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Kevin Drum pushes back
The healthcare front is harder to judge. I agree with Tyler that we waste a lot of money on healthcare, but at the same time, I think a lot of people seriously underrate the value of modern improvements in healthcare. It’s not just vaccines, antibiotics, sterilization and anesthesia. Hip replacements really, truly improve your life quality, far more than a better car does. Ditto for antidepressants, blood pressure meds, cancer treatments, arthritis medication, and much more. The fact that we waste lots of money on useless end-of-life treatments doesn’t make this other stuff any less real.
Matt Yglesias cosigns
I think that’s spot on. The consumer surplus involved in successful medical treatments is gigantic. Indeed, I would say that’s probably a good start at an explanation for whythere’s so much waste. But from a policy point of view this is why I often find myself moored between the impulse to “control costs” and the impulse to “expand access.” What I really want to do is promote good health and there are an awful lot of things we could do to do that at very low cost.
Points well taken and I’ll both backpedal a bit and clarify a bit.
First, yes there are big quality of life improvements that don’t show up in our life expectancy data. Treating pain and emotional distress, of many different forms, is at least as important as extending life and our system has made great strides in doing that.
I want to completely concede that the treatment of pain has improved drastically and that has made a world of difference.
Second, I want to clarify about major breakthroughs. People talk about statins, beta-blockers, chemotherapy, radiation therapy, etc in the treatment of our two major killers, cardiovascular disease and cancer. However, the actual dent these things make in like expectancy is small.
Take statins, which are one of the major weapons in the fight against heart disease. Even the published results in JAMA suggest that the number of people who have to be on statins to prevent a single person from having a single coronary event is between 44 and 258.
However, real world results almost always are worse than trials, not all coronary events are fatal, and the prevention of a coronary event only extends life expectancy if the patient doesn’t die of something else in the mean time. Which makes our frontline weapon not that effective in actually extending life.
Contrast this to penicillin in the treatment of Scarlet Fever. The number to treat is basically one. See a case of Scarlet Fever, administer penicillin. Nearly a fifth of all the people who contract the disease would die from it with no treatment. With treatment almost no one does. The extension in life can be many decades if the disease in contracted in the teens or twenties.
Statins don’t do this. Beta-blockers don’t do this. Chemotherapy in the treatment of cancer doesn’t do this. And, keep in mind these are treatments. Much of our health care dollars are spent on diagnostics. For diagnostics to have any life extending value at all you have to find something, which usually you don’t.
Diagnostics are particularly vulnerable to my critique. People feel reassured when the doctor walks in and says “the MRI was clear.” However, the docs could rephrase this as “I just spent $2000 of your money and its going to make no difference in your health outcome whatsoever, yeah!”
I think I have complained about decision trees before, but people confuse changes in their information set with changes in the state of nature. That a diagnostic procedure comes back negative doesn’t make you healthy, it just reduces your uncertainty about a predetermined fact.
Whatever was true before is true now. We just have more information. Was that information worth $2000? That depends crucially on what we do with it. However, if what we do with it is usually nothing and sometimes to initiate a treatment which will only have an effect in 1 out of 50 cases, then we really have question what we are doing here.
One of the obvious areas where Tyler’s thesis will run into controversy is in Medicine. Medicine is the most obvious place to look for innovation outside of the information sector.
Its also where a big chunk of the middle America’s paycheck has gone. Its not much of a stretch to say that if you think medicine has done a lot of good then you think the last 30 years have been good for the average American. If not then not.
Here I tend to side with Tyler. I don’t think most medicine has done that much good and I am not optimistic about the usefulness of most future medical spending.
This is not to say I don’t think there will be important breakthroughs. I think there will and the next fifty years will be exciting on that front. Its just that along the way we will dump a bunch of GDP down the drain, paying for medicine that is not so good.
The question is why are we doing this?
I have struggled with this. Is it because medical breakthroughs are reaching diminishing marginal returns. That doesn’t seem right because quite frankly there weren’t that many breakthroughs in the past.
We have vaccines, antibiotics, sterilization and anesthesia. That’s about it for really big time breakthroughs.
The view I subscribe to currently is that most people don’t care that much about increasing their life expectancy, they care about being cared for and being cared about. They care about reassurance and they care about feeling like they are not alone.
We can see that people don’t care that much about maximizing their life expectancy because they place an enormous premium on their doctor’s bedside manner and a much smaller premium on his error rate. We can see that when objectively bad doctors who are nice rarely get sued for malpractice, while much better doctors ,who are assholes get sued all the time.
We can see that when we offer potential surgical patients stats on the number of fatalities at prospective hospitals and they refuse them. We can see that when message boards about doctors are filled with comments like “He really understood me.” “She took the time to stop and listen. “ “I knew they cared about whether I got better” “I was more than just a number.”
These are not comments about the skill of the medical provider but about the caring of the medical provider.
Now, when I present this stuff to my students they often say: but a doctor who cares will do a better job and so you are more likely to live longer.
Lets ignore the fact that if this were true it should be captured in the doctors’ stats. Suppose that it is true. Then why in the world are we investing all of this time an energy selecting really smart students and then putting them through years and years of training if the main thing that matters is how much the doc cares?
Dealing with this is a real puzzle. Though I am a free market person, I see the price system’s big advantage is that it conveys information. In medicine virtually no information is conveyed through price. People at all levels are confused about what they really want or what we should do.
For example, when I speak with doctors the issue of non-compliance often comes up. This is typically to explain why treatments that look good in clinical trials don’t work out as well in real life.
Non-compliance is the issue of getting patents to go along with some aspect of the treatment they don’t want to go along with. I argue that if the treatment only works if the patient does something that he or she isn’t going to do, then the treatment doesn’t work. Doesn’t matter what JAMA says. To the docs I say, you go to war with the patients you have, not the patients you wish you had.
To society at large, however, I say, we have to rethink what we are doing here. Ultimately, we want to make sure that we are spending money to make someone better off. If the doctor is complaining, the patient is complaining, and either the insurer or the government is getting a huge bill, then exactly who are we serving here?
It’s my inclination to be drawn to studies showing that we waste money on medical care. This is probably because the fact that so much medical care has no impact, or worse, on actual health outcomes is a underappreciated and counterintuitive truth than the fact that some medical care has benefits that exceed costs. Even after reading many of them, marginal studies showing the former are still always more interesting to me than the latter. But it’s important to focus as well on studies that demonstrate places where medical care has real value.
In this vein, an abstract from a new paper in The Quarterly Journal of Economics has really stuck with me all week for it’s empirical ingenuity and it’s results:
A key policy question is whether the benefits of additional medical expenditures exceed their costs. We propose a new approach for estimating marginal returns to medical spending based on variation in medical inputs generated by diagnostic thresholds. Specifically, we combine regression discontinuity estimates that compare health outcomes and medical treatment provision for newborns on either side of the very low birth weight threshold at 1,500 grams… Under an assumption that observed medical spending fully captures the impact of the “very low birth weight” designation on mortality, our estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1,500 grams is on the order of $550,000 in 2006 dollars.
ADDENDUM: See Mark Thoma in the comments. The paper’s results may actually be spurious. So much for some good news.