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June 13, 2014

Back of the Envelope

This post also appears on Policy Prescriptions.

Recently there have been quite few notable* "back-of-the-envelope" calculations.

The Oregon Health Insurance Experiment included one which estimated how much expanding Medicaid would increase emergency care spending:
A back-of-the-envelope calculation, using $435 as the average cost of an emergency department visit, suggests that Medicaid increases annual spending in the emergency department by about $120 per covered individual.
The recent study showing Massachusetts's state health reform's mortality improvement calculated an NNT of 830, and Dan Diamond used that number to estimate how many lives would be saved if the current non-expansion states expanded Medicaid (answer: a lot). His back-of-the-envelope methodology: divide the number of potential expansion-eligible population in each state by 830.

On the other side of the debate, a number of ACA critics asked the question: is an NNT of 830 really worth it? Michael Cannon calculates the cost-per-life price tag at $4 million (but ignores the other important benefits of health insurance). His back-of-the-envelope calculation: 830 x $5,000 estimated annual premium.

This got me thinking about all my envelope backs:
An NNT of 830 sounds pretty poor, but how does it compare to other estimates of the effect of health insurance?
Perhaps the best known stat was the "45,000 people die every year because they don't have health insurance." This was quoted quite a bit during the ACA legislative debate, and was extrapolated from NHANES data (using slightly more complicated methods than a standard envelope-back can hold).

44,789, to be precise, in 2005. And there were about 46.1 million uninsured adults in 2005.

By my back of the envelope calculation, that's an NNT of 1,030. That means that the NNT of 830 from Massachusetts is not only in the same ballpark of prior estimates, but it's actually 20% lower than we thought. And again, health insurance does a lot more than just prevent death -- that's just the tip of the iceberg.

*to the health policy twitter/blogosphere

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