The Price of a Life

by Elaine Schwartz    •    Jun 29, 2012    •    641 Views

I get concerned when people say we may need to start rationing health care. Like most goods and services, because there is a limited supply of health care, we have always rationed it. In some way, we had to decide who would get more and who would get less. And that is rationing.

Now, with a SCOTUS decision that has validated an insurance buying mandate, it is possible that our rationing system will change. Princeton economist Uwe Reinhardt suggests that cost effectiveness will have to enter health care decisions.

And that takes us to the price of an extra year of a human life.

Explaining how to price life, Dr. Reinhardt uses QALY: Quality-Adjusted Life Years and a curve (below) that represents the most cost effective approach. Starting on the curve at the far left and moving rightward on the curve to point Z, every dollar spent has a relatively good extra year return. Then though, as the curve goes vertical, the extra life span diminishes.

Where on the curve do you say no?

At $10 for an extra year of life? $100? $1000? $100,000? $10 billion?

For whom?  A hip replacement for a healthy 35 year-old? For a healthy 85 year-old? Yearly mammograms for all women past 50? A 45 year-old who is grossly obese, has diabetes and heart problems and now needs a kidney? A $100,000 drug dose after a heart attack?



Discussing how to ration, Dr. Reinhardt suggests we contemplate the following:

1. Should we establish a maximum price beyond which society will not buy additional QALYs out of collective insurance funds?

2. If there is a maximum price, should it apply to everyone equally? Rich and poor? Famous and unknown? Science researcher and manual laborer? Old and young?

Whether our current health care system is based on individual decision-making, ability to pay or government, it still is all about rationing.

Here and here, Dr. Reinhardt clearly explains key issues that have become the “third rail” of health care politics like cost effectiveness. He also directs us to this paper with a fascinating chart of the cost of a life for 500 life-saving interventions.

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