Total vs. marginal effects, or, Are the overall benefits of health care “probably minor”?
I was having an interesting discussion with Seth Roberts about his claim that "the overall benefits of health care are probably minor."
The basis of his claim is evidence cited by Aaron Swartz:
In the 1970s, the RAND Corporation picked out 7700 people in six cities and gave half of them free health care. Those lucky ones took advantage of it (spending 30-40% more on average) and they spent it on reasonable things (as judged by medical observers), but they didn’t seem to get any healthier. . . . The RAND study was by far the biggest study of this kind, but other studies find similar results. One analysis found that regions whose Medicare programs give out more money (when the underlying healthiness of the residents is held constant) see no increase in survival rates. A replication found the same results in VA hospitals. Cross-national comparisons find “the impact of public spending on health is … both numerically small and statistically insignificant”. Correlational studies find “Environmental variables are far more important than medical care.” And there are more where that came from.
Several discussants (including myself) at Seth’s blog were skeptical about his skeptism, citing various successful medical treatments (in my case, fixing a compound fracture of the wrist; others mentioned cancer treatment, etc.). Seth responded:
The RAND study, of course, is limited — but is there a better attempt to figure out the overall value of medicine? I don’t know of one. if you can point me to a study that shows the more-than-minor value of modern medicine I’d love to look at it. . . . when the overall effectiveness of medicine has come under scrutiny, it has not fared well — and the RAND study is a good example.
Total vs. marginal effects
I have not looked at the Rand study so can’t comment on the details, but my first thought is that the marginal benefits from additional health care will be less than the benefits from good existing care. So, even if more is not much better, that doesn’t mean that the overall benefits of existing care are “minor.”
From a policy standpoint, it is the marginal effects that are the most interesting, since nobody (even Seth?) is proposing to zero out medical treatment. Presumably there are diminishing returns, and the benefit/cost ratio for additional treatment is less than that for existing treatment. (And, indeed, some medical care can make things worse, even in expected value; for example, you can get catch the flu in the doctor’s waiting room.) But, unless I’m missing something, Seth and Aaron are confusing marginal with total effects.
P.S. Also see Robin Hanson’s discussion (with lots of links), which explicitly distinguishes between marginal and total effects. Here I’m not expressing any position on the marginal effects of health care (given my ignorance on the topic), just pointing out that Robin’s position seems to have become overstated by others.
P.P.S. Further discussion appears in the comments here. In particular, take a look at Jake Bowers’s discussion of how to interpret the Rand experiment.
Eliezer,
Health insurance level was randomized, actual medical treatment was not. Thus one should be careful when making causal inferences regarding increased medical usage in this study.
I admit to the existence of the biases you bring up in regards to the medical literature, but you can't be so quick to dismiss other explanations when people were in control of making decisions regarding the actual amount of medical treatment they received.
In addition, an increase in doctor and ER visits is not equivalent to an increase in medical treatment. Not every time you go to the doctor do you receive medicine. Also, people with less of a cost to seeing a doctor are likely to go to the doctor for less severe conditions than those who must weigh the financial cost against their perceived need. We can go on and on thinking of other explanations in this study... such is often the heavy burden in an observational study... confident conclusions cannot always be made when other logical conclusions are plausible.
Aside, with a mean age of 31, how much of a benefit measured in terms of overall health should one have expected to see over a 3-5 year period?
Eliezer, great June 15, 2007 at 02:11 AM post. Perhaps there should be Replication prizes, for people who do the best replication studies each year (that succeed or fail in replicating a "statistically significant" study), and perhaps there should an investigative prize for people who expose falsified data by a scientist. I can think of few areas where we have a greater stake in overcoming bias than in cutting edge biomedical research of the type likely to extend healthy lifespan.