New Cato Study Cautions against Taxpayer-Funded Comparative-Effectiveness Research in “Stimulus” Bill

Tomorrow, the Cato Institute will release my latest paper, “A Better Way to Generate and Use Comparative-Effectiveness Research.” But since there’s $1.1 billion for comparative-effectiveness research in the, uh, stimulus bill currently before the Senate, we thought we’d sneak it online now.

The high-level executive summary is this: the $1.1 billion for comparative-effectiveness research in the, uh, stimulus bill will be a complete waste of time and money.

The plain-old executive summary is this:

President Barack Obama, former U.S. Senate majority leader Tom Daschle, and others propose a new government agency that would evaluate the relative effectiveness of medical treatments. The need for “comparative-effectiveness research” is great. Evidence suggests Americans spend $700 billion annually on medical care that provides no value. Yet patients, providers, and purchasers typically lack the necessary information to distinguish between high- and low-value services.

Advocates of such an agency argue that comparative- effectiveness information has characteristics of a “public good,” therefore markets will not generate the efficiency-maximizing quantity. While that is correct, economic theory does not conclude that government should provide comparative- effectiveness research, nor that government provision would increase social welfare.

Conservatives warn that a federal comparative- effectiveness agency would lead to government rationing of medical care—indeed, that’s the whole idea. If history is any guide, the more likely outcome is that the agency would be completely ineffective: political pressure from the industry will prevent the agency from conducting useful research and prevent purchasers from using such research to eliminate low-value care.

The current lack of comparative-effectiveness research is due more to government failure than to market failure. Federal tax and entitlement policies reduce consumer demand for such research. Those policies, as well as state licensing of health insurance and medical professionals, inhibit the types of health plans best equipped to generate comparative-effectiveness information.

A better way to generate comparative-effectiveness information would be for Congress to eliminate government activities that suppress private production. Congress should let workers and Medicare enrollees control the money that purchases their health insurance. Further, Congress should require states to recognize other states’ licenses for medical professionals and insurance products. That laissez-faire approach would both increase comparative-effectiveness research and increase the likelihood that patients and providers would use it. 

Does Karen Davenport Owe Me $40?

At the National Medical Association’s 2008 Mazique Symposium in Atlanta, I made a bet with Karen Davenport.  Davenport is a lovely woman, the director of health policy at the Center for American Progress, a prominent member of the Church of Universal Coverage, and a really good sport. 

I bet Davenport $20 that I could convince her that the following two claims are true:

We agreed on three rules.  First, there would be no splitting the difference or agreeing to disagree – I would either succeed or I would fail.  Second, Davenport would be the ultimate arbiter of whether I succeeded or failed.  Third, if I failed, Davenport would have to explain why she was not convinced.

After my presentation and a subsequent exchange (mostly about the second claim), Davenport was unconvinced and she took the $40.  She made two arguments for why I failed:

  1. A crucial part of my argument – the claim by Helen Levy and David Meltzer that there is “no evidence” that expanding health insurance is a cost-effective way of improving health – is not necessarily true and is, in fact, controversial among health economists, and
  2. The lives that would be lost by adopting universal coverage (rather than a more cost-effective strategy for improving health), would be less than the lives lost during the time it would take to conduct experiments to determine which strategy is most cost-effective.

So I ask you, dear readers, to put on your thinking caps, watch the first 15 minutes of the following video, and tell me: were my arguments logically flawed, or does Karen Davenport owe me $40?

I should add that Davenport tried to give me back my $20 ante.  Naturally, I refused to accept my $20 unless it was also accompanied by her $20.

Barro on Stimulus

Harvard’s distinguished macroeconomist Robert Barro calls the stimulus bill “garbage.” From an interview in The Atlantic:

This is probably the worst bill that has been put forward since the 1930s. I don’t know what to say. I mean it’s wasting a tremendous amount of money. It has some simplistic theory that I don’t think will work, so I don’t think the expenditure stuff is going to have the intended effect. I don’t think it will expand the economy. And the tax cutting isn’t really geared toward incentives. It’s not really geared to lowering tax rates; it’s more along the lines of throwing money at people. On both sides I think it’s garbage. So in terms of balance between the two it doesn’t really matter that much.

Hat tip: John Samples

December Student Op-Ed Winners

Congratulations to the first winners of the Cato on Campus Op-Ed Contest: Mytheos Holt and Šimon Franěk! Their op-eds, both dealing with environmental policy, tied for the December 2008 Cato on Campus Op-Ed Contest.

