It is often suggested that people will spend less on health care if their health

Question

It is often suggested that people will spend less on health care if their health insurance requires them to pay some part of the cost of medical treatment themselves. One study on this issue wanted to know if the percent of medical costs that are paid by health insurance has an effect either on the amount of medical care that people use or on their health. The treatments were 4 insurance plans. Each plan paid all medical costs above a ceiling. Below the ceiling, the plans paid 100%, 75%, 50%, or 0% of costs incurred.

a) Describe briefly practical and ethical difficulties that would arise in trying to design a randomized comparative experiment suitable for this study.

b) Would an observational study be more practical here? What capability is lost using an observational study rather than a designed experiment?

Explanation / Answer

The basic principles of statistical design of experiments are:
1. Control the effects of lurking variables on the response, most
simply by comparing two or more treatments.
2. Randomize—use impersonal chance to assign subjects to
treatments.
3. Use enough subjects in each group to reduce chance variation in
the results.

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