Crisis of Abundance – Arnold Kling (2006)

Crisis of Abundance - Arnold Kling

I’ve been thinking about American health care recently, and thought this book Crisis of Abundance would be a useful read – and it was. Arnold Kling’s an economist (with business experience), and in this short book (95 pages) he surveys the scene and frames the issues, giving some suggestions about an approach.

First, some of the important things about health care to keep in mind (my ideas, not Kling’s):

1. Health care is subject to a lot of technological change, and will continue to be. Thus it’s a moving target as to what is appropriate.

2. Health itself is a bit of a fuzzy concept – is it lack of illness? or something else?

Kling describes current U.S. medical care as ‘premium medicine’ – expensive, specialized and capital intensive. He notes that our health care costs have have gone from 5.6% of GDP in 1980 to 14.6% in 2002. As one sample of the types of things that have driven costs up, he gives statistics on MRIs (basically very rare in 1980), indicating that 24 million MRIs were performed in 2003. Statistics are hard to come by, but it seems that in many cases the MRIs do not alter the planned treatment, and are generally used to rule out rare situations. I think it’s questionable how much ‘better’ U.S. health care is compared to 27 years ago, despite the rising costs.

Kling identifies three main U.S. health care goals (which are in conflict):

  • Affordability for society as a whole
  • Unfettered access for individuals
  • Insulation of individuals from the costs of health care

As he sees it, we can have two out of three, not all of them. Our current health insurance is structured to give this ‘insulation’, and as he notes, while it provides for large downside risk management, it also tends to cover all medical costs (or some percentage thereof), including all ‘standard’ things like physicals, etc. He argues that Americans are not willing to give up on ‘unfettered access’ and he’s probably right, even if a bit of waiting in most cases will not alter the outcome of care.

I agree with him that we should move toward ‘real health insurance’ which would be there to cover for catastrophic costs, and not deal with routine costs, and which would be accessible enough to get the cost of the insurance down. This would protect people, but force each of us to be mindful of our own health. It seems unlikely at the moment that we’ll get anything of the sort. I don’t see how tax subsidies for current health insurance plans will do much of anything to help control costs.

Kling frequently comments on health care news and proposals over at EconLoghere’s a post today.

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