End-of-Life Medical Spending Not So Wasteful

Economists find our last years have a lot of value and perhaps merit expensive life-extending care.


Imagine two deer trying to escape a searing forest fire. One deer is old and hobbled; the other young and fit. Which one tries harder? Of course, they both try as hard as they can. Would anyone expect the older deer to give up the fight for life because of his age?

[See Best Affordable Places to Retire.] Yet in looking at the contentious issue of end-of-life medical care for humans, the discussion often assumes that there is something wrong -- misguided, selfish, economically inefficient -- with an 85 year-old and his or her family doing whatever is needed to reach birthday number 86. Why should an 85-year-old demand huge sums of federal Medicare dollars for end-of-life care in a medical system already barreling toward bankruptcy? Wouldn't it be better to limit such spending and provide those financial resources where they can, dollar for dollar, do so much more good?

Last year, some critics of the health reform package said it would ration healthcare. Images of bureaucratic "death squads" were trotted out, along with the specter of grandmothers being euthanized. No, no, no, the proponents replied. The health and longevity of seniors would not be sacrificed on the alter of healthcare efficiency. Yet this debate is far from over.

Beyond the emotion and ethics of how we treat our oldest citizens, there is substantial academic thought given to establishing the value of life. Throughout society, such valuations may be found at work. They serve as the foundation for any number of business calculations and tough policy decisions. For example, they may underpin damage awards in personal injury suits. And in the health field, they are at work as well. One widespread assumption in value-of-life calculations has been that each year in a person's life has the same value as any other year. With this assumption, it is easy to see that spending a huge amount on healthcare near the end of life is irrational -- it produces very poor "returns" on the value of the increased longevity that is "bought' with such spending.

[See Best Places to Retire.]

However, new research from four economists challenges conventional thinking. I don't pretend to be able to follow the math in their arguments but if it supports their logic, then perhaps we ought to re-evaluate the way we look at end-of-life healthcare spending. The economists are Tomas J. Philipson, Gary S, Becker, Dana Goldman, and Kevin M. Murphy. Goldman teaches at the University of Southern California and is a senior economist at the RAND Corp. The other three are at the University of Chicago. All of them have impressive backgrounds, including a Nobel Prize won by Becker, and a John Bates Clark Medal, awarded to Murphy in 1997 as the nation's most outstanding young economist. Their paper was published by the National Bureau of Economic Research.

Up to a quarter of all healthcare spending occurs at the end of life, they note by way of introducing the topic. "However, though many observers have claimed that such spending is often irrational and wasteful," their paper says, "little explicit analysis exists on the incentives that determine end of life healthcare spending."

In providing such analysis, they conclude, among other things, that each year of life is not worth the same. Later years are actually more valuable. "A substantial amount of spending on futile care is rational when there is little-to-no value of leaving wealth behind," they say, and this is in fact how people behave near the ends of their lives. Thus, the value of an additional year of life rises substantially as people get older. People's perception that wealth has no use to them after they die makes them willing to spend much if not all of their wealth to extend their lives. "The value of a life year equals total wealth when the alternative is death and decreases as you get further from there," the economists write. "By contrast, traditional valuations typically assume that the value of a life-year is constant."

And while many people question spending a lot of money to prolong the life of an elderly, frail patient, the paper found that it was perfectly logical for a frail person to value life extension as much as a perfectly healthy person. Like the deer, age doesn't necessarily diminish the desire for continued life.

Traditional analysis may also ignore very tangible ways that end-of-life care increases hope and the social value of being alive. Preserving hope that life will continue acts to raise the value of that life, the economists say. Also, with advances in medical care, it can be argued that the value of hope has been increasing along with the statistical odds of staying alive until a cure is found. The study included compelling evidence that medical advances in the fight against AIDS had a four-fold increase in the related value of patients' lives compared with the value of earlier, less effective therapies.

Further, the economists say, the value of a life extends beyond its private value to the individual involved. It also can have a positive social effect on the lives of family members and others. Whether you agree or not with views of the late Ted Kennedy, there's no doubt that efforts to extend his life gave tremendous meaning to the lives of a broad circle of family, friends, and admirers.

[See What Gives Your Life Meaning and Purpose?]