25 August, 2009

Health care: how did we get into this mess?

The Independent Review (Summer 2009) has published a really, really good overview of the development of the American health care system, and a copy is available online.

The Modern Health Care Maze: Development and Effects of the Four-Party System
By Charles Kroncke
Ronald F. White

Despite numerous federal interventions that have favored health care providers and insurers, the industry has yet to figure out how to overcome the problems of adverse selection, moral hazard, information asymmetry, and free-ridership. Did it ever make sense to create a health care system in which fourth-party employers purchase insurance for their first-party employees from third-party corporations, which in turn pay second-party providers for health care products and services?

One very important point: a lot of what's been going on is related to the use of tax policy to achieve "social goods," a feature (bug) of the current tax system that almost nobody is willing to do without.  Raising that issue would be a really radical approach.  And then there's the real truth that nobody wants to face: when the demand for health is unlimited and the supply is limited, somebody is going to be unhappy with how it is distributed.

It doesn't mean we can't do better.  It means my definition of better may not be the same as yours, and neither of us agree with the other guy, and somebody is going to lose.

The Modern Health Care Maze

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