How Much is a Year of Life Worth at the End of Your Life?

More than economists have traditionally supposed, according to a NBER paper by Tomas Philipson, Gary Becker, Dana Goldman and Kevin Murphy. In contrast to the conventional view that we are spending excessively on end-of-life care, the economists argue we may be underestimating the value of end-of-life care for four reasons:

  1. Diminishing marginal utility — a year of life is worth more to us if there are fewer years of life to live.
  2. The value of hope — during the six months your life is extended, new discoveries may be made, allowing more extension.
  3. The social value of terminal care is greater than the private value — in addition to the value you place on a few more months of life, your family members care and so do taxpayers (which is why we spend so much Medicare and Medicaid money on terminal care).
  4. The rational level of spending on terminal care by people who are frail (have a low quality of life) may be greater than for someone who is healthy.

Comments (8)

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  1. Vicki says:

    Fascinating. I’ve never seen anything like this before.

  2. Joe S. says:

    Agree with Vicki. This is fascinating. It’s very original, very creative, very innovative, and quite possibly true.

  3. Stephen C. says:

    Very clever. Very good.

  4. Devon Herrick says:

    It makes sense that a 35-year old individual would trade (to increase utility), a year of life 50 years out more cheaply than someone 84-years of age.

  5. Tom H. says:

    This is really interesting. Not sure I agree. I have to think about this.

  6. Linda Gorman says:

    The less an individual has of a good the more he values an additional unit–marginal utility theory strikes again.

  7. Virginia says:

    I agree… but only partly.

    The study probably assumes that people are healthy and relatively lucid until a few weeks before death. This is not always the case. A lot of seniors go through a horrible, painful period leading up to death. I’ve heard of numerous cases where they want to die, but their relatives or doctors want to try one more treatment.

    Also, a good deal of seniors die with significant mental impairment. You’re talking serious deterioration. I’m not sure that marginal utility applies to a person who has forgotten how to swallow.

    But, still, we all know of the person who doesn’t want to die, who hangs on and on, who fights letting go. And I think that life does get more precious as you age. Young people are too busy having kids and running their careers to contemplate end-of-life issues. It still seems like there is a lot of time.

    But, time is relative. A human life span is 80 years, and the earth is how old? That really puts the last year in perspective. On the other hand, a butterfly lives for one summer. As Kurt Vonnegut would say, “So it goes.”

  8. Ken says:

    Fascinating. People have not been thinking clearly about this. Maybe that’s because we are paying more for the end of life care of others than we really want to.