By Jeremy Thompson
While it appears the national debate over health care reform is on hold, don’t kid yourself. Health care is an issue that will work its way to the top of the priority list again. Moving one’s view of health care reform beyond reaction and talking points will be critical for understanding whatever comes down the road. This does not mean the average citizen will need a degree in public health, but reading a book on health care from a free-market perspective might be needed for the next fight. Crisis of Abundance is a good place to start.
Crisis of Abundance: Rethinking How We Pay for Health Care by Arnold Kling is about the problems and solutions in the economics of paying for health care. The book is truly an economic perspective by an economist with credentials. Kling received his doctorate in economics from MIT, and has served as an economist on the staff of the Federal Reserve Board. His analysis is rigorous, yet also concise and clear and therefore accessible to the layman.
The subject matter of the book is divided into two straightforward categories: a) Either Kling is illuminating the current circumstances of health care economics, or b) he is discussing possible solutions. Here are his central ideas:
1. The rise of “Premium Medicine” and “the gray area” of health care. Kling defines “Premium Medicine” as medical care that has become more and more specialized and has used more and more advanced technology. So, if a patient has a severe cough, the doctor can wait and see, prescribe an antibiotic, or he can order an X-ray and refer the person to a specialist. The third option represents premium medicine. Cultural expectations have made Premium Medicine a cost factor, because as more and more patients learn about the latest and best medical care, they demand it. Premium Medicine has not always made a difference in outcomes, but it is very expensive.
“The Gray Area” represents the kind of health care where it is uncertain if the benefit of the care being considered outweighs the cost. Many health care services are neither absolutely necessary nor unnecessary. Instead, they fall into a gray area where the benefits and outcomes are uncertain. If we know that a certain age is most at risk for colon cancer, we order a colonoscopy. If that age is 50, would it be beneficial for a 40 year old man to have a colonoscopy? If the answer is yes, what about a 38 year old man? The yes may not be as enthusiastic. This is a gray area, and when one is talking about procedures that cost thousands of dollars, the costs can add up. We as a society spend a lot of money on this gray area.
2. The perfect health care system Triangle. In the eyes of the average American, a perfect health care system in a perfect world would satisfy three conditions: unfettered access; insulation of the consumer from the burden of cost; and affordability of health care with regard to spending on other public and private needs. Kling says that in reality, since we do not live in a perfect world, only two of those three conditions can ever be satisfied at one time. In our system, we have access and insulation, but we are sacrificing affordability (health care spending as a percentage of GDP is high relative to other industrialized nations). In Canada, they have affordability and insulation, but the consumer doesn’t have unfettered access to needed care. Premium medicine has made insulation important to us because it is so expensive.
3. The absence of true health insurance. Because we as a culture value insulation so much, insurance has had to fill a role that was not meant for it. Initially, insurance was only meant to be and only should be used to minimize the risk of catastrophic situations. But today American culture considers the best insurance plan to be the plan that covers everything from miniscule costs to major costs (from doctor visits to brain surgery). For Premium Medicine, this value has been a major cash cow.
The author uses these three ideas to analyze some possible solutions.
Kling spends chapters 6-8 talking about some possible solutions, but he notes that the book is not intended to be a package of solutions. Chapter 6 discusses some possible solutions for how the insurance market could meet the needs of people today in some alternative ways. Chapter 7 analyzes three perspectives of markets and talks about how government regulation can often impede markets from doing what they do best: adapt to changing needs and growth.
The last chapter gives the most concrete ideas for policy. First, he recommends gradually shifting the burden of health care spending from government to the individual. Second, policy should encourage innovation and efficiency in the health insurance market (usually deregulation and thinking outside the employer-based health insurance box). Third, he recommends that we encourage innovation in the provision of medical care by means of deregulation.
What also makes this book worth reading, is that it gives the reader some basic tools to actually analyze ideas. The author empowers the reader, explaining with effective concision (The whole book is about 100 pages) and structure some very unique analysis of a very important topic.
Jeremy Thompson is the Executive Director of the Alaska Policy Forum.