It is quite unsettling to now know how many days I have left. At least that is the number that the Social Security Administration’s “Life Expectancy Calculator” told me. Admittedly, I was somewhat apprehensive to hit “submit” after filling out the form.
Over the last few months I have been struggling to reconcile what appears to be a societal asymmetry; that is, why do we spend so much on end of life care and spend relatively so little on wellness, prevention and other activities focused on early childhood and young adults. All of this has been brought into even sharper focus because of the recent debates on drug pricing and accusations of gouging, often for therapeutics focused on diseases associated with old age. The sound bites are plentiful: 25% of Medicare spending is incurred during the last year of life, median length of hospice care is over two weeks (and is very expensive), Medicare spends over $16,000 on someone who is 96 versus $7,500 on someone who is 70 years old, and on and on. Overall, Americans spend $8,915 each year per person on healthcare products and services, of which just over $1,000 was for drugs. The Centers for Medicare and Medicaid Services estimates that total healthcare spending for those over 85 in 2010 was $34,783. These are really big numbers when viewed across a large population.
And VC’s have noticed this phenomenon as well. According to StartUp Health data, of the $2.8 billion invested in “digital health” during the first half of 2015, over $1.3 billion of that amount was directed at technologies for the 50+ crowd. Quite consistently over the past five years roughly 50% of all healthcare technology funding has gone to solutions for older people. While many of these technologies arguably have relevance for people of all ages, venture capital tends to follow where a lot of money is spent (or misspent) to hopefully make it more productive. And the elder population consumes a lot of healthcare resources. Interestingly, this balance may now be changing as the largest product category for venture investment in the first half of 2015 was Wellness, which secured $674 million of capital according to StartUp Health.
Undoubtedly the diagnostics sector has suffered over the last decade as technologies focused on early detection ran into extended development timelines, hostile regulatory hurdles and brutal reimbursement policies. The promise of “value-based” diagnostic pricing models continues to be elusive, which also baffles me – isn’t a couple hundred dollar test that will determine the course of very expensive treatments, and oh, flags early onset of disease, incredibly valuable?
Increasingly investors are focused on new emerging care delivery models (see Iora Health) which are powered by many of the innovative healthcare technologies being developed today. For example, 800 new palliative and hospice organizations have been launched just in the last five years bringing the number to over 5,800; these organizations provide care to over 1.5 million people. One should expect innovative new business models to emerge which will partner hospice organizations with traditional providers and payers. Better care coordination continues to be the great promise of all of these new technologies.
When I was born my parents might have been told that my life expectancy would be 66.6 years given my birthdate and race. Now, according to the Social Security Administration, my life expectancy is expected to be 82.6 years – a dramatic improvement arguably due to advances in healthcare technology, nutrition, wealth of the country, etc. Many economists now believe that these numbers are understated due to future advances we cannot even contemplate that are over the horizon. In fact a cottage industry exists to sort all this out as these calculations have significant societal, political and economic implications if they are wrong. Thus the debate around the adequacy of the Social Security Trust Fund. Since 1956, economists have looked to the QALY (“quality-adjusted life year”) index but are now focusing more on the VSL (“value of a statistical life”) paradigm to get a more precise forecast on life expectancy, and frankly, to determine how much cost we should incur as a society to extend life.
Traditionally, economists tend to calculate the value of one year of human life as the amount of economic wealth that person might create. After conducting detailed cost-benefit analyses in 2011, a number of governmental agencies came up with their own determination as to the value of a life: leading the pack was the Environment Protection Agency which concluded that one life was worth $9.1 million, while the Food and Drug Administration calculated that it was worth $7.9 million, although the Department of Transportation determined it was “only” worth $6 million. The Office of Management and Budget hedged by saying a human life was worth between $7 and $9 million.
The DoT pointed to some fascinating data to reach its conclusion. In 1987, the speed limit nationally was raised from 55 to 65 mph which evidently saved all of us collectively 125,000 hours of driving time for each incremental fatality, thus concluding that society valued one additional life for $6 million. Furthermore, the DoT goes on to argue that if the speed limit were set at 13 mph, there would be no fatalities on the road.
To put all of this into some context, the Centers for Disease Control and Prevention tallied the 2013 census data (most recent annual data) and reported that 2.596 million Americans died that year, which is 822 people per 100,000 inhabitants. That same year, 3.932 million Americans were born or 1,240 per 100,000 inhabitants (32.7% of which were by Cesarean if you were wondering). Obviously there are many more of us at the top of the “life funnel” which further underscores my puzzlement over the asymmetry of the healthcare spend on older people. Clearly, older people have a louder voice (unless sitting on a long flight) but like my diagnostics argument above, shouldn’t the rational investment decision be to over-investment in wellness and “beginning of life” activities like prevention and education.
So then imagine how disturbed I was to read the recently released report in the Proceedings of the National Academy of Sciences which observed a dramatic and unexpected spike in the mortality rates of middle-age white Americans, in part attributed to substance abuse and mental health issues (see chart above). So, notwithstanding all the healthcare resources committed to older Americans, their mortality rates are increasing. Analysts speculate that economic stress may account for both this elevated mortality rate as well as a decreased labor force participation rate. To further underscore this phenomenon, 10.6 of every 100,000 people aged between 45 and 54 overdosed on prescription painkillers. To put an even finer point on this, nearly 45,000 Americans died from an overdose as compared to over 35,000 in motor vehicle accidents and just over 16,000 homicides.
In 2013 the overall U.S. suicide rate was 12.6 per 100,000. Now that is an unacceptable cost.