05 Jun 2014 If ObamaCare Saves Lives, It Does So Very Inefficiently

Referring to a recent study about RomneyCare in Massachusetts that finds a link between insurance status and mortality, The New Republic’s Jonathan Cohn says “it makes Obamacare look good.”  In fact, it shows that ObamaCare is a grossly inefficient way to reduce mortality.

Entitled “Changes in Mortality After Massachusetts Health Care Reform,” the study compared certain counties in Massachusetts with other counties in the U.S. with similar demographic characteristics both before and after RomneyCare. It found that after RomneyCare, Massachusetts counties had an average mortality rate 2.9 percent lower relative to the other counties.  The authors find that about every “830 adults gaining health insurance [prevented] 1 death per year.”

However, moving to a system in which health insurance covers most of the cost of physician visits and preventive care (what used to called “first-dollar” coverage) wouldn’t be cheap.  As Michael Cannon notes, Massachusetts shows that reducing mortality via expanding insurance is already pretty pricey:

If we assume the per-person cost of covering those 830 adults is roughly the per-person premium for employer-sponsored coverage in Massachusetts in 2010 (about $5,000), then a back-of-the-envelope calculation suggests that RomneyCare spent $4 million or more per life saved. The actual figure may be much higher if we include other costs incurred by that law.

Prof. Harold Pollack comes up with a slightly less expensive figure of $3.3 million.  Prof. Chris Conover does an even more detailed analysis along these lines here.

Using figures from the study and from the Congressional Budget Office, though, shows that ObamaCare is an even more expensive way to save lives.

Using a formula developed by the Institute of Medicine and plugging in the findings from the Massachusetts study shows that about 30,395 people die each year from lack of insurance.  (To see the calculations behind that number, go here.) The Congressional Budget Office estimates that the ObamaCare exchanges and the Medicaid expansion will cover 25 million, or 46 percent, of the 55 million uninsured by 2017.  Let’s assume those numbers are accurate, and let’s also assume that the number of deaths due to lack of insurance declines 46 percent.  That would be 13,982 more lives saved that year.

The CBO also shows that the net cost of expanding coverage under Obamacare is $142 billion in 2017. Divide that by 13,982, and the cost of saving one life is a staggering $10.1 million.  Even if we make the much more generous assumption that ObamaCare coverage expansions saves all 30,395 lives, the cost per life save is still about a hefty $4.7 million.

Efforts at smoking cessations and hypertention screening, for example, are far less costly.  A 2009 article found that anti-smoking efforts had a median cost of $4,400 per year of life saved.   The cost per year of life saved via hypertension screening is about $79,832.  Annually we lose an estimated 506,634 people due to both smoking and hypertension, far more than we lose due to a lack of insurance.

Now, this is not an attempt to put a price tag on human life.  Rather, this shows that if the goal is improving mortality, a massive government expansion of health insurance is a very inefficient method of doing so, especially when compared to the alternatives.

Resources are limited and they need to be used in ways that are most efficient, especially if the goal is saving lives.  That is, in general, best left to free markets, but as long as government controls so many resources, they should be directed toward methods that improve mortality at the least cost, since those are the methods most likely to save the most lives.  Government expansion of health insurance, alas, isn’t one of those methods.

Related thoughts:

-The title of this post suggests it is an open question whether ObamaCare saves lives.  And it is.  First, while the study on Massachusetts is a pretty solid piece of research, it does have its shortcoming which have been examinedelsewhere.  Next, it is only the latest entry in the ongoing controversy over whether health insurance actually saves lives. At present there are four reputable studies that find no link between health insurance and mortality, and five studies, including the most recent one, that do find a link.  Thus, we cannot say with any confidence that health insurance improves mortality or that the ObamaCare expansion will save lives.

-Ross Douthat of the New York Times focused on the portion of the Massachusetts study showing that much of the decline in mortality can be traced to insurance giving people who were previously uninsured more access to a regular source of care and preventive physician visits.  This leads Ross Douthat to perhaps go a bit overboard when he writes that “we should revise down the extent to which…a reform that would shift the system toward flat, universal subsidies for catastrophic coverage — represents a kind of public policy free (or at least relatively-inexpensive) lunch.”  Douthat claims the Massachusetts study suggests that “bigger co-pays and higher deductibles and health savings accounts” that are part and parcel of catastrophic insurance may create “gaping chasms between the care people need and the care they can afford and get.

If Douthat is concerned that paying for primary-care visits reduces deaths, then we could address that much more efficiently if the taxpayers funded $500 for each of the 55 million uninsured to pay for primary care.  That would cost $27.5 billion, or $904,754 per life saved—a bargain compared to the Obamacare exchanges and Medicaid expansion.