Working Paper: NBER ID: w15649
Authors: Tomas J. Philipson; Gary Becker; Dana Goldman; Kevin M. Murphy
Abstract: Medical care at the end of life, estimated to contribute up to a quarter of US health care spending, often encounters skepticism from payers and policy makers who question its high cost and often minimal health benefits. However, though many observers have claimed that such spending is often irrational and wasteful, little explicit analysis exists on the incentives that determine end of life health care spending. This paper attempts to provide the first rational and systematic analysis of the incentives behind end of life care. The main argument we make is that existing theoretical and empirical analysis of the value of life do not apply, and often under-values, the value of life near its end and terminal care. We argue that several factors drive up the value of life near its end including the low opportunity cost of medical spending near ones death, the value of hope including living into new innovations, and the potential positive effect of on the value of life from being frail. We calibrate the ex-post value of hope associated with treatments for HIV patients to be as much as four times as high as standard per-capita estimates of treatment effects and as many as two and a half times as high as aggregate values across all cohorts.
Keywords: terminal care; value of life; health care spending
JEL Codes: H0; I0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| perception of life value (J17) | spending on terminal care (H51) |
| preservation of hope (Y60) | valuation of life (J17) |
| valuation of life (J17) | spending on terminal care (H51) |
| social value of terminal care (J17) | private value of terminal care (J17) |
| frail patients (I11) | value of life-extension care (J17) |