Free Exchange points to an interesting post by Alex Tabarrok on Quality Adjusted Life Years. Here Tabarrok asserts that if you want to get serious about cutting health care costs you have to get serious about defining a cut-off for the how much you are willing to pay for life. This kind of exercise appeals to me and it is just the thing that would serve as a lynch pin of backroom modeling.

More generally, when people say we should cut “wasteful” health spending they should specify what they think a QALY is worth.  Politicians who say that they can balance the budget by elminating “health care waste” are selling the same line as politicians who say that they can balance the budget by elminating “government waste.”  In particular, it’s naive to think that we can save a lot of money by eliminating spending with 0 QALY.  More reasonably, we can eliminate spending with high costs per QALY.  For example, dialysis for the sickest patients (top 10%) costs more than $240,000 per QALY and some heart pumps costs more than $500,000 per QALY.  

I would say it a bit different though. Rather that calling a heart pump too expensive, I would point out just how many lives could be saved on some other procedure. For example, find the procedure with the median cost per additional year of life. Then just base all other procedures on that one. Such as “For the medical resources of one heart pump I could get 18 life saving angioplasties. Should 18 people really have to die so that one can live?” This type of argument is a lot more compelling to non-nerds.

I do have some problems with his reasoning though. For one thing, maybe, maybe the marginal QALY is worth $300K but the average certainly isn’t. Most people don’t make anything near 300K a year and you can’t value something at more than you have to pay for it. My guess is that a lot of people on $70K dialysis wouldn’t be there unless someone else was footing the bill.

Second, there seems to be some evidence that some procedures actually subtract life years. The New Yorker article quoted in Free Exchange does an excellent job of elucidating how that works. One of the real problems is that Americans really, really trust their doctors and the weight of the evidence suggests that those doctors really, really don’t deserve that trust.

I gave the doctors around the table a scenario. A forty-year-old woman comes in with chest pain after a fight with her husband. An EKG is normal. The chest pain goes away. She has no family history of heart disease. What did McAllen doctors do fifteen years ago?

Send her home, they said. Maybe get a stress test to confirm that there’s no issue, but even that might be overkill.

And today? Today, the cardiologist said, she would get a stress test, an echocardiogram, a mobile Holter monitor, and maybe even a cardiac catheterization.

“Oh, she’s definitely getting a cath,” the internist said, laughing grimly