It is heartbreaking to just say no - that seems a sufficient explanation. When we want to believe so strongly that we can't even stand to consider that it might not work, well that will create terrible incentives for people to actually make it work. So let's turn it around - what else can't we stand to say no to? How about parenting - we can't stand to not help our kids. Judith Harris says we have little effect on them, at least on how they act with others. And we can't stand to not send everyone who wants to college - that may not help much either.
The remarkable observation that medical spending has zero net marginal effect is shocking, but not completely unprecedented.
According to Spiegel in "Too Much of a Good Thing: Choking on Aid Money in Africa", the Washington Center for Global Development calculated that it would require $3,521 of marginal development aid invested, per person, in order to increase per capita yearly income by $3.65 (one penny per day).
The Kenyan economist James Shikwati is even more pessimistic in "For God's Sake, Please Stop the Aid!": The net effect of Western aid to Africa is actively destructive (even when it isn't stolen to prop up corrupt regimes), a chaotic flux of money and goods that destroys local industry.
What does aid to Africa have in common with healthcare spending? Besides, of course, that it's heartbreaking to just say no -