Opinion: Will Health Reform Save Lives?

(March 4) -- In the course of the heated debate over "ObamaCare" legislation, Washington Post blogger Ezra Klein accused Sen. Joe Lieberman of being "willing to cause the deaths of hundreds of thousands of people" after Lieberman threatened to filibuster the bill.

Klein's claim came from a study by the Urban Institute, which estimated that extending health insurance to the uninsured would save 20,000 lives a year. The argument makes sense up to a point -- previously uninsured people would get better access to potentially lifesaving health care.

Others have disputed the finding. In the latest issue of the Atlantic, Megan McArdle does an excellent job explaining why the evidence for the lifesaving effect of health insurance is considerably more ambiguous than the Urban Institute's report makes it out to be.

But the problem with Klein's claim and the Urban Institute study is that they only look at one side of the health care reform coin.

Indeed, while there are studies showing that health insurance may save lives, there are also studies that unambiguously demonstrate that several provisions of ObamaCare will cost lives.

Take, for example, the excise tax on the pharmaceutical industry.

It's popular for some in Congress to demonize the pharmaceutical industry. But in an age of rising health care costs and trillion-dollar budget deficits, it's important to recognize that, dollar for dollar, drug research provides a tremendous lifesaving bang for the buck.

According to economist Frank R. Lichtenberg, it takes only $1,345 of pharmaceutical research spending to save one life-year. Compare that to the infamous EPA regulation to further reduce arsenic in drinking water, which would have cost Americans $65 million for every life saved.

The problem is that the new taxes on pharmaceutical revenue included in the reform plans will reduce the economic incentive to invest in research and development. An economic study by economists Carmelo Giaccotto, Rexford E. Santerre and John A. Vernon shows that every percentage decrease in revenues results in a 0.58 percent decrease in research and development. President Obama's plan would increase taxes on the pharmaceutical industry by $33 billion over 10 years. So the resulting decrease in pharmaceutical research and development from this loss of revenue would reduce American lifespans by about 150,000 life-years, or about 5,000 to 15,000 lives a year.

In other words, this one minor provision of ObamaCare by itself would nearly swamp the most optimistic lifesaving estimate of the bill.

That's not the only provision of ObamaCare that might cost lives.

Increased unemployment also costs lives, because unemployed workers are twice as likely to develop new ailments like high blood pressure, diabetes or heart disease -- and ObamaCare will almost certainly reduce employment.

Thanks to the insurance mandate and income-based government subsidies for premiums (that phase out as income rises), the effective marginal tax rates for some middle-class families would go up to more than 80 percent. Common sense tells you that when people get to keep less than 20 cents for every dollar they earn, they work less -- which will reduce consumer spending, and thus employment.

Obama's plan also calls for a $2,000 fine per employee for companies that don't comply with certain mandates. These increased taxes and the increased cost of hiring employees will certainly increase unemployment.

The bottom line is that while ObamaCare will save some lives, it will cost other lives. And it is far from clear which side of the scale wins that battle.

Theodore H. Frank (www.tedfrank.com) is the founder and president of the Center for Class Action Fairness. He was an attorney on the McCain-Palin campaign.


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