A Better Way to Generate Comparative-Effectiveness Research

Advocates of a new federal comparative-effectiveness agency argue that such information has characteristics of a public good, therefore markets will not generate the efficiency-maximizing quantity. However, economic theory does not conclude that government should provide comparative-effectiveness research, nor that government provision would increase social welfare. Opponents warn that a such an agency would lead to government rationing of medical care - indeed, that's the whole idea. If history is any guide, however, the more likely outcome is that the agency would be completely ineffective. A better way to generate the desired research would be to eliminate government activities that suppress private production. 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. Congress should let workers and Medicare enrollees control the money that purchases their health insurance, and 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