The Value of a Human Life: $129,000

In theory, a year of human life is priceless. In reality, it's worth
$50,000.
That's the international standard most private and government-run health
insurance plans worldwide use to determine whether to cover a new medical
procedure. More simply, insurance companies calculate that to make a
treatment worth its cost, it must guarantee one year of "quality life" for
$50,000 or less. New research, however, would argue that that figure is far
too low.
Stanford economists have demonstrated that the average value of a year of
quality human life is actually closer to about $129,000. To get to that
number, Stefanos Zenios and his colleagues at Stanford Graduate School of
Business used kidney dialysis as a benchmark. Every year dialysis saves the
lives of hundreds of thousands of people who would otherwise die of renal
failure while waiting for an organ transplant. It is also the one procedure
that Medicare has covered unconditionally since 1972 despite rapid and
sometimes expensive innovations in its administration. To tally the
cost-effectiveness of such innovations Zenios and his colleagues ran a
computer analysis of more than half a million patients who underwent
dialysis, adding up costs and comparing that data to treatment outcomes.
Considering both inflation and new technologies in dialysis, they arrived at
$129,000 as a more appropriate threshold for deciding coverage. "That means
that if Medicare paid an additional $129,000 to treat a group of patients,
on average, group members would get one more quality-adjusted life year,"
Zenios says. Based on patient surveys, one "quality of life" year is defined
as about two years of life on dialysis.
Zenios's conclusions arrive amidst mounting debate over whether Medicare,
the U.S. government health plan for seniors, ought to use cost-effectiveness
analysis in determining coverage of procedures. Nearly all other industrial
nations - including Canada, Britain and the Netherlands - ration health care
based on cost-effectiveness and the $50,000 threshold. Medicare, on the
other hand, decides whether to pay for new technology based on whether a
treatment is "medically necessary and appropriate." But as health care
expenses rise and entitlement programs grow fiscally strapped - at least one
part of Medicare is now expected to be bankrupt by 2019 - more and more
academics have called for this approach to be reconsidered, and for cost to
become a factor. Such a move would mean that "if the incremental cost of a
new technology was more than the threshold," Zenios says, "then the
recommendation would be that Medicare not cover that new technology."
Assigning a dollar figure to Medicare patients' lives may sound crass, but
such valuations are routine in daily lives. Take, for example, the $500,000
death benefit the government pays families when a soldier is killed in Iraq
or Afghanistan. Or the cost calculations that for-profit health insurers
make to determine how much coverage they'll give customers. In fact, at
least some Americans seem at ease with allowing money to play a prominent
role in health care decisions. In a 2007 survey of New Yorkers, 75% of
participants felt "somewhat" to "very" comfortable with allowing cost to
inform Medicare treatment decisions, once they understood how the system
worked. "Americans understand and are prepared to engage the issues that
arise when setting priorities and limits for their public programs," Marthe
Gold, the City University of New York Medical School professor who conducted
the study, wrote with colleagues this past fall in the journal Health
Affairs.
The Stanford researchers caution that if Medicare fully adopted a
cost-benefit analysis model, too many patients could be denied life-saving
treatment. They return to the example of dialysis patients. Their study
showed that for the sickest patients, the average cost of an additional
quality-of-life year was much higher - $488,000. "It is difficult to justify
the burden and expense of dialysis when persons have other serious health
conditions such as, for example, advanced dementia or cancer," says
co-author Glenn Chertow, a nephrology professor at the Stanford School of
Medicine. "In these settings, dialysis is unlikely to provide any meaningful
benefit." But with organs including kidneys for transplant so scarce, is it
justifiable to deny these patients a chance to live through dialysis? It is
a question, Zenios says, everyone should approach with trepidation. "What is
the true value of a human life? That's what we're asking people," he adds.
"I wouldn't pretend to know." [TM]