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Healthcare Inflation and Average Lifespans

By Taylor Marvin

Kevin Drum is curious whether the healthcare inflation rate might fall at some point in the future:

“Still: do we really think this is going to keep up forever? If it does, it will be pretty much the first time in history. I’m enough of a technological optimist (and a believer in the power of markets) to guess that someday — 10 years? 20? 30? — things like gene therapies, personalized pharmaceuticals, medical AI, and so forth are finally going to revolutionize medicine. And when that happens, costs will plateau at first and then drop. The curve simply won’t keep going up forever.”

Source: Fiscal Year 2012 Budget Resolution, House Committee on the Budget

Source: Fiscal Year 2012 Budget Resolution, House Committee on the Budget

Drum does have a point. Though current estimates predict healthcare costs rising at about 8% per year for the foreseeable future, forecasting on a 70 year timeframe is difficult, and it’s easy to suspect that unforeseen social or technological changes will eventually slow healthcare inflation. As Drum alludes to, there’s good reason to expect a future reduction in the rate of healthcare inflation to be driven by technological changes rather than market-driven efficiency gains, a point Matt Yglesias makes in a summary of why it’s reasonable to believe that healthcare is fundamentally less responsive to market forces than other goods.

Michelangelo at 60, 16th century.

Michelangelo at 60, 16th century.

However, there’s good reason to suspect that future technological and social developments will drive healthcare costs to increase, rather than slow, their rate of inflation. Throughout history the upper limit for human lifespans have remained largely fixed. If an inhabitant of 1300s Europe could survive the extremely high-mortality childhood years and avoid any injuries and infectious diseases, a lifespan of 70 wasn’t unheard of. This is a surprise to most people —we’re so used to hearing that the average lifespan in the Middle Ages was in the high twenties it’s easy to forget these statistics are skewed by high child mortality. If a Medieval British aristocrat survived his twenties he could expect to live until his sixties, and the upper limit for average adult lifespans haven’t shifted a great deal in the last 500 years. While technological and social advances like antibiotics and widespread plumbing have resulted in huge human health gains, these developments have most impacted childhood mortality and deaths from injuries and infectious diseases, rather than chronic diseases. The conditions that typically killed older people in the past, like heart disease, neurological conditions, and cancer, are still responsible for the bulk of modern elderly mortality and remain the most common upper limit on average lifespans.

However, it’s likely that medical science will make significant progress in combating these conditions this century, potentially leading to a dramatic increase in average rich-world lifespans. While this would obviously be a huge benefit for human welfare, it would be something of a perfect storm for public healthcare entitlements; these advanced treatments would be expensive, and elderly people would live longer to take advantage of them. Healthcare inflation is fundamentally a good thing for humanity, because it’s indicative of constantly improving quality of life for the sick. However, it’s just as reasonable to expect healthcare inflation to increase over the 8% per year benchmark as to optimistically hope for eventual stabilization.
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