Clear Thinkers favorite Arnold Kling has been doing extensive research on health care finance issues over the past couple of years and, as noted in this insightful TCS Daily op-ed, he is coming to the conclusion that one of the main problems with the U.S. health care finance system is that most Americans simply do not want to pay for true health insurance:

What we are left with, then, is that people do not want real health insurance. I would gladly take a health insurance policy with a $10,000 deductible per individual, and I suspect that many of my wise, risk-averse TCS readers would, too. But we are in a tiny minority! Most people do not want to be responsible for the first $10,000 in medical expenses, and most people believe that an insurance policy that is expected to pay no claims 95 percent of the time is a bad deal.

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One of the often overlooked historical aspects of America’s health care finance crisis is that employer-based medical insurance was largely non-existent until World War II. During the war, governmental wage and price controls prompted employers to offer medical insurance as a means to attract scarce labor without violating the wage controls. Employers quickly realized that such insurance was a cheaper way to attract labor than increasing wages, so the concept of employer-based medical insurance became a standard component of many American employers’ compensation plans for employees over the past generation.
Well, as this NY Times article notes, the market distortion of substituting medical insurance for direct employee compensation has generally benefitted employers, but now rising health care costs are making employer-based medical insurance more expensive than simply paying employees direct compensation. The Times article notes the following about Wal-Mart, which employs a large number of low wage earners:

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Malcolm Gladwell‘s recent New Yorker polemic regarding the state of American health care prompts Marginal Revolution’s Tyler Cowen to post this handy list of observations on the key issues facing the American health care system. One point that Tyler makes is particularly important:

The U.S. health care system probably is the world’s best for some class of people, namely the well-off and I don’t mean just the super-rich. Trying to extend those benefits — however this might be accomplished — is a better approach than nationalizing the sector.

Mr. Gladwell’s piece falls into the common trap of blurring the issues relating to the quality of American health care — which is quite good — with the issues pertaining to the way in which America finances health care, which is not so good. Tyler’s post does a much better job of delineating that key distinction.

This outstanding Washington Post article (first in a series of three) on Medicare nails the key problem with reliance on third party payor health care finance systems:

In Medicare’s upside-down reimbursement system, hospitals and doctors who order unnecessary tests, provide poor care or even injure patients often receive higher payments than those who provide efficient, high-quality medicine. . .
Researchers at Dartmouth Medical School, who have been studying Medicare’s performance for three decades, estimate that as much as $1 of every $3 is wasted on unnecessary or inappropriate care. Other analysts put the figure as high as 40 percent.
Medicare has difficulty controlling waste because of deficiencies in the way it monitors and enforces quality standards. Its oversight system is fragmented, underfunded and marred by conflicts of interest, records and interviews show . . .

Read the entire article, including the sidebar containing related articles and graphs and the subsequent articles here and here. It’s a first rate series.

Minnetonka, Minn.-based UnitedHealth Group Inc., the second largest health insurer in the U.S., announced yesterday that it had agreed to acquire Cypress, Calif.-based PacifiCare Health Systems Inc. for $8.1 billion in cash and stock. The huge deal is the latest in a series of consolidations that is reshaping the U.S. employer health insurance industry, a trend that affects thousands of workers in the large medical services sector of Houston’s economy.
The consolidation trend in the employer health insurance is noteworthy also because traditional employer health insurance has been losing market share over the past 15 years because of rising costs. Although almost 80% of U.S. workers in the private sector were covered by traditional employer health insurance in 1990, only 56% of of those workers were covered by such insurance in 2003, and the decline has accelerated over the past five years. The deal also narrows the gap in subscriber bases between UnitedHealth and the largest U.S. health insurer — WellPoint Inc (formerly Anthem) — which has 28.5 members.

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David Asman is an anchor at the Fox News Channel and host of “Forbes on Fox.” In this must read piece for anyone interested in the differences between a centralized and a decentralized health care finance system, Mr. Asman compares the care and cost that his wife received in the British and American health care systems earlier this year after she suffered a serious stroke during a vacation in London. The entire op-ed is interesting, but I found the following observation particularly telling:

When I received the bill for my wife’s one-month stay at Queen’s Square [Hospital, in London], I thought there was a mistake. The bill included all doctors’ costs, two MRI scans, more than a dozen physical therapy sessions, numerous blood and pathology tests, and of course room and board in the hospital for a month. And perhaps most important, it included the loving care of the finest nurses we’d encountered anywhere. The total cost: $25,752. That ain’t chump change. But to put this in context, the cost of just 10 physical therapy sessions at New York’s Cornell University Hospital came to $27,000–greater than the entire bill from British Health Service!
There is something seriously out of whack about 10 therapy sessions that cost more than a month’s worth of hospital bills in England. Still, while costs in U.S. hospitals might well have become exorbitant because of too few incentives to keep costs down, the British system has simply lost sight of costs and incentives altogether.

Meanwhile, Washington Post business columnist Steve Pearlstein contends in this column that most Americans are willing to dispense with market allocation in regard to health care:

For most Americans, providing health care ought to be different from selling soap; they won’t tolerate doctors acting like commissioned salesmen and investment bankers. And if that means having less market competition and more regulation in the health care system, it seems to be a trade-off they’re willing to make.

H’mm, I’m not so sure about that. Hat tip to Arnold Kling for the links to the articles.

Doctor and author Robin Cook has re-evaluated his view on universal health insurance based on advances in academic understanding of the human genome. In this NY Times op-ed, Dr. Cook notes the following:

In this dawning era of genomic medicine, the result may be that the concept of private health insurance, which is based on actuarially pooling risk within specified, fragmented groups, will become obsolete since risk cannot be pooled if it can be determined for individual policyholders. Genetically determined predilection for disease will become the modern equivalent of the “pre-existing condition” that private insurers have stringently avoided.
As a doctor I have always been against health insurance except for catastrophic care and for the very poor. It has been my experience that the doctor-patient relationship is the most personal and rewarding for both the patient and the doctor when a clear, direct fiduciary relationship exists. In such a circumstance, both individuals value the encounter more, which invariably leads to more time, more attention to potentially important details, and a higher level of patient compliance and satisfaction – all of which invariably result in a better outcome.
But with the end of pooling risk within defined groups, there is only one solution to the problem of paying for health care in the United States: to pool risk for the entire nation. (Under the rubric of health care I mean a comprehensive package that includes preventive care, acute care and catastrophic care.) Although I never thought I’d advocate a government-sponsored, obviously non-profit, tax-supported, universal access, single-payer plan, I’ve changed my mind: the sooner we move to such a system, the better off we will be. Only with universal health care will we be able to pool risk for the entire country and share what nature has dealt us; only then will there be no motivation for anyone or any organization to ferret out an individual’s confidential, genetic makeup.

Hat tip to the HealthLawProf Blog for the link.