Cut Medicine In Half

Today my medical skepticism appears as this month’s lead essay, "Cut Medicine In Half," at CATO Unbound. Distinguished health economists are scheduled to comment:  Harvard’s David Cutler on Wednesday, RAND’s Dana Goldman on Friday, and Stanford’s Alan Garber next Monday.  Open discussion begins next Wednesday.  Also, I just learned that next Tuesday a book with a related thesis, Overtreated, will appear. My essay begins: 

Car inspections and repairs take a small fraction of our total spending on cars, gas, roads, and parking. But imagine that we were so terrified of accidents due to faulty cars that we spent most of our automotive budget having our cars inspected and adjusted every week by Ph.D. car experts.  Obsessed by the fear of not finding a defect that might cause an accident, imagine we made sure inspections were heavily regulated and subsidized by government. To feed this obsession, imagine we skimped on spending to make safer roads, cars, and driving patterns, and our constant disassembling and reassembling of cars introduced nearly as many defects as it eliminated.  This is something like our relation to medicine today. …

King Solomon famously threatened to cut a disputed baby in half, to expose the fake mother who would permit such a thing.  The debate over medicine today is like that baby, but with disputants who won’t fall for Solomon’s trick.  The left says markets won’t ensure everyone gets enough of the precious medical baby. The right says governments produce a much inferior baby.  I say: cut the medical baby in half, dollar-wise, and throw half away! …

Our main problem in health policy is a huge overemphasis on medicine.  The U.S. spends one sixth of national income on medicine, more than on all manufacturing.  But health policy experts know that we see at best only weak aggregate relations between health and medicine, in contrast to apparently strong aggregate relations between health and many other factors, such as exercise, diet, sleep, smoking, pollution, climate, and social status. Cutting half of medical spending would seem to cost little in health, and yet would free up vast resources for other health and utility gains. …

Added:  Matt Yglesias mentions this great related essay by Phillip Longman.

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  • Could it be that Americans buy more health-care but also (maybe as a result) live more irresponsibly (obesity, diabetes, etc..), .i.e. not only they tinker constantly with the car but also drive it off the road more often.

  • That’s a great opening. Kudos to you.

  • Ken

    Maybe if we would just charge our citizens for medicine what other countries charge their citizens we would save almost 40% to 50% right off the bat. Unless you have a theory that charging (in some cases) 60% more makes the meds work better.

  • Stuart Armstrong

    Very good essay (even if not new to those who read the blog). Only difference I’d suggest is a few more examples of how medecine can be harmfull, in the body of the text. This would balance the ever-present image of “X is dying, a doctor opperates on X, X gets better.”

    But is CATO unbound the best place to publish it? That seems guaranteed to get it ignored (or pre-emptively discarded) by some people. If you want to pull the debate sideways, it’s best not to let you issues get captured by one side or the other (I know that CATO isn’t so simply “on one side”, especially nowadays, but it still has strong connotations in specific directions – especially dangerous as the essay itself is very neutral in that respect).

  • Stuart, the Overtreated book seems chock full of examples. And on the CATO venue I “dance with him who brung me”; I’d be happy to publish elsewhere if invited.

  • Henry V

    “Could it be that Americans buy more health-care but also (maybe as a result) live more irresponsibly (obesity, diabetes, etc..), .i.e. not only they tinker constantly with the car but also drive it off the road more often.”

    I’ve seen a couple economics papers making this argument, but I can’t seem to dig up the citations at the moment.

  • J Thomas

    “But health policy experts know that we see at best only weak aggregate relations between health and medicine, in contrast to apparently strong aggregate relations between health and many other factors, such as exercise, diet, sleep, smoking, pollution, climate, and social status.”

    Suppose we cut the medicine costs in half and spent the other half on the other factors. How can we spend money to encourage citizens to exercise? TV ads are probably not the way. Publicly-funded gyms? Low-income subsidies for exercise classes?

    Diet? Produce less unhealthy food and sell more healthy food, and maybe subsidise the good stuff some? Maybe some of the overweight people would lose weight if they had better food.

    Sleep? How can the government spend money to get people to sleep more and better?

    Smoking, spend money to get people to smoke less? Raise tobacco taxes? Are we already at the point where taxfree tobacco smuggling is attractive? More money on enforcement?

