The US spends 1/6 of national income on medicine, more than on all manufacturing.In the aggregate (in studies with good controls), variations in medical spending usually show no statistically significant medical effect on health.
For example, a 2007 study (”Health care funding levels and patient outcomes“) found no significant mortality effects of funding variations across 22 U.S. Veterans Affairs regions over six years.
A 2003 study of 18,000 patients (”The Implications of Regional Variations in Medicare Spending“) confirmed a 2000 study (”Associations among hospital capacity, utilization, and mortality of US Medicare beneficiaries“), and a related 1998 study (”How Much is Enough?“), which together used a huge dataset: 5 million Medicare patients in 1989 and 1990 across 3,400 U.S. hospital regions.
Regions that paid more to have patients stay in intensive care rooms for one more day during their last 6 months of life were estimated, at a 2% significance level, to make patients live roughly 40 fewer days, even after controlling for: individual age, gender, and race; zipcode urbanity, education, poverty, income, disability, and marital and employment status; and hospital-area illness rates. The researchers estimated that a region spending $1,000 more overall in the last 6 months of life gave local patients somewhere between a gain of 5 days of life and a loss of 20 days of life (95% confidence interval).
The tiny effect of medicine is in striking contrast to the large effects of other influences. For example, a 1998 study (”Socioeconomic Factors, Health Behaviors, and Mortality“) of 3,600 adults over 7.5 years found significant lifespan effects: a 3 year loss for smoking, a 6 year gain for rural living, a 10 year loss for being underweight, and about 15 year losses each for low income and low physical activity (in addition to the usual effects of age and gender).
These studies look at correlation, not causation, between health and medicine. But not so the RAND health insurance experiment.
From 1974 to 1982 this experiment spent about $50 million to randomly assign over 2000 non-elderly families in 6 US cities to 3 to 5 years of a specific medical price, ranging from free to full price, provided by the same set of doctors. (See “The Effect of Coinsurance on the Health of Adults” and Free for All?.) Being assigned a low price for medicine caused patients to consume about 30% (or $300) more in per-person annual medical spending.
The result: “For the five general health measures, we could detect no significant positive effect of free care for persons who differed by income … and by initial health status.”
There were no significant differences in either severity of diagnosis or appropriateness of treatment between common and extra medicine.
Other studies suggest larger benefits in particular areas, e.g., immunization, infant care, and emergency care. (See “The impact of public spending on health” and “Returns to Local-Area Health Care Spending“.)
“Cut Medicine in Half,” by Robin Hanson