Mytheos is a junior at Wesleyan University. Citing Cato Senior Fellow in Environmental Studies Patrick Michaels regarding the dangers of excessive environmentalism, Mytheos’s op-ed, “Burning the Greenbacks to Save the Greenhouse,” was published by the California Independent Voter Project.

Šimon is an 18-year-old student at Gymnasium Kladno in the Czech Republic. Citing Patrick Michaels to refocus the global climate debate, Šimon’s op-ed, “Climate Change vs. Liberty in Europe,” calls attention to the politics behind global warming and the need to consider the ramifications of policy decisions based on global warming.

Mytheos and Simon were each sent autographed copies of Patrick Michaels’ books Meltdown: The Predictable Distortion of Global warming by Scientists, Politicians and the Media and Climate of Extremes: Global Warming Science they Don’t Want You to Know (just released in January). Their op-eds will also be considered for the Cato on Campus Op-Ed of the Year, with a chance of receiving a full scholarship to Cato University.

Submit your work to one of three Cato student contests.


Holder Takes a Small Step toward State Secrets Reform

Brian Beutler, guest-blogging for Matt Yglesias at Think Progress this week, takes a look at the steps the new attorney general, Eric Holder, is taking on the state secrets front. The Supreme Court case that established the modern state secrets privilege involved a lawsuit against the Air Force by three widows whose husbands had died in an aviation accident. The government convinced the Supreme Court that revealing information about the crash to the plaintiffs would endanger national security. But Beutler points out that there was just one problem:

The government lied. Contrary to its claims, the bomber wasn’t on a secret mission, and there were no top secret technologies aboard. Nothing in the incident report, which was declassified several years ago, legitimized the government’s decision to withhold it. What the report did contain, however, was evidence that the plane had been rather poorly maintained–a fact that might have been embarrassing for the Air Force, and vindicating for the dead mens’ wives, but that hardly amounted to a legitimate claim of state secret.

Unfortunately, the Supreme Court’s ruling is still controlling precedent, and the Bush administration used the state secrets privilege for maximum legal advantage, routinely asserting it in cases related to national security. Attorney General Holder has promised to review these assertions and withdraw those that are not “legally appropriate” circumstances.

This is good as far as it goes, but I agree with Beutler that it doesn’t go far enough. It’s nice to have responsible leaders in the executive branch who don’t abuse their powers, but it’s far more important to put laws in place that will prevent irresponsible leaders from abusing those powers in the future. In the case of the state secrets privilege, that means legislation narrowing the privilege to cases where there’s a genuine danger to national security and giving judges the power to review the relevant secrets in private to verify that it’s being invoked legitimately. Maybe that won’t matter while Eric Holder is in office. But even if Holder doesn’t abuse the state secrets privilege, it’s a safe bet that some future attorney general will. Reforming the privilege now, while memories of Bush administration abuses are fresh, is urgently needed.

The poster child for state secrets reform should be the ongoing Al Haramain case. An Islamic charity accused of funneling money to terrorist organizations was inadvertently handed a document that contained evidence that the government had spied on the charity without proper legal authority. When Al Haramain sued the government for this apparent violation of the law, the government made the astonishing argument that the document’s very existence was a state secret, that Al Haramain must return its copies of the document, and that therefore Al Haramain had no standing to sue the government because it had no evidence that it was the target of illegal surveillance. While we don’t know exactly what was in the document, it appears that rather than containing genuine state secrets, it simply contains politically-embarrassing evidence that the government has been conducting an illegal domestic surveillance program. The law should be changed to make it clear that the government can’t use the state secrets doctrine to get politically embarrassing evidence thrown out of court. And the law should explicitly give judges the power to review secret evidence in for themselves (in private and with appropriate security precautions) and judge for themselves whether the evidence merits state secret protection.

Attention Struggling Workers in New York State…

Click here to see a good example of how your state government is spending your money.

For those disinclined to click, the headline reads: “State employee: I get $93,803 for no work.”

If I were a taxpaying New Yorker I would be miffed that a state employee was getting paid $93,803 to work.

Of course, defenders of state government employees will dismiss this story as an anomaly.  But a key paragraph in the story indicates why societal drains like Mr. Hinton are more common in state bureaucracies than one might think:

“He [Hinton] said he has essentially done very little work since about 1999 but has a competitive civil service position so that he is protected should layoffs occur and cannot be fired without due process, unlike the political appointees occupying posts he seeks.”

Having worked in the “management” side of state government, I can attest that due process for state employees = incompetence insurance.