Unbiased Analysis of Today's Healthcare Issues

RAND HIE…The Sequel

Written By: Jason Shafrin - May• 16•07

Robin Hanson has spent the last week blogging on his Overcoming Bias website asking individuals to sign a petitions to redo the RAND Health Insurance Experiment (HIE). For those who do not know what the RAND HIE, Mr. Hanson has two posts (#1 and #2) describing the experiment. I agree with Mr. Hanson when he states “If you remember only one medical study, it should be the RAND health insurance experiment.”

But is a new RAND-style HIE needed? The Overcoming Bias site states that the purpose of a new HIE would be to “…try to make clear the aggregate health effects of variations in aggregate medical spending, variations induced by feasible regimes of quality control, including free patient choice induced by a varying aggregate price.” The proposal is for a study to randomly assign 10,000 people to different insurance types (or to no insurance) and follow them over 10 years. Mr. Hanson claims that this will cost 1/2 billion dollars over the 10 years. This seems reasonable, but possibly a little conservative—it is equivalent to purchasing $5000 worth of health insurance for 10,000 people each year for 10 years. Is it worth it?

As a researcher, I of course would love to be able to have access to new, high-quality data from a randomized controlled trial. On the other hand, I do not like the idea of spending 1/2 billion of taxpayer dollars (or private foundation money). One could be using these funds to feed the poor, provide medical care to the sick, or spend the money researching for new cures.

In the end, I think repeating the RAND HIE for the 21st century will be a worthwhile endeavor, and I have decided to to sign the petition. By conducting this RCT, we can see how much (if at all) health insurance improves health levels. A RAND-styled RCT could separately look at difference forms of care: preventative care, primary care and specialist care. According to a Health Affairs article by Catlin et al. (“National Health Spending in 2005“), government spending reached $902.7 billion in 1995. Of this, $342 billion was spent on Medicare and $313.1 billion was spent on Medicaid. With these astronomical figures at hand, one can see that 1/2 billion dollars over 10 years is only $50 million per year–less than 0.01% of public health care spending per year. If this cost figure is too high for some people, I think a sensible thing to do would be to reduce the sample size to between 7500-8000 people instead of the 10,000 proposed by Mr. Hanson. Nevertheless, Americans need to know what they are getting in exchange for their dollars used to finance Medicare, and Medicaid as well as their own purchases of private health insurance.

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  1. Michael Scheltgen says:

    Of course the original Rand “experiment” was flawed by the fact that participants were assured of ex post compensation.