    Pollution, we know how to spend money to reduce pollution. But it’s politically unpalatable. Companies that have to control pollution tend to pack up and move somewhere they can pollute and we lose the jobs.

    Climate? What should we do about climate?

    Social status? I can’t exactly imagine how the government could give everybody high social status, but it sounds like a really interesting thing to try.

    It isn’t enough to cut medical expenses. We need to deal with the things that have more effect. Also we need to carefully study how effective our actions are. Whatever we do to get people to sleep well, we need ways to check whether it’s actually getting people to sleep better and then over the long term whether it’s actually improving their health enough to be worth the expense.

  • J Thomas

    “Regions that paid more to have patients stay in intensive care rooms for one more day during their last six months of life were estimated, at a 2% significance level, to make patients live roughly forty fewer days, even after controlling for: individual age, gender, and race; zipcode urbanity, education, poverty, income, disability, and marital and employment status; and hospital-area illness rates.”

    One variable that isn’t controlled here, however is death.

    You need to also look at the people who spent one more day in IC who didn’t die within 6 months. If they do better than the controls it might be worth it.

    Although depending on how those results work out, it might be even better to give the extra IC day just to the people who aren’t going to die.

    (That reminds me of the new england town that had a problem with fire hydrants icing up in the winter, and their town meeting passed a resolution that the fire department should inspect the affected hydrants within 3 days before each fire.) 😉

    Seriously though, what purpose is there for only looking at the patients who die? Isn’t that like a study of lottery players that only looks at the winners?

  • J Thomas

    “Do you have little voice in health policy or research? Then at least you can change your own medical behavior: if you would not pay for medicine out of your own pocket, then don’t bother to go when others offer to pay; the RAND experiment strongly suggests that on average such medicine is as likely to hurt as to help.”

    If you believe this, you should become a Christian Scientist. Or at least tell people that’s what you are when they ask about your medical expenses.

    There are some studies that indicate CS members aren’t as healthy as carefully-selected control groups, and there are studies thast indicate that CS college students aren’t as healthy as carefully-selected college-student control groups. I haven’t checked that those studies were done well enough.

    I’m not sure just what the government should do if it’s true that on average medical care doesn’t help. Should we follow China’s Chin dynasty and make much of medicine illegal? Would that actually drive the cost *up*? It isn’t enough to get rid of procedures that don’t work, they already do that. *All the time!* Like, we’ll get a new form of heart surgery, and after 5 years of statistics it gets shown that on average it has negative effect — the patients who have bad complications or die soon after the treatment outweigh the ones who feel much better. But in less than 5 years they come up with several *new* forms of heart surgery, so we start the process of collecting 5 years worth of statistics on those.

    One time on a road trip a friend said, “You get what you pay for.” And I responded “You may not get what you pay for, but you pay for what you get.” And the wise one among us said “You pay for what you need whether you get it or not.” That’s where we are on health care. When you think you need it, you pay for the chance it will help. If the MDs say they can’t help you, you’re likely to pay for quacks. CF laetrile etc. It wouldn’t surprise me if the whole medical industry is like that. But what can you do? When you need help you pay for whatever you hope will work. Unless you’re Christian Scientist, and maybe even then.

  • I agree with Stuart that “If you want to pull the debate sideways, it’s best not to let your issues get captured by one side or the other (I know that CATO isn’t so simply “on one side”, especially nowadays, but it still has strong connotations in specific directions – especially dangerous as the essay itself is very neutral in that respect).”

    I hope that the best approaches for generally minimizing economic waste (as a function of freeing up resources to maximize our personal persistence odds) don’t become bogged down or controversialized as libertarian vs. anti-libertarians or various other debates.

  • Floccina

    Robin have you seen this post by Tyler Cowen?
    Is health care good for you after all?

  • Floccina

    In the studies that show people in rural areas live longer, do they take into account that if I live in a rural area and I have a child with diabetes or bad asthma I am likely to more to a city with a good hospital?

  • Unit and Henry, many studies looking at the effect of medicine certainly do control for obesity, etc.

    Ken, I have no idea what you are talking about.

    J, there are lots of ways to subsidize other kinds of health inputs. Look the Medicare study carefully before you assume they didn’t consider obvious issues. And cutting out extra medicine is very different from being a Christian Scientist.

    Floccina, yes I mention that study in my essay.

