. Here are some of the challenges:

1) Benefits of medical interventions are usually quite uncertain. My car gets me to work and back reliably, but I'm not sure what lisinopril is doing for me. I have some vaguely quantifiable risk of heart or kidney disease without taking it, while it is far from clear how much that risk is reduced when I do take it. Exactly when I might develop symptoms, how severe they might be, and how gravely that would burden me, none can say.

2) There are almost always alternatives. I might be able to lower my blood pressure by taking great care with my diet, exercising more strenuously and regularly, and having a less stressful life. All that sounds lovely, but it may also come with costs or be simply unattainable. I could take different pills, with different side effects.

3) There might be other issues which are more urgent for me, for example if I were a tobacco addict, or severely overweight. Handing me a pill to lower my blood pressure might actually give me an excuse not to do something about all that -- but that's an imponderable.

4) It is very likely impossible for me to make any of these calculations on my own. That's why we pay physicians for advice about these matters. But do they know what is really important to us? Can they weigh, on our behalf, some highly uncertain relative probabilities of outcomes that even we ourselves can't be sure how to value?

5) The knowledge base on which any such calculations could be made is constantly changing, as is my personal situation -- my age, my comorbidities, my physical and social environment, my income.

Next, I'll try to define some of the easy problems -- the low hanging conceptual fruit that we can harvest easily and should; and the hard problems.


fahd iqbal said...
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fahd iqbal said...
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fahd iqbal said...

Just randomly stopped by as I must say that this is one post which kept me reading. Really informative and I like the concept of Stayin' Alive.


Cervantes said...

Thanks Fahd but you posted 3 times!