Note from the Editor

Healthcare Freakonomics

Posted by Brian Buntz on November 3, 2010


Being old is cheap. It’s dying that’s expensive. With that curt observation, Sweder van Wijnbergen, PhD, got my full attention as he delivered the keynote speech at the Eucomed MedTech Forum in Brussels in October. A noted economist who earned his doctorate at Massachusetts Institute of Technology and served with the World Bank, van Wijnbergen followed that opening jab with a salvo of statements that took conventional wisdom to the mat. They bear repeating.
The cost of caring for the elderly has been steadily declining, relative to inflation, for decades. “This is mostly because of a gradual shift towards letting the elderly stay in their own homes, which is cheaper than institutionalising them,” says van Wijnbergen. As advances in remote monitoring and telemedicine are embraced by society, this trend can only accelerate. “The conventional wisdom is wrong,” he says, “mostly because it mixes up healthcare dollars spent on the elderly who are close to death with the surviving elderly.” Healthcare costs for the latter are relatively inexpensive.
As life expectancy increases, healthcare costs go down. This involves some math and a leap into econometric theories, but, ultimately, it does compute. For a given population, fewer people will die during a given period if individuals live longer on average. Because of the relative low cost of caring for the surviving elderly, money is saved over the long term among populations with a long life expectancy. The World Bank came to that conclusion years ago when it compared healthcare costs across countries.
Sweder van Wijnbergen, PhD, delivered the keynote speech at the Eucomed MedTech Forum in Brussels in October.

On a strictly financial basis, society profits from advanced coronary and heart treatments. Yes, healthcare is more expensive today, but that is because we get more of it. And it belongs on the plus side of the balance sheet. The treatment of coronary artery disease, for example, has lengthened life expectancy by an average of three years. “If you consider that the average cost of treatment for this condition is US$30,000 and that an individual brings between US$50,000 and US$100,000 of economic value to society per year, then you are at least US$120,00 ahead over three years.” Van Wijnbergen suggests adding even more economic value by raising the retirement age. “Since medical technology is giving us more active years, why shouldn’t individuals give back some of that surplus by working longer?”

Medical technology is considered by many to be a cost driver. But as van Wijnbergen elegantly demonstrates, it is, in fact, a high-yield social investment that makes sound economic sense.

Norbert Sparrow

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