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Thursday, August 31st 2006

Take That! And That!

Let’s not pretend I know more than the blogs I link to. Or for that matter, anything on this topic. But I do know faulty logic and vindictive rhetoric when I see it sometimes.

An NEJM publication (read a summary on Med Page Today) claims that healthcare is a bargain. Indeed, Dr. Cutler, the PI in the NEJM published study, is a key figure in the New York Times piece cited in “We Have To Spend It On Something…

From Med Page Today,

The authors calculated that the increase in life expectancy over the 40 years studied, from 69.90 years in 1960 to 76.87 years in 2000, cost an average of $19,900 per life-year gained.

Considering that insurance companies and medical decision-makers consider a year of life (known as the value of a “statistical life”) to range between $50,000 and $200,000, medical expenses give a pretty good return.

“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,” they wrote.

This seems to have been ignored over at The Health Care Blog,

How anybody without the benefit of a tenured Harvard professorship can possibly describe spending $145,000 to gain one extra year of life expectancy from somebody who is over 65 as “reasonable value” boggles the mind.


But, let’s move on. I really don’t understand where Mathew Holt, the author, is getting off on some of these assumptions which he goes on to make.

[T]he average American working income is just above $40,000 a year. That would suggest that the average working American’s life is worth somewhere below $50,000 a year. According to Cutler’s calculations, it has cost some $36,000 to gain an extra year of life. But of course all those years of life that are being gained are at the end of life, when incomes are considerably lower, so it’s hard to tell why that $36,000 number is a reasonable value, when it exceeds the total value that the economy as a whole places on an average retired individual

Of course Holt uses only one means of valuing life, and I’m not stirring up the public cry that “life is invaluable,” I mean in actual economic terms.

Dr. Cutler probably does a very good job representing the range of values attributed to a statistical life. The Health Care Blog does nothing to place his ‘estimate’ above other figures.

As well, it doesn’t appear Holt can have it both ways. If he’s going to concede the basic premise so he can crticize it for overvaluing the life of a retiree then the argument is implicit that the care for a neonate is vastly undervalued.

I certainly think Holt’s trashing of Cutler as some looney tool of the healthcare industry is uncalled for. Cutler does enough to raise his own concerns

for the current trend toward expensive care for older adults. For those 65 and older, the incremental cost of an additional year of life jumped from $46,800 in the ’70s to $145,000 in the ’90s, the authors noted.

“The foremost cause of concern posed by rising medical costs is the tremendous strain coming from increased costs for the elderly,” Dr. Cutler said. “The cost per year of life for seniors is three times higher today than it was in the 1970s.”

Over at Forbes we even get this gem on healthcare waste and quality, which seems to imply a larger understanding of the situation than The Health Care Blog gives Cutler credit for,

Experiments have started in several parts of the country to measure the quality of care provided by doctors, Cutler said. Estimates of the cost of ineffective care run as high as 20 percent to 30 percent of medical funding, he said, but “we hope we can get doctors to do the effective stuff without the ineffective stuff.”

Holt has a previous post criticizing the NY Times piece that I picked up from DB in the post below. You hear many of the same arguments.

This is from the NY Times piece,

By 2030, predicts Robert W. Fogel, a Nobel laureate at the University of Chicago Graduate School of Business, about 25 percent of the G.D.P. will be spent on health care, making it “the driving force in the economy,” just as railroads drove the economy at the start of the 20th century. Unless the current system is changed, most health care costs will continue to be paid by insurance, especially Medicare, which means that the taxpayers will foot the bill. But Dr. Fogel says he is not alarmed. Americans can afford it, he says, because the nation is so rich.

This is The Health Care Blog,

Now there is a huge difference between “we can afford it” and saying that it’s the driving force in the economy like “railways”.

Wait a minute. Dr. Fogel doesn’t even say that, it isn’t in quotes. Taking a reporter at her word is always a fine thing, Mr. Holt. In anycase, Dr. Fogel’s major work discredited the commonly held belief of the driving force the railway system provided to a growing America.

