Like many others, my folks have gotten a lot older, a lot faster than we had anticipated. Recently, my stepfather had what we thought was a stroke, but which instead (thankfully) turned out to be a reaction to one of his meds. Unfortunately, he had another fall while in the hospital, and broke his shoulder.
He’s now in rehab, and we hope that he’ll only have to be there for a short time.
In any event, none of the treatment he has thus far received is free, although most of it is covered by Medicare and his Medigap policy.
So how is this relevant to a column on insurance? Well, it turns out that (no surprises here) we’re not alone in having to deal with these issues, and the cost of such treatment is the subject of a recent study by the University of Michigan and Harvard.
They studied health care spending from 1960 to 2000, and concluded that, all things considered, health care in America has been cost-effective. One area of concern, though, was the skyrocketing costs of care for seasoned citizens.
The researchers looked at per-capita spending and life expectancy in 1960, 1970, 1980, 1990, and 2000 for four age groups, looking at parallel increases in medical expenses and health improvement, and found that the increase in life expectancy since 1960 (about 7 years) had cost about $20,000 per additional year of life. So, for less than $150 “big ones,” we could extend life expectancy by about 10%.
Even factoring in lifestyle and diet improvements, the folks at Michigan and Harvard claim that about half of that increase is directly attributable to improvements in health care.
When actuaries price life insurance, they use something called “mortality tables.” Briefly, these are spreadsheets that help to predict the life expectancy and death rates for various groups of people. Because people are living longer (in general, YMMV), life insurance tends to cost less. Just because we’re living longer, though, doesn’t necessarily mean that we’re living –healthier.-- And indeed, the study’s authors compared the $20,000 price-tag against the value of a year of life (based on those mortality tables and medical decision-makers) and determined that the increase in medical costs were a good value. They said, in part:
"The increased spending has, on average, been worth it."
Now how can you argue with that?
Henry Stern, LUTCF is an independent insurance agent in Dayton, OH. A licensed Continuing Education instructor for Ohio and Kentucky, he has well over 20 years of experience in “the biz.” He blogs every day (or so it seems) at InsureBlog.