 Yeah, we're going to continue on the financial aspect of this, and I want to introduce Kevin Murphy and Robert Topol, who are going to present findings from their paper, The Value of Health and Longevity. This is a legendary paper that won the Kenneth J. Arrow Award for the best research paper in health economics. Their research developed a framework for economically valuing improvements in health and longevity and begins to just answer the question, how much is health worth? Kevin Murphy is the George J. Stigler Distinguished Service Professor of Economics at the University of Chicago's Booth School of Business, and Robert Topol is the Isidore Brown and Gladys Brown Distinguished Service Professor in Urban and Labor Economics, also at the University of Chicago's Booth School of Business. Welcome gentlemen. Thanks for having us. We weren't quite sure of the organization of the venue, so this is going to be a little bit like a Grateful Dead concert. I've reached the age where I'm leaving body parts behind like it's destruction derby, and so I mean it's sort of a symbolic of the kind of things we're talking about. I figured as long as I'm coming to Washington DC and I need a hip replacement, well it turns out the guy who does the really best minimally invasive procedure is here in DC, so with just two weeks notice I called him up and said I'd like to come and see it. So yesterday afternoon I went to see him and now here I am to talk about how we, and so we're lucky we live in an age that we can get, we can just replace parts as we go and maybe if I reach 150 there won't be any of me left. This is, feel free to jump in you know, don't worry I won't. This is, what we're going to talk about is something that we began back in about 2000, a project, and the president of our university came to SNS, you know what's medical research worth, and we were not, we're not by training health economists, so we said well we don't know but we'll think about it, and we did and then the story grew in the telling, and then here today we got to hear that our paper is legendary, I've never had a legendary paper so I want to thank you for that. But what we, what we, the problem we approached is well on the benefit side what's not just medical research, we didn't want to frame it so narrowly, what have health gains and what have longevity gains been worth, and what would be worth prospectively, and the answer is that they're very valuable, and we approach the problem the way economists do because we're economists, so the value that people get from increased health, increased longevity, we'll talk about that mainly here today, isn't because they're more productive or it doesn't make GDP bigger, or it doesn't create jobs in some congressman's congressional district, I remember being asked when we first did this stuff by a senator, he said this is a really great professor, but how many jobs will this create in my state, and it's not about that, so to understand that point, the way we think of it as economists is how much are people willing to pay for these increases in longevity because that's the way economists value everything. To sort of conceptualize it, think about the fact that since in recent times most of the gains in longevity have come at older ages, it's not like early on in the 20th century where it came from reducing infant mortality and childhood diseases and other public health measures, it's come from older ages, reductions in heart disease, reductions in mortality from cancer and the like. Well most of those gains are coming at age 65 and over, well those people aren't really on average, there's a lot of them working, but on average a lot of those people retired, you wouldn't want to say that those life years that they're gained are not worth anything. I mean worse than that, people would say it's bad because they require additional pension benefits and more strain on their health care and social security system, you really want to say you know people, the evidence is people value living longer and they value it a lot. If you look at places where people have to make a choice about how much they value their lives and how much they value longevity, all the empirical evidence is people value it a lot. It's very important to them and in one way to look at it is and we've often done this in terms of kind of a choice, think about if I offered you the following choice, I'm going to take you back and eliminate the last say 113 years of progress and I'm going to take you back to 1900. So I'm going to take you 113 years into the past but I'm going to be nice to you and I'm going to let you take something with you and you got a choice. You can either take today's longevity but give up all that wealth increase and income increase that we had. So you're going to go back to 1900 income but you're going to keep today's longevity or we're going to take you back in time and you can keep the income but you're going to lose the longevity. That's really your choice. Do you want the material side or do you want the longevity side? Let's give them a number. The longevity side is the following. In 1900, 18% of newborn males died before their first birthday and by 2000 it wasn't till age 62 where 18% of the males had been taken off the taken out of the game. So life expectancy life expectancy had birth increased by about 30 years between 1900 and 2000. Right but we're also a lot wealthier, many many full wealthier than we were in 1900 and we use evidence on what people are willing to pay to live longer in terms of what they're willing to pay to say reduce their risk of on the job injury and the like and