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Have Yourself a Very Healthy Christmas

Two books that should be in every wonk's stocking.

By 12.7.06

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For the health care policy wonk on your Christmas list, David Gratzer's The Cure: How Capitalism Can Save American Health Care, and Arnold Kling's Crisis of Abundance: Rethinking How We Pay For Health Care are must-haves. However, most health care policy wonks probably already have them, so that leaves the people on your list who have an interest in, but are not obsessed with, health care. Fortunately, these books are not as wonkish as you might think and so will be popular with them too.

Gratzer is a psychiatrist who grew up in Canada. Having seen Canada's dysfunctional single-payer system first hand, he notes that Canada is now moving toward more privatization. He points out the shock that, at the same time this is happening, "in the United States they have been moving in exactly the opposite direction." He warns that moving toward more government intervention in health care is like watching a car accident unfold, "a series of small events, leading to a spectacularly disastrous end."

From there, he turns his critical eye on insurance in America, Medicare and Medicaid, with each chapter showing how government intervention makes the health care costs more expensive. In his chapter on prescription drugs, Gratzer notes that the number of new drug approvals by the Food and Drug Administration has barely increased since the 1970s despite billions more spent on research. While critics blame this on the pharmaceutical industry supposedly pursuing easy, profitable drugs at the expense of more innovative ones, Gratzer lays the blame squarely where it belongs -- the FDA.

Since 1964, the approval process for a new drug has more than doubled. While the FDA slows down the process in the name of safety, Gratzer notes that the delays result in needless death, as thousands are annually deprived of life-saving medications. He offers common sense solutions such as bypassing the FDA process for drugs that have already gone through the approval process in Europe and farming out some of the FDA's statistical work to private nonprofit institutions. He also calls for congressional hearings looking into the why the FDA is so cumbersome. Unfortunately, we seem headed in the wrong direction. Next year, Congress will hold hearings on the FDA that focus on safety. Expect ever more burdensome regulations as a result.

In his second-to-last chapter, Gratzer offers a glimpse of what will happen should we in the U.S. decide to go down the road of Canadian health-care. We will end up with a system where medical care is "free" but not readily accessible. Canada is plagued with long wait times for surgeries, medical tests and appointments to see specialists, often with deadly consequences for the patient.

While Gratzer provides a doctor's eye view of health care, Kling's approach is that of an economist. While that makes Kling's book the more technical of the two, Kling has the wonderful talent of making economic concepts readily understandable to the layman. Like any good economist, Kling presents trade-offs. If we want a health care system with unfettered access and affordability, then we cannot continue to let insurance companies and government insulate us from the cost. If we want a system that insulates us from cost, however, then we will eventually face rationing.

Crisis of Abundance is full of useful insights, the best being Kling's schema for understanding the value of medical care. His schema has three categories: black, white and gray. Black is the area where medical care provides no benefit. White is the area where the care is essential. Gray is the area where it is uncertain if the care will provide any benefit. Kling states that there "is a large gray area in health care" and provides the example of how often a person with a heart condition should visit a cardiologist at a cost of $200 per visit. Seeing the cardiologist once a year surely provides benefit (white area), while seeing him once a day at a cost of $75,000 per year would not likely provide a benefit worth the cost (black area). But what about seeing the cardiologist once a week, once a month, or once a quarter? That falls into the gray area.

There are two implications to be drawn from this schema. The first is that our current health care system wastes resources trying to police the gray area. Kling states,

In practice, third-party payers face enough of a challenge in policing the black region where providers attempt to profit from services that are totally unnecessary. It is considerably more difficult for third-party payers to decline to cover procedures that offer definite positive benefits, however small.

The second implication is that there is a lot of room in health care for consumerism. The consumer, spending his own money, is the proper agent to police the gray area. It is the consumer, in consultation with his doctor or other health care professional, who is in the best position to judge if a certain medical procedure produces enough benefit to justify the cost.

Kling offers some innovative ideas on how to introduce more consumerism into health care. One such idea is purchasing a plan that gives five-years of coverage with a $30,000 deductible. You would only pay premiums on the plan for one year, enabling you each year to purchase a new five-year plan, so that you have overlapping coverage. If, in each five-year period, your health care expenses are more than $30,000, then the policy you purchased five years earlier would cover the difference.

It is ideas like these that will move us toward a more market-based system of health care and save us from the disaster that is a single-payer system. To learn more about them, put both Gratzer's The Cure and Kling's Crisis of Abundance on your Christmas list.

David Hogberg is a senior analyst at the National Center for Public Policy Research. He also hosts his own website, Hog Haven.

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David Hogberg is a senior fellow at the National Center for Public Policy Research.  Follow David Hogberg on Twitter.