Is the War on Cancer Worth It?

It took two decades after Richard Nixon focused the nation's attention on fighting cancer for death rates to start falling. From in 1993 through 2002, rates fell an average of 1.1 percent per year followed by even greater gains of 2.1 percent from 2002 through 2004, according to the latest available data. In all, some 75,000 less people have died since 1993 while life expectancy for many cancers has improved.

But at the same time billions of dollars have been poured into cancer research. Have the economic benefits from better treatment and care outweighed the costs of this effort?

The answer seems to be a resounding yes, says the first study to try to quantity the gains from cancer treatment.

The researchers -- from the Rand Corporation and the University of Chicago -- estimate that the economic gain from advancements is roughly $2 trillion. In comparison, total spending on cancer has been about $470 billion, so the U.S. is better off by about $1.5 trillion.

Most of these gains, about 80 percent, came from better treatment as opposed to better detection, the researchers argue. This makes sense intuitively in that if treatments for a particular cancer haven't improved, then merely identifying the cancer earlier isn't going to increase the chances of survival.

The findings are based on calculating how much a person living in 1990, for example, would be willing to pay to get the same survival rates as someone living in the 2000. The interesting part of this analysis is that richer people are willing to pay a bigger part of their salary than poorer ones for the better survival rates:

...the willingness to pay for cancer survival is a luxury good, in the sense that wealthier people are willing to devote a larger share of their income towards improvements in survival. For example, a person with an annual income of $5000 would be willing to pay 27-30% of his income for the observed increases in cancer survival, while a person with an annual income of $400,000 a year would be willing to pay roughly 42-44% of his income for the same increases in cancer survival.

The reason for this is that once you've spent your money on the other things you need to survive -- like food and shelter -- the rest of your consumption isn't going to provide as big a bang for the buck. And since the things necessary for survival take up a much smaller percentage of a rich person's income than a poor person's, the rich are left with a much larger portion of their income to spend on cancer treatment.