This commission, if it sticks to its statistical mandate, will be able to recommend many more possible cuts than any vote-maximizing administration will be likely to make. Some other principle will be used to determine cuts. Many defenders of the Obama administration are overestimating how scientific this process will be.
1. I have proposed that the government charter a commission to do research on cost-effectiveness of treatments. I did so in this essay and in my book.
2. I assumed a need for government involvement because of standard public-good arguments. Pure statistical research on the outcomes from different medical protocols is a good from which everyone can benefit, whether or not they pay for it.
3. There are strong incentives for interest groups to try to distort the results of a commission. But those incentives exist whether or not the government is involved. When there are private evaluation systems, people try to distort them also--AAA-rated mortgage securities come to mind.
4. I think that people vastly oversimplify the problem of selecting medical protocols. I cringe every time Peter Orszag speaks in binary terms (for example here where he calls for "more research into what works and what doesn't.")
The research will not divide protocols into "what works and what doesn't." Instead, it will provide probabalistic data. It is not going to tell you that Barack Obama's grandmother's hip operation will be futile. It is going to give you some estimate of the probability of its futility.
Orszag makes it sound as if research will separate treatments into those that work 100 percent of the time and those that work 0 percent of the time. All of the really interesting cases fall somewhere in between.
5. The problem becomes even more complex when you do marginal cost-benefit analysis. For example, suppose that you can prevent 80 percent of colon cancers with a very expensive protocol, and you can prevent 50 percent of colon cancers with a much cheaper protocol. On average, compared with doing nothing, the cost per life saved for the expensive protocol might be, say, $800,000, and you might be ok with that. But when you take into account the cheaper protocol, the cost per marginal life saved of the more expensive protocol might be $2 million, and that's starting to look steep.
6. Which brings up the question of whether the commission should (a) just oversee the studies and publish the results, (b) make recommendations based on the research, or (c) issue regulations that go beyond recommendations. I favor (b), because I think that people could use some expert guidance on issues like decision-making under uncertainty and marginal cost-effectiveness.
It may very well emerge that insurance only pays for treatments that fit with government recommendations, which gives those recommendations a lot of clout. Only if you are paying your own nickel can you get non-recommended treatment. I am ok with that, in part because I think that paying your own nickel should be the norm rather than the exception.
7. Which leads me to the important point. Doing research on medical effectiveness gives people the means to restrain their use of medical services, but it does not give them the motive. For a treatment with high costs and low expected benefits, the research is going to say, "the probability that this achieves the desired outcome is x." If x is greater than zero, and you're spending someone else's money, then you are motivated to get the treatment. So to stop people from getting treatment you either have to change the health insurance system to have higher co-pays and deductibles (my preferred approach) or you need to suppress treatments bureaucratically (the solution to which health care reformers are headed, although they will not admit it).
8. Medical decisions are going to be difficult to make. I believe that statistical information provided by a central source can help. However, the doctor who sees you will have valuable local information that the bureaucrat lacks. And you have information about your risk preferences that the bureaucrat lacks. That is why I prefer to see individuals make decisions, taking expense into account, to having decisions made by remote bureaucrats.