The opportunity cost of dying today

Posted by Marc Hodak on July 16, 2007 under Invisible trade-offs | Comments are off for this article

Most proponents of universal health care see the basic trade-off as health of the poor versus leisure of the well-off. Most economists, however, believe that the real trade-off is between access, cost control, and innovation. You can’t have more of one without less of the others. They also observe that in the real world, those trade-offs tend to place cost control first and innovation last. Access, sandwiched in the middle, is invariably compromised by rationing due to cost control. Elected officials have the last word on these trade-offs, and no one facing election in the next two-to-four years will spend scarce political capital on investments that might pay off in the next decade.

So, while proponents of universal health coverage posit that one can’t trade-off lives versus dollars, the laws of economics force those very trade-offs both today and into the future. The only difference between lack of universal coverage versus the lack of innovation is that those deprived of coverage can be filmed by Michael Moore today to get sympathy for universal coverage in this election cycle. Those deprived of innovation won’t be victims for years or decades, and Moore, if he hasn’t died from self-inflicted wounds by then, won’t have any idea which of the people dying from incurable diseases might have been cured if there had been greater rewards and incentives to innovation. Eventually, entire generations may be spared if innovation could proceed quickly enough.

So, the degree to which innovation affects life expectancy is an interesting question. This question has been partially answered by Frank Lichtenberg, a researcher at Columbia University. In short, innovation dramatically affects life expectancy, much more than policy-makers might suppose (or wish to acknowledge). Lichtenberg finds that life expectancy has increased very unevenly across the United States. In the last 13 years, life expectancy has increased by three to four years in some states while it has gone up less than a year in other states. Lichtenberg shows that two-thirds of that variation is due to differences in the availability of newer drugs, based on different Medicare policies across states.

This study indicates that the development and use of new medical goods and services…have been responsible for many recent gains in the health and longevity of Americans.

So, while party activists are asking, “how many people must die this year because they can’t afford medical care,” they will necessarily ignore the question: “How many people will die ten or twenty years from now because you want to force people and corporations supplying treatments today to make medical care universally affordable this year?”