Putting a price on quality of life

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As the Clinton White House discovered to its grief more than a decade ago, and the Obama White House is learning, no minefield of American politics is as uncharted and explosive as healthcare reform.

And no piece of healthcare reform is as explosive as the issue of cost control.

Consider the conniption being thrown by Republican senators and other conservatives over a $1.1-billion provision in the stimulus package to fund “comparative effectiveness research.”

The health insurance industry and other constituencies have been angling for such research for years, hoping for a rational basis for judging whether one treatment is more cost-effective than another. Such conclusions would presumably drive decisions about what insurance should cover.


The outcry against comparative effectiveness has been led by, among others, Rush Limbaugh, who cited it as a precursor of what he called “the gigantic national socialization of medicine bill . . . to come down the pike.” (Catch an allusion there to the Nazi, i.e., the “national socialist,” party? That’s why no one ever accuses Limbaugh of good taste.)

A clutch of GOP senators last week introduced a bill to “prevent” comparative effectiveness findings “from being used to ration healthcare.”

One of them, Senate Minority Leader Mitch McConnell (R-Ky.), claimed on TV that President Obama’s support of the research was tantamount to his seeking “a national rationing board.”

Leaving aside the fact that commercial insurance companies already ration healthcare by placing intolerable obstacles in the way of patients seeking treatments, it’s worthwhile to examine just how “rationing” by cost-effectiveness works in practice. Or more precisely, how it doesn’t work.

The most extensive laboratory in the field has been run by the National Institute for Health and Clinical Effectiveness, or NICE, an arm of Britain’s National Health Service, the government healthcare program.

NICE’s judgments about cost-effectiveness are based on a measure known as the quality-adjusted life year, or QALY. Get used to the acronym -- you’re sure to hear it a lot more as the health-reform debate rages on.


In simple terms, QALY adjusts the length of time that a treatment might extend a patient’s life by a factor assessing the patient’s quality of life in that time ranging from 0 (death) to 1 (complete health). If a certain cancer drug would extend life by two years, say, but with such onerous side effects that those years were judged to be only half as worth living as those of a healthy person, the QALY is 1.

That’s not very objectionable, as far as it goes. But the clinical effectiveness institute judges new drugs and treatments by their cost per QALY; the institute almost always approves those that cost less than 20,000 pounds per QALY (about $33,000), and except in rare cases rejects those costing more than 30,000 pounds (about $50,000).

The pitfalls of such an approach should be obvious.

One is society’s aversion to placing a hard monetary value on human life. The Brits have had to constantly grapple with this distaste. On several occasions, the institute has had to reverse, modify or reconsider rejections under political or professional pressure. Last year it convened a citizens’ council to ponder rules for relaxing its 30,000-pound standard -- with a majority of the council favoring loosening the rules when the treatment is “lifesaving,” the patients are children, the illness is severe or rare, or no alternative therapies exist.

Another issue is the lack of any empirical basis for the 30,000-pound standard. No one seems to know how it was determined. That’s important, because U.S. health economists tend to use a similar $50,000 cut-off for cost-effectiveness.

Why $50,000? Scott Grosse, a health economist at the Centers for Disease Control and Prevention, speculated in a 2008 study that it might be based on the “convenience of a round number” rather than on “theoretical or empirical justification,” which he says doesn’t exist. (A theory that it was based on cost estimates for kidney dialysis in the 1980s doesn’t hold up, he found.)

In any event, Grosse told me, because the figure has been used since the 1990s, it’s in serious need of updating. Given the rate of medical inflation in the interim, the sum would be the equivalent of roughly $100,000 today, and Grosse believes that still underestimates Americans’ willingness to pay for life-extending healthcare.


“Lots of cardiac procedures wouldn’t be covered under a $100,000 standard,” he says.

Certainly the most fraught element of QALY is the quality-of-life multiplier, which is a quintessentially subjective assessment masquerading as an objective measurement. One key question is whose values are being measured -- the patient’s, the medical community’s or the general public’s?

That matters, Grosse says, because healthy people tend to overestimate the effect of some medical conditions on their sufferers’ quality of life. The hale and hearty, for example, will generally rate life in a wheelchair lower than will the wheelchair-bound, who often find fulfillment in ways “healthier” persons couldn’t imagine.

Different measurement methods can yield a wild variation in QALYs. Grosse cites a neurological syndrome for which the quality of life has been measured from .06 to .84, meaning that 10 years with the condition would translate into anywhere from seven months to eight years of healthy life. That could make a therapy designed to extend a sufferer’s life by a year look either like an outrageous waste of medical resources or a stupendous bargain.

Then there’s the question of whose quality of life gets measured. The chicken pox vaccine looked expensive in terms of the life-years of children when it was licensed in the U.S. in the 1990s -- until the cost of lost work time to parents with sick children was factored in. Then it became clear it paid for itself.

Cost-effectiveness judgments based on something akin to QALY may well become part of our healthcare system in the future, especially if a public coverage option makes the U.S. Treasury the insurer of last resort.

Everyone agrees that costs have to be wrung out of healthcare, which won’t be easy if Obama and Congress insist on preserving a role for private insurers, which impose enormous administrative costs on the system for no commensurate gain. Savings from highly touted projects like computerizing medical records will be marginal at best.


The only solution is going to be discouraging the use of new treatments and drugs that fail a cost-effectiveness test. Britain’s experience teaches us that these judgments are better made in the open rather than in the counting houses of insurers, and that however they’re made, they won’t be easy.


Michael Hiltzik’s column appears Mondays and Thursdays.

Reach him at, read his previous columns at, and follow @latimeshiltzik on Twitter.