Mr. Kling's first chapter talks about "premium medicine," the expensive tendency to use more specialists and more technology in healthcare. The second chapter stacks up the "premium medicine" theory of the rise of health care against what he considers the two other prominent explanations:
-a failure of private health insurance, and
It's sad that anybody would take the idea of "price gouging" seriously anymore, but there it is. I won't spend any time on Mr. Kling's concise debunking of that nonsense.
The theory that private health insurance doesn't work is a more serious possibility. Mr. Kling summarizes it:
This narrative suggests that the main reason there are people without health insurance is that the risk pool has broken down. People who believe that they are healthy will opt out of insurance. People who are particularly sick will be rejected by insurance companies."The theory of insurance failure does make sense, unlike the price-gouging narrative. As insurance companies exist to make money, why wouldn't they try to eliminate high-risk customers?
C of A addresses this by looking at data. The U.S. really has two parallel health insurance systems: private insurance for those under 65 and Medicare for the old folks. If private health insurance was the cause of high health costs, one would expect that health costs for Medicare receipients would reflect this, adjusted for the age of the receipient base. Mr. Kling concludes that Medicare doesn't work any better than private insurance at keeping costs down. He supports this by comparing U.S. costs and practices with countries with national heath insurance for all ages.
This makes sense, but it glosses over some issues with private insurance - it can be difficult to buy outside of a group, and there is adverse selection caused by healthy young people who save money by going without. I think regulations that prevent a free national market for health insurance are largely responsible for the problems of buying individual policies, but I am at a loss as to how to deal with those who voluntarily go uninsured. Is it a widespread problem? Does it really affect insurance prices? And how many people who say they "can't" get insurance really mean they "can't" get it at the price that they want to pay?
Handy C of A statistic:
As a line item of our national health care accounts, health insurane administration accounts for about 1 percent of GDP, out of total health care spending of 15 percent of GDP.