"More Is Better" Spending: Effective?

Who knows?

That's the conclusion drawn by Arnold Kling, author and essayist in TCS today. His topic is not "education" nor "war on poverty," but health-care--another field in which the "More Is Better" school seems to have a solid grip.

In the process of writing Crisis of Abundance, my book on U.S. health care policy, I came across study after study that indicated that intensive utilization of medical services has little effect on aggregate outcomes. For example, Dartmouth Professor John Wennberg and colleagues have found very different levels of utilization by Medicare patients in different regions, but with similar health outcomes.

What these studies suggest is that we are sending patients to specialists, to hospitals, and for expensive diagnostic tests without knowing when this is cost-effective and when it is not. In a nation where health care spending as a share of income has roughly doubled over the past thirty years, and where consumers are more than 85 percent insulated from the cost of health care (because 85 percent of personal health care spending is paid by either private insurance or government), ignorance about cost-effectiveness is a major economic concern.

It is fair to argue that "over-care" is licit in the face of malpractice concerns--but how much is "enough"? How much is pure waste?

I think that many people would prefer not to have the answers to these sorts of questions. For the most part, consumers and taxpayers would rather not know whether education, health care, and foreign aid are cost-effective. Instead, people would rather "trust the experts" and attribute high skill levels to educators, doctors, and aid agencies. And, of course, the experts would like us to continue to pay their salaries without questioning their results. As on many other issues, in seeking cost-benefit analysis economists are fighting an uphill battle.

Back a hundred years ago, my parents were always suspicious of the MD's who prescribed pills for whatever seemed to be an ailment. I think they recognized that some diseases simply ran their course and went away--without any assistance whatsoever from the MD's.

But preferring total ignorance about the efficacy of 15% of the GNP doesn't seem to be a prudent course, does it?