  • Ibod Catooga

    I do not like niglets. They are not cute. The smell like a poop chute. They do not live in Butte.

    Do you have a chance to refute?

    Oh well, it’s moot.

  • Ibod Catooga

    Cutting funding for the assfucked Iraqi war would enable everyone even the niglets to go to college for the next 10,000 years! And that’s a lot of bachelor’s degrees I could get in 10,000 years! At least four! NOUGAT!

  • I just had a chance to read the entire essay, and I encourage everyone else to, too. It will hard to look at much of medical media the same way afterwards.

  • Ibod Catooga

    I control for obesity. I DO NOT FUCK FAT WOMEN!

    Chaka khan!

  • Doug S.

    Ken is saying that the prices for equivalent services in the US are greater than in other countries. He’s implying that even though the US spends more on medicine than other countries, we’re still getting basically the same care, but at a higher price.

    One way to interpret this is that he’s claiming that the supply of medicine is extremely inelastic, and that we’re just allocating our supply of medicine to higher bidders in the same way that star athletes are allocated to the highest bidders. If we allocated some medicine on a basis other than ability to pay, we’d get more efficient care.

    Another way to interpret this is that medicine acts like a price-discriminating monopoly. If Microsoft charges students $50 for a copy of Windows and a corporation $500, then two different prices exist for the same good. If the same bottle of pills costs $100 in the US and $10 in Canada, then the US is getting whatever benefit the pills provide less efficiently. (Intellectual property laws are not Pareto efficient; isn’t there a better way to subsidize useful idea creation?)

    I’m not saying any of these descriptions are accurate, but I think that’s what Ken means.

  • To help people imagine that we could be this wrong, I’d suggest looking at investment advice. A generation ago I suspect most people believed there was value in paying a decent person with apparent expertise to manage your investments or advise you about it. Better measurement of results has changed informed opinion, but there’s still a large industry selling expertise that’s worth approximately zero.

  • Doug S.

    Speaking of investment advice… If index funds tend to do well, then doesn’t that just shift the expertise away from mutual fund managers to those who define the indexes? How do the people who decide the composition of indexes decide which stocks make the cut and which don’t? Could one apply their algorithm to a hypothetical unindexed stock exchange and make returns that are as good as known indexes?

  • Stuart Armstrong

    I’d be happy to publish elsewhere if invited.

    I hope you do get invited. The US government seems to be trending Democratic at the moment, and they’re the ones proposing changes to the health-care system. If you can get your ideas injected into that debate…

  • Tom Breton

    This seems to be a result that everybody has trouble believing.

    Me, I can’t help wondering if more chronically ill patients were placed in the better funded group of these studies, either by their own choices (eg, moving to that region that paid for longer hospital stays) or by well-meaning, locally-optimizing health care providers. In my experience, it is common that health care providers do so. I’d call it gaming the system, except that’s a little harsh when they’re just trying to help sick people.

    Perhaps I’m missing something, but I don’t see where any of the studies prevented that.

    One suggested test on the existing data: Did hospitals near the edges of the pay-for-one-extra-day regions, which are presumably more likely to experience this effect, show this effect more than hospitals far from the edges? And similarly for other measures of easy/difficult entrance into the better-funded groups.

  • Tom, the RAND experiment was randomized, and they also independently checked on and controlled for initial health status.

  • Tom Breton

    OK, yes, the RAND experiment was randomized, but then it got better outcomes in 4 categories of 30. I’ll grant that dentistry and optometry are more predictable in nature than general medicine. That leaves hypertension and serious symptoms. I’ve read your argument that hypertension at .03 significance may be a fluke. But it’s not 1 significant result in 30, there were 4 significant results in 30.

    It could be that you are right, but the RAND study alone doesn’t seem to prove it.

  • J Thomas

    Tom, the RAND experiment was randomized, and they also independently checked on and controlled for initial health status.

    I haven’t paid to read that study yet. But I notice that they threw out the data for people who survived more than 6 months.

    Suppose that the result of an extra day in intensive care was that the healthiest patients *didn’t die*. Then those would be out of the study, and you’re left comparing all the ones who died with the cheaper care against only the sickest of the more expensive care.

    It makes good sense to use this study when you’re making policy about patients who will die within 6 months. But you shouldn’t use it for patients who might survive longer than six months. The study doesn’t say anything about them.

