What If a Death Panel Evaluated Obamacare Itself?

One of the most controversial features of the Affordable Care Act (Obamacare) was the desire on the part of many of its backers to subject medical decisions to a “cost effectiveness” standard. In a nut shell, that means asking of various medical procedures if the addition to good health or life expectancy they promise is worth what they cost.

But if it’s good to ask that question about a medical procedure, isn’t it equally good to ask the same question about the entire Obamacare program? When we do it turns out that Obamacare fails the test.

To a lot of Americans, comparing health care outcomes with their money cost is an abhorrent idea. But in his book Critical: What We Can Do About the Health-Care Crisis, Tom Daschle, President Obama’s first choice to head the Department of Health and Human Resources, said that such health care rationing is essential if we are to control costs. Daschle pointed to Britain as a country that routinely does what he had in mind.

According to a 2002 World Health Organization report, 25,000 cancer patients die prematurely in Britain each year -- often because of lack of access to drugs generally available in the United States and Europe. (See also this 2013 NHS estimate on all causes of premature deaths.)

So how do the British determine who gets what in their health system? As Aaron Carrol writes:

Other countries routinely use cost-effectiveness data to make decisions about health coverage. In Britain, the National Institute for Health and Care Excellence, a government agency that gives guidance about which services the National Health Service should cover, has a threshold of 20,000 to 30,000 pounds per QALY (about $31,000 to $47,000). They don’t make decisions on whether to cover therapies based on this number alone, but it is certainly considered a factor.

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And since government health care budgets are strained everywhere in the world, you can be sure that the cost effectiveness criteria is “considered” a lot.

A QALY, by the way, is a “quality-adjusted year of life.” The main idea is that a year spent on a respirator shouldn’t count anywhere near as much as a year doing normal activities. For those who are interested in the technicalities, see Aaron Carrol’s discussion and links to the literature. For the many problems involved in arriving at a figure, see a review by Ike Brannon.

The practice we are describing is far more wide spread than even Daschle seemed to know at the time he wrote his book. But then again, it’s not the sort of thing politicians, insurance companies or even employers want to talk about. A few years ago, Time Magazine announced that $50,000 for a year of life saved is

… the international standard most private and government-run health insurance plans worldwide use to determine whether to cover a new medical procedure…. Nearly all other industrial nations — including Canada, Britain and the Netherlands — ration health care based on cost-effectiveness and the $50,000 threshold.

So what happens when we apply cost effectiveness to Obamacare itself? The program is expected to cost $2 trillion over the next ten years. And that’s just the cost to taxpayers. The social cost is much higher than that. President Obama says it will save thousands of lives. But where did he get that number? Duke University health economist Chris Conover used estimates of the health gains in Massachusetts as the basis for a calculation and he bent over backwards to make assumptions most favorable to the administration. He writes:

…. even under the most wildly optimistic assumptions possible, Obamacare costs a jaw-dropping $224,000 per QALY. In the worst case, the costs would be as high as $1.3 million per QALY.

He presents this chart (green = low estimate; red = high estimate):