Unbiased Analysis of Today's Healthcare Issues

Rx: Cut U.S. medical spending in half!?!?!

Written By: Jason Shafrin - Sep• 13•07

A pair of interesting essays are available at Cato-Unbound.

Robin Hanson argues that the best way to help patients is to cut U.S. medical spending in half. He argues that there has been little evidence that increasing medical spending increases health outcomes. The best evidence comes from the RAND Health Insurance Experiment. The RAND HIE showed that “For the five general health measures, we could detect no significant positive effect of free care for persons who differed by income and by initial health status. Dr. Hanson’s solution is to “cut would be our government and corporate subsidies for medicine, including direct payments, tax exemptions, and regulatory requirements.”

David Cutler responds by worrying that Hanson’s demand side approach will compel patients to reduce unnecessary medical care (good!) but also reduce the amount of preventative and other care (bad!). For instance, patients may not buy prescription drugs to treat a disease if they are forced to pay for them out of pocket. If the patient becomes ill after not taking the drugs and needs surgery, the insurer will then pay for the operation. This is not an efficient use of resources. Dr. Cutler believes health care costs could be cut almost 50% with the implementation of “information technology, reduced errors, investment in disease management, or generation of comparative effectiveness information.” Finally, Cutler believes medicine is not as inadequate as Hanson claims, citing advances in post-heart attack treatment.

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  1. [...] Rx: Cut US medical spending in half!?!?! Robin Hanson argues that the best way to help patients is to cut US medical spending in half. He argues that there has been little evidence that increasing medical spending increases health outcomes. The best evidence comes from the … [...]