  • J, you are completely confused about which study you are talking about, and about how it worked.

  • J Thomas

    Robin, in that case please tell us what you’re talking about and what it said, because you have left that confused.

  • J Thomas

    OK, sorry, I was interested in the other study because it’s so obviously wrong-headed. You’re talking about the RAND study which can be downloaded free. I started looking at that.

    They allow medical care at various costs, free, $150/year, $1000/year (or some percentage of income, whichever is less).

    They note that without free care there were 2/3 as many doctor visits and 2/3 as many hospitalisations.

    And with 2/3 the care, they got no significant difference on most of their metrics. However, when they tried to do that for subgroups — just poor people or just sick people etc — the confidence intervals got too big. There could have been important benefits to extra care for some subgroups and it wouldn’t show up as statisticly significant.

    For a rich person the difference between free care and $150/year or even $1000/year might not matter, they would reduce the significance for the whole study, and there weren’t enough poor people to get a good baseline.

    The eleven measures were “physical health”, “role functioning”, “mental health”, “social contacts”, and “general health measures”: smoking behavior, weight, cholesterol level, diastolic blood pressure level, visual acuity, and a death index.

    Right offhand I wouldn’t expect free psychiatry to quickly affect mental health, social contacts, or role functioning. And over 1975 through 1981, would we expect more medical care to affect weight, cholesterol, blood pressure, or get people to quit smoking? What did MDs do to get people to quit smoking in 1981 besides tell them to quit smoking? What did they do to get them to lose weight or gain weight? Would you expect 3 doctors visits to do more about that than 2 visits?

    More later.

  • Henry V

    “Unit and Henry, many studies looking at the effect of medicine certainly do control for obesity, etc.”

    In this case, I don’t mean *controlling* for obesity, but trying to empirically (or theoretically for that matter) estimate to what extent healthcare and healthy living are substitutes. To what extent do increases in medical technology enable people to be more obese? Is obesity endogenous?

    Maybe that’s what you meant, but I wasn’t sure.

  • J Thomas

    Henry, the RAND study is available — for free! — as a .pdf download.


    Your earlier question about edge effects doesn’t apply, what they did was to randomly offer people different insurance plans. Practically everybody who was offered the plan with no copayments at all took it. Three quarters of the ones who were offered the plan with the most expensive copayments took it. They compared the people who took the plays with copayments against those without and couldn’t find any important difference. Also they tried to cmopare the people who took the copayment plans against the ones who refused and couldn’t tell a difference there either.

    So it was random by insuree and not by area. You get insurance from them and they offer you a plan at random, you take it or leave it.

    One bias I haven’t examined closely is that for 60% of their patients they did physical exams at the start and at the end to base their statistics on, but for a randomly-chosen 40% they did the exams only at the end, and they guessed the numbers for the beginning. I haven’t seen why they chose to do that. I’d expect the result would be to make any changes less statisticly significant. Imagine that they guessed at baselines for all the patients, and then they looked at the difference at the end compared to the beginning. Imagine that they assigned everybody the same initial state (which they didn’t, they guessed from questionnaires and very general data). Imagine that everybody changes by 2%, but they measure it as 48% decreasing from the universal baseline while 52% increase. The extra noise would make the result look weaker than it is.

    The study was too small to do much about actual deaths. So they predicted deaths based on obesity, smoking, etc and used the predictions as a measure. Since medical care as of 1982 did not do much to reduce obesity or smoking etc the predicted mortality was not changed much, except the observed small blood pressure decrease.

  • Floccina

    As to exersize Dr. Dean Edell once said that a study found that health people like exersize more and thus exersize more. The 10 years increase in life due to exersize seems to high and I say this as an advocate for exersize. How did the studies separate such things.

  • J Thomas

    Floccina, they asked 60% of their subjects how much they exercised, at the start of their participation in the study. Then they asked all of them how much they exercised at the end of the study. They folded this information into a bigger combined variable. They found that having 50% more visits to doctors and 50% more hospitalisations didn’t have much effect on the bigger health variable.

    It makes sense that wouldn’t have much effect on how much exercise people said they did, doesn’t it?

  • cw

    There is some criticism of the Rand study here (, basically arguing that those participants with significant health costs were more likely to leave the study to regain full coverage, thus skewing the results. If that criticism is correct, the entire premise of the argument collapses.

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