RANDomizing the Cost of Healthcare: Economics, ‘Health Status,’ and U.S. Federal Policy

• In Event: Modeling Health Futures: Practices of Assuming, Anticipating, and Forecasting - III

Abstract

For a half century, economic research on health insurance in the U.S. has centered on the importance of ‘cost sharing,’ or the idea that individuals ought to shoulder some of the cost of their insurance. First theorized as a ‘moral hazard’ problem in the 1960s, cost sharing was tested experimentally by the RAND Corporation from 1974-1982 in one of the largest social scientific experiments in U.S. history. The RAND Health Insurance Experiment, led by economist Joseph Newhouse, modeled the ‘health status’ of participants assigned to insurance plans at different price points and found that people who share in the cost of their insurance use medical services less, with no adverse health effects. For decades, this research has informed health policy debates in the U.S. and made it difficult for reformers to promote universal healthcare as a legitimate policy goal. Using historical sources from National Archives facilities and key economists’ personal papers, this paper traces how economic knowledge about cost sharing became institutionalized in the U.S. federal policy apparatus over a series of prominent debates about healthcare reform. Drawing on insights from STS research about quantification and economic expertise, it shows that crude ways of measuring ‘health status’ did not prevent economic arguments about the importance of cost sharing from driving policy debate. The paper also considers the potential impact of the recent Oregon health insurance experiment, in which far more sophisticated tools for measuring ‘health status’ were incorporated into a study similar in scope to the earlier one at RAND.

Author

• Zach Griffen, UCLA