A monetary value on each life saved

by Benjamin P. Geisler, MD, MPH

A recent New York Times article on how to value a life drew almost two-hundred heavy-handed comments. It discussed how different governmental agencies such as the Food and Drug Administration (FDA), the Environmental Protection Agency (EPA) or the Department of Transportation (DoT) place a monetary value on each life saved.

In many public policy areas, cost-benefit Analysis (CBA) is being used to assess whether an investment in a particular area is worthwhile. CBA uses an “exchange rate” in which the consequences are monetarized.

The article mentioned the following values: The DoT value each life saved at or around $6 million 2010 USD$; $9.1 million 2010 US$ was the corresponding value of the EPA; and the FDA put a figure of $7.9 million 2010 USD$ (increased from $5 million in 2008 USD$) on each life saved from cancer death caused by cigarettes.

I did not know that the FDA considered efficiency measures such as money per life saved at all.

What I find fascinating is how arbitrary the approach of the different agencies can be. They could have just funded certain policies by how cheaply they can save a life up to a certain threshold (e.g. when the budget is exhausted).

Instead, the EPA uses a methodology derived from logging industry (yes, you heard right). $1,000 worth of extra-work for the lumberjacks each year is generally accepted to save 1 in 1,000 lumberjacks. This was apparently developed by a Professor Viscusi who wrote his first paper on CBA as an undergrad at Harvard in the 1970s.

Other governmental agencies seem to survey citizens. In economics, this could actually be considered a valid approach if done right.

There were interesting comments by the readers. Some did not want to put any value of life. It was controversial if the value was too high or too low. One reader mentioned that the Federal Aviation Administration might have had a value of $450,000 per life in the late 1970s.

I think the article misses a few things:

First, it does not mention that other countries’ “exchange rates” are much lower. A life was valued at £1,312,260 ($2.14 million in today’s exchange rates) in 2003 in the United Kingdom (UK Department for Transport (Highways Economics Note No. 1. 2003 Valuation of the Benefits of Prevention of Road Accidents and Casualties. London: UK Department for Transport, 2004.) and at €2 million ($2.76 mio. in today’s exchange rates) in the France of 2000 (Boiteux and Baumstark 2001).

Second, the article does not mention that there are alternative approaches, which exist, for example, in health economics. Unlike CBA, where costs and consequences have a common denominator, Cost-effectiveness analysis (CEA) expresses efficiency in a ratio (costs are divided by effectiveness, e.g. in life years or quality-adjusted life years). CEA was developed by Milton Weinstein in the late 1970s at Harvard.

Policy makers can compare the relative values of each strategy with alternative health care investments available to them in order to make informed decisions.

Benjamin P. Geisler is a comparative effectiveness researcher who blogs at Health Care Value Strategies.

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