NCPA - National Center for Policy Analysis


September 8, 2006

To provide insight into the value of increased use of medical therapies in connection with increased medical costs, researchers from Harvard University and the University of Michigan compared gains in life expectancy with the increased costs of care, and recently reported their findings in the New England Journal of Medicine.

The authors estimated life expectancy at the beginning of each decade, from 1960 to 2000 for four age groups, and compared that with the lifetime cost of medical care in the same years.   To control for the influence of non-medical factors on survival, such as not smoking, the researchers assumed that 50 percent of the gains were due to medical care.

Results show that from 1960 through 2000:

  • The life expectancy for newborns increased by 6.97 years, lifetime medical spending adjusted for inflation increased by approximately $69,000, and the cost per year of life gained was $19,900.
  • The cost increased from $7,400 per year of life gained in the 1970s to $36,300 in the 1990s.
  • The average cost per year of life gained between 1960 and 2000 was approximately $31,600 at 15 years of age, $53,700 at 45 years of age, and $84,700 at 65 years of age.
  • At 65 years of age, costs rose more rapidly than did life expectancy: the cost per year of life gained was $121,000 between 1980 and 1990 and $145,000 between 1990 and 2000.

On average, the increases in medical spending since 1960 have provided reasonable value, say the authors.  However, spending increases in medical care for the elderly since 1980 have been associated with a higher cost per year of life gained.  As a result, national focus on this rise should be balanced by attention to the health benefits of this increased spending.

Source: David M. Cutler, Allison B. Rosen, Sandeep Vijan, "The Value of Medical Spending in the United States, 1960-2000," New England Journal of Medicine, August 31, 2006.

For NEJM abstract:


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