Which half?

By Megan McArdle

There's a lot of very good stuff in Robin Hanson's provocative essay arguing that half the money we spend on health care is wasted. Overall, I think he has the better of the argument; probably, excess health spending doesn't much change outcomes. But I'm less sanguine than he is at the notion that we could simply slash our spending in half.

Mr Hanson's argument is that above a certain basic level, there's no evidence that extra spending improves health. Some procedures above that make you healthier, but other unnecessary procedures make you less healthy; the overall effect is a wash. I'm fine with that conclusion, too. But he argues that cutting those extra expenditures wouldn't impact innovation. There, I'm less convinced.

It would seem natural that the procedures most likely to have dubious health value are the newest procedures, where benefits and side effects have yet to be fully explored. So while current spending might not do you any good, it is providing the knowledge that will do others good in the future.

This suggests that on health costs, Americans are leaning in to the strike zone and taking one for the global team: spending a lot on procedures of dubious value, so that others can incorporate the valuable ones into their health systems. Yet another reason that I think my European friends, if they know what's good for them, will stop extolling the virtues of a cheaper single-payer system to us, and start telling us how awful it is, nothing we'd ever want to try.

This article available online at:

http://www.theatlantic.com/business/archive/2007/09/which-half/1950/