Crisis of Abundance: Rethinking How We Pay for Health Care

126 Pages·2006·0.63 MB·English

by  Arnold Kling

CRISIS
of Abundance
RETHINKING HOW WE
PAY FOR HEALTH CARE

CRISIS
of Abundance
RETHINKING HOW WE
PAY FOR HEALTH CARE
A R N O L D K L I N G
WASHINGTON, D.C.
Copyright©2006bytheCatoInstitute.
Allrightsreserved.
LibraryofCongressCataloging-in-PublicationData
Kling,ArnoldS.
Crisisofabundance:rethinkinghowwepayforhealthcare/ArnoldKling.
p.cm.
Includesbibliographicalreferences.
ISBN1-930865-89-9(alk.paper)
1. Medical care, cost of—United States. 2. Healthcarereform—United
States. 3.Medicaleconomics—UnitedStates. I.Title.
RA410.53.K5862006
338.4’33621—dc22 2006043904
CoverdesignbyJonMeyers.
PrintedintheUnitedStatesofAmerica.
CATOINSTITUTE
1000MassachusettsAve.,N.W.
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www.cato.org
Contents
ACKNOWLEDGMENTS vii
PREFACE ix
INTRODUCTION 1
1. The Rise of Premium Medicine 7
2. Three Health Care Narratives 19
3. Dollars and Decisions 33
4. No Perfect Health Care System 45
5. Insulation vs. Insurance 51
6. Matching Funding Systems to Needs 63
7. Markets and Evolution 77
8. Policy Ideas 85
CONCLUSION 95
NOTES 97
INDEX 105
ABOUTTHEAUTHOR
v

Acknowledgments
BrinkLindseyapproachedmewiththeideaofwritingabookon
health care financing policy, and he then gave me a free hand in
creatingit. MichaelCannon wasextremely generouswith histime,
sendingmetopicalarticles,thoroughlyreadingthemanuscriptsev-
eral times, and making a number of suggestions that greatly
improvedthefinalproduct.Otherswhoprovidedhelpfulcomments
includedIainMurray,RobinHanson,TylerCowen,AlexTabarrok,
and Peter Van Doren. Adrienne Aldredge and others at Cato also
provided important support.
I would like to express my appreciation to the technical team at
theAgencyforHealthResearchandQualityformakingtheMedical
Expenditure Panel Survey information accessible via the World
Wide Web in such a user-friendly manner. This is an instance in
which a Cato author feels compelled to acknowledge the existence
of a public good.
Notwithstanding all of the valuable assistance I received, any
errors of fact or analysis are solely my own.
vii

Preface
Healthcarecostsaffectusasconsumers,asworkers,assharehold-
ers, and as taxpaying citizens. Why are health care costs rising so
rapidly?Whatarethetradeoffsinvolvedinchoosingdifferentways
to pay for health care? How can we improve efficiency and equity
in the health care system?
The goalof this bookis to presenta reasonable setof answers to
those questions, and to provide factual and analytical background
for policy discussions concerning how we pay for health care and
howthataffectstheavailabilityandqualityofhealthcare.Thegoal
isnottopressaspecificsetofsolutionsorproposals,buttoarticulate
an economic perspective on the issues involved. An economic per-
spective is important because much of the uneasiness about health
care in the United States today relates to cost. The questions posed
are ones that an economist can attempt to investigate.
In preparing this book, I reviewed some of the voluminous aca-
demicand policyliterature,andI triedtoassembledata thatcould
help shed light on important issues. In some cases, I found the
statistics that I was looking for in the literature. In a few cases, I
was able to work with source data to develop answers. In other
cases, it seems that we have to do without definitive data for now.
The audience for this book is the concerned citizen. The analysis
isintendedtobecredibletoprofessionaleconomistswhilereadable
fornoneconomists.Ihopethateveryonewhoreadsthisbook,econo-
mist and noneconomist alike, will be able to take away useful
insights.
ix