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Professor Mankiw is a really smart guy, but I don’t think the NYT is getting its money’s worth. In his Sunday column, Mankiw tells us that the soft-headed left demands universal coverage, meaning:
… that everyone should have access to the best health care possible whenever they need it. That soft-hearted aspiration, however, runs into the hardheaded reality that state-of-the-art health care is increasingly expensive.
I’m pretty sure most of us would settle for providing routine care for people who need it. This study (pdf) tells us that the uninsured are more likely to die than the insured, and that the big problem is the lack of routine care for chronic conditions, like diabetes and high blood pressure.
He also assumes that we are doomed to ever-rising health care costs, forcing us to ration care.
As health care becomes an ever larger share of the economy, we will have no choice but to struggle with the questions of how far we should allow such inequality to extend and what restrictions on our liberty we should endure in the name of fairness.
Of course it isn’t true that health care costs will go up forever, unless Herbert Stein’s Law is false: If something cannot go on forever, it will stop. What was true of the housing bubble and the dot com bubble and every other bubble is true of health care costs. They can’t go up forever, so they will stop going up.
By “restrictions on our liberty”, he means the freedom of the rich to buy stuff the rest of us cannot have. The strange part of this is his example, a statin drug he takes for high cholesterol.
Not long ago, I read that a physician estimated that statins cost $150,000 for each year of life saved. That approximate figure reflects not only the dollars patients and insurance companies spend on the treatment but also — and just as important — an estimate of how effective it is in prolonging life.
As we know, columnists don’t have fact checkers, but everyone has the google. A high-end statin is available for $80 per month, all in, and generic statins are about half that. There are a lot of cost-effectiveness studies of statins, and they tell a decidedly different tale: statins are cost effective for a wide range of people at risk for heart attacks, strokes and major vascular events, and at a much lower value than $150,000. Those studies consider all relevant factors and calculate the expected cost of adding a year to a life.
Mankiw teaches at Harvard, which offers health insurance, so I assume Harvard is paying for his statins, and I assume that he could afford them even if the insurance didn’t cover them. This is what he says about it:
An optimist might hope that my doctor, or someone higher up in the health care hierarchy, made a rational cost-benefit calculation on society’s behalf.
So, yes, the studies are being done. And yes, HR 3200 creates a system for evaluating drugs.
What was this column supposed to be about?
6 Comments
I do not support HR3200. I see it as a vehicle for a massive sellout to the insurance, medical, and drug industry. OTOH I have always had a low opinion of Mankiw. He is one of the reasons that economics currently holds a place on par with phrenology, just ahead of alchemy and just behind astrology.
The first two quotes of his that you cite are strawmen. In the first, Mankiw confuses the increasing cost of new cutting edge technologies and procedures with the overall rise in costs of healthcare as a whole. If patients received more and earlier preventive treatments, the costs of the overall system would go down. What Mankiw is doing is acting as if all patients would need and get a heart-lung transplant instead of a statin and an ACE inhibitor.
In the second he wraps the issue of rationing in a lot of democratic verbiage: inequality, liberty, and fairness. These terms are very odd for an economist to use, especially when they are making an economic point. In fact, they are a red flag that BS is about to follow. But he also ignores what we have been discussing for months, that the current private insurance based system rations care already by not insuring 50 million Americans and contesting the claims of most of the others. You might think he might notice this but being a modern economist is mostly about not seeing the obvious and treating reality as hostile to the discipline.
In the third quote, Mankiw makes an assertion without providing the reference. A physician??? If there was a study he could have mentioned the name or in the online version provided a link. Me just using the google and knowing that good free medical literature is not that accessible on the web, I found a reference right off the bat to a 2006 study published in the American Journal of Cardiology that looked at 1.5 million elderly VA patients and found that those using statins on average had two years greater life expectancy than those that did not. Now the first statin lovastatin was approved for use in 1987 so they have only been around for 20 years or less. At least for this population drug costs to the VA would have been lower than to the general public, I believe, and would be divided by two (2 years of increased life expectancy).
The only way I can think that a number like $150,000/year added could be arrived at is if you employed funny math, taking the brand, not the generic price, and spreading life expectancy increase over all statin users. Since most would be younger than the VA study group, they would be less advanced in their heart disease and so their life expectancy gain at that point would be small. Start with higher prices and a denominator of less than 1 and you might be able to jack up the cost/year added but even with these gimmicks it is hard to see how it could be jacked up as high as the figure Mankiw cites. In my book, using half-assed numbers is the mark of a half-assed economist.
Finally,
Mankiw hopes this was done? That is what has been lacking from the private healthcare system and the current debate. The only places you will get such a calculation are precisely in programs like the VA and in Medicare (although not with drugs, think Medicare Part D). The only cost-benefit calculation private insurance does is in behalf of its own profits. And much as Obama and most of our Congress would have us think differently these are not the same as the public good.
I am currently uninsured, but even when I had insurance, it was never a Cadillac plan. I don’t really care about getting the best health care American has to offer and I don’t care if the rich get better perks because they end up being able to buy plans with frills. I think most people are like me. We’ve got our big girl panties on and we can handle some inequality and whatnot. What is not acceptable is that there is no floor, no safety net, no basic health care available to all. I’m not looking for extra MRI’s. I’m just hoping not to die, physically or financially. If everyone were suffering, that would be one thing, but when some risk life and limb so others can have an extra yacht, that’s just wrong, especially when the guy wouldn’t have a yacht if it weren’t for the work all those little guys do day in and day out.
By “restrictions on our liberty”, he means the freedom of the rich to buy stuff the rest of us cannot have.
lol. unfortunately, that’s right on the money.
true to some extent, but the way other countries keep it affordable is to ration NOT how much care ordinary people get, but how much money the doctors, hospitals, drug companies, insurance companies, etc, get. all these other countries that have modern AFFORDABLE high tech health care have price controls in one form or another, which we probably ought to be re-branding as government preventing price gouging in medical care.
but of course we can’t talk about that here in this country. that would be socialism.
I started this because that $150K number looked way high. I found an old study that had higher prices, but it dates back to the mid-90s, when the price of the statins was much higher. None of them were in the $150,000 range. All of the studies work from an estimate of the patient’s risk of having one of these events; maybe if you ignore that factor and just give them to everyone, the price per year would be in that range.
Looks like nobody really knows the cost of health care. Paging ezra!
that’s sort of how they estimate these costs. you have to wade through explanations of qaly and nnt and and a few other things that only a wonk could love, but basically the idea is that statins, using this example, only substantially help a small number of people who take them [iirc], and since we don’t really know exactly which of these people benefit the most, we treat everybody who MIGHT benefit. in which case the costs would add up to a bunch of $$$$$$$$$$ for that group but the total gain in life expectancy, while probably noticeable for those individuals who benefit, is small when averaged over the the whole group that takes the drug, thus the high cost per year of added life.
i’ve explained it badly. i’m better at this when i have a great big chalk board to draw on.