Some of the wisest words I ever heard came from Harvard economist Claudia Goldin. Her students often cited isolated numbers — “sixty-three MILLION dollars!” — assuming that many decimal places prove that some expenditure was excessive. Goldin said her response was to pause and then ask, “Is that a big number or a small number? And compared to what?”
I call her refusal to let statistics speak for themselves “The Goldin Rule” and have borrowed her technique ever since. Most often, the responses resemble the resigned eye-blinking of Wile E. Coyote spying a falling anvil.
Goldin’s technique came to mind in June, when I heard a National Public Radio broadcast about one family’s gigantic medical bill: “Summer Bummer: A Young Camper’s $142,938 Snakebite.”
The story involved a 9-year-old Indiana girl’s life-threatening venomous snakebite at summer camp. Saving her life involved an 80-mile helicopter flight to a trauma center, plus four vials of the antivenom CroFab. The family received a $142,938 bill, including $55,577.64 for the helicopter transport and $67,957 for the antivenom. Insurance ultimately paid all the charges after negotiating the tab down to $115,000.
An NPR interviewee called the charges “extortionate,” adding, “The hospital has a captive audience here and can mark up with abandon,” and, “This kind of case is exactly why other countries do regulate drug prices.” But her only “evidence” was the parents’ sense that the number — which, again, insurers ultimately paid — sounded big.
Unfortunately, health care policy debates often boil down to, “This number is bad because it sounds big.” But, as Goldin would ask, “Compared to what?”
A thorough analysis might show that the helicopter and drug charges were, in fact, excessive. But the raw numbers in isolation proved nothing. The helicopter charge of $55,577.64 sounds big for an 80-mile ride (160 miles round-trip for the helicopter). But is that, in fact, a big number? And compared to what?
A “Managed Care” article, “Air Ambulance Turbulence: Consolidation, Cost Shifting, and Surprise Billing,” examines the question, “Do air ambulances cost too much?” The study’s answer is ambiguous, but along the way, the authors describe the eye-opening manpower needs: “Keeping a single air ambulance helicopter ready 24 hours a day requires 13 people — four pilots, four nurses, four paramedics, and a mechanic, a big national operator told (the Government Accountability Office).” Of course, you also need a helicopter, a home base and lots of equipment. The article reports that “the average cost per flight in 2016 ranged from $6,000 to $13,000.”
So, compared to the average flight, $55,577.64 is a big number. But was this an average flight? Maybe. Maybe not. Perhaps the 160-mile round trip is a lot longer than the average flight. Perhaps air ambulances aren’t often required around Bloomington, Indiana, so the company has to charge each patient more to cover fixed costs. But just stating the $55,577.64 figure tells us absolutely nothing.
Going a step further, there’s a tendency in health-care debates to say, “That’s a big number. If only we shift the expenses to the government — like Canada does — then surely the number will get smaller, and we’ll still get the same health care for less.” One anecdote suggests a caveat to such magical thinking:
In 2009, British actress Natasha Richardson died at a Quebec resort after a skiing accident. An Associated Press report said, “Quebec lacks a medical helicopter system, common in the United States and other parts of Canada, to airlift stricken patients to major trauma centers. Montreal’s top head trauma doctor said Friday that may have played a role in Richardson’s death.”
An article in The Globe and Mail added: “The Quebec government is making no excuses for the lack of a helicopter air ambulance service to transport trauma patients such as actress Natasha Richardson. … Purchasing a helicopter ambulance is not a priority and there are no plans to acquire one, a government spokeswoman said yesterday.”
So, in 2009, no one in Quebec faced an unexpected $55,577.64 air ambulance bill. But simply assuming a number is “big” and assuming it might shrink with no loss of health-care quality if the government pays, just might be a deadly pair of assumptions.
