The basic idea is that the placebo effect is extremely powerful.
Does that mean we should give everyone placebos?
No...one of the commenters hits the nail on the head here:
if this is any example of how the left thinks we are really screwed. No one is suggesting we give people placebos. There is no way to ovecome the liability issue. What it proves is when people are not responsible for the cost and spending smeone elses money even faux treatments will garner positive results.
A patient paying for these drugs would make more accurate and informed decisions. It's detaching consumption from responsibility that is killing our system.
Now, other commenters point out that the "placebo effect" doesn't hold for anything besides pain and low-level depression. One wonders, though, how much health care we get that provides little additional value to the person's quality of life because the marginal cost is very low (since insurance covers it, whatever "it" is).
Hence, the rationale behind high deductible health care plans. People have to actually pay for the less costly treatments they need, but, if something REALLY goes wrong, they'll be covered.