when we first ask you guys which one would you choose? Would you take the money or take the longevity? You can still have your cell phone and everything but you got to have your health from 1900. Yeah you're going to have life expectancy of 40 something years. Yeah no real income, real income. You can live the same, you still got your flat screen TV, your cell phone and all that stuff and you're going to go back to 1900 but your life expectancy is 43 years or whatever and you're going to die with 18% chance of dying before your first birthday and you got to take all of it so you either get the hell or you get the money. I mean that's really the choice. Yeah you can't say I want to you know I want to take my cell phone but I don't want to take my Twitter account or something. Yeah exactly and in our number how well first how many people would take the money and how many people would take the hell? Yeah okay well I mean I think our numbers are kind of consistent with our numbers come out that between over the century for both men and women it came out to be about worth about 1.2 million dollars per person which is to say that if I offered you the 1.2 million dollars would you take 1900 health if you think it's a close call then you probably think our numbers are pretty good measure of what people gained in terms of life years over that century. But that adds some real perspective on things because we often think about economics in terms of how much better off we are in terms of wealth and all these other things and we ignore the fact that we've probably got at least as much value from longevity. What that means is longevity is on the table there with everything else in the economy that is all the improvements in you know computers and communications and everything else honed up is roughly the same or even a little smaller than what we've gotten from increased longevity. So I think that makes a discussion like we're having here today really important because all the economic evidence is longevity is really important to people. And these numbers don't really account for the changes in quality of life that have gone along with health improvements. So the fact that I can get a hip replacement or a knee replacement or whatever and live the years I might have lived otherwise but live them in a more comfortable way. We're not counting those numbers and if you just look at the changes in longevity from 1970 to the end of the century those were worth in total just in the United States alone to men and women about 95 trillion it comes out to be a flow of about three trillion dollars a year now keep in mind that GDP is about 15 trillion 14 trillion. So we're talking about a pretty large and uncounted flow of value we call it health capital in our work that's not counted in the traditional welfare or per capita income statistics and it changes your perspective on certain periods of time as well so that the 1970s were often considered in terms of GDP growth a period of fairly low growth whereas the 1960s were thought of as a high growth period well if you look at the changes in the flow of health capital over those two periods it kind of reverses your perspective because we didn't make all that much progress health wise in the 1960s but after 1970 we did and that's when the that's when especially for men men started catching up a little bit to women the both men and women gained but men started gaining more relative to women after 1970 there'd been a long slowdown in male progress from about 1940 to 1970. Yeah so over the whole period men and women gained just about the same women pulled ahead in the early part of the 20th century and the men have been kind of catching up ever since in terms of the cumulative gains that they received so that's really one element of good news the good news is we've had a big increase in longevity and not only is it quantitatively significant it's economically significant that in terms of improving people's lives it's as important as the rest of the economy put together so that that's a piece of good news. Second piece of good news is we have a lot of perspective gains out there to be had as well we estimate for example a 10 reduction in cardiovascular disease and in fact a 10 or a 10 reduction in in death rates from cancer has a present value that is a cumulative future value of about five trillion dollars for either one of them. That's in the United States. That's just the U.S. and if you think of the the technologies that would cause that kind of thing we've done this we've we've done these conversations a lot with the panels with doctors and stuff you ask them well you know could you reduce mortality from cancer by 10% and they say yeah yeah yeah give us the research money give us the research money but the the those those those numbers are they would say that even if they couldn't that's right that's for size of one those those numbers are those are those are big numbers but keep one thing to keep in mind is they're the purely the benefit side of the of the calculus we haven't we're not we'll talk a little bit about the cost side it matters what it costs you to achieve those gains so the way I typically phrase it is look at if to get those five trillion dollars in present value and that's in the U.S. alone I got to hook every one of you up to your own personal nuclear reactor it might not be a good a cost effective gain whereas if somebody can come up with a technology that can give you those gains by just taking a pill every day then it's got a lot of to an economist and a cost benefit analysis that's got a lot of value and that comes back to a