Cato Unbound

Let Go of the Medical Monkey Trap

By Robin Hanson
September 18th, 2007

It is said you can trap a monkey by putting a nut through a small hole in a gourd. The monkey reaches in and grabs the nut, but then his fist won’t fit back through the hole. Greedy monkeys will literally let themselves be caught rather than let go of the nut. So far, no commenter on my essay seems willing to let go of the nut of effective medicine, held in the gourd of the second half of medical spending.

As an analogy, imagine you ran a software company, whose many offices had different wage levels and work cultures, with average work hours ranging from seven to fourteen per day. Surprised to see these offices were equally productive, you randomly changed wages, inducing changes in work hours. You again found offices that worked more did not produce more; after seven hours people got tired and added as many bugs as they fixed. If instead of just cutting wages to get only seven hours of work, you just told everyone “watch out for bugs,” you would be in a monkey trap, refusing to let go of the nut of productive work in the gourd of extra work hours.

[1] I challenged health policy experts to “publicly agree or disagree” that “it has long been nearly a consensus” that since “variations in local medical culture … [and] prices” produce spending variations with little apparent relation to aggregate health, “if we were to reduce medical spending via a [similar large] disturbance … [this would] reduce helpful and harmful medicine in roughly equal amounts.”

Cutler [2] seems at first to agree, saying “if the high spending areas were brought to the level of the lower spending areas … we could save 25 to 30 percent of Medicare spending.” But then he says higher prices are “wrong” because they do not “separate the good from the bad” as “consumers appear to cut back indiscriminately,” such as stopping drugs. Instead Cutler wants “carefully targeted evaluations” of better “supply side policies.”

Goldman [3] agrees “the role of medicine has been overstated,” but also rejects higher prices because it “isn’t enough” to eliminate waste, as patients are “as likely to reduce appropriate as inappropriate care.” Instead, “we should be spending a lot less in some areas, but also spending a lot more elsewhere.”

Garber [4] says my “diagnosis … is not particularly controversial” but rejects “policies that would heedlessly cut high-value benefits along with the low-value marginal benefits.” He instead wants “changes … to promote high-value care” though these “are inevitably more complex, and we are still learning which approaches will work best.”

Shannon Browlee’s [5] Overtreated, published today, argues “between 20 and 30 cents on every health care dollar we spend goes towards useless treatments and hospitalizations.” Yet even she will not support crude price increases or spending caps (personal email).

Bloggers [6] Matt Yglesias and [7] Ezra Klein reject higher prices because “patients … will just cut care indiscriminately.” Tyler Cowen [8] similarly shrugs “I’m not sure what mechanism will get rid of the bad half” of spending. ([9] Arnold Kling, [10] Bryan Caplan, and [11] Seth Roberts seem more sympathetic, but take no explicit position.)

I’m all for finding better ways to favor helpful over harmful medicine, but since we have no consensus on how to do this, why must this distant possibility stop us from publicizing and acting now on our consensus that we expect little net health harm from crude cuts?

Critics seem to me to suffer a “leave no man behind” obsession that makes the best the enemy of the good. No one seems to have denied that there would be little or no average health cost from simple crude cuts, like price increases and spending caps, which could, for example, give us all a 4% raise by cutting one quarter of medical spending. “Indiscriminately” cutting helpful and harmful medicine in equal measure can save big on spending. Yet no one seems willing to endorse such gains. It looks like a medical monkey trap; the option to run free of the extra spending gourd seems intolerable compared to the hope of extracting the nut of effective medicine from that gourd.

But apparently I stand alone; what am I missing? Help me see your reasoning. Please, pick one or add another:

One last comment: In [12] the RAND experiment all patients got common medicine while only patients who faced lower prices got extra medicine. Since extra medicine had little health value, if medicine has a big average value, then common medicine must be more valuable than extra medicine. Since patient choices determined common versus extra medicine, patients were by definition able to distinguish them. Doctors, however, could not distinguish them. For example, doctors rated both types of medicine as the same appropriateness of care and severity of diagnosis. Thus patients were actually better quality discriminators than doctors.

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[1] I challenged:
[2] seems at first to agree:
[3] agrees:
[4] says:
[5] Overtreated:
[6] Matt Yglesias:
[7] Ezra Klein:
[8] similarly shrugs:
[9] Arnold Kling:]
[10] Bryan Caplan:
[11] Seth Roberts:
[12] the RAND experiment:

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