RAND Health Insurance Experiment II
I reported yesterday on the RAND health insurance experiment:
Thousands of people randomly given free medicine in the late 1970s consumed 30-40% more medical services, paid one more "restricted activity day" per year to deal with the medical system, but were not noticeably healthier. So unless the marginal value of medicine has changed in the last thirty years, if you would not pay for medicine out of your own pocket, then don’t bother to go when others offer to pay.
The extra medical care induced by free medicine seems to have no health value. But what do we know about the value of common medicine, used by both those with free medicine and those who shared costs in this experiment? From a recent summary:
Cost sharing reduced the use of effective and less-effective care across the board. …. For hospitalizations and prescription drug use, cost sharing likewise reduced more-effective and less-effective care in roughly equal amounts for all participants. … the experiment measured … the appropriate use of visits and diagnostic tests by providers and the appropriate use of therapeutic interventions after participants sought care. … cost sharing did not significantly affect the quality of care received by participants.
People with free medicine made 30%+ more doctor visits than those who had to pay, but those extra visits were not just trivial visits for sniffles or warts. The extra visits were just as often to the hospital, their condition was at a similar "stage of disease presentation", and the treatment was later evaluated by panels of doctors to be just as appropriate.
By all of these measures extra and common medicine looked the same to doctors. So if common medicine is more valuable than extra medicine, it must be that patients somehow know when they really need help, and make sure to get care no matter what the cost.
Over 300 publications resulted from the RAND experiment. The best single source is the 1996 book Free for All?
If people knew that they weren't going to get medical care, could they not have been more careful, resulting in better health? Is this accounted for in the study?
Denis:
"the marginal value of medicine is zero" means that the value of more medicine than you are willing to pay for is zero. Whether this corresponds with as much as you need is an issue of contention.
Obviously for any non-free medicine a person (however rich or poor they are) will have to sacrifice whatever else they would have done with the money, so there will be an effect on their other consumption (school, whatever). Subsidised medicine will undeniably relieve this. However it will also compel them to use a lot more medicine, the benefit of which appears to be zero (at a large cost). Perhaps it would be better to just give them the money in welfare to cover the potential effects on schooling etc. and not pay for all the useless medicine. A usual argument for not doing this (people will spend it all on other things and still have no healthcare) is irrelevant if these costs of not having money for healthcare are borne by their lifestyle (where they are presumed to have spent the money).