R. Lichtenberg
Columbia University and National Bureau of Economic Research

It is no surprise that Americans are living longer today than in previous generations. A typical baby born in 1900 was expected to live to about age 45. Today, life expectancy at birth is about 78. Less well known, however, is the fact that the gains in life expectancy have not been uniform across the country. In his new study—the first of its kind—Columbia University researcher Frank Lichtenberg set out to find out which states are the leaders, which ones are the laggards, and why.

Lichtenberg began by constructing life-expectancy estimates of residents in all fifty states using data from the National Center for Health Statistics. He found that in 2004, on average, residents of Hawaii (81.3 years) and Minnesota (80.3 years) lived six or seven years longer than residents of Mississippi and Louisiana (74.2 years).

In addition, he found that while nationwide life expectancy increased by 2.33 years from 1991 to 2004, the increase varied greatly among the states. Certain states—New York (4.3 years), California (3.4 years), and New Jersey (3.3 years)—led the way, while others–Oklahoma (0.3 years), Tennessee (0.8 years), and Utah (0.9 years) trailed the national average by significant margins.

Lichtenberg then set out to examine why this “longevity increase gap” exists by measuring the impact of several factors that researchers agree could affect life expectancy. He found that, although some obvious suspects—obesity, smoking, and the incidence of HIV/AIDS—played a role, the most important factor was “medical innovation.”

Specifically, Lichtenberg found that longevity increased the most in those states where access to newer drugs—measured by mean “vintage” (FDA approval year)—in Medicaid and Medicare programs has increased the most. In fact, about two-thirds of the potential increase in longevity—the longevity increase that would have occurred if obesity, income, and other factors had not changed—is attributable to the use of newer drugs.

According to his calculations, for every year increase in drug vintage there is about a two-month gain in life expectancy. These represent important findings given the fact that the costs of prescription drugs continue to receive a great deal of attention in the ongoing debate over health-care policy, while their benefits are often overlooked.

Lichtenberg also estimated impacts on productivity and per-capita medical expenditure. He concluded that states adopting medical innovations more rapidly had faster labor productivity growth, conditional on income growth and other factors, perhaps due to reduced absenteeism from chronic medical ailments. He also found that states that use newer drugs did not experience above-average increases in overall medical expenditure, which contradicts the common perception that advances in medical technology inevitably result in increased health-care spending.

There are two ways to improve the average quality of U.S. health care. One way is to give best-practice care to people who are currently receiving less than best-practice care (e.g., to ensure that all heart-attack patients take beta blockers after they are released from the hospital). The other way is to improve best-practice care by shifting the technological frontier (e.g., to develop new ways to monitor, treat, and even prevent heart disease). This study indicates that the development and use of new medical goods and services, which shift the technological frontier, have been responsible for many recent gains in the health and longevity of Americans.

SUMMARY OF FINDINGS

Variation in Life Expectancy Gains

• From 1991 to 2004, nationwide, life expectancy at birth increased 2.33 years; life expectancy at age 65 increased by 1.29 years.

• The states with the largest increases in life expectancy were the District of Columbia (5.7 years), New York (4.3 years), California (3.4 years), New Jersey (3.3 years), and Illinois (3.0 years).

• The states with the smallest increases in life expectancy were Oklahoma (0.3 years), Tennessee (0.8 years), Utah (0.9 years), Alabama (1.0 years), and West Virginia (1.0 years).

• In the eight states with the smallest increases, life expectancy increased by 0.31–1.16 years. In the eight states with the largest increases, life expectancy increased by 2.60–4.33 years.

Factors Affecting Life Expectancy

• Growth in obesity and, interestingly, growth in income were both inversely related to (and presumably reduced) the growth in life expectancy.

• If obesity and income had not increased, life expectancy at birth would have increased by 3.88 years from 1991 to 2004, instead of the actual 2.33-year increase. Thus, 3.88 years is the “potential increase in life expectancy at birth.”

• Of the 3.88-year potential increase in life expectancy at birth, medical innovation (i.e., the increase in Medicaid and Medicare drug vintage) accounted for 2.43 years (63%). The declines in AIDS incidence and smoking accounted for 0.23 and 0.12 years (6% and 3%), respectively. About 1.1 years (28%) of the potential increase in life expectancy at birth is unexplained.

• If obesity and income had not increased, life expectancy at age 65 would have increased by 2.15 years from 1991 to 2004, instead of the actual 1.29-year increase. Thus, 2.15 years is the “potential increase in life expectancy at age 65.”

• Of the 2.15-year potential increase in life expectancy at age 65, medical innovation (i.e., the increase in Medicaid and Medicare drug vintage) accounted for 1.19 years (55%). The declines in AIDS incidence and smoking accounted for 0.07 and 0.12 years (3% and 5%), respectively. About 0.8 years (36%) of the potential increase in life expectancy at age 65 is unexplained.

Medical Expenditure Impact

• Increases in income, education, smoking, and the incidence of AIDS tend to increase per-capita medical expenditure; expanded health coverage reduces it.

• States that had the greatest increase in drug vintage did not experience above-average increases in overall medical expenditure. While use of newer drugs has increased some types of medical expenditure, it has reduced other types, and the expenditure reductions approximately offset the expenditure increases.

• Although use of newer drugs does not appear to have increased annual medical expenditure, it probably has increased lifetime medical expenditure slightly as the use of newer drugs increased life expectancy at birth by 2.43 years. But the implied cost per life-year gained is quite low.

Productivity Impact

• States with larger increases in Medicaid drug vintage had faster productivity growth, conditional on income growth and other factors.

• The increase in Medicaid drug vintage is estimated to have increased output per employee by about 1% per year. Much of this may be attributable to increased hours worked per employee.