Better Off Dead: The Looming Battle Over Survivors' Costs

As Congress and the Obama administration try to design a new and improved American health care system that covers everybody, improves the quality of the medical care we receive, and slows down or reverses unsustainable cost escalation, they're confronted with a very long list of challenges. Democrats in the White House and on Capitol Hill have made a political calculation that's making their job even harder: They've promised that their plan for health reform -- which no one can contest will cost more than $1 trillion in new government spending over 10 years -- will pay for itself.

Endeavoring to take a system that's growing uncontrollably, add 50 million or so people to it, and somehow make it cheaper for everyone without driving the health insurance industry and health care providers out of business is ambitious, to say the least, but that's what President Obama has promised.

Probably the most gruesome issue they'll have to resolve is so-called "Survivors' Costs." Providing better access to lifesaving health care treatments means that people live longer, which means they'll be alive to consume more health care, which means spending will rise. In other words, it'd be cheaper for the system if people were to die "on schedule."

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This may be a cruel calculation but it's also just true, and budget scores are resolutely amoral. Health insurers and human resources managers have to make the same considerations whenever they examine their benefit packages.

Leaving aside, if we can, the question of whether overhauling the nation's health care system will even work, reformers face a host of particularly vexing problems from a federal budgetary standpoint. I've written in this space before about the uncertainty budget makers have about the effects certain reforms would have on federal spending and about the combined effects of multiple reforms being enacted simultaneously, for example.

The Congressional Budget Office, along with private sector consultants hired by pro- or anti-reform forces to analyze proposals, can't actually know the answers to some of the questions they'll be asked because a lot of these things have never been tried or, at least, not on a national scale. The CBO outlined its positions on a lot of these budgetary issues in a pair of reports it put out last year.

Survivors' costs won't be the biggest budgetary challenge but they will be part of the calculation. When lawmakers make decisions about what medical services or products the new system will cover and how providers will be paid, they will have to heed the CBO's estimates of survivor costs. If those costs are too high, benefits may be excluded from the bill.

This isn't a new concept by any means. The subject comes up whenever measures are put in place to reduce tobacco use, for example. But as it's something politicians are understandably loath to discuss, I thought it worth mentioning because it's not a topic you're likely to hear a lot about over the coming months.

Recently, I was reminded of the survivors' costs issues and referred to a paper published in the Georgetown Law Journal last January. The article, a withering critique of federal budget scoring, is written by Georgetown law professor Timothy Westmoreland. Westmoreland also is a health policy adviser to Rep. Henry Waxman (D-Calif.), the chairman of the powerful House Energy and Commerce Committee and one of the principle authors of the health reform bill that will emerge from that chamber this summer.

These increased costs associated with keeping people alive are known as "Survivors' Costs," and they are undoubtedly real in many instances. They must be estimated to run an insurance program and the administrator should be told to adjust the cash flow on this basis. But, as a part of the scorekeeping process on which [pay-as-you-go budgeting] is based, they have become an on/off switch about whether to consider a policy at all. It is, at best, morally questionable for a health policy decision to be made on this basis. In essence, the consideration of Survivors' Costs penalizes any policy that might keep people with expensive health problems alive.

As an illustration, Westmoreland cites legislation enacted in 1979 to provide Medicare coverage of a new vaccine against pneumonia. "[I]t was estimated that the value to Medicare of providing a newly licensed, highly effective pneumonia vaccine would be a net cost rather than an overall benefit -- not principally because of the vaccine's price but because of the 'costs ... for the treatment of illnesses [other than pneumonia] ... in extended years of life.'" Congress decided to cover the vaccine anyway. You can download the entire paper, "Can We Get There from Here? Universal Health Insurance and the Congressional Budget Process," here.

There's always lots of talk about out-of-control health care spending but this sort of thing rather grimly reminds me that all that money is being used to buy something that society values.

Jeffrey Young is a staff writer at The Hill.