Health-care cost containment and Nataline Sarkisiyan

Should controlling health care expenditure be a prime objective in health care finance reform?
If so, are we willing to deny liver transplants to people like Nataline Sarkisiyan?

I’m involved in a listserv debate about cost containment in health care. One viewpoint is that health care is taking too big a share of GDP, that the marginal benefits of high-tech medicine are small &#8212 that we’re on the flat part” of the cost-results curve &#8212 and that controlling costs ought to be a major objective in health care finance reform. I take that to be the standard policy-wonk analysis of the problem.

So I tentatively offered an alternative viewpoint. If you take the Robert Frank Luxury Fever analysis seriously, health-care spending doesn’t look so bad compared to other consumer spending. It’s not subject to two of Frank’s mechanisms by which more consumption fails to generate more happiness: since intensive health care is mostly episodic, people don’t adjust their standards, and they experience quality directly rather than by comparison with what others get. At a middle-class standard of living, moving resources out of health care and into fancier cars and larger houses doesn’t seem like such a good trade.

If that’s right, then reducing the impact of health care on job market decisions, reducing out-of-pocket spending by the poor, and reducing the risk of a bad health event leading to financial ruin are all major objectives, along with improving quality and access. But cutting total expenditure might not rank very high, again assuming that the tradeoff is with other forms of private consumption expenditure by the non-poor. (I’d clearly rather spend the money on environmental protection or basic science, but those don’t seem like the practically relevant trade-offs.)

Still, the trillion dollars a year or so we spend on health care, over and above what the average advanced country would spend if it had a population our size, is a hell of a lot of money. And it’s not hard to find parts of the system where tons of money gets spent for only modest improvements in length or quality of life, or in some cases for no demonstrated improvements at all. Surely we’d be better off having some of those decisions made by disinterested boards on the basis of evidence, rather than sold to desperate patients and their families (spending insurance companies’ money) by fee-for-service providers?

Maybe. So let’s take a specific case: Nataline Sarkisiyan. She had leukemia. Her liver failed after a bone-marrow transplant. Her doctors wanted to do a liver transplant, and claimed that she had a 65% chance of surviving for at least six months with a new liver. Other doctors challenged the evidentiary basis for that claim. The insurance company said “No.” The patient died.

How much did the health-care system save by not performing the transplant? Presumably the cost of the transplant, plus the cost of several months of additional care for the patient. (The story doesn’t make it clear how much of the six months survival the docs were guessing at was expected to be spent in the hospital.)

Now it’s easy to see that the same money could have produced more life extension and quality-of-life improvement if spent in better basic health care for the poor, or on various public-health measures. But if we assume instead that the money at stake either gets spent on the transplant or gets spent on non-health consumer goods, the tradeoff isn’t nearly as clear.

And yet this is exactly the sort of high-cost, dubious-benefit procedure that efforts toward “evidence-based” medical decision-making are supposed to squeeze out.

So, what are we to think? Did the insurance company do the right thing? I don’t think there’s a clear answer. But the advocates of single-payer health care with tight cost controls ought to think carefully about Nataline Sarkisiyan.

Footnote The company points out that it was simply the administrator of an employer-based plan, and was therefore merely deciding how to spend the plan’s money rather than merely increasing its profit by denying care. After the publicity sh*t-storm hit, the company decided to pay for the procedure out of its own funds, but the patient died before the transplant happened.

Update Maggie Mahar has more at Health Beat

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: