January 26, 2010 3:23PM

Groopman on How Behavioral Economics Undermines the Case for Central Planning

In The New York Review of Books, oncologist and author Jerome Groopman delivers a stunning rebuke to those in the Obama administration (read: OMB director Peter Orszag) who think the federal government can improve health care quality by telling doctors how to practice medicine:

in the Senate health care bill…Doctors and hospitals that follow “best practices,” as defined by government‐​approved standards, are to receive more money and favorable public assessments. Those who deviate from federal standards would suffer financial loss and would be designated as providers of poor care…

Over the past decade, federal “choice architects”—i.e., doctors and other experts acting for the government and making use of research on comparative effectiveness—have repeatedly identified “best practices,” only to have them shown to be ineffective or even deleterious.

For example, Medicare specified that it was a “best practice” to tightly control blood sugar levels in critically ill patients in intensive care. That measure of quality was not only shown to be wrong but resulted in a higher likelihood of death when compared to measures allowing a more flexible treatment and higher blood sugar. Similarly, government officials directed that normal blood sugar levels should be maintained in ambulatory diabetics with cardiovascular disease. Studies in Canada and the United States showed that this “best practice” was misconceived. There were more deaths when doctors obeyed this rule than when patients received what the government had designated as subpar treatment (in which sugar levels were allowed to vary).

That’s just one of many examples Groopman offers of where government planners have gone awry. He concludes:

Ironically, the failure of experts to recognize when they overreach can be explained by insights from behavioral economics…

The care of patients is complex, and choices about treatments involve difficult tradeoffs. That the uncertainties can be erased by mandates from experts is a misconceived panacea, a “focusing illusion.”

Come to think of it, Groopman makes much the same case as I did in my article, “Pay‐​for‐​Performance: Is Medicare a Good Candidate?” (Yale J. Health P. Law & Ethics, Vol. 7, issue 1: Winter 2007): evidence‐​based medicine is essential, but variation in disease burden and patient preferences (read: values) makes it impossible for central planners to define quality accurately.

Read the whole thing.