Robert Fogel believed that much of the praise heaped on the economic contributions of the railroad were little more than overblown rhetoric, and he set out to prove it. In his 1964 book, Railroads and American Economic Growth, Fogel examined the American economy for the year 1890

Holt sets out to teach us, that healthcare cannot be a driving force of the economy. But, it looks like Dr. Fogel’s work was centered on challenging the very assumptions The Health Care Blog goes on to make,

Thinking back to your high school economics class, you were taught that there were two types of economic activity—those that assisted in making stuff (usually called “manufacturing”) and those that didn’t directly assist in making stuff (“services”). Railways (and telecommunications and power and all the other utilities) are infrastructure that directly assist in the support of making stuff, usually by allowing producers to access new markets, and those markets to access new producers. That’s basically the logic whether it was railways opening Kansas wheat fields to East Coast markets, or the Internet allowing American software companies to access Indian programmers.

Health care, though, is a consumption good.

Now I am completely sure that Mathew Holt has accurately represented a widely held economic tenet, concerning what drives the economy. But, at the very least The Health Care Blog has misrepresented Dr. Fogel’s position. Clearly the noble laureate understands the difference between infrastructure supporting manufacturing and a service, his most famous works were on the ability of any one piece of the infrastructure to drive the economy! A simple Google search would’ve shown that. Mathew Holt implying he’s informing us of something that Dr. Fogel must have missed in making his claim, that healthcare could be a driving force, is arrogant.

Is This Really What Fogel Said?

Beyond what I believe are fallicies, The Health Care Blog engages in some rhetorhic that is questionable at best.

He questions the credibility of the NEJM (*rolls eyes*), the journal which published Dr. Cutler’s work,

Which of course makes me very suspicious about why the not exactly purer than pure New England Journal is one publishing this somewhat obscure economic analysis in its limited policy section, as opposed to some real debate about how to fix the healthcare system’s problems. Is it possible that they too are bending before their advertisers? Perhaps Roy Poses will find out for me!

Yes, his antecedal evidence for the claim that the NEJM is less “purer than pure,” probably runs along like this. In actuality beyond the APPROVe study, I have no idea where he gets the criticism for the NEJM. Not that he needs to back it up with anything, it is not a “logic” technique he’s using.

Holt does it more absurdly when he discredits Folger, in the post on the NY Times piece, by comparing him to HIV denier and Noble Laureate Kerry Mullis (!)

I guess in some ways it shows the fallibilty of Noble prize winners. Still.

Off the choice of words and vindictive attacks and back to The Health Care Blog’s reasoning. Read this with the sarcasm Holt intended,

There’s clearly no chance that the actors in the system have somehow captured the body politic to ensure that ever growing health care spending is the result. No, no chance of that at all. After all health care is a pure free market Adam Smith would love–yes it is!

I raise an eyebrow. Healthcare is overprized because he thinks the manufacturers and providers have their hands too deep in the cookie jar? Really? Please reader, let’s go in this hypothetical world where restrictions on physician compensation are removed – no protections on collections of debts, no insurance contracts that don’t allow them to bill for the remainder, no fee schedules set by a cabal of payees – and you’re in a car crash or your child is deathly ill. What’s the healthcare worth then? No better example of subjective theory of value exists than the healthcare market, something Holt ignores throughout his pieces.

Holt’s right, this isn’t a free market, but not because providers and manufacturers are ringing every last dime out of politicians with lobbying efforts and campaign contributions. Its because a single payee controls more than 40% of reimbursements. Its because better than probably 80 or 90% are controlled by a cabal. I don’t see the overvalue. Talk about price fixing.

I have some humor about throwing my opinion out there. I’m sitting over here with a film degree and a half read Economics for Dummies. That is true. So you take my last comment with a grain of salt. My criticisms of The Health Care Blog’s criticisms though? Those I stand by.

In any case, I think there’s more of a debate here than apparently others. Dr. Cutler makes some fine points. You should read both the NY Times piece and the summary of the NEJM published study.