The Value of Medical Spending in the United States, 1960 -2000
By David M. Cutler, Ph.D., Allison B. Rosen, M.D., M.P.H., Sc.D., and Sandeep Vijan, M.D.
The New England Journal of Medicine
August 31, 2006
According to virtually any commonly cited value of a year of life, we found that if medical care accounts for about half the gains in life expectancy, then the increased spending has, on average, been worth it. However, the current trends are a cause for concern. There has been a sharp increase in the cost per additional year of life gained during the past two decades, primarily among the elderly. Analyses focused on spending and on the increase in life expectancy beginning at 65 years of age showed that the incremental cost of an additional year of life rose from $46,800 in the 1970s to $145,000 in the 1990s. The former amount certainly reflects a good value, but the latter fails to meet many cost-benefit criteria. Furthermore, it appears that although the rate of increase in spending had stabilized, if not declined, by 2000 for the newborn and 15-year-old groups, this rate is substantially outpacing the rate of increase in life expectancy in older age groups. If this trend continues in the elderly, the cost effectiveness of medical care will continue to decrease at older ages.
In conclusion, although medical spending has increased substantially during the past 40 years, the money spent has provided good value. However, temporal trends suggest that the value of health care spending is decreasing over time, particularly for older age groups. We need to continue tracking trends in health care spending and its benefits to ensure that resources are allocated wisely. Such efforts should focus on specific diseases in order to provide a more detailed picture of the value of health care both within disease categories and across a spectrum of common diseases over time. Also, the United States should modify its system of tracking the health sector to include a measure of population health in addition to spending, so that policymakers and the public have an informed picture of the benefits obtained for the money spent.
http://content.nejm.org/cgi/reprint/355/9/920.pdf
Comment:
Don McCanne, MD
Identifying the acceleration in cost trends is the first step. The second is to identify which spending is providing value. The final step is to direct spending away from expensive services with no benefit and toward health care services that do provide value. This process would be much simpler under a single payer health insurance system, whereas it is almost impossible with our current fragmented method of funding care.