The $819 billion “stimulus bill” passed by the House includes $1.1 billion that has nothing to do with economic growth and everything to do with letting government control your medical decisions: House Democrats propose to spend taxpayer dollars researching which medical services work best. The need for such “comparative-effectiveness research” is tremendous, and this work could benefit the economy–but not if it’s done the way the Democrats propose.
The Congressional Budget Office estimates that Americans waste $700 billion each year–roughly 5 percent of GDP–on services that provide zero value. Reallocating that money to productive uses would essentially make us $700 billion richer every year. Pres. Barack Obama’s budget director, Peter Orszag, testified before Congress last June that “there do not appear to be other examples that credible analysts can identify that offer a potential efficiency gain of that magnitude for the U.S. economy.”
However, the economic argument for taxpayer-funded
comparative-effectiveness research is shaky, and experience suggests that it will fail to achieve any savings. Under Orszag’s direction, last year the CBO estimated
that a measure similar to the House Democrats’ would reduce federal health spending by a mere “one one-hundredth of one percent” over the next ten years. But due to their desire to see a bigger government role in health care, Democrats persist.
One argument in favor of using tax dollars to fund comparative-effectiveness research is that the information produced has characteristics of a “public good”: Some people who didn’t invest in the research might benefit from its results. When the investments don’t reflect all the benefits, markets may fail to produce (some) research even when the benefits would exceed the costs.
The extent of this problem, however, is unclear. It is even less clear that government provision could improve on a policy of laissez-faire. Private health plans like Kaiser Permanente are powerful engines of comparative-effectiveness research, thanks to corporate structures and financial incentives that encourage such research. If the government were to provide this work at taxpayer expense, it could crowd out these private efforts.
Also, the government is not well-positioned to reduce wasteful medical spending. Every dollar of wasteful spending is a dollar of income to somebody–and that guy usually has lobbyists working to squelch unwelcome research. For the crime of producing research that questioned the value of their services, the health-care industry has already killed the National Center for Health Care Technology (d. 1981), the Council on Health Care Technology (d. 1989), and the Office of Technology Assessment (d. 1995). The Agency for Healthcare Research and Quality has twice escaped the gallows, but only because Congress effectively neutered it in 1995. Indeed, the only agencies that Congress seems capable of eliminating are those that produce comparative-effectiveness research.
Why do Democrats think this time will be different? Because Tom Daschle, nominee for Health and Human Services secretary, has a plan.
In his recent book, Daschle proposed a new federal board that would generate and use comparative-effectiveness research to make “specific coverage decisions” for all government health-care programs and “exert tremendous influence on every . . . provider and payer, even those in the private sector.”
Daschle understands that refusing to cover specific services is “not so clean cut,” that patient advocates often view those decisions as “matters of life and death,” and that “doctors and patients might resent” the board’s decisions. He therefore proposes to have the board operate under “a decision-making process that is one step removed from Congress and the White House.”
That’s a delicate way of saying that Daschle wants government bureaucrats to have more room to ignore you, even if you have good reason to think your child would respond better to a non-covered chemotherapy agent than the average patient would.
Lefty health-care blogger Matthew Holt predicts that Daschle’s rationing board, “if it gets established, will get defanged by lobbyists immediately.” House Democrats disagree: Their “stimulus” package would give Daschle $400 million to get his rationing board going.
History suggests that government money will do nothing to reduce health-care costs. And even if Democrats could create a rationing board that could deny health care to people without accountability, is that kind of savings we want?
— Michael F. Cannon is director of health-policy studies at the Cato Institute and co-author of Healthy Competition: What’s Holding Back Health Care and How to Free It. His paper “A Better Way to Generate and Use Comparative-Effectiveness Research” is forthcoming from the Cato Institute.