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    Saturday, September 09, 2006

    Second Hand Book Reviews: Arnold Kling's Crisis of Abundance: Rethinking How We Pay for Health Care got a good review in the New England Journal of Medicine:

    Many readers will know that I am a longstanding critic of the economic approach to health care policy, but I liked this little book and can recommend it highly. I disagree with many of Kling's assumptions and conclusions — for example, that medical "cost–benefit" analyses are as important as he thinks, that prices in health care are related to costs of production, that we cannot have health care that is both accessible and affordable while still insulating consumers from its cost, that professional regulation mainly serves the interests of physicians who wish to restrict competition, and that the best way to control costs is to shift more responsibility to patients of all ages through health savings accounts and insurance with high deductibles. Above all, I think he is terribly mistaken in believing, contrary to Arrow, that free markets can largely replace government in protecting the public's interest in health care.

    Nevertheless, I was attracted by a certain freshness and directness in much of Kling's argument, and I found myself agreeing with many of his observations. I think he is right in attributing our present cost crisis mainly to the practice of what he calls "premium medicine," which overuses expensive forms of technology that is of marginal or no proven benefit. I agree with him that more attention should be paid to the systematic evaluation of new technology and that an independent private agency should generate voluntary guidelines for the benefit of doctors and patients. I agree that an effective and efficient health care system requires both more integrated responsibility for reporting outcomes and an integrated electronic record system. A major impediment, he correctly appreciates, is the fragmentation of health care.

    ....I warmly recommend his book to general readers who want to understand what economics has to say about health care.

    Not a bad review, and from a very eminent personage who has some well publicized ideas of his own, which are discordant with Kling's.

    I've read Culture of Abundance, too, and found it easy to understand. (I wish he had taught my Economics 101 course in college.) His point that we spend much money for little benefit on "premium medicine" is an important one that needs to be sounded more often. Think of what we could do with the money we save on high dose Lipitor. Oh, wait. In our current system that would just mean higher profits for the insurance company CEO, not necessarily lower premiums for the people.

    posted by Sydney on 9/09/2006 03:58:00 PM 3 comments


    Health insurance is too competitive for the health insurance company not to pass on its savings. Most employers put their health insurance out to bid every year. If a insurance company is making excess profits, it will lose the bidding.

    By Blogger Jake, at 9:07 PM  

    It doesn't quite work that way, however. What employers buy are insurance contracts that cost less because the employee pays more or has fewer benefits. That's not necessarily wrong, it's good to have options, but when the CEO of health insurance company makes millions in salary and billions in stock options at time when health insurance premiums are going up at a rate of 14% a year, and reimbursements to hospitals and doctors are going down, it's hard to believe they're passing along any savings to their customers.

    By Blogger Sydney, at 11:24 PM  

    The hospitals are not doing too bad. Our local hospital just completed a $80M expansion and still showed a $15M profit. Sorry, this is a nonprofit hospital so that $15M is not profit, but income.

    HCRENEWAL has an interesting point on compensation for the CEO's of non-profits in Boston. Everyone is paid over $1M. Not bad.

    Steve Lucas

    By Anonymous Anonymous, at 2:27 PM  

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