Health Reform's Intellectual Failures

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I am tempted to talk about the politics of health care reform.  But, honestly, I cannot figure out why the Democrats cannot pass a bill.  So, some Republican constituents are really vocal in opposition.  Is that such a big deal?  I cannot fathom what is going on in the minds of the Democratic Senators and Representatives. 

Instead, I want to talk about the intellectual failures on health care reform.  I doubt that the political problems and the intellectual problems have much overlap, if any.


The "public option" is based on a hypothesis that profit and inefficiency in the private health insurance industry is so significant that the government could step in and reduce costs.  I am quite sure that this hypothesis is wrong.  The reason that health insurance is expensive is because we consume so many medical services.  Health insurance will be expensive whether it is provided by government or by someone else.  The only way to bring the cost down is with lots of cost-sharing, in which individuals pay a much larger share of the cost of their medical services, and insurance only protects against extremely expensive illnesses.

Although there are wonks among the Democrats who have been keen on the idea of cost-sharing in the past, it is now apparently considered a right-wing idea, so the Democrats seem to have banished it from discussion.  The "Progressive" approach to getting people to be less wasteful in their use of medical care is to have government set quality standards.

Somehow, the Republicans managed to turn the "quality" issue into the "death panels" issue.  There, I think that the intellectual failure is more on the Republican side.  Comparative effectiveness research is a good idea, and they make it sound like the second coming of Joseph Mengele.

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Arnold Kling

Arnold Kling earned his Ph.D in economics at MIT. He was an economist on the staff of the Federal Reserve Board. From 1986-1994 he worked at Freddie Mac. He started Homefair.com in 1994 and sold it in 1999. His fourth book, From Poverty to Prosperity, co-authored with Nick Schulz, is due out in April of 2009. He blogs regularly at Econlog.
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