Right... and there are a lot of reasons guys fail... this is just one. I can't think of many guys where it was just the flagged health issue that made them fail.. Jonathan Bender is the first name that comes to mind but I'm not sure if he was flagged. The rest of the guys like Perry Jones... they just sucked at basketball. DeJuan Blair had a decent run for a guy picked in his range and I think he had no Meniscus' in his knee. There have been guys like Oden I guess but at the top of the draft I think its something I'd be more cautious with than in the end of the first and second round.I'd say that the issue of health prognostication is a lot like talent prognostication. Everyone familiar with the draft has enough experiencing in seeing how some "sure things" never pan out (and not infrequently) and how other guys on nobody's radar end up with solid careers. For those younger or newer to the draft, they may view pre-draft prognostication as a much more sure thing that what it is in reality, and for people who haven't had as much go around in this (I'm talking about fans), it creates a lot of rabid animosity surrounding something so uncertain. The executives all have (or should have) the pie-in-the-sky beaten out of them and have a much more grounded and realistic understanding of the uncertainty you're dealing with. But the medical side of this is where they enter into another realm where they have little context and experience and end up, in a way, reverting back to how a draft novice would approach prognostication from the basketball side, and may become much more black and white in their thinking. Health is obvious an important thing that you need to obviously look at, and in a number of circumstances there legitimately are the red flags there that are almost certain to be issues later down the road. But for a lot of other scenarios, the issues need to be considered but in conjunction with a healthy dose of agnosticism to keep things grounded, and not be the health-prognosticating equivalent of that 18 year old who just started following the draft. Harder to do without that requisite experience, but resisting the wind blowing from allowing what others are doing to influence your assessment can give one an advantage in many scenarios (and can hurt them in others).
tl;dr draft prognostication of basketball and draft prognostication of health are similar, with very few certainties. We're obviously much more acquainted with the basketball side and acknowledge the uncertainties, whereas earlier on in ones experience they may not be. On the health side the way we often behave is more on the inexperienced side and we fail to grasp the uncertainties and weigh them too heavily (whichever side it may be on).
I think I'd have it lower on the list of considerations than most I guess. I think skill, intelligence, size, athleticism, work ethic would all be things I'd put before most types of red flags. The risk tolerance likely shifts somewhere in the late teens where the red flags just don't matter as much to me because its already a pick that is likely to not become a good nba player.