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Terminal Care and the Value of Life Near Its End

  • Tomas Philipson

    (University of Chicago Harris School)

  • Gary S. Becker

    (University of Chicago)

  • Dana Goldman

    (University of Southern California Schaeffer Health Policy Center)

  • Kevin Murphy

    (University of Chicago)

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. It seems generally agreed upon that medical resources are being wasted on excessive care for end-of-life treatments that often only prolong minimally an already frail life. However, though many observers have claimed that such spending is often irrational and wasteful, little explicit and systematic analysis exists on the incentives that determine end of life health care spending. There exists no positive theory that attempts to explain the high degree of end-of life spending and why differences across individuals, populations, or time occur in such 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 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 4 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.

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File URL: http://econresearch.uchicago.edu/sites/econresearch.uchicago.edu/files/MFI-2010-005.pdf
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Paper provided by Becker Friedman Institute for Research In Economics in its series Working Papers with number 2010-005.

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Date of creation: 2010
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Handle: RePEc:bfi:wpaper:2010-005
Contact details of provider: Web page: http://bfi.uchicago.edu/
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  1. Garber, Alan M. & Phelps, Charles E., 1997. "Economic foundations of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 1-31, February.
  2. Johannesson, Magnus & Weinstein, Milton C., 1993. "On the decision rules of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 12(4), pages 459-467, December.
  3. Philipson Tomas J & Jena Anupam B, 2006. "Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs," Forum for Health Economics & Policy, De Gruyter, vol. 9(2), pages 1-33, January.
  4. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2003. "The Quantity and Quality of Life and the Evolution of World Inequality," NBER Working Papers 9765, National Bureau of Economic Research, Inc.
  5. David Card & Carlos Dobkin & Nicole Maestas, 2004. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization and Health: Evidence from Medicare," NBER Working Papers 10365, National Bureau of Economic Research, Inc.
  6. Hausman, Jerry, 2000. "Efficiency Effects on the U.S. Economy from Wireless Taxation," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 733-42, September.
  7. Tomas Philipson & Stephane Mechoulan, 2003. "Intellectual Property & External Consumption Effects: Generalizations from Pharmaceutical Markets," NBER Working Papers 9598, National Bureau of Economic Research, Inc.
  8. Amy Finkelstein & Robin McKnight, 2005. "What Did Medicare Do (And Was It Worth It)?," NBER Working Papers 11609, National Bureau of Economic Research, Inc.
  9. Tomas J. Philipson & William H. Dow & Xavier Sala-i-Martin, 1999. "Longevity Complementarities under Competing Risks," American Economic Review, American Economic Association, vol. 89(5), pages 1358-1371, December.
  10. Weinstein, Milton C. & Manning, Willard Jr., 1997. "Theoretical issues in cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 121-128, February.
  11. Alan M. Garber, 1999. "Advances in Cost-Effectiveness Analysis of Health Interventions," NBER Working Papers 7198, National Bureau of Economic Research, Inc.
  12. Jena, Anupam B. & Philipson, Tomas J., 2008. "Cost-effectiveness analysis and innovation," Journal of Health Economics, Elsevier, vol. 27(5), pages 1224-1236, September.
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