A Slam-Dunk Case
Economist Cutler Says Research Investments Are Well Repaid

By Richard Currey

When anticipating a presentation by a Harvard-based economist and former presidential advisor, one might imagine an event bordering on the impenetrable. Not so with Dr. David Cutler, whose humor and personable style spiced a lecture grounded in practical, everyday realities. His recent talk, "Making Sense of Medical Care" offered a version of health economics that was plain-spoken and in the service of a central message: The national investment in biomedical research has been well worth the cost.

Cutler spoke to a packed Natcher auditorium, fueling his talk with three interconnected assertions: increases in medical spending over the last 50 years have been largely driven by technological advances which, in turn, have enabled health benefits of far greater value to society than their cost — and that we are, as a nation, rich enough to afford future increases in spending.

Cutler noted that the "long version" of his talk, including the research and data that support his assertions, can be found in his book Your Money or Your Life: Strong Medicine for America's Healthcare System. The book has received positive reviews.

Medical Research: Worth the Investment

That medical research is worth its cost is a message well-received at NIH, but Cutler did not assume he was preaching to the choir. In covering specific examples, such as heart disease or low birth weight, he showed how innovations that might have once appeared to be extravagant have been proven fiscally sound in terms of the value of lives saved, improved health and enhanced productivity for millions of people.

Dr. David Cutler Although Cutler acknowledged that some of the fiscal woes of health care are attributable to factors such as physician salaries, hospitalization expenses and drug costs, he noted that medical advances — new understandings, techniques and equipment — account for most of the nation's increased health care spending since 1950. So — have these costs paid off? To answer the question, he used the example of heart disease, noting that the standard of care for heart attacks in the early 1950s was, simply enough, putting the patient on bed rest for as long as 6 months. Bed rest was a very low-cost option. It was also, of course, of little use in ameliorating heart disease.

Several decades plus a few years brings us to today. After large infusions of capital in research and technology development, we have cardiac care that would appear futuristic, even impossible, to a practicing physician (or a heart attack patient) in the 1950s. Many more survive heart attacks than ever before, and return to productive lives and work after recovery. And the research and care costs are now significant.

Cutler then put the question bluntly: Was it worth it? Was there anybody in the audience, he asked, who would claim that the investment involved in moving cardiovascular knowledge and care to its current point had not been worth it?

Worth It — But How Best To Spend?

The measurable benefits in terms of survival, recovery and return to productivity of heart patients is, of course, very substantial as of 2005. So the answer to Cutler's question, in the light of today's knowledge, is that cardiovascular R&D costs over time have indeed been worth it.

But Cutler acknowledged that we can't know, beyond any doubt — any more than policymakers or legislators or scientists could in 1950 — that a large national investment in a particular line of biomedical inquiry will yield vast benefits.

Econometric evidence based on research outcomes over the last half-century, however, tells us that in general and across the board, the financial risk in medical innovation is easily justified by the results.

A prevailing need, then, is to improve our understanding of where — and at what disease targets — investment is best directed. To improve investment targeting, Cutler called for a "true health account" — an equation balanced by "inputs" (sound data on medical spending, individual behaviors that affect health and environmental factors that either exacerbate or improve health) and "outputs" (data on population health by disease and demographic groups).

A True Health Accounting

Cutler went on to present cost-benefit analyses on low birth weight infants and the management of depression, demonstrating the basics of economic and statistical concepts confirming that investment in medical innovation has been (and will continue to be) justified.

Meeting organizer Dr. Ron Abeles (l) of the Office of Behavioral and Social Sciences Research chats with Cutler at the Natcher Center.

In comparing the value of improved health produced by medical advances with the costs of those advances, he emphasized that understanding the dollar value of medical care requires measuring the health of the population — an aspect of his "true health account" that is integral to better targeting of health care R&D dollars. To do this, he discussed what he called the "nation's health capital," the dollar value of health a person will have over the course of his or her remaining life. It is by comparing changes in health capital with increases in medical spending that Cutler confirmed that, by virtually all measures, increased medical technology has been worth its cost.

What emerged in his presentation was a striking insight: the direct economic value of lives saved due to medical advances is extraordinary. Calculating the number of lives saved with a predicted dollar value per life saved, the value derived from cardiovascular innovation alone equals nearly $3 trillion per year. This represents a rate of return on investment in excess of a 100-1, a profound national dividend.

A bottom line informing Cutler's insights and call to action was his plea for universal health insurance. "There's not much point in having marvelous medical care," he said, "if most Americans cannot afford it." He observed that much of the economic advantage conferred by medical advances is lost if cutting-edge care is widely unavailable to those who might benefit the most.

Improving the Return on Investment

Cutler not only emphasized the benefits in innovation but also called on us to think about our health care assets and how we finance those assets in a new light. Old thinking, he suggested, will not produce new results. He concluded by urging economists and policymakers to get "out of the box" in approaching health care spending.