more a broader point that we make which is the value of these gains depends on the costs of achieving them and some health gains may be worth achieving if medical resources are allocated efficiently down the road whereas if medical resources aren't allocated efficiently down the road say because of third-party payer systems and things like that or sometimes we call it you know build it and they will use it it's like the movie build it and they will come then it may not be worth investing in those those gains because we're going to waste a lot of resources and how we allocate the medical resources in the future yeah I mean I think a good way to think about it is and this really changes your view on what's important and you go to talk to people in Washington you talk to them about medical research and you talk to the researchers and they say look at all the great things we could do if we had more medical research and then you go talk to people have to pay for it and they're like terrified of all the things that could be done if you actually had to pay for it and in some sense they're both right because think about like the cancer we said five trillion dollars for a 10 percent reduction in cancer and in our experience even recently in cancer historically in cardiovascular disease is that kind of progress is possible it's not pie in the sky stuff to say we could reduce death rates by 10 percent and that's worth five trillion dollars so let's say somebody proposes a 200 billion dollar war on cancer big increase in cancer funding 200 billion dollar war on cancer with the goal being to get this five trillion dollars and improve longevity and they say well we're not sure whether it's going to be successful or not so maybe maybe but it the 200 billion even if it has a one in 10 chance is clearly going to be worth it if the only thing you get is the benefit we have slides on this but we're not showing them but the important question though is what's that treatment going to cost and if that treatment costs 10 10 trillion to give it to everybody it's not worth it if it costs three trillion it's clearly worth it and what's not very important in that calculation is the 200 billion that number is so small compared to the other two key elements the key elements in this debate are about what's the value of of longevity and that's a huge number and what's the cost of treatment and that's the other potentially huge number the cost of the research itself is like a roundoff error in this calculation it really doesn't matter very much whether the whether the war on cancer costs 200 billion 300 billion 100 billion in the game we're playing in the game of raising longevity it's all about the increased value which we know is there the key remaining question is the cost of care and that's why we like to say look if we can get a sane health system that spends money when it's worthwhile and doesn't spend money when it's not worthwhile that unlocks the benefits of research because it eliminates the key downside of research the key downside of a 200 billion dollar war on cancer is not that it won't come up with anything it's that it'll come up with something that costs so much that we end up bankrupting ourselves in the process of trying to implement we like to say it's unaffordable success is really the greatest risk and if you can take unaffordable success off the table research becomes much more valuable as an input and we really can say we can continue this train rolling we can continue this train of increased longevity rolling and the big worry is in if you look over the 20th century we had this progress in longevity just because making longevity longer the big difference is the cost of increasing that longevity has been going up and up as we've had more and more expenditures on more and more expensive treatments and that the need to balance that cost is more important today than it was in the past but but let me know that that sounds Kevin makes it sound depressing you give it may give you a slightly brighter spin on it we also backed out you know we just compare the gains in longevity between 1970 and the early 2000s to the increase in medical expenditure in the united states one thing we always talk about is how fast medical expenditures increased in the u.s and how big it is as a share of GDP in the u.s compared to other places but actually given that the longevity gains we got we're worth about three times the increase in in medical expenditure now that doesn't say that the medical expenditure caused the other all i'm telling you is that what we gained in terms of total health was much more valuable than what we spent over that period the increase in spending over that period of time yeah and that and the key is to keep that going i think you know we have found for some in some areas and for some groups of the population we do find that the increase in cost is approaching and in a few cases even exceeding the increase in longevity so but the point is it doesn't the point is you don't want to give up the increased value of longevity just because there's potential costs and then you might ask yourself well why do we have this problem of unaffordable success we don't worry about it in other areas right we don't worry about people inventing really expensive tv sets that people will that cost more than people value why because people won't buy them people aren't going to invest in things that they won't develop things that people won't buy but if you created a system that said if you big if you invent a really big expensive flat screen tv and you have to give it to everybody who wants one your