This previous post reported on Arnold Kling’s insightful Cato Unbound piece in which he explains how America’s health care finance system is being undermined by health “insulation” policies rather than real health insurance.
Kling’s article has provoked three excellent responses, including this one from Duke University professor Clark C. Havighurst, who has taught courses and written on health care law and policy, antitrust law, and economic regulation at Duke since 1964. Professor Havighurst explains cogently how the tax subsidy on employer-based health insurance has become a destructive force in the health care finance system and why it survives despite the fact that everyone knows that it is the principal cause of wasteful spending on health care:

The tax subsidy thus introduces new ìmoral hazardsî into health care decision-making. Not only are employers, union leaders, legislators, and courts happy to commit employee-votersí money in ways that make themselves appear to care about health above all things, but their stake in not having to say ìnoî to more and better health care also coincides perfectly with the preferences of the politically powerful health care industry. For these reasons, the tax subsidy has survived through political thick and thin even though every policy wonk knows that it is a principal cause of wasteful spending on health services. Liberals, of course, resist proposals to fix this glaring defect in the incentive system that drives health care spending. Why fix incentives to encourage consumers to make more appropriate health care choices when big government stands ready to choose for them?

Read the entire Havighurst piece, as well as this one by Jonathan Cohn, (a New Republic senior editor and the author of Sick: The Untold Story of America’s Health Care Crisis ó and the People Who Pay the Price, which will be published by HarperCollins later year) and this one by Matthew Holt (author of the Health Care Blog), both of whom favor a universal care, one-payor system administered by government. Holt, in particular, provides a pithy explanation of why meaningful reform of the health care finance system is so difficult to achieve:

[T]he political strength of the health care system actors combined with the disaggregated weakness of the consumers and those paying the bill ó intermediated by the costs of health care being hidden within overall employment compensation and buried in the murky finances of the federal government ó has meant that the system has chewed up and spat out any serious attempt to reform it since the 1930s.

Update: All of the authors have now responded to each other pieces in this cyber-conversation.