Robin Hanson has a fondness for bold, outlandish claims so I think his argument that half of all medical spending is waste seems overstated. Nevertheless, the general shape of his point is something I certainly agree with -- an awful lot of medical spending is wasteful, and spending money on medical care isn't a particularly effective way of improving the health of the population. I'm taken with this opening metaphor:
Car inspections and repairs take a small fraction of our total spending on cars, gas, roads, and parking. But imagine that we were so terrified of accidents due to faulty cars that we spent most of our automotive budget having our cars inspected and adjusted every week by Ph.D. car experts. Obsessed by the fear of not finding a defect that might cause an accident, imagine we made sure inspections were heavily regulated and subsidized by government. To feed this obsession, imagine we skimped on spending to make safer roads, cars, and driving patterns, and our constant disassembling and reassembling of cars introduced nearly as many defects as it eliminated.
The crux of the matter, is that while there certainly are specific areas of medicine where you see a lot of efficacy (Hanson names "immunization, infant care, and emergency care") there are also a lot of areas where you don't see it. Moreover, while the current American policy environment is stingy about health care in some regards, Medicare is a very generous program and the tax treatment of employer-sponsored health care is, de facto, a giant and totally untargeted subsidy for the consumption of medical care. Obviously, though, health care policy has a "health" dimension but also a social justice dimension so even though a libertarian like Hanson and a liberal like myself can agree about this basic point this still leads in various directions.
For one example, see the centrist authoritarianism of Philip Longman's "TheHealth of Nations" for one approach to the phenomenon Hanson's pointing to. Alternatively, there's the wonky social democracy of Brad DeLong's impractical scheme or some versions of Jason Furman's progressive cost sharing proposal.
Be that as it may, I think Hanson's observation that "humans long ago evolved a tendency to use medicine to 'show that we care,' rather than just to get healthy" partially explains why things like the UK's National Health Service generate so much bang for the buck. In effect, a highly centralized state run health care system is able to put a cap on how much demonstrative caring can be done through the health care system. Nobody's going to say to his or her spouse, "well, sure we could afford the procedure, but it doesn't really stand up to cost-benefit analysis compared to spending the money on organic produce for the kids" but if bureaucrats stand in your way well, then, that's hardly your fault.
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