insurance company will pay for it yeah that might not be such a great idea and that the the notion that it's very difficult in the kinds of of allocation mechanisms that we have to deny a technology to people once it's invented yes or or to use it appropriately use it on in cases where it's cost effective and not use it in others and we're going to turn it over q and a so the bottom line of what we're saying is if you're trying to say how do we get the most out of research one of the answers is improve the delivery system because a better delivery system is going to feed back and lead to a better research system and really allows us to open this picket on research so why don't they ask us to ask for questions so turn it out are you on a and you want to hand the microphone around and we just let them go go here you they even i think you need a microphone otherwise we can hear but not everybody else hi i'm i'm william angel again um you mentioned at the end of your speech that the you know the the issue of allocating valuable technologies like this uh given given how expensive you know effective extreme longevity is likely to be in the near future how do you have any ideas of how that might be implemented without leading to increased socioeconomic disparities of life span and overall income thank you yeah um the it's a complex question one of the things that i was i was struck by some of the earlier conversations so i look back at some of our earlier estimates and that um you know there's been a lot of discussion of income inequality both in united states and worldwide but if you actually look at the data the way the gains in value the way we calculate them over the last third of the 20th century african-americans were converging to whites they gained more in terms of of value of additional life years than than whites did um additionally if you look at it worldwide you talked about inequality that that's been there's been convergence there too so there's sort of spillovers of this technology into into other places now you know i don't know what the issues of allocation are going to come up it might occur if we all start living in one of the scenarios is that we all live up to 150 i know in terms of the the sort of metaphor that was up there before i already feel like i'm drooling on my shoes so uh you know i don't i don't i guess i don't view that as a great great possible but how we're going to allocate medical care in that i mean it's an important question like i mentioned last night that um the what's called the dependency ratio if you're going to have social insurance programs that that pay for public pensions and pay for a lot of health care well you know there's a transfer from those who work to those who are no longer working and at at current levels of benefits you know in a lot of these systems uh an extension of a life year the expected lifetimes by just one year also implies that if you want to keep tax rates fixed on the working population then you're going to have to increase working lives by about 0.7 years for every additional year um it isn't happening in a lot of the welfare states of of euro yeah and one one thing i would i would say i don't i think actually the dimension on which disparities have been increasing probably the most is really education and that's really an artifact of and you get into a world when there's more things you can do to affect your own health then education is going to play a bigger and bigger role i mean for example as you move to more outpatient care and versus in a hospital i mean if you're anesthetized on a operating table doesn't matter whether you got a phd or quitting kindergarten you're not really doing anything a doctor is really doing the work but if you're required to monitoring your blood pressure monitoring your diet or doing all these other things which we've increasingly done then education plays a bigger role and one place you do see differences in longevity emerging is on that education front and educated people are more skilled at a lot of things and one of the things are more skilled at is being healthy yeah and and as you as you expand the number of things you can do to live longer you know you know when it was getting eaten by a you know a lion it really didn't matter how educated you were he was just as tasty no matter how much how educated you were but what it really is these increasing things you can do for yourself and i think that's for frankly going to continue to increase it's not and it's not just in health it's in financial planning it's in raising your kids there's tons of dimensions on which education has become a really really important question sorry to the mic person we should kind of move more continuously but thank you in very simple terms could you please walk me through an analysis of Alzheimer's research and how you would uh what Alzheimer's oh research yeah i mean i'll i'll do an aspect of it i think is really important progress on different elements of health are interrelated and how what we call in economics a complementarity relationship that is the more progress you make on one dimension the more important it is to make progress on the other so for example we make tremendous progress in cardiovascular disease which is allowed a lot of people to live beyond you know age 65 or 70 to live into their 80s and beyond which is where Alzheimer's is a much bigger issue so the value of progress against Alzheimer's is so much higher now because we've made progress against these other diseases it wasn't even on your radar screen back when everybody keeled over from one hot shade depreciation at