Can you? If we took the money donated to Watsi, let these people suffer/die instead, and used it all to solve an "underlying problem" - would it help more people?

Without a lot of research that answer seems difficult to get to. I think in the interim, helping these people is a fine use of some people's disposable income.

Also, consider that money going to Watsi does not necessarily stop money going to a different/more effective cause. Many people donating to this may not donate to a different idea, and vice versa.