Hanson's argument is certainly compelling. I haven't had much exposure to the practice of medicine, but based on the few patients I've seen (and mostly on the clinical cases we go over in class) it seems obvious that so much of what is spent on medical care in this country could be prevented if people would take care of themselves — for example, most people don't need a kidney transplant because they acquired a bacterial infection that went septic or were born with a rare genetic defect . . . . [I]nstead it's often due to diabetes or hypertension, which in most cases are prevented through a healthy lifestyle.
Indeed, as we are currently going over infectious diseases, I can't help but think how much must be spent each year on hospital-acquired infections — particularly because they are often resistant to older drugs, and require newer and more expensive inpatient treatments to cure . . . and of course lead to all sorts of nasty complications that must also be treated. (Note to self: don't ever get admitted to the hospital and have various catheters and IVs inserted unless absolutely necessary!). And of course, there are the numerous medical procedures performed everyday that probably have little to no benefit — I can't tell you how many times I'm told we need to learn how to properly conduct a physical exam, only to be followed by "but nowadays we just order an MRI / CT scan / ultrasound / other fancy imaging just to be sure." (!)
I think Dana Goldman and David M. Cutler place a lot of emphasis on the medical innovations that have occurred since the RAND study, and while I agree that a lot of really cool and lifesaving technology has been invented since that study, it seems likely (to me) that the returns have been small compared to the gigantic costs (which seems to be the argument Hanson makes). As several of them mentioned, in order to cut costs intelligently, you would need to distinguish between low-quality and high-quality care. My problem with that argument is, as always, who gets to decide what is low or high quality? Take the example of atherosclerosis — certainly the cardiologists will argue the importance of their catheterization labs and use of stents, while a PCP may suggest a good medication and continuity of care instead (and the surgeon might recommend bypass surgery). Each could probably come up with convincing studies to suggest their treatment is correct — do they get to decide, or does some committee, or does the patient?
I'm also not convinced that Medicare FFS rates could be effectively changed, as Alan Garber briefly hints at — physicians will still find ways to game the system (consciously or not), and it is unlikely that a large program such as Medicare will ever be able to accurately distinguish between high and low quality while also taking into account the individual needs of the patient. You could probably scale back the medical field to vaccines, antibiotics, prenatal care, and emergency (trauma) care, and not see a change in community health status that couldn't be overcome by lifestyle changes.
Don't get me wrong — I think that a lot of the research being performed (particularly in identifying the genetic components of disease) is really promising from a medical perspective, but asking if it is cost-effective is a different story. That's why economists seem less biased than doctors — economists see the entire population, while doctors only look at their patients who often are the sickest of the bunch and want to do everything in their power to help. They're caring and intelligent people, but not always rational in resource-usage. And of course, most patients don't want them to be — a sick patient often wants to do everything possible to save/prolong their life — this is expected.