age 55 but it also now we're worried about now it also goes the other way if we're going to make progress on longevity on other fronts making progress on Alzheimer's even more important for the same reason right because now if we're going to have more and more people living beyond into the years where Alzheimer's a risk more and more gain so i i think Alzheimer's has risen in importance precisely because of all the other progress we've made and progress against Alzheimer's is going to increase the value we receive from progress elsewhere because now if i now if i know i'm not going to have Alzheimer's well you know like being alive is a little bit better thing so let's let's make some progress more progress against heart disease and so on so it it's not just Alzheimer's that kevin was talking about it's all these age related diseases progress against one age related disease raises the value of progress against other age related diseases because you're going to be around to experience them yeah exactly right here in the middle thank you i'm dan perry i had an organization here in town called the alliance for aging research as you might imagine we've been fans of murphy and tepel ever since that paper came out going back to joe garrows scenarios which i thought were very useful it seems that by pursuing scenario a which is where kind of the washington do things as they've always been done is going to get us to scenario b which is probably the most distasteful and scenario c which is what i think you get most votes for is going to suffer and quite frankly i think scenario d works kind of against c2 because it gets people off and i can't remember all the scenario well d is the immortality which is probably if what we really want is an extension of the health span the healthy vital years of life and realize the economic benefits of that we're going to have to change in fundamental ways and a is sort of do the same old same old so we've got to make changes and you guys have really been out in front from the chorus that generally says another dollar span medical innovations just adding more to the deficit that's a bad thing so you've seen past that and i i salute you for that one last thing the big change coming in medical research in aging is going to be highlighted at a very important conference at the end of this month at the NIH where a new concept is emerging called geroscience which is getting us past the the silos of heart research cancer research alzheimer's research all separate and getting at the underlying biological mechanisms that come with aging that all go that go to all of those different diseases so whether your a a r p or prudential or or slate pay attention to this big summit conference on geroscience the NIH the 30th and 31st of this month thank you well thank you i mean that's that's good because i think the complementarity that we just talked about earlier points to the value of kind of that balanced approach right you know compliments are like peanut butter and jelly you know you don't want to end up where you have a sandwich but you only got the peanut butter you only got the jelly you need to have them both to really get the most value out of it and i think that's an important important side of all this so that sounds good the other the other side i think has been encouraging is you know this theme that we've been talking about which is thinking about cost effective solutions that and again ties in with everybody being able to access them brought access to cost effective solutions getting more evident more emphasis on the research side it's not just about is this treatment going to be better than the last one is it going to be cost effective is getting i think more attention in in those circles which i think is great i think it really is a key part of evaluating potential research directions i think are we almost how are we doing on time i don't want to run over to okay we're done we're done oh okay one more one more one more Bob Rosenblatt freelance writer my grasp of statistics is not what it should be i want to make sure i understand this the five trillion dollars from ten percent reduction heart disease and ten percent reduction death rate catch does that mean you apply a million dollars to each additional year of longevity or how did you get the five no okay well you're getting complicated the um the we used um there's a scientific review panel at the environmental protection agency and also at other government agencies these are concept called the value of a statistical life to for cost benefit analyses like it's going to cost us this much by improving road safety to save one life per year well if it costs 47 million dollars to improve the safety of the road and it saves one million dollars a year their number is six million dollars per statistical life it's not worth it on a cost benefit analysis but if it only costs a hundred thousand to save that life that's a pretty good deal so we used value of a statistical life which is the sum of the life years over your entire life cycle expressed in present value la la la as six million dollars and then we backed out how that varied over people's lives as they age it got closer to the end of life and so on but we so we're valuing life years at different rates and you you can admire it at your leisure when you when you look at the when you look at the papers but that's the basic approach yeah we we tried to make an adjustment for variation in the value of life here's a different point in the life cycle and uh you know that was one of the innovations we thought we had in our research all right okay thanks